1. Inland Empire & San Bernardino County 2009 … A Very Difficult Year!
John Husing, Ph.D.
Economics & Politics, Inc.
11/20/2018

2. So. Calif. Job Change,
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3. Inland Empire Job Change, 1984-2009
11/20/2018

4. Worst National Unemployment Rates
11/20/2018

5. Unemployment Can Get Stuck For Years
L not U
11/20/2018

6. What Happened?
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7. Shrinking Our Economy $10.6 Billion Hole In IE Economic Base
$8.3 Billion From
Residential Decline
11/20/2018

8. -$21.2 Billion Loss To The Economy
Gold Mine Theory
-$21.2 Billion Loss To The Economy
Secondary Tier
Another
-$10.6 Billion
Primary Tier
-$10.6 Billion
11/20/2018

9. Taxable Sales Decline
11/20/2018

10. Housing Demand Rose With Population
CA Home Restrictions
Slow Growth
NIMBYs
Endangered Species
Water
Keep “Them” Out of Our City
Just Under
LA & OC Production In 2006 or 2007
million people/3.9 million SFR homes =
Add 3.2 million people: Need 709,600 homes = 4.66
Actual New homes ,900
Shortfall ,700
Annual Production Too Low: ,670 a year
11/20/2018

11. Prices Had To Take-Off To Eliminate Buyers
Exhibit 8.-Price Trends, New & Existing Homes
$404,611
Inland Empire, , Quarterly
420,000
400,000
380,000
360,000
340,000
320,000
12.9% per year
300,000
280,000
260,000
240,000
220,000
200,000
180,000
160,000
140,000
120,000
100,000
19.7% per year
80,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
11/20/2018
Source: Dataquick

12. Sales Soars Until Late 2005 … Back to 2002
Price Peak
31,545
Exhibit 11.-Existing & New Homes Sales, Inland Empire
29,670
Seasonally Adjusted, by quarter,
32,000
32,000
30,000
19,664
30,000
28,000
28,000
26,000
26,000
24,000
24,000
22,000
22,000
20,000
20,000
18,000
18,000
16,000
11,398
83.5%
16,000
14,000
14,000
12,000
12,000
10,000
10,000
8,000
8,000
6,000
6,000
4,000
4,000
2,000
2,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
11/20/2018
Source: Dataquick
Source: Dataquick

13. Prices Back to Early 2002 Levels
359,044 SFR Homes Traded
More Owed They Are Worth!
33.2% Of IE’s 1,080,328 SFR Homes
-56.8%
$404,611
Exhibit 8.-Price Trends, All Homes
Inland Empire, , Quarterly
$420,000
$390,000
$360,000
$330,000
$300,000
$270,000
$240,000
$210,000
$180,000
$177,363
$150,000
$120,000
$90,000
$60,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
11/20/2018
Source: Dataquick & Economics & Politics, Inc.

14. Supply: Foreclosures Sales In Jan. 2009 71.2% of Riv. Co.
67.3% of SB Co.
11/20/2018

15. Housing Affordability
Exhibit 16.-Share Able To Buy Median Price Home
San Bernardino County,
66%
53%
45%
18%
2000
2002
2005
1Q_2009 SB County
11/20/2018
Source: CA Association of Realtors, ; Economics & Politics, Inc., 2009

16. Demand Rising From Lower Prices Supply High From Foreclosures
Demand & Supply
Demand Rising From Lower Prices
Supply High From Foreclosures
vs.
11/20/2018

17. Foreclosure Supply Still Overwhelming Demand
And The Winner So Far ….
Foreclosure Supply Still Overwhelming Demand
BUT … Price Is Stabilizing Indicating The Supply and Demand are Nearing Equality … The Price Bottom Is Near
11/20/2018

18. Current Status Of SB Co. Housing 150,927 San Bdno
Current Status Of SB Co. Housing 150,927 San Bdno. County’s Traded in ,492 Total Homes Existed in January % Share of Homes In Potential Trouble
11/20/2018

19. Notices of Default
76,180 of 150,927 Homes Sold : Notices of Default
74,747 Upside Down but Not Yet in Visible Trouble (49.5%)
11/20/2018

20. Defaulted Homes 76,180 Notices of Default
67,338 through 90-Day grace period
52,323 (78%) foreclosed … 15,015 (22%) worked out
11/20/2018

21. Upside Down Homes 74,747 Upside Down … Not Yet Notices of Default
12,820 NOD Grace Period
87,567 Future Issue!
11/20/2018

22. Bank Foreclosure Sales
36,357 Re-Sold (69%) of 52,323 Foreclosed
15,966 Inventory (31%) of Unsold Foreclosures
11/20/2018

23. Pace of Future Problem Alt-A Sub-Prime Option Adjustable Over
Unsecured ARMS
Sub-Prime
Over
11/20/2018

24. Months of Standing New Home Inventory Southern California
1st Qtr 2009 Statistics
Orange County 12.3
LA County 11.8
Inland Empire 4.6
Riverside 3.8
San Bernardino 6.4
Source: Market Monitor, Metrostudy
11/20/2018

25. Standing New Home Inventory 1st-2009
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26. Inland Empire’s Long Term Competitive Advantage Still Exists
Exhibit 118.-Home Price Advantage, So. California Markets
Median Priced New & Existing Home, 1st Quarter 2009
Median All Home Price
$433,000
Inland Empire Advantage
$331,000
$307,000
$130,000
$154,000
$256,000
$177,000
Have To Get This Crisis Behind Us …
$10.6 Billion Hole to Fill
Inland Empire
Los Angeles
San Diego
Orange
11/20/2018
Source: Dataquick

