Saturday, February 03, 2007

Housing Downturn Slows Sacramento Job Growth; Bay Area Migration Cools Off

From SRRI.net:

Housing-related slowdowns took their toll on the Sacramento Region’s economy in 2006, generating declining job growth and causing the Region to fall to the middle of the list of major and neighboring regions in the state.

The six-county Sacramento Region ended 2006 with 1.4 percent job growth, a 2 percentage point decline from the 2006 peak in February of 3.4 percent. The December 2006 rate reflects a year-over-year gain of 13,300 jobs. Over the last quarter of 2006, job growth continued to decline, posting rates lower than the Region has seen since mid-2004 and falling toward the national average. The declining job growth throughout most of 2006 is primarily the result of slowdowns in housing-related sectors (Construction and Financial Activities) coupled with decreasing growth rates in other large sectors (such as Manufacturing; Professional & Business Services; and Trade, Transportation & Utilities).
...
The Region’s employment losses were concentrated in the housing-related sectors (Construction and Financial Activities) along with Information and Manufacturing. While Manufacturing; Financial Activities; and Construction were showing year-over-year job gains in previous quarters, acting as strong contributors to the Region’s job growth, all three posted losses in the fourth quarter of 2006.
From the Sacramento Bee:
They brought the Bay with them: upscale shops, more government services, new restaurants. But also: More traffic, higher home prices, congestion. Almost 150,000 people moved from the Bay Area to the Sacramento metropolitan region from 2001 to 2005, a torrent of 80 newcomers a day, according to a Bee analysis of new federal IRS data.
...
[I]f you want to buy a house with a typical local income, the Bay Area transplants may have helped price you out of the market. "It's pretty hard to reach any other conclusion than that that influx had a significant impact on the run-up on housing prices in the region," said Mike McKeever, executive director of the Sacramento Area Council of Governments.
...
The wealthiest Bay Area transplants tended to head straight for the suburban counties, while Sacramento County has attracted those less well-off...[A] large number of the transplants to Sacramento County are struggling to get by, tax records show. The average household income of the 90,000 Bay Area residents who came to Sacramento County -- only 31,000 left for the Bay Area -- was 7 percent lower than the average annual income of those already here.
...
Because relative housing costs were a significant factor in the Bay Area influx, there is debate among experts over whether the trend will hold now that the housing price gap has closed a bit.

The 2005 migration figures show many more are still coming in from the Bay Area than heading in the opposite direction. But a slowdown in that migration has contributed to the cooling of the area's real estate market.

In 2000, a typical Bay Area home cost more than twice as much as a typical Sacramento area home, according to real estate tracking firm DataQuick Information Systems. In 2006, the Bay Area's median home price was about 63 percent higher.

"You have lost a bit of that competitive edge," said Stephen Levy, director of the Center for Continuing Study of the California Economy, based in Palo Alto. "Sacramento is still an attractive place, but my guess is that most of the people who would move there have moved already."

17 comments:

anon1137 said...

continuing this discussion from the Water Cooler thread . . . .

I've discussed this before on this blog, so excuse me if I sound repetitive . . . but I think that many of these BA transplants (many of which, I agree are lower income by BA standards, but not by Sac standards) think that they are increasing their standard of living by moving to a lower cost area like Sac. They think, wow! I sold my 1200 ft2 house in San Jose and was able to buy a 5000 ft2 house with a 6-car garage in Roseville for the same amount! and my wife doesn't even have to work! (or, the same rent I was paying in Sunnyvale buys a 2500 ft2 house in EG! and there's less traffic!). Same with CA residents who move out of state to a lower cost area. Many of these people are making that choice so they can afford a family, or a bigger family, so OK, it fixes the short-term problem. But long-term, a house in Roseville or EG or anywhere in the Sac region will never appreciate like one in the BA because there is essentially an endless supply of land in the valley. Many are choosing quantity of life (more children) over quality of life - not that there's anything wrong with that.

RMB said...

Anon1137:

I think a lot of these people moving to the central valley from the Bay Area and doing so on a 1 dimensional viewpoint - housing cost. There have been a number of articles showing that the cost of living often time goes up when the cost of commuting to the BA is factored into the equation. As far as quality of life, I fully expect to read in the coming years of the the terrible plight these transports have of hours spent in traffic destroying marriages, lower living standards, causing cancer and global warming. This will then lead to a call for the govt to "do" something about this "problem" which isn't really a problem but a lifestyle choice. In the end I have faith the market will sort itself out and those people who want to work in the BA and have a good quality of life will move back, those that want a long commute will stay and commute and others will look for a job in the central valley which I doubt they will find.

