Sonoma County Business Barometer Q4 CY 2007

Transcription

1 EDB Sonoma County Economic Development Board economy Sonoma County Business Barometer Q4 CY 27 Economic Development Board 41 College Avenue Suite D Santa Rosa CA

2 EDB Sonoma County Economic Development Board With Acknowledgment and Appreciation to local key businesses supporting Sonoma County Economic Development: Chairman s circle: Executive Tier: Associate Tier: County of Sonoma Board of Supervisors Sonoma County Permit & Resources Management Community Development Commission Sonoma County Health Services Sonoma County Transportation & Public Works

3 Table of Contents 2 Executive Summary Real Estate 3 Residential Real Estate 6 Commercial Real Estate Economy 7 Vitality 8 Energy, Inflation, and Interest Rates 9 Special Focus: Construction and Airport

4 27 Q4 Business Barometer February 28 The Sonoma County Economic Development Board (EDB), in partnership with the Sonoma County Workforce Investment Board (WIB), is pleased to bring you the 27 Fourth Quarter Calendar Year (CY) Business Barometer. This report primarily covers data from the months of October, November, and December 27. The purpose of the Business Barometer Report is to provide a sense of how the Sonoma County economy is performing. The indicators selected for this report cover a broad swath of economic topics, including employment, housing and construction, and prices and inflation. Highlights g from the Fourth Quarter Business Barometer include: The median price of an existing home sold in November 27 dropped to $462,5 from $537,25 in November 26, a 13.9% decline. Seasonally adjusted nonfarm employment e remained within all-time highs, surpassing Q1 21 s benchmark of 19,4 by more than 3, jobs. The Sonoma County Business Cycle Index also held steady at 17.4, close to the apex for that indicator. The seasonally adjusted unemployment rate was 4.7%, lower than both the state and national figures. A special focus on the Construction sector, one of Sonoma County s largest, is printed herein. The EDB encourages interested readers to recommend any pertinent local indicator or ways in which we may improve this report. As always, if you have any questions, please feel free to contact us at (77) Sincerely, Ben Stone Executive Director 27 Sonoma County Economic Development Board. The Economic Development Board (EDB) believes all data contained within this report to be accurate and the most current available, but the EDB does not guarantee that this report is accurate or complete. Use of data from a source does not represent an endorsement of any product or service by the EDB, its members, or affiliates. This publication can be made available in alternative formats, such as Braille, large print, audiotape, or computer disk. Requests can be made by calling (77) Please allow 72 hours for your request to be processed. This quarter s report was prepared by Robert Nachtsheim.

5 Residential Real Estate November s median home price decreased $74,75, or 13.9%, on a year-over basis to $462,5. The recent cooling of Sonoma County s residential real estate market follows nearly a decade s worth of strong price advances. According to the Center for Regional Economic Analysis at Sonoma State University, home prices tripled in Sonoma County from 1996 to 25. In a recent report by Moody s Economy.com, Sonoma County ended 27 as the 5 th least-affordable metropolitan area in the country, based on the ratio of median income to median monthly housing costs. The average home sold for 95.9% of its asking price in December 27, down from 96.8% in December 26 and 98.% in December 25. Sonoma County s sales/list price ratio is currently at its second-lowest mark since EDB tracking began in 23, with the lowest figure recorded in November 27. The general downward trend in the sales/list price ratio and median price of homes sold suggests buyers have been able to apply more leverage in price negotiations, given current market conditions. Northeast Santa Rosa, Northwest Santa Rosa and Cotati/Rohnert Park had the greatest number of home sold. The Sea Ranch, Healdsburg and Coastal- Sonoma had the highest average home price during the fourth quarter. Median Price of an Existing Home Sold ($Thousands) $6 Nov 27: $462,5 $5 $4 $3 $2 $1 $ '98 '99 ' '1 '2 '3 Nov '5 Nov '7 Nov '4 Nov '6 Source: California Association of Realtors ( Sales/List Price Ratio of Homes Sold Dec 27: Jan '3 Jan '4 Jan '5 Jan '6 Jan ' % Increase Since % Decrease Since Nov 6 2.1% Decrease since Dec 5.9% Decrease Since Dec 6 Source: Bay Area Real Estate Information Services ( Average Sales Price ($Thousands) and Total Sales by Sub-County Area, Q4 27 $12 $1 Average Sales Price ($Thousands) Total Unit Sales (Right Axis) Source: Bay Area Real Estate Information Services ( $8 12 $6 8 $4 4 $2 SW Santa Rosa Cotati/Rohnert Park W Petaluma NE Santa Rosa E Petaluma Penngrove Sebastopol Coastal Sonoma Healdsburg NW Santa Rosa Russian River Cloverdale SE Santa Rosa Oakmont Windsor Timber Cove Sonoma The Sea Ranch 3

