planning for the future economic/demographic trends in california and beyond
TRANSCRIPT
Planning for the FutureEconomic/Demographic Trends in California and
Beyond
The Last Few Years…
• Warning signs started in 2005 with a widening gap between home values and HH incomes.
• Affordable housing was becoming an issue as supply was taken by purchasing of second homes and investment properties.
• Initial favorable interest rates which encouraged refinancing and home equity loans. This brought more money into the economy.
• Pressure on interest rates came later in year.
The Last Few Years…
• In 2006, rising interest rates and higher inventories began to slow demand and home value appreciation.
• Higher home inventories depressed the sales of new and existing homes.
• Home value decline removed equity as a source of HH wealth.
• Decline of housing market slowed growth in GDP and affected income and job growth.
• Lower job and income growth, combinedwith rising interest rates impacted abilityto service mortgages.
The Last Few Years…
• By mid 2008, the housing market was in decline.
• An increase in home loan defaults was evident which caused lenders to tighten credit.
• HH formation began to slow and population changes slowed.
• Slowing of migration (both in and out).
• The hottest housing markets were hit first and the hardest.
Source: ESRI Demographic Update 2009/14 May 2009
So Where Do We Go From Here?
Latest Research and Thoughts From:
• Demographic Research Unit, California Department of Finance
• USC School of Policy, Planning and Development
• USC Population Dynamics Research Group
• Southern California Association of Governments
• Los Angeles County Economic Development Department
• Hanley Wood Market Intelligence
• California Association of Realtors
• National Center for Education Statistics, U.S. Dept. of Education
• ESRI Business Data, ESRI, Inc.
The Consensus is:
Uncertainty in the Short Term
Long Term Demographic Trends are More Clear
National Enrollment Trends
Source: US Dept of Education, NCES Dec 2007
Regional-Population Change (2000-2008)
Source: ESRI Business Data May 2009
Regional- Enrollment Change
Source: US Dept of Education, NCES Dec 2007
Regional
Source: US Dept of Education, NCES Dec 2007
Planning for the Future
• Economists and demographers say that California will continue to grow.
• How fast this will occur is dependent upon the recession.
• Industries in CA are targets for growth.
• Venture capital still seeks out CA firms.
• The recession will end, but when?...
When Will the Recession End?
• Many economists say between 2010-2011.
• A few economists say longer to around 2012.
• But if we’re planning long-term for California school growth to 2020 and beyond, the difference between 2010 and 2012 doesn’t matter…
Where are we compared with our last recession?
CA Job Loss in 1990s Recession
CA Share of U.S. Jobs (1990s recession)
CA Share of U.S. Jobs (1990-2008)
CA Job Loss Then and NowMonths After Recession Started
Job Trends
Source: Bureau of Labor Statistics, CA EDD
Unemployment- April 2009
Source: ESRI Business Data April 2009
Foreclosures
More about this later…
The Current Recession: Implications for California Growth
• Larger job losses than in the 90s but,
• Only a slight loss in share of U.S. jobs primarily due to housing/construction.
• This is a NATIONAL recession –• Oregon, Nevada and Arizona have larger
% job losses and nine states have higher unemployment rates
Future California Growth
• California’s job, population and household growth depends on:
• The amount of population and job growth nationwide
• The attractiveness of California for entrepreneurs, workers and their families
• The choices made by the two fastest growing demographic groups- over 55 and children/grandchildren of immigrants
What will the Future Bring?
• Internal growth primarily from residents already in the state (in/out migration down).
• Increased births from those who have settled since the 1980s (including the children and grandchildren of immigrants).
What will the Future Bring?
• As in previous up cycles, population growth will occur where:
• Relatively young populations already exist
• Housing costs are moderate (low end housing will rebound first)
• Areas where family formation are likely to occur
• Location will vary widely within California.
California Enrollment
Source: CA Dept of Finance 2008 Series
California Public K-12 Graded Enrollment
5,900,000
6,000,000
6,100,000
6,200,000
6,300,000
6,400,000
6,500,000
6,600,000
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2013
-14
2014
-15
2015
-16
2016
-17
2017
-18
We are here
California Enrollment
Source: CA Dept of Finance 2008 Series
We are here
What the Components of Pop Change?
