Riverside County faces economic headwinds over the next two years, with another surge in foreclosure activity, slow employment growth and marginal appreciation in home values, keeping the county’s tax coffers lean, according to a report submitted to the Board of Supervisors.

"We’re being battered here very badly," Supervisor Bob Buster said in response to the 47-page economic forecast authored by researchers at Cal State Fullerton.

The county-commissioned study by the university’s Institute for Economic & Environmental Studies (IEES) examined the economic variables that weakened the local economy and how long it may take for the region to regain traction.

Researchers said the Inland Empire’s housing boom put the area "in an unsustainable trajectory," leading to artificially high home prices that barely one-fifth of the region’s residents could afford using conventional loan products.

The market peaked in 2006, when the median home price in Riverside County reached $415,000.

Since then, prices have plummeted 60 percent, squashing demand for new construction, the researchers said.

According to the report, the county’s property tax receipts – its largest source of discretionary income – will decline between now and the end of 2011, as mortgage delinquencies remain high, keeping unsold inventory on the market and property values low.

"The Riverside County economy has plunged into an even deeper recession than the national economy," the report states. "The collapse in the housing market and in housing activity is one of the main factors behind the sharp deterioration of the county’s economy."

The report warned that adjustable-rate loans taken out in the last three years will begin to reset next year through 2012, likely resulting "in a second wave of foreclosures."

The unemployment rate is expected to average close to 12 percent this year, but will edge lower over the next two years, eventually dropping to around seven percent in 2014, according to the researchers.

Job opportunities will crop up in healthcare, tourism, education and Advertisement
leisure, but the availability of high-paying real estate jobs may be a thing of the past, the report indicates.

The local housing market is expected to improve as the job market recovers.

"A long-lasting recovery in the Riverside County housing market is likely to occur in mid-2010 to early 2011, but even then recovery will be very slow and accompanied by minimal price increases," the report states.

The researchers said the area’s affordability relative to "other regions in Southern California" make the prospects for long-term growth and demand for housing good.

However, a macroeconomic recovery is necessary for the county to expand economically, according to the report.

The IEES study predicted the US economic recession will linger well into next year, if not longer.

The researchers assumed the county’s sales and property tax receipts might recover to pre-recession levels in the next five years, but that estimation was based largely on a state budget deficit of $16 billion – almost 30 percent less than what is currently projected.

"At this point, we recognize we’ll have to go quarter by quarter to make adjustments [to the forecast]," said Riverside County Chief Financial Officer Paul McDonnell.

Supervisor John Tavaglione said he was not surprised when the go-go days of rapidly rising home values came to an end in Riverside County.

He said he’s now worried about the commercial real estate market.

"It’s just beginning," Tavaglione said. "It’s a huge bomb, and not just in Riverside County, but all over California."

Board Chairman Jeff Stone said if the real estate market is allowed to correct itself, without further federal or state government intervention, "you will begin to see an escalation in equity."

"There is nothing you can take away from Riverside County as far as weather, quality of life and safety," Stone said. "I am optimistic we are going to see brighter days. We’ll be back on the road to prosperity."

Be the first to share your opinion on this article!