Santa Barbara County

1
Goleta Economic Outlook
Bill Watkins
July 14, 2005
2
The Economy is
UCSB
Tourism
Manufacturing
3
The Economy is
62.9 Service, Retail, Government 15.8
Manufacturing 5.7 F.I.R.E 15.6
Construction, Agriculture, etc.
4
The Economy is
Uhm
Well.
You know, it is a bit slow
5
Median Home Price Forecast Performance
Ventura County
Forecast
Actual
Santa Barbara County
Forecast
Actual
San Luis Obispo County
Forecast
Actual
actual came in lower than forecast
6
Outline

• Home Prices
• The Forecast
• United States
• California
• Goleta
• Today
• The Forecast
• Separate Topics
• Traffic
• Retirement

7
Houses and Bubbles
8
Will home prices collapse and cause the end of
the world?
9
Bill Says
They mean that house prices will fall, and that
fall will cause a decline in consumer spending.
10
Chuck Maxey Says
Not to worry. American society is superficial
and materialistic. Consumers will continue
to spend.
Dean, CLU School of Business
11
Two Californias
12
Coastal California
13
Everywhere Else
14
Ten Least Rapidly Growing Counties in California
(2000-2004)
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Ten Most Rapidly Growing Counties in California
(2000-2004)
16
Santa Barbara County Lost 944 people in 2004!
According to the Department of Finance, Goleta
was responsible for about 10 of the Countys
population decline
17
Real Median Home Price Growth
South Coast of Santa Barbara County
18
Real Median Home Price Growth
City of Goleta
26.7
25.0
17.8
13.6
9.0
7.9
5.7
1.9
-1.8
-1.7
-5.0
-5.6
1993
1995
1997
1999
2001
2003
19
Bill Says
The population is not just shrinking. It is
also changing.
20
Why Are Home Prices Going Up?

• Coastal California is not a local market
• Demographics
• Wealth accumulation
• Interest rates
• Taxes
• Supply

21
1,008,745
509,435
194,434
2005
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1,268,231
1,047,259
1,036,688
1,008,745
980,279
2005
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What About Interest Rates?
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Greenspan Says
Its a conundrum.
25
Interest Rates
Fed Funds Rate
30-yr Conventional Mortgage Rate
26
What About Rents?
27
What About Commercial Property?
28
United StatesEconomy
29
Greenspan Says
Fiscal Discipline
One Trillion Dollars New Debt
30
Real GDP Growth
United States
4.5
4.4
4.2
4.0
3.7
3.7
3.3
3.0
2.7
2.5
1.9
0.8
-0.2
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
31
How High Are Oil Prices?
32
Real Oil Prices Normalized by Wealth
33
Californias Economy
34
Frank Zappa says
Sometimes you got to get sick before you can
feel better.
35
California Issues

• Budget
• Energy
• Housing costs
• Workers Compensation Insurance

• Health Insurance
• Tort Law
• High Costs
• Onerous Regulation

36
Californias Great Migrations

• Latinos
• Baby Boomers
• Generation X
• Business

37
California Manufacturing Percentage of All Jobs
16
15
14
13
12
11
10
1990
1992
1994
1996
1998
2000
2002
38
5-year Total Employment Growth
2004
Agricultural Production
-8.3
Mining Quarrying
-12.8
24.1
Construction
Durables Manufacturing
-17.8
Non-durables Manufacturing
-13.4
Information Services
-6.8
Transportation, Warehousing, Utilities
-5.1
4.1
Wholesale Trade
Retail Trade
7.1
Finance, Insurance, Real Estate
13.8
Professional Business Services
-1.0
Education Health Services
14.2
Leisure Hospitality Services
11.2
Other Services
6.6
Public Sector
6.7
39
Bill Says
Actually, California has been doing better than
expected.
40
Real Gross State Product Growth
California
41
Goleta
42
Goletas Strengths

