Santa Barbara County

1
Dr. Bill Watkins UCSB Economic Forecast Project
2
Finn Kydland
Time Inconsistency
Real Business Cycle
3
About the Outlook
4
Outline

• NSB and Growth
• Home Prices
• The Forecast
• United States
• California
• North Santa Barbara County
• How different is North County?
• The Forecast
• The Retirement Industry

5
North Santa Barbara County And Growth
6
Santa Barbara County Lost 944 People In 2004!
7
Ten Most Rapidly Growing Counties in California
(2000-2004)
8
Ten Least Rapidly Growing Counties in California
(2000-2004)
9
Santa Barbara County Cities
10
The San Bernardino Riverside Growth Model
Todays Commuters Are Tomorrows Jobs
11
The Coastal California Growth Model
Ormaybe it is the No-Growth Model
12
Dan Says
Santa Maria retirees are different.
13
Bill says
Infrastructure is critical to long-term growth.
This includes utilities, Medical, educations,
and especially traffic.
14
Houses and Bubbles
15
Are Home Prices In a Bubble?
16
Ten Most Affordable Communities in America
National Association of Home Builders
17
Housing Affordability
United States
65
60
55
50
45
1990
1992
1994
1996
1998
2000
2002
2004
18
Are California Home Prices In a Bubble?
19
Keb Mo says
Its the land of milk and honey, but you better
have some money, if youre looking for a house in
California.
20
Ten Least Affordable Communities in America
National Association of Home Builders
21
Median Home Price
California
610.9
559.8
thousands
509.4
452.3
372.7
262.4
217.5
188.2
186.5
178.2
1993
1995
1997
1999
2001
2003
2005
2007
22
Real Median Home Price Growth
California
17.4
17.2
14.9
9.7
7.2
7.4
6.6
6.2
5.8
5.2
3.5
-2.2
-3.0
-5.2
-6.8
1993
1995
1997
1999
2001
2003
2005
2007
23
Bill says
The key is to understand that Coastal
Californias home market is national.
24
Bill says
Home prices will probably not fall.
25
What About Interest Rates?
26
Greenspan Says
Its a conundrum.
27
Interest Rates
Fed Funds Rate
30-yr Conventional Mortgage Rate
28
Real 30-Year Fixed Mortgage Rate
29
Mortgage Rate minus Federal Funds Rate
United States
net percent
9
6
3
0
-3
-6
1973
1977
1981
1985
1989
1993
1997
2001
2005
30
Bill says
Mortgage rates will probably not rise in
lock-step with the Federal Funds Rate.
31
What About Rents?
32
What About Commercial Property?
33
United StatesEconomy
34
United States Unemployment Rate
35
Real GDP Growth
United States
4.5
4.4
4.2
4.3
4.0
3.7
3.7
3.3
3.0
2.7
2.5
1.9
0.8
-0.2
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
36
Real GDP per Capita Growth
United States
3.3
3.3
3.2
3.0
2.8
2.6
2.5
2.0
2.0
1.3
1.3
0.8
-0.3
-1.5
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
37
How High Are Oil Prices?
38
Real Oil Prices Normalized by Wealth
39
Real Consumption per Capita Growth
United States
40
Californias Economy
41
Frank Zappa says
Sometimes you got to get sick before you can
feel better.
42
California Issues

