Category Archives: Economy

Economy General Property

The Firmest of Housing Market Recoveries

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By John Mulville, Regional Director – Metrostudy

Most people, especially those in the housing industry, can remember a few unbelievable anecdotes from the sub­prime era. One of the most memorable was the one about the Riverside County “investor” who owned 15 homes, all with “no doc” stated income loans (so called “liar loans”). Inevitably, the slightest hiccup in rent payments, taxes, dues and maintenance caused a shortfall in cash flow for this unfortunate inves­tor that ultimately led to a bankruptcy filing.

Compare the subprime era to 2018. Our thesis for 2018 is that the current recov­ery is experiencing conditions that are diametrically opposite of the subprime era. In fact, the conditions that typify the current housing market expansion have established one of the firmest hous­ing market recoveries in U.S. history.

Remember early in this recovery cycle when new home builders focused al­most exclusives on upper-end housing? Here is why.

Upper-income households don’t rely on wages from working as do lower income classifications. Affluent households have investments and business income that recovered much more quickly and with greater vigor than wage income. As a result, this cycle has many more home purchases being made by financially capable households than has been the case in past recoveries. Higher income groups are financially resilient, make larger down payments and have greater reserves in case of financial distress.

Composition_of_income_caries_with_Income_Level_Table

A second factor is immigration. In recent years immigration has been dominated by well-educated groups that earn higher wage levels than immigrants have historically. Additionally, current immigrants have a much greater propensity to buy and will spend more on housing, with larger down payments, than existing American citizens. It is important to note that the housing stock in many foreign countries is very unattractive. Immigrants considering a purchase have reported that U.S. housing, particularly new homes, are vastly more attractive and livable than housing in developing nations.

Trend_of_H-1B_Petitions_Filed_By_Annual_Compensation_Chart

A third factor is household debt. The so-called Great Recession rebalanced the amount of household debt with overall income levels (shown next). While it is true that the reduction in household debt came about as the result of foreclosures and short sales, it is also true that many households rid themselves of debt that could not have been paid off or amortized away. As shown below, debt service payments have retreated to levels last seen in the 1980s.

Mortgage_Debt_Service_Payments_Chart

The severe shortage of new and existing homes for sale has forced those interested in purchasing to improve their standing as potential purchasers. In general, it takes a degree of determination and persistence to be a successful purchaser in today’s market. Prospective home buyers have cleaned up their credit, made multiple offers, and written “sweetheart” letters to sellers, only to find there are dozens of other buyers. Some interested buyers opt for the new home market, where they hope there is less competition. However, builders recognize the deep undersupply of homes and will tend to cater to those parties that have the best chance to qualify for a loan and the determination to complete the purchase transaction.

The competition for homes can be viewed in terms of credit scores among those that have qualified for a loan (shown next). As shown below, for 2017 the FICO score (credit ratings for consumers) for successful mortgage applicants is at an all-time high. Public homebuilders that often originate their own loans report similar stellar credit scores among their applicants. A 720 FICO score is considered to be in the “good” range and highly creditworthy. Accordingly, current scores indicate a highly qualified and capable pool of purchasers is competing for the available homes.

Much has been made about the lack of entry-level and first-time buyer activity until recently, when this activity has finally picked up. The fact that buyers are much older and marry later in life has a profound impact on the home purchase equation. Intuitively, we recognize that getting married later in life offers more maturity to the relationship; in fact, divorce rates for those married at older ages are markedly lower.

Lending_Standards_for_Approved_Mortgage_Loans

The same can be said for older home­buyers, particularly in a market climate were the determination and persistence needed to purchase will tend to exclude the less-committed buyer that may be infatuated with the concept of owning. Over time the older homeowner will prove to be a better neighbor, a better owner and a better borrower than would be typical of a much younger age profile.

Age_at_Which_Majority_are_Married_or_Homeowners_chart

Another contributor to the quality and durability of the current recovery is the lack of new home construction. The recession depressed housing construction levels in a very severe manner. Housing starts were far below the totals needed to meet population growth. New home construction rebounded very slowly, especially in Southern California, even as the economic expansion took hold and then strengthened.

The chart on page four shows building permits in six Southern California counties going back to 1990. Normal population growth suggested the need for 83,000 apartments, condos and single-family-home permits annually (as shown by the dashed red line). Permits levels have been below 83,000 in nearly all years and far below that level in most years.

Annual_Residential_Permit_Activity_Chart

The magnitude of the undersupply is large enough that there is no practical way to build our way back to supply/de­mand equilibrium. This indicates that strong demand will persist and that the current recovery will enjoy positive de­mand characteristics for years to come.

Key Takeaways

It is widely recognized that housing, or more specifically, poor credit stan­dards and loan underwriting, led to the subprime debacle and the Great Reces­sion. Historically and statistically, it is very unlikely that real estate will be the cause of the next economic downturn or recession. Additionally, policy mak­ers and government officials have typi­cally taken steps to avoid a repeat of the conditions that caused the LAST reces­sion. The aforementioned factors indi­cate that housing will not be the cause of a similar disruption. Moreover, the factors suggest that the current housing market recovery may enjoy the firmest footing and the most positive alignment of conditions experienced by any hous­ing market recovery in U.S. history.

Please refer any comments or questions to:

John Mulville, Regional Director – Metrostudy
2211 Michelson Drive, Suite 810
Irvine, CA 92612
jmulville@metrostudy.com
949-579-1250

Economy General

Tax Reform has Made Investment in Commercial Real Estate More Attractive

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By E. Lamont Cosby, Cost Segregation Services, Inc. Senior Consultant

The Tax Cuts and Jobs Act of 2017, along with other tax reform, has made investment in commercial real estate an even better proposition. There is now the opportunity for a greater “Return On Investment” for commercial build­ings. This legislation is also important to investors considering the purchase of a commercial building.