• UCSB
• Tourism
• Airport

43
Clouds on Goletas Horizon

• Housing prices
• California
• Friendly Fire

44
Employment Distribution (jobs)
Goleta Valley - 2004
706
Agriculture
1,330
Construction
5,026
Durable Manufacturing
288
Non-Durable Manufacturing
1,892
Trans., Comm., Utilities
1,309
Wholesale Trade
2,897
Retail Trade
1,917
Finance, Ins. Real Estate
10,830
Other Services
Public Sector
7,479
45
5-Year Job Growth by Industry
Santa Barbara County - 2004
6.8
Agriculture
-30.3
Mining
20.6
Construction
-17.7
Durable Manufacturing
3.7
Non-Durable Manufacturing
0.0
Trans., Warehousing Utilities
-2.6
Information
-9.8
Wholesale Trade
-1.7
Retail Trade
5.6
Finance, Ins. Real Estate
11.7
Other Services
10.6
Public Sector
46
2-year Employment Growth
Goleta Valley - 2004
47
Bill Says
The Santa Barbara County Workforce Investment
Board and the UCSB-EFP are trying to help.
48
Santa Barbara County
Output Share of Tri-Counties
49
Nominal Gross County Product
Goleta Share of Santa Barbara County
20.3
20.0
18.5
18.5
17.7
17.7
17.5
1993
1995
1997
1999
2001
2003
50
Goleta Valley
Output Share of S.B. South Coast
51
Hotel / Motel Occupancy Rate
South Coast of Santa Barbara County
78.9
77.7
77.2
76.2
74.1
74.0
73.9
73.6
72.7
71.2
71.0
70.6
1993
1995
1997
1999
2001
2003
52
Hotel / Motel Room Sales
Goleta Valley
53
Hotel / Motel Occupancy Rate
Santa Ynez Valley
54
Population
Comparison
Index (1991 100)
55
Private Sector Jobs
120
115
110
105
100
95
90
85
1992
1994
1996
1998
2000
2002
2004
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235
Includes 235-unit Willow Springs Project
8
2
0
0
2001
2002
2003
2004
2005
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26
13
10
7
7
2001
2002
2003
2004
2005
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2004 Owner-Occupied Housing
Cities in Santa Barbara County
73.3
68.2
63.6
58.1
56.4
55.6
54.7
50.3
41.4
Buellton
Carp-
Goleta
Guada-
Lompoc
Santa
Santa
Solvang
Santa
interia
lupe
Maria
Barbara
Barbara
County
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2004 Median Household Income
Cities in Santa Barbara County
67,078
56,975
55,350
53,682
52,194
50,773
40,678
40,268
37,441
Buellton
Carp-
Goleta
Guada-
Lompoc
Santa
Santa
Solvang
Santa
interia
lupe
Maria
Barbara
Barbara
County
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2004 Unemployment Rate
Cities in Santa Barbara County
5.3
5.2
5.1
4.2
3.8
2.3
2.0
1.9
1.2
Buellton
Carp-
Goleta
Guada-
Lompoc
Santa
Santa
Solvang
Santa
interia
lupe
Maria
Barbara
Barbara
County
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2004 Median Age
Cities in Santa Barbara County
44.3
38.5
38.3
36.3
35.1
33.9
32.5
30.0
27.5
Buellton
Carp-
Goleta
Guada-
Lompoc
Santa
Santa
Solvang
Santa
interia
lupe
Maria
Barbara
Barbara
County
62
2004 Population Growth
for Regions in Santa Barbara County
5.8
3.9
1.0
0.6
0.2
0.1
0.0
-0.1
Buellton
Carpinteria
Goleta
Guadalupe
Lompoc
Santa
Santa
Solvang
Valley
Barbara
Maria
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Forecast
64
The future is uncertain, and death is always
near.
Jim Morrison Says
65
Nominal Gross Regional Product
Goleta Valley
billions
3.86
3.70
3.55
3.40
3.25
3.14
3.12
2.85
2.55
2.48
2.39
2.16
2.04
1.80
1.70
1993
1995
1997
1999
2001
2003
2005
2007
66
Real Gross Regional Product Growth
Goleta Valley
67
Total Employment Growth
South Coast of Santa Barbara County
6.0
5.9
3.4
1.9
1.8
1.2
1.0
0.9
0.8
0.7
0.7
0.4
0.2
0.0
-0.5
1993
1995
1997
1999
2001
2003
2005
2007
68
Total Employment Growth
Goleta Valley
16.8
5.6
5.2
4.4
2.9
2.8
1.4
1.2
1.2
0.1
-0.9
-1.7
-5.6
-14.3
1993
1995
1997
1999
2001
2003
2005
2007
69
Real Average Salary Growth
South Coast of Santa Barbara County
70
Real Average Salary Growth
Goleta Valley
8.9
3.8
2.7
1.9
1.7
1.0
0.3
0.1
0.0
0.0
-0.1
-0.2
-0.4
-0.6
-5.2
1993
1995
1997
1999
2001
2003
2005
2007
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Nominal Median Home Price
City of Goleta
1,173,900
1,006,600
862,500
737,400
570,800
395,900
332,200
249,000
232,500
231,900
1993
1995
1997
1999
2001
2003
2005
2007
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Real Growth Rate of SFR Median Price
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Bill Says
The forecast is for slow economic growth. Now
lets look at traffic and how to profit from
demographic trends.
75
Special Topics
76
You may ask yourself.
David Byrne says
77
If the population is declining,
And jobs are weak,
Why is traffic getting worse?
78
Bill Says
Lets talk about the Traffic Paradox.
79
What isThe Traffic Paradox?

• Falling Population.
• Increasing Traffic.

80
The Traffic Paradox
Necessary Conditions

• Home prices must be divorced from local economic
  activity.
• High home prices must have a negative impact on
  jobs population.

81
The Traffic Paradox
The Changes

• Young families leave.
• Older, smaller households replace them.
• Service jobs replace tradable goods production.

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First-Order Impacts

• Higher workforce housing density
• Increased commuting traffic

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Second-Order Impacts

• Commute times increase
• Surface street congestion
• Recruitment difficulties
• Pollution increases
• Economic activity decreases

84
You may ask yourself.
David Byrne says
85
How can I make money off of these old folks?
86
Think of retirees as tourists who just stay
longer.
Bill Says
87
How can I miss you when you wont go away?
Dan Hicks says
88
Retirees who migrate are the healthiest,
wealthiest, and best educated of all retirees.
Mark Fagan says
Jacksonville State University sociologist
89
Older Migrants Classified

• Amenity
• Return
• Dependency

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Amenity Migrants

• Younger
• Married
• Educated
• Homeowners
• Wealthy

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Top Three Requirements

• Safety
• Health Care
• Amenities
• Active Downtown
• Climate
• Lifestyle Activities

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Advantages of Amenity Migrants

• Works like a clean export industry
• Bring lots of capital
• Dont strain
• School systems
• Welfare systems
• Criminal justice systems

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Advantages of Amenity Migrants

• Income is discretionary and spent locally
• Income is not cyclical or seasonal

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Advantages of Amenity Migrants

• No infrastructure needed
• No investment needed
• No tax concessions needed

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Winners

• Health care industry
• Financial services
• Recreation providers
• Entertainment sector
• Retail sector
• Other service sectors

96
Losers

• Tradable goods producers
• Agriculture Industry
• Generation X

97
Conclusion
Even in a slow-growth environment, change implies
economic opportunity.
98
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