Southwest Riverside County Economic Forecast

By Southern California Rental Housing Association

In late August, the Temecula Valley Chamber of Commerce hosted a Regional Economic Forecast breakfast. The breakfast featured the City Managers of Hemet, Lake Elsinore, Menifee, Murrieta, Temecula, and Wildomar, the Executive Director of Riverside County Economic Development Department and Economist Christopher Thornberg, Founding Partner of Beacon Economics and Director of UC Riverside School of Business Center for Economic Forecasting and Development.

The economic forecast highlighted the recent and upcoming accomplishments of the cities and county in the Southwest Riverside Region as well as an update on the nation and region’s economy. Each city manager touted the positive economic growth their city is experiencing even during the pandemic. They noted the rise in area median incomes, and home prices. Healthy job growth and new businesses are generating more tax revenue for the cities improving quality of life for their residents. 2020 U.S. Census data showed that the Southwest Riverside region had robust population growth during the past decade.

Riverside County’s Economic Development Department spoke about its economic development and job training programs. Southwest Riverside County continues to see increased business investment and its economic conditions improve, but the EDD did note that the businesses in the region face challenges such as hiring new workers and retaining and attracting workers because of high competition for homes that are for sale.

Keynote presenter Christopher Thornberg addressed the nation and Southwest Riverside’s economy now and what it may look like in the next few years. Thornberg noted the causes and differences between the 2008 and 2020 recessions and how the government responded to both events. Thornberg described the government’s response to the 2008 Great Recession as inadequate and its reaction to the COVID-19 pandemic as excessive.

Thornberg provided various economic data to explain what is happening nationally and in the Southwest Riverside region. The onset of the pandemic resulted in thousands of businesses closing and millions of workers losing their jobs, totaling $525 billion in lost income. However, the federal government’s stimulus packages of May 2020 and January 2021 pumped $5.1 trillion into the economy with stimulus checks, increased unemployment insurance, PPP loans, and emergency funding to state and local governments for items such as emergency rental assistance programs.

Unlike the 2008 recession, which took the United States years to recover from, the 2020 COVID recession was brief. Thornberg noted the U.S. Gross Domestic Product, industrial production, and manufacturing has quickly rebounded rising to or above prepandemic numbers. U.S. consumer spending is near pre-pandemic levels and showing many households are fine financially. Most higher income households deposited their stimulus checks and other direct payments into their savings and checking accounts. Low-income Californians led in spending among all other income level households and held higher balances in their checking accounts.

However, Thornberg stated government public health orders shutting down businesses disrupted services and manufacturing supply chains, creating a spike in prices, shrinking inventory in many economic sectors. During the pandemic recession, he noted national home sales dropped briefly, but spiked considerably and now is showing signs of leveling off.

Building permits for multifamily and single-family homes dropped considerably in RiversideSan Bernardino Counties with multifamily construction only a fraction compared to singlefamily homes built in 2020 and 2021. Like in many US housing markets, Southwest Riverside saw a sharp rise in demand for homes as inventory of for-sale homes dwindled significantly, increasing homes prices. Home prices rose more than 15 percent between January 2019 and 2020.

Government-mandated moratoriums on evictions affected rental markets in various ways. Rental markets in Los Angeles and Orange County saw nominal declines in both rental rates and vacancy rates in. Rental rates in Riverside-San Bernardino counties rose significantly but rates remained well below the other counties making the region a popular choice among residents. Thornberg, countering the notion there will be a tsunami of evictions once eviction moratoriums end, providing data that most tenants did not miss their rental payments or paid back rent if it was owed during the pandemic.

Despite the positive economic data, Thornberg remained concerned with the US and California’s future economic outlook. Inflation and interest rates are showing signs of spiking higher because of the federal government’s stimulus packages. Inflation could rise higher if the federal government approves more stimulus packages. Thornberg also was concerned with California’s existing housing imbalance and shortage of available workers. Many of California’s job markets have more available jobs than workers and many eligible workers are not rushing to enter the job market. California has the 2nd lowest ratio of homes to population among US states. California could lose more eligible workers to other states if it does not build more workforce housing. Even if California enacts more pro-housing construction laws, it will take years for California to see the impacts of those laws.

Please visit https:// ucreconomicforecast.org/index. php/events-presentations/ presentation-archive/ to see Christopher Thornberg’s full presentation and other economic forecasts posted on the webpage.