To put it simply, ROI is positively im­pacted by a 5% to 8% influx of cash flow from a significant reduction in income tax liability. This reduction in income tax is largely from bonus depreciation. Money that is not paid in income tax­es is now money available to building owners, business owners, and investors to use or invest.

The Tax Cuts and Jobs Act increased the bonus depreciation of commercial buildings from 50% to 100% for quali­fied property purchased after Septem­ber 27, 2017. While there are technical and other considerations, bonus eligible property must have a depreciation life of 20 years or less. Bonus depreciation has been expanded to include both newly constructed buildings and existing prop­erty purchased after Sept. 27, 2017.

While accountants are a part of the pro­cess, this is an engineering-platform-based building analysis. In fact, many CPAs are turning to organizations like Cost Segregation Services Inc. to pro­vide them with the calculations and guidance to allow incorporation of the relevant data into the business or prop­erty owner’s tax returns.

Experts who handled depreciation schedules and forecasts prior to the Act are now on a steep learning curve. For example, Qualified Improvement Prop­erty (QIP) has replaced qualified lease­hold improvements. Qualified retail improvements and qualified restaurant improvements, which have had a 15-year recovery period, are now eligible for 100% bonus depreciation in the cur­rent tax year.

In order to achieve these financial ben­efits requires that building “units” are identified and valued by a specialized building analysis called Cost Segrega­tion. Although there are other methods of identifying buildings, Cost Segrega­tion is the proven method and the most acceptable method by the IRS.

In summary, the way that buildings are treated for tax purposes has changed. These changes are favorable to the build­ing owners. An engineering-platform-based Cost Segregation analysis allows building owners to take full economic advantage of the Tax Cuts and Jobs Act, as well as the Tangible Property Regu­lations. Cost Segregation Services, Inc. is one of the national firms that does the identification, valuing, and calculations for the owners and their accountants.

E. Lamont Cosby
Cost Segregation Services
310 218-0446 direct line
www.costsegserv.com

Economy Education General

Victorville’s ComAv Takes the Lead in Local Job Creation and Education Through “Aviation Pathways”

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ComAv

By Lisa Skeels

Aviation_Pathways_Logo

After adding 100 jobs, and expanding to over 300 employees over the past year, ComAv CEO Craig Garrick’s biggest challenge is finding local Victor Valley residents who can handle the type of work that the global airplane maintenance and leasing company excels in.

Last year, ComAv launched “Aviation Pathways” to directly address the issue it was facing in sourcing local employees and, along the way, gear students for promising careers in aviation. The plan was to partner with local educators to gain a better understanding of their interests and needs, leading to the development of aviation-based educational programs while providing aviation field expertise.

“We want to recruit locally as our staffing requirements increase,” Garrick told the Victorville Daily Press when the program was launched. “We’ve found that we are not only helping our own community by providing jobs, but recruiting locally provides our company with a longer-term and loyal employee base. We pride ourselves as a company with low employee turnover, which is unusual for an aviation-based compa­ny.”

On February 20, 2018, ComAv hosted the first “VVC Aviation Tour” with students, joined by fellow aviation companies GE, the VVC Aviation School and Exquadrum, coordinated with the Vic­tor Valley College Bridge Program.

ComAvPhoto

“It was a joint effort, everyone did a really great job,” said Lisa Skeels, ComAv Director of Corporate Marketing. “Victor Valley College Bridge Program did a lot of the heavy work in coordinating us all to make this happen. We’re happy to see the Aviation Tour as a great extension of the Aviation Pathways efforts”

Over 100 students from Victor Valley area High Schools convened at Southern California Logistics Airport (SCLA) and held a day-long program at ComAv’s hangar for a tour of aviation facilities and presentations by the companies and Victor Valley College programs. This tour provided students with not only ex­posure to the aviation industry, but with the unique mix of aviation companies, students can learn about different types of jobs and education within the avia­tion/aerospace industry.

Students at this session came from all over, including Serrano High School, Oak Hills High School, Hesperia High School, Victor Valley High School and Barstow High School. College students from Victor Valley College also attended.

At GE, students learned about en­gine testing and jet propulsion; at Ex­quadrum, they learned about rocket science, engineering & testing opportu­nities; the Victor Valley College Avia­tion School showcased its airframe and power plant education program and taught students about the educational requirements needed to pursue a career at the aforementioned companies.

ComAv, in addition to presenting about the job opportunities available at the company, offered students the opportunity to tour a 747.

The program ended at ComAv’s wide body hanger where over 100 students were treated to lunch and gathered to ask questions and get more one-on-one time with the organization they may have been most interested in. Aviation Pathways allows those interested students to seek internships with ComAv and get the hands-on experience needed to become a licensed airframe and power plant mechanic.

Inside_Cockpit

Located right next to Victor Valley Col­lege’s Airframe and Powerplant (A & P) school, ComAv offers paid internships, as well as provides the guidance and in­struction needed to further the intern’s education. Don Dombrowski, ComAv’s Director of Quality and a founder of the Aviation Pathways program, is a long-time teacher at the A & P school.

A part of Aviation Pathways’ program are student internships with a pathway to employment at ComAv. One student from the first Aviation Tour has already been accepted for a ComAv internship, and there are three more slots open for summer internships.

Another Aviation Tour is scheduled in May, with a date to be determined. Educators interested in being a part of Aviation Pathways can learn more by contacting Lisa Skeels at lisa.skeels@comav.com.

