Record Home Prices, Scarce Supply; Businesses Brace for Impact on Job Market
Wednesday, May 04, 2022
Irvine medical device maker Edwards Lifesciences Corp., the most valuable public company in Orange County with a nearly $70 billion valuation, last week listed nearly 220 open positions for its expansive Irvine headquarters campus along Red Hill Avenue, where it has spent well over $200 million buying land and building new facilities the past several years.
Electric vehicle upstart Rivian Automotive Inc., valued at around $30 billion as of last week, says it has openings for over 370 positions at its rapidly expanding Irvine headquarters, where it has already built a base of nearly 2,000 workers in a few short years.
If either firm is hoping to lure out-of-town workers to the city for those medical and tech-related positions, good luck finding them a home.
The city of Irvine, Orange County’s fastest-growing city over the past decade with a current population of more than 300,000, only had about 230 homes and condos actively listed for sale as of last week, according to online real estate marketplace Redfin.
The median asking price for those homes: a little more than $1.4 million, the site’s data indicates.
It’s not just Irvine seeing a housing crunch.
That was made clear late last month, when housing sales data from DQNews indicated OC’s median home price in March topped the $1 million mark for the first time.
The $1.02 million median marked the first time a Southern California county has hit the seven-digit mark, according to the data from DQNews, a unit of Irvine’s CoreLogic.
The rising cost of housing for employees, and the lack of supply—both for new and existing homes—is an increasingly key challenge for local businesses to navigate, area economists say.
In particular, rising housing prices make it harder to recruit young people to work in OC, notes Anil Puri, director of the California State University Fullerton’s Woods Center for Economic Analysis and Forecasting at California State University, Fullerton.
“There is a disconnect. That is why so many people live in the Inland Empire and commute to come into Orange County,” Puri said, noting that the trend has been going on for years.
CEOs cite housing affordability as the most unfavorably rated aspect of California’s business climate, according to a new report highlighted in the Business Journal last month from Chapman University and University of California, Irvine economists.
It’s not just home prices hitting new highs. The monthly average rent for an apartment in metro OC topped $2,600 at the end of the first quarter, an 18.5% jump year-over-year, according to a recent market report by Marcus & Millichap.
Members of the Greater Irvine Chamber of Commerce “cite ‘housing near jobs’ as their No. 1 priority to attracting and retaining top-tier talent,” chamber President CEO and President Bryan Starr said during a recent city council hearing.
This is especially true for recent graduates entering the workforce, Starr said at a late-March city council hearing.
Area developers are willing to add to the stock of more affordable homes and apartments, with an eye on helping OC cities meet new state requirements.
Officials with Irvine’s FivePoint Holdings LLC, for example, have said their land at the Great Park Neighborhoods, now entitled for 10,500 homes, can add plenty more housing options, if the city were to approve more entitlements.
The Business Journal last month was first to report on The Irvine Company proposing to add workforce housing to land at its Market Place shopping center in Irvine and another spot in the Spectrum area of the city. It would be Irvine Company’s first housing development at its shopping center.
OC’s rising housing prices, with a median price up more than $200,000 in about two years, was among the the most striking features of Cal State University, Fullerton’s Spring Economic Forecast, held on April 22 to 120 people at the Meng Hall with several hundred more who joined remotely.
The local economy hasn’t caught up with the housing market, said Puri and fellow CSUF economist Mira Farka. She is the co-director of the Woods Center.
The OC labor force is still 53,000 workers lower than pre-pandemic level of February 2020.
“Two years after the sharp jolt of COVID-related shutdowns, the local economy has yet to fully recover,’’ they said.
Prepare for a possible slowdown on multiple fronts, they said during the forecast as inflation, lingering effects of COVID-19 and the Russia-Ukraine war take their toll (see story, this page).
“The labor force is still constrained,” Puri said. “We think that the job growth is going to slow down.
“Productivity is high but going back to expansion, they may not need as many workers as they did before the pandemic.”
The forecast predicted payroll employment growth in Orange County to slow from an expected 2.2% this year to 1.5% in 2023.
Orange County’s unemployment rate fell from 3.7% in February to 3.1% in March, according to the state’s Employment Development Department.
“High-tech sectors have been doing pretty well,” Puri said. “And we have Disneyland of course.”
Disneyland in Anaheim is Orange County’s second-largest private employer with about 25,000 workers, according to the Business Journal’s annual list of largest Employers.
On the national front, the two economists said, “over the next 10-12 months, we expect continued growth, albeit a decelerating one, coupled with high inflation” while their longer-term view “is decidedly more grim.”
They added that “the fundamentals of the economy continue to be strong.”
“We have had 17 months of double-digit growth,” Puri told the Business Journal before last month’s presentation, speaking of housing prices.
“That is going to come down dramatically because of higher mortgage rates. It’s already slowing things down.
“We expect for this year about a 3% to 4% price increase,” Puri said of the prices for single-family homes in OC.
Next year could be even slower.
Prices “are not going to fall. They’re just not going to rise at double-digit rates,” Puri said.
CSUF Economists: Businesses Need to Plan Well, Be Cautious
The Orange County Business Expectations Index (OCBX), a local CEO economic survey which California State University Fullerton’s Woods Center for Economic Analysis and Forecasting Director Anil Puri oversees, declined from 91 in January to 85.3 in late March.
That’s still an optimistic figure; a reading of above 50 indicates a belief in future growth in the economy. The OCBX bottomed out at a rating of 22.7 following the onset of the pandemic.
The economists said the outlook slipped possibly due to higher inflation, the Russia-Ukraine war and persistence of COVID-19.
Despite the decline, Puri said executives “aren’t worried yet.”
As a result, “we’re kind of bullish enough in the short term, but longer-term we see a lot more troubles on the horizon,” CSUF colleague Mira Farka said. She is the Woods Center’s co-director and a CSUF associate professor of economics.
Farka predicted the period beyond the coming 12 months will “be precarious.”
She gave the following advice to OC executives:
- “Plan well because there are going to be tougher times ahead.”
- “Be a bit more cautious even when it comes to wage increases, even when it comes to labor hires. I know there is a shortage of labor but that will actually sort of balance itself out.”
- “Demand for labor will come down as the economy sort of goes through this headwind.”
- “Time to be a lot more prudent and a lot more cautious in terms of capital spending, employment hiring and so on.”
Category: Housing, Irvine, Greater Irvine Chamber, Bryan Starr, Edwards Lifesciences, Rivian, Leaders Circle, Job Market