The Housing Chronicles Blog: Inland Empire economic outlook remains grim

Wednesday, October 29, 2008

Inland Empire economic outlook remains grim

According to a presentation this morning in San Bernardino, it looks like it's going to be tough sledding in the Inland Empire for the near future, with home prices continuing to decline and an economy in recession.

Such were the projections of speakers from Beacon Economics, which organized the conference and the University of Redlands, which acted a title sponsor (MetroIntelligence Real Estate Advisors was also a sponsor and authored the real estate sections of the report). From a story in the L.A. Times:

A panel of economists today offered grim predictions for the Inland Empire economy, including a rise in unemployment, a slide in manufacturing and a wave of foreclosures likely to continue for another two years.

Some of the numbers were staggering.

"There has been a 3,500% rise in foreclosures in the Inland Empire since 2005," said Brad Kemp, director of regional research for Beacon Economics, a research and consulting firm. "Most people want to think this housing drop is over, but it's going to continue."

A recovery, he said, is not expected until early 2011, the same year he thinks the housing crash will bottom out after home prices fall 28% to 32% more...

"California has been in a recession for almost a year now," said Christopher Thornberg, one of the founders of Beacon Economics, which produced the forecast. "This is not only a recession but a deep recession, and it's amazing how many people were denying it even when we were in the middle of it."

He said house prices must fall 40% to 50% to become affordable again. And when they do, it will be a long time before values go up.

"Housing markets don't bounce, they splat," he said. "We will be at the bottom for a while. The peak of foreclosures will be around for the next two to three years."

Recessions, he said, are a good thing because they "work the evil out of the system."...

Between 2000 and 2006, 315,000 jobs were created and 815,000 new residents moved in, according to the report. Home prices jumped 214% in Riverside County and 241% in San Bernardino County.

Many homeowners took out adjustable-rate mortgages that were foreclosed when the rates reset at a higher level. Home prices plummeted 35% in Riverside and 37% in San Bernardino Counties over the last year.

"Most of the downturn . . . will be experienced by the end of 2010, when median home prices are expected to be on order of $198,000 and $165,000 in Riverside and San Bernardino Counties respectively," the report said.

Click here for full story.

If you missed the presentation, you can find the conference materials here:

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