Economy General

Inland Empire Small Business Development Center Assist High Desert Business Start-Ups Evaluate the Local Business Environment

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By Louisa L. Miller, Business Consultant

The economic fate of the nation of­ten does not reflect the environment and activity in the High Desert. Small business growth has been slow since the Great Recession across the coun­try ,and the uncertainties caused by changes in national and local govern­ment, for better or for worse, make business and banking more cautious. Uncertainty is the hobgoblin of busi­ness growth. The interest folks in the High Desert have for starting and growing their small businesses is strong.

The Inland Empire Small Business Development Center notes that the top startup business categories in­clude food services/restaurants, retail, consulting and fitness-related busi­nesses. These categories look a lot like they did a decade ago. In some ways that is a concern because of rela­tively low pay, but the upside is that our region consumes a lot of retail of­ferings. There is opportunity for small manufacturing-and logistics-related services that can be supported by local infrastructure and personnel.

Those wishing to take advantage of the older and newer opportunities need to look for problems that exist and bring solutions that solve problems that peo­ple care about to the table. It is also important for them to be passionate about what they do and not just be in it for the money. A key component of working with startup businesses is assisting them in the feasibility pro­cess in evaluating the business envi­ronment, identification of customers, as well as establishing their business legal structure. In short, there needs to be evidence that supports the busi­ness idea.

Existing businesses counseled sought assistance with business expansion, working capital, equipment or real es­tate purchase loans; business manage­ment and marketing. The IESBDC assists them with gathering market and financial data to support their business expansion, loan, etc. In addition, as­sistance is provided with the develop­ment of financial projections based on proposed business growth expected from the expanded operations or fund­ing. It is also important to assist exist­ing business with a feasibility analysis to ensure that the proposed expansion will be profitable and generate posi­tive cash flow.

Client sessions cover a variety of top­ics based on the client’s specific needs and can touch on things such as: how to start; being an entrepreneur; busi­ness planning for expansion and mar­keting/advertising. The top areas of counseling are: Sources of Capital, Startup Assistance, Business Planning and Marketing. Client referrals come from a variety of sources, including banks, government agencies, cham­bers of commerce and client word of mouth. These businesses include light manufacturing, restaurants, au­tomotive service/repair, janitorial, re­tail, Internet-based businesses, home -based businesses, landscaping, coffee shops, gift shops, and residential care facilities.

In 2016, with the establishment of outreach offices at the Apple Valley Chamber of Commerce and the City of Hesperia, individuals seeking to use the services of the IES­BDC were given the op­portunity to choose one of two locations to meet with Business Consultant Loui­sa Miller. During 2016 the IESBDC offered 13 semi­nars and workshops in the High Desert covering such areas a pre-business plan­ning, marketing/sales, ac­counting/budgets, business loans, QuickBooks and tax planning. In addition, in late fall a Business Focus/Boot Camp-style series was hosted at the Apple Valley Chamber of Commerce offices. The 4-part series included the following topics: Open for Business; Under­standing Your Financials; Marketing Your Small Business; and Marketing Technologies to Attract Customers.

Currently, there are 10 seminars scheduled for 2017. Anyone interested in registering for one of the High Desert seminars or others scheduled throughout the two-county area can go the IESBDC’s website, www.iesmallbusiness.com, and click on the Training section.

The Inland Empire Small Business Development Center is a cooperative program of the Inland Empire Center for Entrepreneurship and is supported by the U.S. Small Business Admin­istration (SBA) and California State University Fullerton and extended to the public on a non-discriminatory ba­sis. To learn more about the program or to schedule an appointment, call Louisa at 951-295-4183.

Economy Education General

Launch of First Entrepreneurship Center-Barstow Resource Center

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Entrepreneur

By Paul A. Courtney

ecBarstow.com/Barstow Area Center for Entrepreneurs, 1041 West Main St., opened in January 2017 with a mission to help unlock economic and education­al potential, which are powerful tools to drive economic growth and prosperity. Barstow area Entrepreneurs are integral to the stable and thriving local formal economy but often face disproportion­ate barriers, including travel distances, financial, and professional educational support services, states Paul A. Court­ney, Entrepreneur and formal Educator.

ecBarstow.com is centrally located where students, parents, individuals and business people will have access to essential resources (public computer access, administrative/office support services, education referral, financial planning, business planning, signature training, OSHA training, etc. Service Support: scheduling, billing, collec­tions, employee training, HR, and safety training. All designed to facilitate and develop entrepreneurial and educational enhancement capacities. “The center will provide an entrepreneurial/edu­cational ‘hub’ that will create a robust exchange of communication and ideas that will stimulate growth and benefit the community.”–Paul Anthony Courtney, ecBarstow.com, Ex­ecutive Director.

Entrepreneur1

The Center seeks to augment the educa­tional offerings of the local schools and col­leges by coordinating and offering paid and non-paid internships that require entrepre­neurial training in the areas of customer service, human resources, marketing, sales, employment acquisition, leader­ship, employment re-entry and business planning. The center supports economic diversification and seeks to serve as a catalyst for innovation that will stimu­late Barstow’s business growth and, when fully functioning, will be led, managed and operated by subject matter experts, K-12 grade students and col­lege students.

ecBarstow.com will serve as an example of how private industry can cohesively work with education and community leaders to successfully promote entre­preneurial activity!. J. Adaberto Quijada, Director/SBA, U.S. Small Business Ad­ministration, has agreed to incorporate SBA resources into the center, creating history (in Barstow) and the surround­ing communities that the resource cen­ter will serve. Additional details will be released as they come available.

For further information, please contact Paul A. Courtney / ppaccln2@aol.com / 760-559-8347

Economy General

Browning Automotive Group Announced State-of-The-Art Toyota Dealership in the High Desert

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By Scott Dickinson, Executive Vice President, Browning Automotive Group

We all love that shiny new toy. Wheth­er it’s a new car in the driveway or the latest phone in our pocket, we gravi­tate towards the latest and greatest. So when the Browning Automotive Group announced a state-of-the-art Toyota dealership coming soon, the entire High Desert community began to buzz with excitement.

