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SD Economy and Jobs Grow Along with Home Prices

Carrie Rossenfeld Residential & Mixed Use

According to a new report from Los Angeles–based research firm Beacon Economics, the San Diego County economy continued on its growth trajectory during the first half of 2018. Local employment numbers are increasing and the region’s unemployment rate is falling. Home prices also continue to rise, but home sales are declining due to mounting affordability challenges. Residential building permits are up, but the increased stock will only limit, not reverse, the upward trend in San Diego’s home prices.

During the second quarter of 2018, the median home price in San Diego reached $604,000, for a 5.4 percent growth rate over the second quarter of 2017. While these numbers represent strong growth, neighboring counties experienced even higher percentage gains. Year-­‐over-­‐year home price growth in Los Angeles (+8.9 percent), the Inland Empire (+7.9 percent), Orange County (+7.2 percent) and California as a whole (8.5 percent) all surpassed the 7 percent mark. And while the median home price in the state has grown faster over the past year, San Diego’s median home price exceeds
California’s by over $120,000.

Due to limited supply and higher prices, San Diego home sales declined by 1.8 percent from the second quarter of 2017 to the second quarter of 2018. Residential building permits, however, also increased by 66.5 percent during the same period, potentially providing some relief to the tight supply conditions. Multi-­family housing permits also increased, from roughly 1,100 in the second quarter of 2017 to more than 2,200 in the second quarter of 2018. These additions to San Diego’s housing stock should help alleviate problems associated with lack of supply and declining affordability, Beacon says.

The firm is projecting the median home price in San Diego County to increase by approximately 6 percent for all of 2018. While this sounds high, it is lower than the 7.1 percent year-over-year growth that national home prices experienced from May 2017 to May 2018, according to CoreLogic, an Irvine, California–based a leading global property information, analytics and data-enabled solutions provider.

With a total of 1.48 million workers, total nonfarm employment in San Diego expanded by 2.2 percent between April 2017 and April 2018, outpacing Orange County (+1.8 percent) and Los Angeles County (+1.3 percent) but lagging the Inland Empire (+3.1 percent).

More job openings in San Diego also translated into a declining unemployment rate, which fell by 1 percentage point to 3.1 percent. San Diego now has one of the lowest unemployment rates in the broader Southern California region, lower than Los Angeles (4.4 percent) and the Inland Empire (4.1 percent), although higher than Orange County (2.8 percent).

San Diego’s professional and business-services sector added 14,100 positions, accounting for
almost half of the 31,700 jobs added in the region between April 2017 and April 2018, Beacon finds. Of these positions, 6,800 came from the professional, scientific, and technical-services subsector, representing a 6.1 percent increase. Education and health also experienced solid gains, climbing 3.1 percent and adding 6,400 jobs. The largest percentage growth came from administrative support, where 6,300 jobs were added for a year-­‐over-­‐year increase of 7.6 percent.

Two of San Diego’s job sectors suffered losses over the past year, with the largest decline coming from leisure and hospitality. The industry lost 3,300 jobs and shrank 1.7 percent. Financial activities also fell, dropping 0.8 percent and losing 600 positions.

Beacon is projecting employment in San Diego County to expand slightly through the end of the year, with growth expected to land in the 1 percent range. As a result, the region’s unemployment rate should also edge down slightly.