6 Residential Real Estate Average Days on the Market 15 Dec 27: % The average days on the market for sold homes has been volatile since June 26 s peak, and it is up more than 25% in the past two years. The average home stayed on the market for more than three months before being sold in December, down five days year-over. 9 6 Increase Since Dec 5 4.3% Two hundred thirty-six (48.%) fewer properties were sold in December 27 than December 26. The decrease in year-over sales was met with a corresponding rise in year-over listings, indicating an increasing supply of housing relative to demand Jan '3 Jan '4 Jan '5 Jan '6 Jan '7 Source: Bay Area Real Estate Information Services ( Listings and Closed Sales (Includes Commercial Properties) Jan '6 Listings Closed Sales Jan '7 Notices of Default Sales Dec 27: 256 Listings Dec 27: 471 Source: Bay Area Real Estate Information Services ( Decrease Since Dec % Increase in Dec Year-Over Listings 48.% Decrease in Dec Year-over Sales Defaults rose 2% from 323 defaults in Q4 26 to 968 in Q4 27, a new 15-year high. Each of the last three quarters of 27 established a new record for the number of defaults. Around 23% of Sonoma County mortgage originations in 25 were subprime, granted to individuals or families with tarnished or limited credit histories at premium rates. These loans have been widely criticized as a key source of the recent spate of foreclosures in California. Sonoma County did, however, have one of the lowest incidences of subprime refinance lending in the country in 25, according to the Consumer Federation of America. Of the 7,93 refinancing originations, only 6.9%, or 542 loans, were subprime, the second-lowest rate among the over 3 metropolitan statistical areas included in the study. Q4 27: '92 '93 '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 Source: DataQuick Information Services ( % Increase Since Q Number of Defaults Higher Than Previous Q3 7 Peak

7 Residential Real Estate Fair Market Rents, calculated by the Department of Housing and Urban Development, have reached a plateau in Sonoma County. The current fair market rents per month in Sonoma County are $91 for a one-bedroom residency, $1,137 for a two-bedroom residency, $1,613 for a three-bedroom residency, and $1,886 for a four-bedroom residency. Fair Market Rents $2 $15 Efficiency One-Bedroom Two-Bedroom Fourth quarter residential permit issuances were at their fourth-lowest quarterly level since 21. Single-family permits over the entire year 27 were at their lowest since 2. In total, 187 multi-family permits were issued in Q4 27, up from 114 in Q4 26. Conversely, single-family permits showed a year-over decline, falling from 23 in Q4 26 to 127 in Q4 27. The small number of single- and multi-family permit issuances depressed the value of residential building permits to $7,737, through December, significantly lower than last year s figure and is the second-lowest figure since 2. Of $7.7 million in building permits issued, approximately $24.9 million (35.2%) was attributable to multi-family permits, $32. million (45.3%) to single-family permits, and $13.8 million (19.6%) to residential alterations and additions permits. $1 $ ' '1 '2 '3 '4 '5 '6 '7 '8 Source: Department of Housing and Urban Development ( Residential Building Permits Issued (Includes Single- and Multi-family Units) Q4 27: 314 Three-Bedroom Four-Bedroom 44.8% Year-over Decrease in Single-Family Permits Since Q % ' '1 '2 '3 '4 '5 '6 '7 Source: Construction Industry Research Board ( Year-over Increase in Multi-Family Permits Since Q4 6 Value of Residential Building Permits Issued ($Millions; Includes Single- and Multi-family Units, Alterations and Additions) $25 Source: Construction Industry Research Board ( $2 $25 $2 $15 Q4 27: $7,737, $15 $1 $1 $5 ' '1 '2 '3 '4 '5 '6 '7 $5 16.9% 42.8% 144% Year-over Decrease in Residential Permit Value Since Q4 6 Year-over Decrease in Single- Family Permit Value Since Q4 6 Year-over Increase in Multi- Family Permit Value Since Q