Located directly across from Costco on Valley Center Drive, the smell from the baked goods being prepared pales in comparison to the seven acres of land being prepped for the largest dealership in the area. Victorville awaits the newly built dealership stretching over an acre, including a 15,000 sq. foot showroom, a large parts boutique, and a huge four-lane service drive housed with 14 ser­vice writers ready to check in tons of ve­hicles. Over 60 lifts will make sure your vehicle is in tip-top condition ready to take that trek to Las Vegas or make it to Saturday’s soccer game.

Toyota

With more than 1,000 vehicles on the lot, choosing a new or pre-owned ride will become a more intense experience. Like a kid in the candy store, the choices of transportation will be immense! On the showroom floor alone, 8 vehicles will be showcased and swooned over during the car-buying process. Custom­ers are sure to get their 10,000 steps in while traversing through rows upon rows of cars, trucks, and SUVs ready to drive off the lot.

Twenty-four sales stations and 8 F&I (finance & insurance) offices will expe­dite the car-buying process in the highly energy-efficient dealership. Huge panels of Low E Glass will keep the customers cool and safe from harsh UV rays. The glass reflects infrared energy (or heat) and at night, the bright yet cost-efficient LED lights will brighten up the show­room.

An Exterior Insulation Finishing Sys­tem (EFIS) will contribute to the build­ing becoming highly energy-efficient by cooling and being environmentally responsible. The insulation is applied to the exterior, making the dealership even more cost effective. The insulation will withstand the bright and hot High Des­ert summer heat.

Valley Hi Toyota will be a destination with state-of-the-art building materials as well as the latest in technology. There will also be a large customer lounge area complete with custom decor, charging stations, and other amenities such as fresh coffee, vending machines, children’s play area, and even oc­casional massages provided by a lo­cal business. An array of monitors will provide enter­tainment as well as informative details of service waiting times, service specials, and dealership deals.

Valley Hi Toyota will become the ulti­mate destination to purchasing and ser­vicing vehicles in the High Desert. The Toyota product is surging with innova­tive and creative advances in car design. By constructing a new and extraordinary dealership, buying a new or pre-owned vehicle will surpass any and all expecta­tions for generations to come. Especial­ly, when it comes to buying that shiny new Toy(ota).

Publisher note:

As publisher of the Bradco High Desert Report, we have never had the oppor­tunity of having the High Desert (Vic­tor Valley) New Car Dealer or New Car Dealerships supply us information about their very dynamic industry which gen­erates a tremendous amount of sales tax dollars to the City of Victorville.

Nearly 15 years ago, we started to see the development of the new car auto industry and Victorville’s new car fa­cilities built along Civic Drive (Greiner, GMC, Buick, Dodge, Chrysler, Nissan, Honda, Kia, etc.). Now the Browning Auto Group, the High Desert’s largest owner of new and used car dealerships, is making a very serious commitment to the City of Victorville and the High Desert region by the creation of their new and greatly improved dealership.

Many people don’t realize (many of us old timers do) that the area where these car dealerships are located was a part of Roy and Dale Rogers’ amusement facil­ity adjacent to Interstate 15.

Mr. Kent Browning, Owner and Presi­dent, Mr. Scott Dickinson, Executive Vice President, and their four general managers, Mr. Todd Stokes of Toyota, Mr. Joe Vickers of Honda, Mr. Shawn Nazari of KIA, and Mr. Todd McNitt of Nissan, collectively sold approximately 9,452 cars in 2016, which created tre­mendous financial benefit to the City of Victorville. Congratulations to Brown­ing Auto.

Mr. Browning and his staff have been strong supporters of Victor Valley Com­munity College and many of the en­deavors undertaken by the Victor Val­ley Community College Foundation.

Thank you for everything that you do.

Economy General

Demographic Clarity for Businesses

Published by:

Big Shift Lead

By Chris Porter and John Burns

Demographic shifts create exciting op­portunities for the business leaders who act on them. Those who do not react can quickly fall behind. With change occurring more rapidly to­day than ever before, we recognize the need for more clarity on the demographic trends shaping the US today.

There are plenty of anecdotes floating around about how consumer behavior var­ies by generation. These are often informed by one’s personal experience with their own parents, peers, or children. Business leaders need real facts to help them make informed decisions and adjust their strategies when unanticipated events shift prevailing trends.

Our search for clarity resulted in a book called Big Shifts Ahead: Demographic Clarity for Businesses. We wanted to make demographics easier to understand and anticipate by giving readers the tools and framework to recognize the shifts that will affect nearly every business.

Demographic

At a high level, here are some of the shifts coming that businesses need to be aware of:

