By Allyson Pfeifer, Special to the Voice

Hosted by UCSB’s Economic Forecast Project (EFP), the “Economic Outlook 2005” presentation on April 29 summarized local business trends, national and regional demographics, and factors affecting the economy for an audience of local business owners, professors, and elected officials.
The 25th annual event welcomed a high-profile schedule of speakers including Dan Walters, columnist from the Sacramento Bee; Steve Happel, Professor of Economics at Arizona State University; and Bill Watkins, director of the EFP.
Why is living on the South Coast so expensive? Recent statistics show that of the ten least affordable counties in California, Santa Barbara is number one.
The Outlook states that Santa Barbara County’s “2004 existing single-family median home prices were $557,500, up from $402,700 in 2003.” Goleta’s median home price for 2004 was $737,375, second highest in the county, but below Santa Barbara’s $895,333.
Growth rates for California’s residential home prices are currently 9.7% annually, and, said Watkins, “home prices will probably not fall.”
Contrary to common opinion, Watkins believes that the county’s housing prices are not in a “bubble”-a bubble, he said, implies that ever increasing prices will fundamentally crash or plateau eventually. Rather, he said, price tags on homes will continue their gradual increase to meet demand. Some of the factors at work, according to the Outlook, are “wealth, demographics, and long-term interest rates.”
Coastal real estate has boomed for the past few years, and the trend is expected to increase as the baby-boomer generation retires and seeks coastal locations. As retirees increasingly migrate to the county, their wealth is expected to contribute to the local economy in the entertainment, retail, health care, and financial services sectors.
Watkins emphasized that locally, the increasingly severe problem of traffic congestion is a potential crisis. Calling it a “traffic paradox,” he said that much of it can be attributed to a decreasing population, which is related to the exceptionally high prices of homes.
With this decrease in affordability, young families leave and older households replace them, while service jobs replace those in tradeable goods production.
As for Goleta, once “a center of industry and middle-class housing,” according to the Outlook, the manufacturing sector is almost entirely gone. “Few middle-class families [in Goleta] can afford a home there, unless they have large amounts of equity from a previous home or family wealth,” it said.
Locally and statewide, California’s “inadequate infrastructure investment” has contributed to the increasing transportation problems.
According to Walters, “investment in transportation has lagged demographic and economic changes,” and this county is no exception.
He addressed the severity of the governor’s problems in Sacramento, saying they stemmed initially from claiming falsely to have solved the state budget crisis. As a result, for example, $5 billion was eliminated from the Department of Transportation’s funding, contributing to our local transportation crisis.
For Santa Barbara County, Watkins recommends continued investment in infrastructure and consideration of “new light rail, an expanded and regionally coordinated bus system, and additional freeway lanes.”
Statewide, he said, the problems are numerous: the budget is “unsolved,” Workers’ Comp costs have not decreased as promised, water and energy are incorrectly priced, infrastructure has not seen sufficient investment in years, and insurance costs and home prices are still high.
The result is that “tradable-goods producers are migrating out of the state and taking their jobs with them.”
This means, Watkins said, that Santa Barbara County will see a lower growth rate than the state in general. The county’s “2004 real per-capita economic growth rate was only 1.3 percent.”
Accordingly, our job market has shifted. The four lowest paying sectors, services, government, retail, and agriculture, compose the majority of Santa Barbara County’s jobs.
According to the Outlook, “if it were not for UCSB and Vandenberg Air Force Base,” the county might “look like a third-world county...[and] the bi-modal wealth distribution has to be the most serious and difficult issue facing policy makers.”
In Sacramento, Walters concluded, “fundamental structural reform is absolutely vital” for future improvement.
On a positive note, the report also stated that “beautiful places attract wealthy people” and the county’s wealthy population contributes to the environment through investing in the quality of life. Our “enviable lifestyle” includes an exceptional cultural environment, schools that “generally outperform the average California school,” excellent air and water quality, and high citizen involvement.

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