Los Angeles Forecast July 2009
The global financial and economic crisis hit hard the Los Angeles County economy in 2008, as nonfarm employment declined 1.3% (a drop higher than the one 1.1% drop registered in 2001), taxable retail sales dropped 6%, and permits of housing units plunged 31.8%, following the also big drop of 22.7% in 2007. Furthermore, non-residential building permits declined 5.2%. As a result of these developments the unemployment rate increased from 5.1% in 2007 to 7.5% in 2008.
As a result of these negative forces, the Los Angeles County non-farm employment in 2009 is predicted to drop by 4.1% and the unemployment rate to climb to 11.7%. Total personal income is predicted to decline 1.6%, while taxable retail sales are expected to dive 9%.
In 2009, the Los Angeles tourism sector is also expected to suffer with total overnight visitors registering a decline of 2.7%. The real estate construction sector will suffer the hardest hit of all sectors as the number of housing permits that will be issued in 2009 is predicted to plunge 53.4% compared to 2008. Furthermore, the value of non-residential building permits is predicted to dive 45%.
The LAEDC Los Angeles forecast for 2010 points to the return of the economy to stabilization, but the housing market is likely to continue to struggle as nonfarm employment is predicted to fall further by 2% and unemployment to rise to 12.8%. Furthermore, the value of non-residential building permits is predicted to drop by 4%.
However, several positive developments are predicted. In particular, total personal income is predicted to increase by 1%, while taxable retail sales are predicted to increase by 3%. In the tourism sector, total overnight visitors are expected to increase by 0.8% in 2010, while housing permits are predicted to register their first increase of 4% after 3 years of severe declines. Since the health of all sectors of the real estate market including the Los Angeles housing market, is closely linked to the health of the local economy, in our opinion the LAEDC Los Angeles forecast spells clearly great caution on the part of property investors at least for the remaining of 2009.
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