8 Commercial Real Estate Commercial Property Vacancy Rates 25% Q % 2% 15% Q3 27: 8.2% 1% Q3 27: 2.% 5% Office Industrial Retail Fourth quarter data for commercial property vacancy rates were not available at the time of publishing this document. The office vacancy rate for Q3 27 in Sonoma County was down noticeably from Q3 26, shifting from 2.8% to 17.8%. Over 25, square feet of new office space has been added over the past eighteen months, according to Orion Partners figures. Orion Partners also predicts lower Sonoma County office vacancies in the future as rising lease rates in Marin County may cause many firms to relocate, particularly to the southern half of Sonoma County. % '3 '4 '5 '6 '7 Source: Keegan and Coppin Company, Inc. ( Source: Orion Partners, Ltd. ( Share of Q4 Nonresidential Permit Value Alterations and Additions (31.6%) The industrial vacancy rate decreased from 8.8% in Q3 26 to 8.2% in Q3 27. According to Orion Partners, industrial lease rates have remained relatively constant in the area. The retail vacancy rate, at 2.% for Q3 27, was a four-year low. Sonoma County is one of the fastestgrowing retail markets in the Bay Area. 31.6% 11.8% 2.5% 54.2% New Other (11.8%) New Commercial (54.2%) New Industrial (2.5%) Source: Construction Industry Research Board ( Value of Nonresidential Building Permits ($Millions; Includes Alterations and Additions) $1 Q4 27: $56,579, $1 $8 $8 $6 $6 $4 $4 $2 ' '1 '2 '3 '4 '5 '6 '7 $2 Source: Construction Industry Research Board ( % Year-over Increase in Value of Q4 Nonresidential Permits 68.2% Increase in Value of Nonres. Permits Relative to Q4 21

9 Vitality The Sonoma County Business Cycle held steady in the 4th Quarter of 27. Currently, the Index stands at % above 4th Quarter 21. The index bottomed out in the first half of 23, and has been steadily rising since, a representation of the improving economic conditions experienced in the County. The Sonoma County Business Cycle Index attempts to show the current trends of several key economic statistics in one graph. The Index combines four statistics in varying proportions based on their volatility - those statistics, such as employment, which are relatively stable are considered more important than those statistics, such as business confidence, which tend to vary considerably. Currently the index is weighted in the following approximate proportions: Employment - 5.2%, Wages %, Taxable Sales - 2.3%, Business Confidence - 3.8%. Following the decline of the technology sector, the index shows the economic contraction experienced in Sonoma County after 21 and is set so that 1st Quarter 21 = 1. Sonoma County s seasonally adjusted nonfarm employment is up 2,1 jobs on a year-over basis and remains above 21 levels for the fifth-straight quarter, indicating that the local economy has fully rebounded from its contraction. Job growth has been strong across virtually every sector between 26 and 27, with particularly sizable gains experienced by the Construction, Professional and Business Services, Manufacturing, and the Trade, Transportation and Utilities sectors. Sonoma County's seasonally adjusted unemployment rate increased to 4.7% in Q4 27 from 3.8% in Q4 26. The seasonally adjusted unemployment rate was up.2 percentage points from Q3 27, despite high job numbers in the fourth quarter, but remains below the U.S. (4.8% for Q4 27) and California (5.8% for Q4 27) rates. Despite recent shakeups in the real estate and financial sectors, Sonoma County s diversified economy should buffer the area from sudden labor market swings. Business Cycle Index '1 Seasonally Adjusted Nonfarm Employment (Thousands) Q4 27: 193, '1 '2 '2 '3 '3 '4 '4 '5 '5 Q4 27: 17.4 Seasonally Adjusted Unemployment Rate '6 '6 '7 Source: Economic Development Board ( '7 Source: California Employment Development Department Sonoma County s nonfarm employment has been seasonally adjusted by the EDB. 8% California 7% 6% 5% 4% Q4 27: 4.7% United States Sonoma County 9.6% Increase Since Q4 21.9% Increase Since Q % Increase Since Q % Increase Since Q Percentage Point Increase Since Q % '1 '2 '3 '4 '5 '6 '7 Percentage Point Increase Since Q4 26 Source: Bureau of Labor Statistics ( Sonoma County s unemployment rate has been seasonally adjusted by the EDB. 7

