The California Bankers Association and Beacon Economics Release California Banking and Economic Update
Authors emphasize patience not policymaking in dealing with California’s foreclosure problem
SACRAMENTO, CA — The California Bankers Association (CBA), one of the largest state banking trade associations, and Beacon Economics have released the California “Banking and Economic Update,” a report that examines important issues that currently affect California’s banking industry and overall economy. The report is authored by Chris Thornberg, Ph.D., founding partner, and Jordan Levine, economist and director of economic research, of Beacon Economics.
This first report examines elements of California’s foreclosure crisis and housing recovery, and also takes a look at how California compares economically to Texas, a state often looked to as being more business friendly than California. This report offers the authors’ insights into the national and state economic landscape by examining a number of statistics including GDP growth, unemployment, real estate and housing starts, and consumer income and spending. Finally, the report provides a banking statistics section that includes a variety of data on banking activities in California, including gross loans by categories, delinquencies, capitalization and charge-offs.
“Our objective in producing this report is for policy makers and the general public to utilize the data and thoughtful analysis contained in the study when considering and discussing these very important issues,” said Rodney Brown, president and CEO of the California Bankers Association.
The results of this study were discussed today in a teleconference call, delivered by the two authors from Beacon Economics. Among the report’s findings, unlike in other states with high rates of foreclosure such as Nevada, Florida and Michigan, California does not have an oversupply of housing units. In fact, California has the second-lowest vacancy rate in the nation, arguing against the commonly held notion that foreclosures are adding to and creating an excess supply of housing.
The report also answers the question of why, if California is so housing constrained, we haven’t seen a more dramatic price appreciation during the past two years? This is explained by what the report’s authors call the second major problem with the housing market today: equity. During the run-up in home prices, Americans saw the aggregate value of housing stock increase by $17 trillion, and at the same time, Americans took on $7 trillion in new mortgage debt. When the housing bubble collapsed, most of the new value left while most of mortgage debt remained. Because California homeowners have little or no equity there is little demand for “move-up” buying, and the only thing that can solve this is time.
Additionally the report offers a perspective on how California is performing economically. Thornberg and Levine note that there are clear indications that the state’s economy is on the mend. Since “hitting rock bottom” California has added back more than 226,000 jobs, although unemployment does remain “stubbornly high” in the state. However, in comparison to the U.S. overall, California is lagging behind the economic recovery. Most notably, U.S. GDP is nearly back to its peak levels reached before recession- a recovery of nearly 5 percent from trough levels- while California has added back 3.5 percent.
Please contact Beth Mills to schedule a media interview with the study authors.
About the California Bankers Association (CBA)
Established 120 years ago, the California Bankers Association (CBA) is one of the largest state banking trade associations in the country. CBA leads the way in developing relevant educational and legislative solutions to some of California’s more pressing financial and banking issues, including adult financial empowerment, identity theft, financial privacy, and financial elder abuse. CBA’s membership includes nearly 200 of California’s commercial, industrial and community banks and savings associations. For more information, visit www.calbankers.com.
About Beacon Economics, LLC
Beacon Economics, LLC is an independent economic research and consulting firm with offices in Los Angeles and the San Francisco Bay Area. The firm delivers economic analysis and data sites that help their clients make informed, strategic decisions about investment, growth, revenue, policy, and other critical economic and financial issues. Their nationally recognized forecasters were among the first to predict the collapse of the housing market and foretell the onset and depth of the economic downturn that followed. Core areas of expertise include economic and revenue forecasting, market and industry analysis, economic impact studies, economic policy analysis, and international trade analysis.