Explaining Southern California's economy

A tale of two California housing recoveries: Coastal and inland

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A construction worker cuts a piece of wood on the top of a home under construction at a new housing development on in Petaluma, California. A recovery in housing is developing in the state, according to UCLA economists. But it's geographically uneven.

For a while now, the economists at the UCLA Anderson Forecast have been arguing that California is experiencing a two-track economic recovery from the Great Recession. The coastal side of the state is doing relatively well, while the inland regions are struggling. Other economists dispute this analysi; they maintain that the recovery is more robust in Northern California than it is in the Southern California.

A key lens to look through when trying to figure out which analysis is right (and really, both have some merits) is real estate. The UCLA Ziman Center for Real Estate and the Anderson Forecast have just released an brief report on the housing situation, written by economist Jerry Nickelsburg. He notes that prices appear to be moving up in California:

The aggregate California home price statistics are encouraging....The S&P Case-Shiller
Index for San Diego, San Francisco and Los Angeles is the highest it has been since June 2011 and the median sales price is now the highest since 2008.


California and LA unemployment: Improving, but very slowly

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A "we are hiring" sign is displayed on a table during the San Francisco Hirevent job fair. California's jobless rate in October fell to 10.1 percent from 10.2 percent.

The California Employment Development Department released its report on October jobs in the state Friday. The federal Labor Department will release its report next week. The story is good, in a tenth-of-a-percentage-point kind of way: the jobless rate fell to 10.1% in October, from September's 10.2%.

In Los Angeles, the unemployment rate dropped to 10.5 from 10.6%.

"We're seeing everything start to move in he right direction," said Kimberly Ritter-Martinez, an economist with the Los Angeles Economic Development Corp. "We're edging closer to breaking that 10% mark."

That could happen soon if California continues to add jobs as it has at a faster clip than the nation as a whole. In the U.S. jobs are being added at a rate of 1.5%. In California, the rate is 2.1%, driven by the strong performance of the tech sector in Silicon Valley and the San Francisco Bay Area.


Home foreclosures in California among highest in US


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For sale signs are posted on a foreclosed house in Glendale, California.Foreclosures are declining in California, but the state is still one of he hardest hit.

California is still in the top five states nationally for home foreclosure rate, with one in every 379 houses filing, according to real-estate data firm RealtyTrac. But foreclosure activity fell in the U.S. in October and in the Golden State. That sounds good. But maybe it isn't.

Less foreclosure activity in California! How can that possibly be a bad thing?

Well, it does show that the housing market is showing some signs of a true recovery. But in Southern California, we’re currently dealing with a price bubble in some markets, particularly with houses that are selling for over $300,000.

A lack of housing supply is pushing prices higher, with the escalation spurred on by historically low interest rates and investors looking to snap up properties in the area on the cheap. Investors are often all-cash buyers, which makes it difficult for run-of-the-mill homeowners to compete with them. A suitcase of money usually trumps a mortgage, especially if a bidding war gets started on a property.


Runaway porn: What economic difference would it make to LA?


Photo by Robert Elyov via Flickr Creative Commons

Will these innocuous tubes of latex drive the porn business out of L.A.? Does it matter?

The passage of Measure B last week means that the condom will now become, by a law, a fixture in adult movies. Predictably, this has set off a frenzy of speculation about the porn industry picking up and leaving its longtime L.A. boogie-nights home and heading for the prophylactic-free jungle rooms of Las Vegas - or even, the L.A. Times suggests, Budapest, Hungary, the San Fernando Valley of Mitteleuropa. 

The LAT got into the numbers:

Adult entertainment boomed after the advent of home video in the 1980s. A decade ago, local economists estimated that the porn industry in the San Fernando Valley generated 10,000 to 20,000 jobs a year and had $4 billion in annual sales.

But declining DVD sales and the availability of free content on the Internet have hammered the local industry. The number of porn producers in L.A. has fallen to about 300, down from approximately 500 at its peak seven years ago, Helmy said.

Although porn production accounts for fewer than 5% of all film permits in Los Angeles County, the industry is an important player in the region's entertainment economy.

Industry estimates figure that about 5,000 adult films are shot each year in the county's warehouses and private homes.


Why the Obama administration thinks the housing market is improving



An improving housing market is bringing buyers back.

The federal Department of Housing and Urban Development and the Treasury Department just released their October "Housing Scorecard," a rundown of all things housing and housing-related in the U.S. economy.

The October Scorecard contains a huge amount of housing data, but the really good news has to do with prices — and although there's a limited amount information related to Southern California and Los Angeles, the news is fairly positive. After crashing during the financial crisis and stumbling further in 2011, they’ve begun to steadily move up this year.

Even better, expectations for rising home prices are more optimistic. 

They never dropped as far as feared back in 2009. Rather, prices have bumped along, rising and falling, for three years. Now they appear to have formed a bottom and are projected to resume a trend of price appreciation that was completely distorted by the bubble that inflated between 2003 and 2007. Check out the two charts above in the short slide show. They tell a reasonably happy story.