10 Energy, Inflation, and Interest Rates 12-Month Change in Prices, San Francisco Bay Area 8% 7% 6% 5% 4% 3% 2% 1% % '99 ' '1 '2 '3 '4 '5 '6 Source: Bureau of Labor Statistics ( Dec 27: 3.8% '7.3 Percentage Point Increase in Rate of Inflation Since December 21.4 Percentage Point Increase in Rate Of Inflation Since December 26 The price of regular unleaded gasoline in the San Francisco Bay Area rose to $3.39 per gallon in the last week of December, a 27.5% increase over last year s reading of $2.66. Inflation crept upward from August s reading of 2.8% to 3.8% annualized in December. The Federal Reserve of San Francisco attributed the rise in inflation to increasing oil prices in tandem with the falling dollar. However, inflation is expected to remain contained over the long-term due to apparent slack in the labor market, despite the pressure of rising energy prices. Additionally, the recent uptick in inflation may have been partially caused by the simultaneous drop in interest rates, thereby increasing the availability of credit and bolstering consumer demand. Interest Rates 1% 8% 6% 4% 2% Mortgage Prime Federal Funds $3.75 $3.5 $3.25 $3. $2.75 $2.5 Weekly Regular Unleaded Gasoline Prices ($ Per Gallon), San Francisco Bay Area Dec 31, 27: $3.39 per Gallon 27.5% Increase Since Dec 31, % % '4 '5 '6 '7 $2.25 Jan '7 Dec '7 Increase Since May 6 Source: Federal Reserve Board ( Source: Department of Energy ( Electricity Prices ($ per Kilowatt Hour) $.17 Jan 28: $.164 per KwH Natural Gas Prices ($ per Therm) Jan 28: $1.14 per Therm.1% $1.3.9% $.16 Decrease Since Jan % $1.2 $1.1 $1. Increase Since Jan % $.15 Jan '7 Jan '8 Increase Since Apr 6 $.9 Jan '7 Jan '8 Decrease Since Apr 6 Source: Pacific Gas and Electric ( 8 Source: Pacific Gas and Electric (

11 Special Focus: Construction And Airport The Construction sector accounts for 6.3% of all employment within Sonoma County as of December 27. Moody s Economy.com forecasts that Construction employment will grow 2.6% over the next five years. Specialty Trade Contractors accounts for the majority (6.%) of jobs in the sector. The average annual wage for a Construction worker grew 12.8% between 21 and 26. In 25, Construction economic output was 7.7% of total Sonoma County economic output. Horizon Air traffic at the Sonoma County Airport averaged nearly 6,5 passengers during the quarter. New service to Portland, OR may have caused the 22.7% increase in passenger volume between the third and fourth quarters of 27. Construction s Share of Total Sonoma County Regional Product 8% 21: 7.1% 25: 7.7% Construction Employment (Thousands) 212: 17,9 2 27: 15,8 199: 1, % '9 '95 ' '5 Source: Bureau of Labor Statistics ( Forecast by Moody s Economy.com, Sonoma County s Advantage In A Slowing Economy, May 27 '1 Employment Growth Since % Projected Employment Growth From Construction Employment By Industry, 27 6% 4% 2% 4.% 6.% General Contractors and Highway Construction (4.%) Specialty Trade Contractors (6.%) % '1 '2 '3 '4 '5 Source: U.S. Bureau of Economic Analysis ( Source: Bureau of Labor Statistics ( STS Airport (Sonoma County) Passenger Loads, q Passengers $5 $45 $4 Oct in Oct out Nov in Nov out Dec in Dec out $35 Construction Average Annual Wage ($Thousands) '1 Nominal Real (in Constant 26 Dollars) 21: $42,537 '2 '3 26: $47,988 '4 '5 '6 12.8% Nominal Wage Growth Between % Real Wage Growth Between Source: Sonoma County Airport ( Source: Bureau of Labor Statistics ( 9

12 EDB Sonoma County Economic Development Board With Acknowledgment and Appreciation to local key businesses supporting Sonoma County Economic Development: Chairman s circle: Executive Tier: Associate Tier: County of Sonoma Board of Supervisors Sonoma County Permit & Resources Management Community Development Commission Sonoma County Health Services Sonoma County Transportation & Public Works