‘They need housing’: Keynote speaker at ERC summit talks real estate, jobs
People want to live in California, and many discover potential in Nevada County.
Despite the challenges of the pandemic over the last 18 months, the economy is moving forward, said Christopher Thornberg, director of the UC Riverside School of Business Center for Economic Forecasting and Development.
“Business investment is up, particularly in California, software is up, industrial equipment is up,” he said. “Meanwhile, credit markets look wonderful, debt hasn’t grown, little or no delinquent fees and the housing market is on fire.”
Thornberg was the keynote speaker at Monday’s Economic Resource Council annual summit. During his discussion he referenced housing, jobs and the workforce.
Residents have seen phenomenal rises in housing prices in the state.
”But from an objective measure of looking at the cost of housing relative to the income for buying a house, housing in California is more affordable today than a decade ago,” he said.
The supply of housing goes to the highest income earners because they can afford it. The problem for everybody else is not that they cannot afford it, but that there is not enough housing available, Thornberg said.
“I may not be able to outbid that family because I don’t have enough income,” he said, “So, I’ll move to Arizona or Nevada, where I can win a bidding war.”
The real estate sector is doing well because of demand, not supply. There is enormous opportunity in Nevada County, leading Thornberg to ask what people want.
“Many want kids, and what do you need for kids?” he questioned. “Good schools, kid attractions. This is important to think about for economic development for a region.”
The unemployment rate in the U.S. is 5.1% currently.
“But there’s 11 million jobs in the U.S. right now,” said Thornberg. “Before the pandemic, there were 3 million jobs. So, we now have almost 50% more jobs before COVID-19, but job quits are at a record high now.”
One reason that is happening is people are feeling confident about their prospects, and they have left or were laid off. The labor market contracted by 3 million since the start of the pandemic. Supply chain problems are due in part to labor shortages, and the working population in the U.S. is decreasing.
“We’re running out of workers,” said Thornberg. “You didn’t feel this, in part, because wages had been rising and that encouraged people to stay in the labor market longer than they would have.
But during the pandemic, 2.5 million people retired, Thornberg said. When people retire, it often pulls up everybody else in the firm. That puts the country in one of the tightest labor markets ever.
Before COVID-19 an employee might have been in a dead end job and remained because it was not so certain that employee could quickly find work again. Many now have opportunity because of stimulus benefits. Because of that people took their time deciding what else they might do for a job.
“Low skill workers don’t do well after a recession,” said Thornberg. “It is one reason to make sure your kid gets a good education. It helps them survive better through a business cycle. And by helping kids get an education, it helps the economy. It’s a hell of a time to be a worker. It’s a seller’s market — in homes and in labor. So, if you’re an employer, you’re going to have to step up and pay more.”
The labor shortage is worse in California almost more than anywhere else. The reason is the state does not build enough housing. Home prices in California are about 80% more than most anyplace else, Thornberg said.
“Wonder why we can’t find labor for business? … remember housing,” he said. “People are moving out of the state, not because of taxes or regulations, they’re moving out because of housing.”
In Nevada County construction is up, manufacturing is down, and leisure and hospitality are up. The unemployment rate in the county is at 5%. Not as low as the pre-pandemic 3%, though it’s still a tight labor market.
One of two panelists, Kristin York, vice president of the Sierra Business Council, said one key to prosperity is establishing reliable communications and a way to achieve that goal is implementing broadband infrastructure.
“The county is doing one of the most progressive things, granted (internet service provider) grants,” she said. “It’s really important because it addresses development costs and streamlines permitting.”
In April, the Board of Supervisors awarded four grants totaling $500,000.
Jordan Levine, vice president and chief economist of the California Association of Realtors, spoke by video presentation. He noted that the bright spot in the economy has been housing.
“The worst of COVID-19 is behind us,” he said. “The pandemic created more urgency in the crisis as the broader economy climate gets brighter.”
Gil Mathew, executive director of the Economic Resource Council, said Thornberg helped the community see a brighter near-term future than the audience might not previously had.
“You”re watching technology move up the I-80 to Sacramento, and to Reno, and Nevada County can be a part of that,“ Thornberg said. ”But people need to get used to change and they need housing. The population has barely grown in the decade, yet people want to live in this beautiful place.”
William Roller is a staff writer with The Union. He can be reached at email@example.com
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John Cassidy, the longtime CEO of Sierra Central Credit Union, has announced that he will retire January 15, 2022, ending his 22-year career as CEO of Sierra Central Credit Union.