• Natural increase in population• Births – deaths
• Net Migration
Components of Population Change
Source: CA Dept of Finance 2007 County Race/Ethnic Pop Estimates
Population Numeric Natural Net
(July 1) Change Births Deaths Increase Migration
Total
2000 34,095,209
2001 34,766,730 671,521 529,395 231,737 297,658 373,863
2002 35,361,187 594,457 526,280 232,941 293,339 301,118
2003 35,944,213 583,026 537,419 233,295 304,124 278,902
2004 36,454,471 510,258 539,858 239,325 300,533 209,725
2005 36,899,392 444,921 547,137 231,054 316,083 128,838
2006 37,298,417 399,025 553,028 239,036 313,992 85,033
2007 37,712,588 414,171 564,556 234,660 329,896 84,275
Average 516,768 542,525 234,578 307,946 208,822
CA Components of Population Change
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Population Change Net Migration % Migration of Pop Change
Source: CA Dept of Finance 2007 County Race/Ethnic Pop Estimates
White Components of Population Change
Source: CA Dept of Finance 2007 County Race/Ethnic Pop Estimates
-150,000
-100,000
-50,000
0
50,000
100,000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
0%
20%
40%
60%
80%
100%
120%
Population Change Net Migration Migration as % of Pop Change
Hispanic Components of Population Change
Source: CA Dept of Finance 2007 County Race/Ethnic Pop Estimates
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Population Change Net Migration Migration as % Pop Change
CA Age-Nativity PyramidArrival Decade and Generation
Source: CA Demographic FuturesUSC School of Policy, Planning and Development
% Immigrant Share of Total PopulationCalifornia 1970 to 2030
Source: CA Demographic FuturesUSC School of Policy, Planning and Development
CA Projected Births
Source: CA Dept of Finance 2008 Series
Projected
CA Projected Births by Ethnic Group
FIGURE 10. BIRTHS BY RACE/ETHNIC GROUP, HISTORICAL AND PROJECTED, 2000-2017
0
50000
100000
150000
200000
250000
300000
350000
400000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
YEAR
BIR
TH
S
AMERINDIANASIAN
BLACK
HISPANIC
MULTIRACE
PACISLANDERWHITE
American Indian births do not register on this chart. Their 2017 projected births are 2,153.
Source: CA Dept of Finance 2008 Series
CA Regional Projected Births
Source: CA Dept of Finance 2008 Series
Fresno, San Joaquin,
Riverside, San Bernardino
CA Regional Projected Births
Source: CA Dept of Finance 2008 Series
Los Angeles, Orange County,
San Francisco, San Diego
The Housing Market
• Housing is the key to long-term continued growth in various areas
• Opportunities are appearing:
• Lower housing costs
• Low interest rates (for now)
• Demand still there
CA Median Price Existing Detached
Source: CA Assoc. of Realtors CA Outlook Sept 2008
Housing Market
• First-time Buyer Housing Affordability Index• California vs. U.S. 2003-2008
Source: CA Assoc. of Realtors CA Outlook Sept 2008
Housing Market
• Sales Hit Bottom in 2007, up in 2008 and 2009
Source: CA Assoc. of Realtors CA Outlook Sept 2008
CA Ratio Median Home Price to Median HH Income
Source: CA Dept of Finance
Housing Market
• Unsold Inventory Index- July 2008 6.7 months and dropping
Source: CA Assoc. of Realtors CA Outlook Sept 2008
Housing Market
• Peak vs. July 2008 prices
• Bay Area:• Sales down• Moderate median price declines
• Central Valley:• Sales up dramatically• Large median price declines
• Southern California:• Moderate to large sales increases• Large median price declines• Varies by county
Source: CA Assoc. of Realtors CA Outlook Sept 2008
2009 CA Housing Market Outlook
• According to California Assoc. of Realtors
• Sales should increase 5-10% over 2008 (primarily low-end and foreclosures)
• California median home price:• Prices stabilize in 2Q 2009 at earliest• Should correspond with foreclosures at/near peak
• Affordability is good; availability of funds uncertain
Source: CA Assoc. of Realtors CA Outlook Sept 2008
2009 CA Housing Market Outlook
• CA Housing Market will stay stagnant for several more years…
• Potential homebuyers waiting on the sideline…skittish about prices
• Buyers unable to get loans even with stellar credit background
• Financing not available for builders in current market
Source: CA Assoc. of Realtors CA Outlook Sept 2008
Summary of K-12 Growth in CA
Potential growth in the future will occur:
• In areas with larger immigrant populations
• Where the population driven by settlement of young families coupled with births
• Areas with affordable housing
California Enrollment
Source: CA Dept of Finance 2008 Series
Thank You For Your Attendance