1. Inland Empire & San Bernardino County 2009-10 A Very Difficult Period!
John Husing, Ph.D.
Economics & Politics, Inc.
12/6/2018

2. So. Calif. Job Change,
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3. Inland Empire Job Change, 1984-2009
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4. Worst National Unemployment Rates22 16 4 2
12/6/2018

5. Unemployment Can Get Stuck For Years
not U or V
12/6/2018

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
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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
12/6/2018

9. Prop 172 Changes: Month Vs. Last Yr. Based On California Retail Sales
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10. Housing Demand Rose With Population
CA Home Restrictions
Slow Growth
NIMBYs
Endangered Species
Water
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
12/6/2018

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
12/6/2018
Source: Dataquick

12. Sales Soars Until Late 2005 … Back to 2002
Price Peak
78.1%
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13. Inland Empire Has 1,080,328 Homes
Home Traded Notices of Default Share of
359,044 (33.2%) , %
Balance Are Future Issue + Unemployed + Piggy Bank Loans
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14. Alt-A Option Adjustable Sub-Prime Over
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15. Is There Any Good News?
YES!
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16. Supply From Foreclosures Demand From Lower Prices
Supply & Demand
Supply From Foreclosures
Demand From Lower Prices
vs.
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17. Demand > Supply & Price Rising
4.3%
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18. Soaring Housing Affordability Easily Sets A Record
68%
59%
4.5 Times
15%
12/6/2018

19. Some Market Normality Has Returned
July Foreclosure Sales
Riv. Co.
59% down from 71% in Jan.
SB Co.
61% down from 69% in Apr.
12/6/2018

20. Price Advantages/Disadvantages
Home Price Advantage, So. California Markets
Median Priced New & Existing Home, 3rd Quarter 2009
Median All Home Price
Inland Empire Advantage
$498,000
$366,000
$332,000
$279,000
$147,000
$219,000
$113,000
Inland Empire
Los Angeles
San Diego
Orange
12/6/2018
Source: Dataquick

21. Standing New Home Inventory 2nd -2009
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22. Consumer Confidence In Future At Dec 2007 Level (pre-Recession)
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23. Price Stability Now Likely
12/6/2018

24. 259,200 Unemployed – Nearly 3 times Normal
282,600
89,450
12/6/2018

25. Housing Slowdown Hurts!
Office Market
Housing Slowdown Hurts!
12/6/2018

26. Office Absorption Absorption Fell With Housing Slowdown
1991
Exhibit 10.-Office Net Space Absorption
Moving 4-quarters, Inland Empire,
2,000,000
Absorption Fell With Housing Slowdown
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
(200,000)
(400,000)
(600,000)
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
12/6/2018
Source: Grubb & Ellis & Economics & Politics, Inc.

27. Office Vacancy Rate Has Jumped Dramatically
23.6%
7.0%
12/6/2018

28. Vacancy Rates By Area, 3rd-2009
Office Availability Rate, 3rd Quarter 2009
Inland Empire, By Market
Source: Grubb & Ellis
29.0%
23.2%
10.7%
26.6%
25.8%
24.4%
23.6%
22.6%
18.8%
16.9%
Class A
Class B
Class C
High Desert
Temecula-Murr.
Inland Empire
Riverside-Corona
Ont-R. Cucamonga
San Bdno-Redlands
Chino-Upland-Mtcl
12/6/2018

29. Office Vacancy Rate Up Everywhere!
Inland Empire % %
Orange County % %
San Diego % %
Los Angeles County 12.2% %
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30. Lease Rates Down! 2007 2009 Inland Empire $2.18 $2.17
Inland Empire $ $2.17
Orange County $ $2.50
San Diego $ $2.87
Los Angeles County $ $3.06
12/6/2018

31. Why? Housing Finance Escrow Title Home Insurance Developers Engineers
Planners
12/6/2018

32. Refinancing Is A Growing Issue
High Vacancy Rates
Falling Lease Rates
Balloon Payments
12/6/2018

33. Blue Collar Industrial Jobs
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34. Why Blue Collar Jobs Important?
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35. Ports On West Coast Nearest Asia
Los Angeles
Long Beach
12/6/2018

36. Deep Water Ports As Ships Draw Over 50 feet of Water
8,000-Container Post-Panamax Ships
12/6/2018

37. International Containers Thru So. Calif. Were 43% of U.S. … But …
Port Container Traffic
Ports of Los Angeles & Long Beach, & Long Term (million TEUs)
42.5
2025e
42.5
2035e
Loss of 4% Market Share
15.8
15.7
14.2
14.5
11.8
13.1
9.5
9.6
10.6
6.5
7.5
8.2
4.4
5.1
5.4
5.8
3.7
3.8
4.1
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
12/6/2018
TEU=20 foot equivalent container units
Source: Ports of Los Angeles & Long Beach; forecast: Moffatt & Nichol Engineers

38. U.S. Economy Has Shrunk
-7,205,000 Jobs
12/6/2018

39. 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
LA Supporting Teamsters Legislation to Organize Ports
12/6/2018

40. The Diversion Fear : 4-Corners Strategy
Loss of 4% Market Share
12/6/2018
Panama & Suez

41. Port Imports Have Crashed
12/6/2018

42. Logistics Joined Blue Collar Job Losses
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43. 12/6/2018

44. Logistics Gained 76,500 But Now Lost -6,900
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45. Industrial Absorption Has Stopped
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46. Industrial Vacancy Rate Soaring
SB-Redlands 21.4%
Moreno Valley-Perris 18.8%
11.8%
Ontario-Mira Loma 8.0%
12/6/2018

47. When Will “Normal” Start To Return?
2010 National
2011 California
2012 So. Calif.
If Policies Work!
12/6/2018

48. While Waiting For Recovery….
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49.
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