  • 38% more people over the age of 65. Most of growth in the population 65 or older, which will reach 66 million peo­ple by 2025, will be young baby boom­ers born in the 1950s. They are 7% more likely to work than their predecessors, which means 25% will be working full-time. Demand for higher-density, lower-maintenance living among this generation has already surged. We coined the term “surban” to describe urban living in sub­urban environments. These active retir­ees will keep their cars but don’t want to spend much time in them. They want to live near their kids, too. More than ever, we expect they will be providing down payments to the kids to keep them living nearby.
  • 8 million more working women. Wom­en now earn 58% of all college degrees. They also earn more than their spouse or partner 38% of the time—a stat that has been rising 0.4% per year for at least the last 30 years. Men and women, particu­larly those born in the 1970s, are willing to trade a large house for a home closer to work so they can be near their kids. While the percentage of 20–64-year-old women choosing to work has fallen 3% since 2001, the percentage of men has fallen 5%. The real estate needs of these 78 mil­lion women will vary. The one common thread will be how busy they are.
  • 8 million increasingly affluent immi­grants. Clearly, elected officials can af­fect this trend dramatically. For example, three immigration laws in the 1980s gave rise to more immigration over the subse­quent 20 years than the prior 60 years. Today’s immigrant tends to arrive on an airplane from China, Brazil, and other countries where the economies have been booming. While most expect some slow­ing in those economies, the pent-up de­mand to move to the US remains large.
  • 8 million newly formed households. 13.3 million of these households will re­place a relative who passes away or moves to an assisted living facility. The net gain will be 12.5 million households, which is an 86% increase over the paltry growth from 2005 to 2010. The record number of deaths recently is one big reason that net household formation has been slow. Nonetheless, these 25.8 million want to live differently than prior generations and will fill their homes with all sorts of tech­nology. While more people than usual have been living urban, three times as many live suburban.
  • 62% of the growth heading south, where 42% of America currently lives. Plenty of jobs, affordable housing and warm weather will make Texas, Arizona, Nevada, Florida, Georgia, North Caro­lina, and surrounding states the growth engine.
  • Renting taking market share. 80% of the people passing away own their home, making it very difficult to prevent home-ownership from falling. With mortgage interest and property taxes on most homes already less than the standard deduction, the tax benefits of homeownership have been greatly reduced. The foreclosure scars of the last recession have not faded either. People want to own their own home but are going to proceed more cautiously. They will wait until they are confident in their job and savings before taking on a mortgage. We estimate that homeowner­ship will fall to 60.8% in 2025.

Below are just some of the highlights from the book, which includes 100 color charts and two tools for making demographic anal­ysis much easier:

  • Define each generation by decade born. We decided to make every generation 10 years long. The math becomes easy: those born in 1980 turn 37 this year. Gen­erations divided by decade have far more in common than previous generational definitions, which can be up to 20 years long. Our method makes it easier for you to understand people’s backgrounds and attitudes, something we summarize in the book. We give each generation a name based on the shift they led in society:
    • 1930s Savers
    • 1940 Achievers
    • 1950s Innovators
    • 1960s Equalers
    • 1970s Balancers
    • 1980s Sharers
    • 1990s Connectors
    • 2000s Globals
    • Apply the 4-5-6 Rule. We group all the external factors that influence demo­graphic characteristics into four main categories (which we call the Big 4 Influ­encers):
    • Government policies
    • Economic cycles
    • New technologies
    • Societal shifts

We describe how different policies, cycles, technologies, and societal shifts have af­fected groups, depending on where they were in the 5 Life Stages that we outline. This framework will help you adjust your strategy when one of the Big 4 Influencers changes unexpectedly. You will also be bet­ter able to answer the 6 who, what, when, where, why, and how questions you are ask­ing about your business.

We live in an exciting time when American businesses can capitalize on rapidly chang­ing demographics. These changes will im­pact the types of homes, offices, retail, and storage spaces America needs and where America needs them. Group the generations by decade born and use the 4-5-6 framework to quickly make better-informed decisions.

Economy General Politics

San Bernardino County Economic Development Agency Improving the Job Prospects of Residents

Published by:

By Mary Jane Olhasso, Assistant Executive Officer, County of San Bernardino

One of the most rewarding aspects of the San Bernardino County Economic De­velopment Agency’s work is improving the job prospects of residents. Work­ing with the business community on relocation and expansion opportunities and implementing proactive workforce development programs are just some of the ways the agency makes an impact. Moreover, the department’s efforts are augmented by valuable partners in edu­cation, investment and real estate who work in collaboration to ensure job cre­ation opportunities.

A great example now being led by edu­cation partners is the implementation of a nearly $15 millon grant awarded to Chaffey College and the Inland Empire Regional Training Consortium (IERTC) in 2014. The competitive grant was awarded by the Trade Adjustment As­sistance Community College and Ca­reer Training (TAACCCT), which is co-administered by the Department of Labor and Department of Education, to improve manufacturing training for the Inland Empire. The IERTC includes 10 community colleges, 2-four-year universities, and the Manufacturers’ Council of the Inland Empire as well as several faith-based and community or­ganizations.

In March Chaffey and the consortium celebrated the opening of the Industri­al Technical Learning Center (InTech Center) located on the campus of Cali­fornia Steel Industries (CSI) that will train thousands of workers in advanced manufacturing, advanced transporta­tion, logistics, energy and utilities, as well as computer/ICT/digital media. These programs are conducted at no or low cost to employers and employees, thanks to the TAACCCT grant.

Through TAACCT funding, Barstow Community College now offers a low-cost, two-year plan in Industrial Main­tenance Mechanic Technology. This program offers National Center for Construction Education and Research(NCCER) stackable certificates. Bar­stow offers this program at a lower cost compared to similar programs offered at private colleges.

These programs and others are true job creation successes. California Steel ac­cepted five Barstow Community College students into their paid internship program over the last several years and a few have stayed on to become full-time California Steel employees. A number of other companies have partnered with Barstow Community College, either by recruitment, placement, advisory, or donations, including: NRG Energy, Abengoa Solar, Rio Tinto, Trinity Con­struction, National Training Center-Fort Irwin, Marine Corps Logistics Base, and Burlington Northern Santa Fe.

Another example of how community colleges are increasing job prospects is the work being done by Victor Valley College. The Welding Department at Victor Valley College has been an ac­tive department in the community for more than 35 years as a Los Angeles Certified Testing Facility for the Los Angeles Department of Building and Safety, an American Welding Society Certified S.E.N.S.E educational facil­ity, and a Fabricator and Manufacturers Association International Educational partner. Today, the Victor Valley Weld­ing department has evolved into a robust program that has placed students throughout the years with government agencies such as NASA, the Naval Nuclear Submarine Assembly dock in Virginia, and the Marine Corp Logistics Base in Yermo. It has served as a pre-employment testing facility for Northwest Pipe and Cas­ing, partnered with local industry to create intern­ships and pathways, and is continually working to provide students with job placement opportunities.