Anonymous said...

The article neglected to discuss in detail the impact that the lower income segment that came in from OakTown and San Jose had on areas such as South Sac and Elk Grove.

In addition to the yuppies, the Bay Area influx also brought a bunch of rap music listening thugs that drive around on 20 inch low profile tires chromed rims that are worth more than the automobile itself.

Why do think there were so many murders in Sac in January? The thugs from the Bay brought up their low life Gangsta lifestyle to South Sac and Elk Grove.

Anonymous said...

The hoods of the East Bay are being transplated here in Sacramento. This is not good for Sacramento.

Gwynster said...
This comment has been removed by the author.
Anonymous said...

So true the demographics are changing fast in Sacramento.

Anonymous said...

gwyn - my wife and i were thinking the same thing last night at the galleria.

we saw a caucasian family jumping the rail to ride the merry-go-round, another caucasian family pushing their kids in a sears cart and a caucasian couple fighting on who would take the kids for the weekend.

all of it true but we never associated the behavior with their race. i just wanted to show how ignorant some of your comments sound.

Anonymous said...

I did not see anywhere in the previous posts where any specific race was mentioned. I belive the point is that people do not want getto people in their neighborhood - of any race. People who dont work - just hang out all day in front of the house , cruse the area lookin for truoube and breaking into house's ect.
Unfortunately, it seems that as soon as you mention bad attitude, gang killers looking to rape and murder, you think what? White guys in sweaters?. Unfair and injust stereotype, yes. But I am afraid to leave my house when a group of teenage black youth wearing gang colors , drinking ect. are hanging out in front of my house

SIppn said...

Bay area migration cools off....

Hey I though you guys said that it was the local income that determined home prices.

Perfect Storm said...

while Sacramento County has attracted those less well-off...[A] large number of the transplants to Sacramento County are struggling to get by, tax records show.

Yep more low income people to swell the City and County.

This is another factor that will cause property prices to erode furher.

Were on track for a 50% decline by 2009.

Housing Doom 2007.

Max said...

Hey I though you guys said that it was the local income that determined home prices.

Don't forget ease of credit. How many plasma TVs will you find in Sec. 8 housing? 0% for six months at Best Buy! :)

Anonymous said...

Oak Park/South Sac is gang central in Sacramento.

Anonymous said...

Hopefully the prices are high enough to keep the hoddlum riff raff from coming from the Bay Area.

Modesto seems like a more appropriate dumping zone for SEction 8 and AFDC households.

Ive seen a bunch of thugs at the local mall acting like they are back on East 14th Str in Oakland.

If the rents and prices remain high there will be less thug migraton.

realist said...

I am really surprised, no, dissapointed that this blog get censored. There goes what little credibility you had.

Gwynster said...

Cencored? I just deleted my own post on my own observations that came out sounding wrong. My decision, not Landers.

Real said...

Here are some random thoughts and stats for Sacramento:

Average HH income of a home-owning HH: $87,919*
Average HH incomes of a home-owning HH is 48% higher than the statistical average for Sacramento ($59,548)

Median exising HH sales price:
$339K or 3.9x the average income. For larger cities, you will find a range of 4x - 16x.

Typical Payment on $339K loan (assuming financed on an ARM in 2005/2006 timeframe): $1,800 ($1000+ in interest)

% of HH Income assuming 100% of purchase price is mortgage: 25% of pre-tax income or around 20% of pre-tax income assume interest tax savings

Total home-owning HH in area covered by http://www.sacrealtor.org/documents/about/statistics/zipcodes_1206.pdf

= 296K

Amount of existing homes sold by year:
2006: 4.4%
2005: 7.3%
2004: 7.7%
2003: 6.5%
2002: 6.4%

Assuming that prices have receeded back to Dec. 2004 level, maximum number of homes that are underwater assuming 0% down on all homes ~11.7%.

For those renters thinking housing is unaffordable: is your HH income greater than $88K/year? If it is not, you are not likely to be a homeowner.

* source: US census data on total HH by zip code and 'average' income/HH per homefair.com
Income distribution per: http://www.comcastspotlight.com/sites/Default.aspx?pageid=11276&siteid=111&subnav=2

Assumes top 61% of the income brackets are home owners per HH ownership statistics (my assumption of top 61% - this is an upwards bias, however, average income is a downward bias as I assumed top income bracket is $200K-$250K.

Lander said...

Comment deleted
This post has been removed by the author.


realist said...
I am really surprised, no, dissapointed that this blog get censored. There goes what little credibility you had.


Yawn. I'm waiting for an apology. If you're referring to past deletions, I've explained the comment policy in the past.