Next year is projected to be the best year yet for the economy since the start of the recovery, with California's state economy lining up to do better than the nation. And this positive trend is expected to continue for the next two years, a new report from Beacon Economics said.
But HousingWire isn't happy to stop with just that. Click the next page to see five awesome facts on the future of California's housing.
First, here are the results of the Beacon report: (click here to go to the second page now)
California’s economy will continue to steadily improve throughout the life of the state forecast in 2019. Employment growth is expected to settle in at 2.5% by 2016, and the state’s unemployment rate is forecast to drop below 6% by mid 2017 – about half of what it was at its peak in October 2010 (12.4%).
“Every metropolitan area in California has now returned to job growth,” says Jordan Levine, Beacon Economics’ director of economics. “Although the jobs and broader economic recovery has been more robust in some areas of the state than in others, the overall numbers are indicative of real, sustained improvement statewide.”
However, one of the biggest problems facing California is the rapidly rising cost of housing, driven by a lack of new supply.
“You can’t add jobs if there is no growth in the labor force because people are leaving because they can’t afford housing,” says Thornberg.
But things look positive for the next couple of years since there is sufficient slack in the labor market to allow for solid growth.
Click here to see 5 awesome facts that play into California’s housing future.
5 awesome facts that play into California’s housing future:
1. Home sales will rise!
First and formost, home sales are set to rise in the Golden State! Although the rate of home sales needs some time to pick up, pick up it will. Home sales are estimated to continue on their upward trajectory over the next two years; however, the pace of growth will cool to the 4% to 6% range, a rate more in line with income growth. Home sales in California are forecast to rise by double-digit percentages in 2015. What's more, the really, really pricey homes are already knocking it out of the park.
2. The state’s budget
The good news is the state's bottom line continues to heal, with the improvement trickling all the way to the financially strapped local governments as sales and property tax revenues rise across the state. According to Reuters, "California's newest budget package of $152.3 billion in state spending emphasizes large increases for education, pays down debts, and proposes a 32-year plan to fully fund the teachers' pension system." That represents a three-decade investment that is a net positive for homeowners who must swallow the coming rise to their yearly tax bill, which averages close to three grand.
3. Tourists love it!
The state remains a top tourist destination as it keeps driving the economy forward with hotel occupancy at 73.4% statewide, 10 percentage points higher than the national average. According to TripAdvisor, there are precisely 12,246 things for tourists to do in California. That represents a robust and extensive opportunity for state and local economies that forever feeds financing to homeowners who work off the tourism trade.
4. The bad news
California faces a number of major structural challenges that keep the state’s economy from reaching its full potential, including hyper-cyclical budgeting, failure to address the state’s substantial long-term pension obligations, housing costs driven in significant part by abuse of the California Environmental Quality Act and a widening education gap relative to other states. And the state's enduring drought will no doubt weigh on the agricultural sector, the main user of the state's H2O.
5. And finally: jobs, jobs, jobs
Technological change will be a long-term challenge for California, and for all states. In commercial real estate, for example, traditional relationships between employment and commercial absorption are breaking down as more workers telecommute or work remotely. The job growth that used to propel new commercial construction activity is expected to have a smaller and smaller effect. And with more markets, such as North Texas, building larger tech sectors, skilled labor will continue to slowly bleed out of the state. Luckily, a surge in white collar jobs is helping to balance out this shift.