Look for Continued Economic Growth in 2016
Big Demand for Multi-Family Housing Units in California
In 2016 this country should have steady job growth, pick up in consumer spending, slower home appreciation, solid growth in the health care sector and gain in Real Gross Domestic Product. These were a few of the predictions made by Esmael Adibi, PhD of Chapman University, at the Building Industry Association/Inland Empire Section on January 27 at the Riverside Convention Center in Riverside, Calif.
Prior to the recession the Inland Empire was the fastest growing area in terms of economic growth, according to Adibi. Currently, however, the area is starting to gain strength.
Adibi said that compared to 30 other financial institutions, Chapman University has been the most accurate in predicting Real Gross Domestic Product. This takes into account consumer spending, government, exports and investment.
"We had a huge drop of 3.1 percent Real GDP from 2007 to 2009," said Adibi. "In 2011 we were in recovery and then the next three years in expansion. Currently we're up 10 percent expansion from the low point, but that's anemic. We should be up 18 percent."
The employment market hasn't looked so good, according to Adibi. From 2007 to 2010 California lost 7.6 million jobs. By 2014 most of those jobs have been recovered, but a lot of people have either exited the work force or found part time jobs.
Lower gasoline prices this year has affected consumer spending in a positive way. Last year consumer spending was up 3.2 percent and this year Adibi forecasted that it would be up 2.8 percent. In 2015 California experienced historical highs for new automobile purchases, a trend Adibi did not expect to continue.
"Our national exports have taken a big hit because the economies of our trading partners has been weaker," said Adibi. "Europe is lingering, China and Canada have slowed down. When the U.S. dollar is strong, it makes exports less attractive for other countries."
The biggest challenge for the housing industry is affordability for the buyers, said Adibi. Employment determines if the consumers can buy the homes. If home buyers placed a 20 percent down payment, with interest rates in 2006, the Inland Empire buyers needed 31.9 percent of their income to pay mortgages. Ten years later, it's down to 12.7 percent in the Inland Empire and 22.7 percent for the state.
In the business environment, California has some negative and positive trends, according to Adibi. It's the top state has far as access to capital and No. 2 in technology. However, it's No. 46 as far as cost of living, No. 49 for cost of doing business and last in business friendliness.
"If we in California lose the big tax payers to neighboring states, then we could be in a lot of trouble," said Adibi.
For more news and economic forecasts go to Chapman University Anderson Center Facebook page.