Some 2011 Business Outlook to Consider

Attended UCI Annual Business Outlook and here are some interesting notes I took,
Enjoy the Read.

Overall growth: 2.8 percent - 3.3 percent.

Inflation: 1.3 percent -1.5 percent.

Unemployment: Slowly declining; currently at 9.4 percent; won't hit 8 percent until 2012.

The "normal" rate for unemployment will be 6.5 percent -7 percent, not 5 percent.

The key to lowering unemployment is retraining construction workers for other jobs and "making Detroit our China," meaning building high-tech manufacturing facilities in cities with low cost of living and inexpensive labor.

NEXT 5-10 YEARS:

•Higher taxes on everyone, not just on higher income earners.

•Higher interest rates.

•Increased inflation, especially on food, energy and medical needs.

CURRENT SIGNS:

Positives:
•Factory, retail and homes sales are up.
•Unemployment claims are trending down.
•Investment sentiment is up.
Negatives:
•Heavy household debt remains.
•Strained state and local governments.
•Food and commodity prices are seeing inflation.

CALIFORNIA:

Expect slow economic growth of 1 percent to 2 percent in California because the state is significantly dependent on the housing market.

Some positive signs for the California economy are that housing permit requests are up and price declines are slowing.

ORANGE COUNTY:

The OC will grow at a slower pace than the U.S. economy but should exceed the forecasted rate of 1 percent to 2 percent for California.

We should expect unemployment to fall slowly but, as in the national economy, it is unlikely to hit 8 percent until sometime in 2012.
Unfortunately, the recovery here will continue to be slowed by the sluggish housing market.

Irvine Housing:

Lennar Corp. executives called Irvine “one of the most desirable (housing) markets in the country,” saying they’re excited to finally be moving forward with housing around the Orange County Great Park.

The firm, one of the nation’s largest homebuilders, bought the former El Toro Marine base at the top of the market in 2005, only to see the project stalled by the housing slump and its value shrink.

But the project got a new lease on life with the recent approval of restructured financing and the filing of plans for nearly 5,000 new homes around the former base.

Lennar says,“It’s a great land position in one of the most desirable markets in the country.

With this debt restructuring and partnership restructuring, they see the stabilizing the capitalization of the project for the next seven plus years, which will give them the ability to monetize the assets.

So, as they are really exited about that.

They Just submitted the next level of maps to the city for entitlement … and now we’re moving forward.

These restructurings have come with some pain. Over the past five years, Lennar has taken a lot of pain on some of these ventures.

Meanwhile,

Irvine officials issued a report Thursday saying that city and Great Park staff are studying Gov. Jerry Brown’s proposal to eliminate a key funding source earmarked for park development over the next 40 years.

They are Studying??

Brown proposed in his new budget to dissolve the state’s 425 redevelopment agencies, which have the power to capture property taxes that otherwise would be shared with counties and schools.

The city hoped to capture up to $2.2 billion for the Great Park, the report said.
“We are working … to minimize the impact of this proposal on Irvine,” the report said.

No specific solutions were mentioned.

Among the findings:

Brown’s plan would exempt tax revenue earmarked for existing debt.

That could include two loans to Irvine’s redevelopment agency already on the books: $134 million raised in a complicated cash transfer among city agencies and $6.6 million lent by the Asset Management plan.

But nearly two-thirds of a projected $2.2 billion in property tax revenue for the park “could be at risk under the governor’s proposal.

The $134 million loan repayment could be at risk as well because the state may not recognize it as existing debt.

Brown proposed that cities replace lost funds by asking voters to approve taxes for redevelopment, the staff report said.

However, Irvine can’t take advantage of that because of a long-standing promise not to finance the Great Park with new taxes.

More to come:

Contact;

John Hacker

jhackerleads@cox.net www.letsgobuyahome.com