Recovery by 2012? Hopefully!

by Debra Gruszecki, The Desert Sun

INDIAN WELLS — When will there be true economic recovery in the Coachella Valley?

Try 2012.

And that's only if everything's done right.

That's the prediction from John Husing, an economist who has studied the Riverside and San Bernardino counties region for more than 40 years, and recently that of the Coachella Valley.
During his 2009 Coachella Valley economic report before about 650 business, government and local leaders gathered at the Renaissance Esmeralda Resort & Spa in Indian Wells on Friday, October 23, 2009, Husing used one word to express what the valley's been through:
"Arrggh!"

Fueling that frustration, Husing said, is the fact that the valley has suffered unprecedented job losses in the recession.

"We've lost 130,000 jobs" in this area and in two surrounding counties, he said. The unemployment rate has topped 14 percent, and is rising to levels close to those recorded in Detroit.

"That's not pretty,'' Husing said. "It's a rate that is somewhat comparable to what was going on in the middle years of the Great Depression."

The good news is the valley's median home prices likely hit the bottom in the third quarter, he said.

In a comprehensive assessment, Husing said the valley's economy in 2009 continues to be caught up in the difficulties unleashed by the excesses of Southern California's recent housing boom. This decline has led to difficulties:

Construction jobs and payroll have decreased, hurting a crucial employment sector.

Retail sales have fallen as local incomes have been reduced.

The recession has reduced discretionary incomes of consumers and profits of companies, lowering the number of travelers and conference attendees in the desert resort that's based much of its livelihood on the $1 billion tourism economy.
Assessed valuation has fallen sharply, given the home value decreases, a situation that has commensurately hurt discretionary funding for city governments.

Bank deposits are off, indicating the downturn is directly affecting household wealth and income.

Future is mixed

Looking ahead, Husing said a return to economic prosperity will require diversification of the economy and a housing market recovery.

"The last major shift in the California economy in this last cycle was housing,'' Husing said, citing some $10.6 billion in lost building permit activity, $8.3 billion of it being residential.

"If you take that out of the economy, it eliminates the money that would have moved through restaurants and retail stores."

To Husing, that's lopped $21.2 billion out of the region's $110 billion economy.

"That means one of the targets you have to worry about is how to get that (construction) sector back to work,'' he said.

Husing's 2009 report on the economy said he's seen pent-up demand for homes, mostly because of high affordability. The valley's affordability level, once at 10 percent, is up to 63 percent.

Sales volume is up, and the median prices are back to 2002 levels.

Still, Husing said one yet-to-be-resolved piece of the valley's economic puzzle is that a portion of the 35,498 homes that were sold in the valley are in danger of being worth less now than what is owed.

"How many homes are upside down" and in danger of default that have not yet shown up? Husing said. "That's a huge piece of the challenge."

So why is he saying the bottom may be behind us?

Supply and demand is balancing out, he said.

"Housing prices are flat,'' affordability is up and, for now, the percentage of foreclosures in the valley is dropping.

Education is still a concern as well for the valley, he said.

The level of valley residents with bachelor's degrees is lower than the coastal areas of Los Angeles, Orange and San Diego counties. And many of the college grads here are retiring.

"It means, literally, the toughest job in your economic strategy is, 'How do you raise education?' That's not the job of educators, it's your job as a community."