27. Worst Potential Financial Crisis Since 1929
President Hoover
Fed Raised Rates
Cut Money Supply!
Fed’s Ben Bernanke
11/20/2018

28. Issue: Mortgage Backed Securities
Loan Servicer
Loan Originator
Home Buyer
Mortgage
Fannie, Freddie
Investment Bank
Loan Servicer
Will Do
Nothing To Hurt
the Interest of the
Investors
Low Risk Investors
Mortgage Group
High Risk Investors
11/20/2018

29. Reduce Principal Purchase Price $400,000 Owe $350,000
Today’s Value $250,000
90% of Today’s Value Paid To Investor $225,000
Loss to Investor $125,000
30 Year FHA Mortgage, Less Principal & Interest, Lower Payment
If Sell Early For Over $225,000 Profit To Lender
Only For Existing Mortgages
Obama Cramdown: Bankruptcy But Must Negotiate First
11/20/2018

30. Hurts The Interest of the Investor
NO!
Hurts The Interest of the Investor
11/20/2018

31. Reduce Monthly Payment
Leave Principal Alone
Cut Interest Rate
Lengthen Term
Reduce Monthly Payment
11/20/2018

32. Stay In Home BUT Upside Down
Never Able To Sell!
Inland Empire Upside Down Too Much For These Strategies!
Obama: FNMA, Freddie Mac If Owe 105% Refi To Lower Rate
Obama: If 38% of Income, Share Cost of Lowering to 31% of Income
11/20/2018

33. What About Moral Hazard?
Unless We Cut Off The Flow of Foreclosures …
If Foreclosures Not Lowered …
No Recovery Until Past 2012
11/20/2018

34. 225,000 Unemployed – 2½ times Normal
11/20/2018

35. Can New Homes They Be Profitably Built?
2,500 Square Foot Homes on 7,200 Square Foot Lot, No Fee Reduction
$336,500 with 4% return
2,000 Square Foot Homes on 6,000 Square Foot Lot, 40% Fee Reduction
$257,000 with 4% return
Fees: 100% School; 60% Agency; -500 Sq. Ft.; 6,000 Sq. Ft. Lot
11/20/2018

36. Consumer Confidence In Future Dec 2007 Level (pre-Recession)
11/20/2018

37. Housing Slowdown Hurts!
Office Market
Housing Slowdown Hurts!
11/20/2018

38. Absorption Falls With Housing Slowdown
Office Absorption
Absorption Falls With Housing Slowdown
11/20/2018

39. Office Vacancy Rate Has Jumped Dramatically
23.3%
7.0%
11/20/2018

40. Blue Collar Industrial Jobs
11/20/2018

41. Why Blue Collar Jobs Important
11/20/2018

42. 1. International Containers Thru So. Calif.
11/20/2018

43. 2. Ports On West Coast Nearest Asia
Los Angeles
Long Beach
11/20/2018

44. 3. Deep Water Ports As Ships Draw Over 50 feet of Water
8,000-Container Post-Panamax Ships
11/20/2018

45. U.S. Economy Has Crashed
-6,001,000 Jobs
11/20/2018

46. Ports Increasingly Regarded As Unreliable
UP Buys SP, Trains Can’t Move
ILWU-PMSA Lockout/Strike
93 Ships Can’t Be Unloaded: Not Enough Labor
Rains Wash-Out Rail Track
Clean Truck Fees
Employee Truck Mandate & Law Suits
Riverside Suing Ports
11/20/2018

47. BCOs 4-Corners Strategy
Beneficial Cargo Owners
BCOs 4-Corners Strategy
11/20/2018

48. Port Imports Have Crashed
11/20/2018

49. Logistics Gained 76,500 But Now Lost -6,900
11/20/2018

50. Industrial Absorption Has Stopped
11/20/2018

51. Industrial Vacancy Rate Soaring
SB-Redlands 21.4%
Moreno Valley-Perris 18.8%
11.8%
Ontario-Mira Loma 8.0%
11/20/2018

52. Issue: Financial Freeze
Savers
Account x
Bank, S & L, CU
More Loans
Borrower
Mortgage
Student
Auto
Business
Personal
Secondary Market
TALF: Term Asset Backed Security Loan Facility Creates Secondary Market
Mortgages
Auto Loans
Student Loans
Personal Loans
Short Term Business Loans
11/20/2018

53. Restoring Demand Borrow $787 Billion & Spend It Consumer (Scared)
Business Investment (Can’t Borrow)
Export Growth (Dollar Value Has Risen Again)
Government Borrow & Spend (World War II Experience)
Borrow $787 Billion & Spend It
11/20/2018

54. Collect Taxes … Spend That Amount
Borrow $787 Billion … Spent That Too … Adds $787 To Demand
Collect $787 Billion In Taxes … Cuts $787 Billion In Private Spending
Spend $787 Billion Collect … Effect is NEUTRAL on Demand
11/20/2018

55. Has This Been Tried?
11/20/2018

56. World War II As A Giant Stimulus Effort
U.S. Unemployment Rates
Entering World War II
14.5%
9.7%
4.7%
1.9%
1940
1941
1942
1943
11/20/2018

57. Why Do This? $10.6 Billion Hole In IE Economic Base $8.3 Billion From
Residential Decline
11/20/2018

58. When Will “Normal” Start To Return?x x
2010, 2011
2012
If Policies Work!
11/20/2018

59. While Waiting For Recovery….
11/20/2018

60.
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