Thanks to additional funds, Victor Val­ley’s successful Welding department will expand its training in metal forming and fabrication with the planned addi­tion of space and resources. Construc­tion will begin on their new facility, which is slated to be completed by the end of this year.

The efforts of Barstow Community Col­lege, Victor Valley College and InTech Center are all part of a collaborative solutions-oriented effort to provide an economic boost to the county by provid­ing new skills to workers who are then able to quickly fill jobs in manufactur­ing, distribution and related technology sectors.

The Economic Development Agency has also been focused on a manufac­turing initiative that builds awareness of the county’s advantages for manu­facturing businesses: it identifies opportunities for manufacturers outside the county to consider expansion or relocation to the county; identifies obstacles to expansion of existing county busi­nesses; and informs busi­nesses about workforce incentives and programs.

The team has already reached out to nearly 1,000 unique manufac­turing companies, result­ing in more than 258 direct contacts that allowed staff to share information on the benefits of San Bernardino County. More than 90 of those contacts were sent follow-up let­ters and general cost com­parisons for manufactur­ing in San Bernardino vs. Los Angeles or Orange County. This effort will continue throughout this year.

The department also hosted educational workshops in collaboration with other partners, provided resources to educate and prepare local manufacturing busi­nesses that are interested in exporting or expanding their export base, and en­gaged in business-to-business match­making meetings, both locally and in other countries. Additionally, the county is participating in the Advanced Manu­facturing Partnership’s (AMP SoCal) efforts with USC Center for Economic Development as the lead agency to pro­mote and support the aerospace and de­fense industry in Southern California.

These multiple outreach efforts and the progress to date will continue to posi­tion this region as a premier choice, especially in Southern California, for new investment and job creation.

Economy General Politics

Taxable Parcels Increase in Value Due to Existing Home Sales

Published by:

By Bob Dutton, San Bernardino County Assessor

In June 2015 the assessment roll contained 820,314 taxable parcels and was valued at $186,894,462,703, which represented a 5.077% net in­crease as compared to the 2014 as­sessment roll. Our office reported that the primary reasons for the in­crease in value were sales of existing homes, Proposition 8 recovery of as­sessed values, and the Proposition 13 Consumer Price Index adjustment. New construction also contributed to the increase but to a lesser degree.

The 2015 assessment roll finally reached and surpassed the previous high achieved in 2008 before the collapse of the real estate market. Three of the cities with the highest increases were all located in the High Desert, including Hesperia at 7.8 %, Victorville at 6.7 %, and Adelanto at 6.5%.

When looking at historic trends for the High Desert, we see that the as­sessment roll for all cities is increas­ing since the drop in values experi­enced in 2009. The upward trend is a positive sign and many of the same drivers for the County as a whole are responsible for the upward trend in the High Desert. In general, peo­ple are taking advantage of the af­fordability of homes in the market. Moreover, little of this upward trend is due to new construction. Approximately 12 % of the increase was due to construction, unlike the 2006-2007 valuations when 60 % of the value increase was due to new con­struction.

This bodes well for the High Des­ert. While I am optimistic about the region, the greatest need is for new business start-ups. Based on person­al experience over the course of my career, I think the greatest judge of a healthy economy is small business growth.

The High Desert has all the right components for healthy growth, such as low cost land, affordable homes, basic infrastructure, and a pro-busi­ness approach from the County and High Desert cities. I think the re­newable energy opportunities that are unique to the region are another benefit to business growth.

Looking back over the course of my career in both the private and public sectors, I was fortunate to have par­ticipated in encouraging: the redevel­opment of Ontario Motor Speedway, which ultimately became Ontario Mills; the development of Victoria Gardens; expansion of Ontario Inter­national Airport; and the billions of dollars invested in goods movement and transportation infrastructure for the Inland Empire, as well as help­ing to bring Amazon to our region. All of these projects are significant long-term catalysts for ongoing eco­nomic growth and development opportunity.

Now I look at the current trends and believe that the future is bright, espe­cially because our County, including the Assessor’s department, is com­mitted to delivering a friendly and fair business environment. This is all part of my work to help San Ber­nardino County be recognized as the best place to live, work and raise a family.

Values and Parcel counts By Roll Year and High Desert City

Values and Parcel Counts By Roll Year and High Desert City

Economy General Property

2016 Economic and Housing Market Outlook

Published by:

By Oscar Wei, Senior Economist

CALIFORNIA ASSOCIATION OF REALTORS®

Economic Outlook

The U.S. economy ended last year with a lackluster performance of 1.4% annual­ized growth rate in the fourth quarter of 2015. While the annual increase in GDP in 2015 maintained the pace as that of 2014, it was a letdown for many econo­mists who predicted a stronger outlook for the nation last year. The subpar per­formance of the year was due to multiple factors including: 1) the sharp decline in oil and commodity prices; 2) the eco­nomic slowdowns in China, Europe, and Canada; and, 3) a strong dollar that makes American goods relatively expensive and weakens demand overseas. Despite the hiccups in recent quarters, the labor mar­ket continued to improve, with nonfarm employment averaging a gain of more than 233,000 new jobs per month in the last 12 months. The unemployment rate in March 2016 also reached a near-full employment level of 5% that we have not seen since 2007.

Meanwhile, the economy of California continued to grow at a faster pace than that of the nation as technology and tourism pushed the state economic growth ahead of much of the country. The strong per­formance in the labor market is an illustra­tion of how well the Golden State has been doing in recent years. The unemployment rate in California dropped to 5.5% in Feb­ruary, the lowest level observed since Au­gust 2007. Statewide job growth has been rising at or near 3% year-over-year since late 2012. While the unemployment rate in California remained above that of the U.S., the growth in the job market at the state level has been outpacing the nation since March 2012. Overall, the outlook for the economy remains positive with continued improvement in consumer, business, and state and local government spending in 2016.

