About the best thing that can be said about 2008 is that it’s over. When asked to sum up the year, “challenging,” was the most popular word from business and political leaders. Others were less politic. “The apocalypse, disaster, terrible,” said Congressman Brad Sherman. “The only thing you can say about this year is it’s not as bad as next year’s going to be — we had 12 months of this year and only four of them really sucked. We’re looking at 12 months that will really suck next year. Hopefully only 11 or 10 but better plan for 12.” That seems to be fairly well the consensus for the national economy, but most are a little more sanguine about the Valley’s prospects. “We are insulated in a way because we have a very diverse economy,” said Elan Shore of the Economic Alliance. “We have three major industries entertainment, manufacturing and financial services and that’s not even the totality of the Valley economy.” So far, none of the big three have experienced major turmoil in our area. Although names have changed on many of the large lending institutions, we’ve not seen mass layoffs like those in Orange County resulting from the mortgage lending sector’s collapse. Bank of America’s purchase of Countrywide has not yielded large numbers of pink slips outside of the subprime lending unit. Even that only resulted in about 150 jobs lost locally. The Wells Fargo purchase of Wachovia should be ratified by the end of the year, said Vince Liuzzi, regional president of community banking, who said that no decisions have been made yet about consolidations of locations. “Wachovia has some great locations in the Valley,” he said, “and we think this merger will just give us even more opportunities to help serve clients and help meet their needs and help them succeed financially.” Manufacturers in the area likewise have not yet signaled major changes in their business plans and the entertainment sector is having a fair year, having weathered the Writer’s Strike at the beginning of the year and so far averting a strike by the Screen Actors Guild. Consumerism curtailed The soon-to-be-retired Director of the San Fernando Valley Economic Research Center, Dan Blake, said that the retail sector has really taken a beating locally. “We just got past the energy crisis but now we’re getting pummeled by unemployment. Full-time jobs are turning into part-time jobs and part-time jobs are disappearing. People are saving more and that’s all cutting into the retail picture in the Valley and certainly elsewhere.” Bankruptcies within the retail sector have piled up this year with Van Nuys-based Shoe Pavilion, Linens ‘n Things, Mervyns, KB Toys and Whitehall Jewelers leaving a lot of large vacant space in area shopping centers. All this in the same year that more than 2 million square feet of new retail space came online. The new Americana at Brand “lifestyle center” in Glendale debuted with about half of the new space. Westfield Topanga opened its new wing including the first Neiman Marcus in the Valley. The Oaks in Thousand Oaks got a brand new Nordstrom plus a whole wing of new restaurants, small retailers and the shell of a new movie theater. Housing The silver lining to the housing market in the region is that homes are now more affordable than they have been for about five years. In September, the median price of a home reached $400,000, down 31 percent from a one year ago. If you’re trying to sell a home purchased during that time frame, that’s not good news. “Forty percent of Valley residents can now afford a home at the median price,” said Jim Link, CEO of the Southland Regional Association of Realtors. What they still can’t afford, however, is a 20 percent down payment which is what most lenders are now requiring. “Lenders are being extremely careful in their qualifying process,” said Link, “and people who want to buy are just being, not turned down, but really put through the ringer to get a loan. The conforming loan limits were raised but if lenders aren’t willing to lend it doesn’t matter.” The number of homes sold has been trending upward and not only due to foreclosures. “We have fared better than a lot of communities in terms of the volume of foreclosures,” Link said. “On the other hand, foreclosures are still a very dominant part of the market in the Valley and they are affecting the overall market.” Banks that now own homes are finding it challenging to dispose of their properties. “Part of the problem with this market is if you’re trying to buy a foreclosed property it often takes several weeks, even several months to get approval on a purchase,” Link said. “Oftentimes you think you are approved and six weeks later you find another offer came in and they trumped you by a small amount of money and you’re in the cold.” Bankruptcies and Unemployment While bankruptcy filings have increased dramatically over the past year Chapter 7 filings increased by 144% in the year from September 2007 — they are still at very low levels when compared to a decade ago. In the late 90’s, the average number of Chapter 7 filings in the San Fernando Valley region were about 1,200; this year they have been about half that. In his annual San Fernando Valley Economic report, Dan Blake suggests that the change in bankruptcy filing rates may have less to do with the health or lack thereof of the economy and more to do with governmental reforms that became effective in 2001. Unemployment in the Valley is very difficult to track, said Blake, because the federal government does not keep track of our region separately from Los Angeles County overall. There is still a sense of waiting for the other shoe to fall with regards to unemployment, with companies like AIG still in restructuring mode. MGA Entertainment said they are going to appeal a judge’s decision that they can no longer continue manufacturing their highly successful Bratz line. The Screen Actors Guild will not be voting on a strike until January. It’s not all doom-and-gloom. The recession, said Blake, “provides opportunities for businesses to branch out and refocus their efforts clever businesses can spot these opportunities and really come out of this in good shape.”