• Budget
• Energy
• Housing costs
• Workers Compensation Insurance

• Health Insurance
• Tort Law
• High Costs
• Onerous Regulation

43
Californias Great Migrations

• Latinos
• Baby Boomers
• Generation X
• Business

44
California Manufacturing Percentage of All Jobs
16
15
14
13
12
11
10
1990
1992
1994
1996
1998
2000
2002
45
Bill Says
Actually, California has been doing better than
expected.
46
Real Gross State Product Growth
California
47
Employment Distribution (1,000 of jobs)
California - 2004
370
Agricultural Production
23
Mining Quarrying
847
Construction
973
Durables Manufacturing
559
Non-durables Manufacturing
482
Information Services
482
Transportation, Warehousing, Utilities
654
Wholesale Trade
1,617
Retail Trade
903
Finance, Insurance, Real Estate
2,099
Professional Business Services
1,562
Education Health Services
1,442
Leisure Hospitality Services
504
Other Services
2,390
Public Sector
48
5-year Total Employment Growth
2004
Agricultural Production
-8.3
Mining Quarrying
-12.8
24.1
Construction
Durables Manufacturing
-17.8
Non-durables Manufacturing
-13.4
Information Services
-6.8
Transportation, Warehousing, Utilities
-5.1
4.1
Wholesale Trade
Retail Trade
7.1
Finance, Insurance, Real Estate
13.8
Professional Business Services
-1.0
Education Health Services
14.2
Leisure Hospitality Services
11.2
Other Services
6.6
Public Sector
6.7
49
North Santa Barbara County
50
How Different Is North County From Its Neighbors?
51
Population
Source Claritas Inc
52
Population
Source Claritas Inc
53
Income
Source Claritas Inc
54
Miscellaneous
Source Claritas Inc
55
Nominal Median Home Price
South Coast of Santa Barbara County
981.0
thousands
825.0
749.0
655.0
572.0
475.0
425.0
359.9
313.0
310.0
300.8
290.0
1993
1995
1997
1999
2001
2003
56
Nominal Median Home Price
North Santa Barbara County
364.1
288.7
thousands
239.8
186.0
155.2
136.1
130.4
129.6
126.9
124.1
123.3
123.4
1993
1995
1997
1999
2001
2003
57
Nominal Median Home Price
San Luis Obispo County
442.0
381.8
thousands
326.7
282.2
248.3
208.3
182.5
180.9
179.3
169.9
166.1
163.0
1993
1995
1997
1999
2001
2003
58
Real Median Home Price Growth
South Coast of Santa Barbara County
16.6
16.4
15.1
14.2
11.3
10.8
9.2
7.4
6.5
1.3
-4.1
-5.4
1993
1995
1997
1999
2001
2003
59
Real Median Home Price Growth
North Santa Barbara County
60
Real Median Home Price Growth
San Luis Obispo County
1993
1995
1997
1999
2001
2003
61
Employment
Comparison
134.0
Index (1991 100)
South Coast of Santa Barbara County
122.4
North Santa Barbara County
98.8
96.2
1992
1994
1996
1998
2000
2002
2004
62
Employment Distribution (jobs)
South Coast Santa Barbara County - 2004
Agriculture
2,693
Mining
232
Construction
5,183
Durable Manufacturing
6,791
Non-Durable Manufacturing
1,120
Trans., Comm., Utilities
4,120
Wholesale Trade
2,723
Retail Trade
11,022
Finance, Ins. Real Estate
7,014
Other Services
47,074
Government
19,577
63
Employment Distribution (jobs)
North Santa Barbara County - 2004
13,157
Agriculture
2,678
Construction
4,697
Industrial
2,099
Trans., Comm., Utilities
1,239
Wholesale Trade
7,514
Retail Trade
2,148
Finance, Ins. Real Estate
16,217
Other Services
19,601
Government
64
Employment Distribution (jobs)
San Luis Obispo County - 2004
4,058
Agriculture
Mining
837
6,975
Construction
Durable Manufacturing
3,475
Non-Durable Manufacturing
2,850
3,658
Trans., Warehousing Utilities
Information
1,500
2,392
Wholesale Trade
13,475
Retail Trade
4,658
Finance, Ins. Real Estate
38,050
Other Services
21,867
Government
65
Total Employment Growth
South Coast of Santa Barbara County
6.0
5.9
3.4
1.9
1.8
1.2
1.0
0.6
0.4
0.2
0.0
-0.5
1993
1995
1997
1999
2001
2003
66
Total Employment Growth
North Santa Barbara County
10.6
5.6
4.7
4.1
3.1
2.6
2.5
2.3
1.8
1.2
-2.0
-2.2
1993
1995
1997
1999
2001
2003
67
Job Growth
San Luis Obispo County
5.1
4.4
4.4
4.4
4.2
3.6
3.2
3.0
1.1
0.8
0.3
-0.9
-1.8
1992
1994
1996
1998
2000
2002
2004
68
Forecast
69
Total Employment Growth
North Santa Barbara County
70
2-Year Job Growth by Industry
North Santa Barbara County - 2004
Agriculture
20.2
Construction
17.6
Industrial
2.5
Trans., Comm., Utilities
7.3
Wholesale Trade
-25.2
Retail Trade
2.4
Finance, Ins. Real Estate
4.5
Other Services
7.3
Government
3.0
71
What Is Going On With Agriculture?
72
Nominal Gross Regional Product
North Santa Barbara County
billions
73
Real Gross Regional Product Growth
North Santa Barbara County
12.4
8.8
6.0
5.4
4.5
4.4
4.2
3.8
3.9
3.8
3.6
3.3
1.0
-0.3
-3.8
1993
1995
1997
1999
2001
2003
2005
2007
74
Nominal GRP per Worker
North Santa Barbara County
116,748
109,158
104,750
97,290
86,096
79,894
72,459
71,840
1993
1995
1997
1999
2001
2003
2005
2007
75
Real GRP per Worker Growth
North Santa Barbara County
6.1
4.2
3.1
3.0
2.3
1.6
1.6
1.3
1.0
0.9
0.8
0.4
-0.3
-2.5
-4.9
1993
1995
1997
1999
2001
2003
2005
2007
76
Real Median Home Price Growth
North Santa Barbara County
25.4
22.0
17.4
15.9
12.0
10.4
10.2
8.3
3.6
2.6
-1.6
-2.3
-3.7
-3.8
-4.0
1993
1995
1997
1999
2001
2003
2005
2007
77
The Retirement Industry
78
Think of retirees as tourists who just stay
longer.
Bill Says
79
Retirees who migrate are the healthiest,
wealthiest, and best educated of all retirees.
Mark Fagan says
Jacksonville State University sociologist
80
Older Migrants Classified

• Amenity
• Return
• Dependency

81
Amenity Migrants

• Younger
• Married
• Educated
• Homeowners
• Wealthy

82
Top Three Requirements

• Safety
• Health Care
• Amenities
• Active Downtown
• Climate
• Lifestyle Activities

83
Advantages of Amenity Migrants

• Works like a clean export industry
• Bring lots of capital
• Dont strain
• School systems
• Welfare systems
• Criminal justice systems

84
Advantages of Amenity Migrants

• Income is discretionary and spent locally
• Income is not cyclical or seasonal

85
Advantages of Amenity Migrants

• No infrastructure needed
• No investment needed
• No tax concessions needed

86
Winners

• Health care industry
• Financial services
• Recreation providers
• Entertainment sector
• Retail sector
• Other service sectors

87
Losers

• Tradable goods producers
• Agriculture Industry
• Generation X

88
Conclusion

• The short-term forecast is strong
• Opportunities
• Retirees
• Outbound commuters
• Clouds on the horizon
• Infrastructure
• Changing demographics

89
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