California Housing Market Outlook

With the economic fundamentals remain­ing strong in California, the state housing market has had a solid performance since the beginning of this year. Through the first two months of 2016, sales of exist­ing single-family detached homes have surpassed the sales level at the same point of 2015 by 7.6%. When compared to the previous year, sales in February in­creased in most price segments except for those properties priced under $200K, between $300K and $400K, and homes over $2,000,000. Homes priced between $1,000,000 and $2,000,000 experienced the strongest growth—rising by 10.8% over February 2015.

Much of the growth in Southern Califor­nia in particular was driven by the Inland Empire as sales in Riverside and San Ber­nardino were 7.5% and 5.1% above last year. Orange County saw a 1.5% increase in sales last month. However, Los Ange­les, San Diego and Ventura all experi­enced negative growth in February. In the Bay Area, only Solano and Sonoma saw an increase in home sales, suggesting that tight inventories are beginning to nega­tively impact activity.

As for the statewide median home price, growth rate cooled to a 3.8% annual pace in February 2015 as the statewide median price increased to $446,460. This marks the slowest rate of growth for home price in six months and likely reflects the shift of sales activity toward the Central Valley which has lower home prices on average. As tight inventory in the Bay Area and Southern California drive a larger share of activity in more affordable areas, price growth should continue to normalize in the remainder of 2016.

The statewide housing supply remains an issue as the demand for housing contin­ues to outpace the growth in inventory. While it is a welcome sign to see steady improvement in housing demand, the lack of supply is definitely a concern. The im­balance between the two sides not only intensifies market competition and pushes home prices higher, but it also leads to housing affordability issues that will ulti­mately lower homeownership rates if the problem persists.

The supply constraint in the Bay Area is more pronounced and has led to fewer homes being sold in the high-cost region. On the other hand, demand in regions with more affordable housing continues to improve and more home sales will like­ly take place in the coming year. As such, a slow-down in home price appreciation at the state level is anticipated as the mix of sales changes in favor of lower-priced properties in 2016.

High Desert Regional Housing Market Outlook

Home sales activity continued to improve in the High Desert region at the beginning of 2016. The number of single-family detached homes sold in February 2016 increased 4.5% when compared to the same time last year. In fact, sales have been improving on a year-over-year basis for every month since March 2015. The year 2015 was also the first year since 2009 that the market experienced a year-over-year gain in sales. With the econo­my expected to improve in the upcoming year, sales in the regional housing market should continue to grow with a mid-single digit in 2016.

The median home price of the High Des­ert region remained on an upward trend in the most recent month. When com­pared to last year, the regional median price increased 8.5% to $203,600 in Feb­ruary. Over the last twelve months, the year-over-year gain in median price has an average of 9.6%, slightly higher than the statewide average of 6.0% for the same time frame. Home prices in the High Desert region have been improv­ing since 2012, with its annual median price increasing 24.5% in 2013, 16.6% in 2014, and 9.2% in 2015. Despite the upward trend in price in recent years, the regional median price in February 2016 remained 39.6% below the cyclical peak reached in June 2006 but was up 90.9% from the recent cyclical bottom reached in April 2009. For the rest of 2016, increase in housing demand in the region should put upward momentum on home prices as the economy continues to improve. The regional median price could increase year over year by a mid-to high-single digit in 2016.

Economic and Housing Market Forecast

Fig 1: Sales of single-family homes (High Desert)

Fig 1: Sales of single-family homes (High Desert)

Looking ahead, the state economy should continue to grow through 2016, as the high-tech sector remains in the driver seat. New product development may disrupt in­dustries across the globe, but it could also yield sizable revenue and have significant spillover effect in their respective local economies. The construction industry is an example that shows how the rapid ex­pansion of technology firms throughout Silicon Valley has helped to drive the con­struction payrolls to increase by double-digits over the past year. Improvement in the construction industry is expected in the upcoming year and will help to push the economy forward. The statewide non-farm job growth will increase by 2.3% in 2016, and the unemployment rate in Cali­fornia will fall from 6.2% in 2015 to 5.5% in 2016.

Meanwhile, the California housing market is expected to have a decent performance in 2016. The Federal Reserve will most likely raise the federal funds rate two to three times in 2016. Modestly higher in­terest rates, however, should not present much of a direct challenge to the hous­ing market. With the economy expected to grow, housing demand should continue its upward trend, with sales of existing single-family homes projected to increase 6.3% in 2016 to 432,570.

Fig 2: Median price of single-family homes (High Desert)

Fig 2: Median price of single-family homes (High Desert)

Inadequate supply in high-end areas such as the Bay Area will continue to exert up­ward pressure on prices, but home sales in those regions will simultaneously be constraint. The constraint in home sales in the Bay Area leads to a decline in the share of high-end homes sales to overall home sales, which could also lead to a slow-down in the appreciation in the state­wide median price. As such, the statewide median price is expected to increase at a moderate pace of 3.2% in 2016 as more homes in the affordably-priced Central Valley and Inland Empire are being sold.

Risks that Could Tip the Scales

Fig 1: California Housing Forecast

Fig 1: California Housing Forecast

Although the outlook for both the econo­my and the housing market remains posi­tive for 2016, there are uncertainties and wildcards in 2016 that could change the outcome and tip the scales the other way. Global economic issues, for example, could begin taking a toll on economic growth domestically in 2016. Slow eco­nomic growth in China and other Europe­an countries, coupled with stronger growth in the U.S., have paved the way for higher interest rates and led to a stronger dollar. As such, international trade will likely be a drag on growth with global economic slow-down and the stronger dollar cut demand for exports, while continued improvement in consumer spending will pull in more imports.

Robust increase in jobs in high-cost ar­eas could be another downside risk to the housing market. Due to the spillover ef­fect of growth in high-paying jobs, plenty of lower-paying jobs have been created, with many of these jobs being in the same geographic areas where the high paying jobs are being added. As such, income disparity in these areas could further com­plicate and deteriorate the housing afford­ability issue.

Policymakers continue to list the mortgage interest deduction (MID) as a potential tar­get in any movement toward tax reform. If MID were to be eliminated, home buy­ers would not have the tax savings benefit of homeownership, thus reducing their incentive to purchase a house, lowering the demand for housing, and thus reduc­ing affordable homeownership across the country and the State of California. The economic impact would stress the state’s already battered balance sheet and, if any of the proposed changes were to come to fruition, could amount to billions of dollars of economic output lost.

While the recent volatility of the stock market has been drawing attention in the news, it is more of a distraction rather than a disruption to the continual improvement in the housing market. The drop in values of equity in January reduces the overall wealth and may have a small negative ef­fect on the economy in general. Its impact to the housing market, however, should be minor, as solid employment conditions, anticipated increase in household forma­tions, and record-low interest rates contin­ue to provide support to the fundamentals of the housing market.

 

Economy General

Economic Report: Job Growth on the Horizon

Published by:

Economic Report: Job Growth on the Horizon

By Sandy Harmsen, Executive Director,

County of San Bernardino Workforce Development Board

The San Bernardino County Workforce Development Board (WDB) commissioned the Virginia-based consultant Chmura Economics and Analytics to conduct in-depth analyses of the Inland Empire’s economic vitality on an annual basis. The purpose of the analysis was to assist the Board in determining future actions that will support growing industry sectors to strengthen the workforce talent pipeline. In addition it provides an accurate guide to where the WDB should invest funds to ensure the availability of skilled workers in the projected growth sectors.

The study denotes there are positive indicators on the horizon. The employment rate is expected to rise 3.5% this year, a statistic that outperforms the state of California and the nation.

Industries are thriving and creating jobs. The Chmura analysis shows that since 2012, 88% of employment in the Inland Empire has been driven by six projected growth sectors: Healthcare and social assistance; transportation and warehousing; manufacturing; construction; utili­ties; professional, scientific, and techni­cal services.

Construction, healthcare, and utilities are the growth sectors forecasted to grow more rapidly in the near future. As a result of this new data, the WDB can efficiently allocate federal dollars appropriately to bolster the acceleration of growth for these businesses.

The analysis explains that manufacturing is the most important sector of economic activity. Average wages in manufacturing are 20% higher than the average of all other industries; therefore, this industry holds enormous employment potential for the growing population of young workers who would replace numerous retiring workers.

This information suggests a key area of opportunity for the Workforce Development Board to assist both the job seeker and employer. Young job seekers receive services such as occupational skills train­ing, counseling, internships, job place­ments, mentoring, tutoring, leadership development, and support services. Pro­grams are designed to help youth achieve academic and employment success.

Adult job seekers can access a number of services at the High Desert America’s Job Center of California (AJCC) locat­ed in Victorville, which include resume writing, interview training, job training and placement, career counseling and skills assessment. For more informa­tion, please call the High Desert AJCC at 760.552.6550.

For business owners there is a team of Business Service Representatives avail­able to provide assistance with On-the-Job Training, customized recruitment services, and easy access to a large pool of pre-screened applicants.

A free Human Resources Hotline is available to San Bernardino County businesses 24 hours a day. Advisors at the hotline deal with a variety of inquiries ,including questions on wages and hourly rates, leave laws, hiring and termination procedures, handbooks and policies, attendance, and attitude and discipline problems. Businesses can access the free Human Resources Hotline by calling 1.800.399.5331 or visiting www.employers.org. To read more about the hotline, visit http://mediasourcelink.com/human-resources-free-hotline-of­fers-help-to-local-businesses/.

In addition to providing excellent services to businesses and job seekers, the WDB strives to ensure that employment and training services are coordinated so that job seekers acquire industry recognized skills and credentials. Riverside County has partnered with the WDB to form the Inland Empire Consortium for the statewide SlingShot initiative, a project to accelerate income mobility for the local workforce through employer-informed training and education.

The consortium works to link, align and leverage the assets and resources of economic development, education and workforce development partners. It implements a regional economic and work­force development strategy designed to ensure greater prosperity and opportunity.

For more information on the San Bernar­dino County Workforce Development Board, please visit www.csb-win.org or call 800.451.JOBS.

About the Workforce Development Board of San Bernardino County:

The Workforce Development Board of San Bernardino County (WDB) is comprised of private business representatives and public partners appointed by the County of San Bernardino Board of Su­pervisors. The WDB strives to strengthen the skills of the County’s workforce through partnerships with business-education- and community-based organizations. The County of San Bernardino Board of Supervisors is committed to providing county resources which generate jobs and investment in line with the Countywide Vision.

The Workforce Development Board, through the County of San Bernardino’s Economic Development Agency and Workforce Development Department, operates the County of San Bernar­dino’s three America’s Job Centers of California (AJCC). The AJCCs provide individuals with job training, placement and the tools to strengthen their skills to achieve a higher quality of life. The AJCCs also support and provide services to the County’s businesses, including employee recruitment and business retention programs.

Employers and job seekers who are interested in the Workforce Development Board programs may call: 800.451.JOBS or visit www.csb-win.org. Also follow us on: Facebook www.facebook.com/SBWIB; Twitter @InlandEmpireJob; and YouTube http://www.youtube.com/SBCountyWIB.