Inflation Hits Home

According to Forbes Magazine, San Jose boasts the highest cost of living of any major metro region in the country.

If you've been to the grocery store or stopped at a gas station recently, you know that prices are headed higher still. Inflation indexes released today revealed big jumps in the prices of energy and food in March, leading to the second-largest monthly increase in wholesale inflation since 1975 (the largest increase was last November).

Apparel prices were down, though. Food, gas, housing and healthcare may all be unaffordable, but at least you can buy new clothes!

Here are the price increases for major household budget items since 2000[1] (not including the last couple months):(Continued...)
Healthcare costs lead the pack; in the past seven years, insurance premiums have more than doubled, up 110 percent. Gas isn't far behind, with an 86% increase (and the price is rising so fast that that's already out of date). Childcare is incredibly expensive; the average annual cost at a center for one preschooler is $10,200. Even food -- which has historically been cheap in the U.S. -- has started to shoot up. And then, of course, there's housing (see yesterday's blog post on the thankless tradeoff of renting vs. owning.)

The cost of living is rapidly becoming a worldwide problem. In recent months, the costs of basic necessities have been rising rapidly in international markets, leaving millions of people without enough to eat. Escalating prices for staple foods including wheat, rice, corn and soy are crating a global food crisis.

Here in the U.S., wobbly financial markets, overstretched banks and bankrupt mortgage companies are still getting more attention. But given the choice between a starving family or a Bear Sterns shareholder -- which one is more in need of government aid, and which one should be left to the mercies of the free market?




[1] Data from multiple sources. Food cost is an average for the U.S., based on USDA Moderate-Cost Food Plan. Health care cost is an average for California, based on worker's share of premium for job-based family health coverage. Electricity cost is based on residential rates in the PG&E service area. Gasoline cost is for regular unleaded in the SF-Oakland-San Jose metro area. All other items are based on costs in the Silicon Valley region. Housing costs reflect only the trend through 2006, as 2007 data is not available. Childcare cost reflects the trend from 1998-2006 as costs for 2000 and 2007 were not available.

[ Continue reading Inflation Hits Home ]

Rent vs. own: Between a rock and a hard place

Finding affordable housing may be the toughest financial challenge that most Silicon Valley residents face. Whether you rent or own your home, the last few months have not been good.

Caught by the nationwide mortgage meltdown, in Santa Clara County alone tens of thousands of homeowners are at risk of losing their homes. This chart pretty much says it all:

According to foreclosures.com, 3,133 Santa Clara County homeowners received notices of default on their mortgages in the first quarter on 2008 -- an increase of 64% over the first quarter of last year, and five times the number of defaults in Q1 of 2001. (A notice of default is the first step in the foreclosure process; not all of these homes will end up in foreclosure.)

Renters are feeling the pain too.(Continued...)
To afford a modest 2-bedroom apartment for their family, a worker in Santa Clara County must earn a minimum of $24.87 per hour, according to a study released last week by Housing California and the National Low Income Housing Coalition. That's $51,720 annually. At least a third of all county households had incomes below that standard last year.

And there's worse: these numbers are based on the "Fair Market Rent" for 2008, which was set by federal agency HUD at 40% of median rent last year -- $1,293 for a 2-BR in Santa Clara County. But as more families lose their homes or are reluctant to buy, there are more folks looking to rent, so rents have been shooting up. In San Jose, rents rose by an estimated 14.5% last year and are projected to grow another 7.8% this year, according to the Business Journal.

In addition to rising rents, renters are also being hit by the fallout of the mortgage crisis. The New York Times reported on Sunday that even renters are not immune from the mortgage crisis; as landlords are hit by foreclosures, tenants are increasingly being forced out of their homes. The NYT quotes Mark Zandi, chief economist for Moody's Economy.com, saying, "Landlords of all stripes could potentially get caught up in this very severe downturn. I suspect that it's going to be more of a problem for lower- to middle-income markets."

Local nonprofit organizations like Neighborhood Housing Services Silicon Valley, Project Sentinel, and ACORN Housing are urgently trying to help homeowners avoid foreclosure. If you are having trouble keeping up with your mortgage, or believe you may have been the victim of predatory lending, contact one of these agencies -- they may be able to help. Project Sentinel also helps renters.

[ Continue reading Rent vs. own: Between a rock and a hard place ]

Silicon Valley Jobs Report: Job growth slows, but remains positive; housing crisis impacts economy

Today's employment report from the state shows that the San Jose metro region lost 13,100 jobs last month. This isn't nearly as bad as it sounds: we always lose jobs in January, as retailers and others lay off the extra help they hired on for the holiday season.

However, with just a 1.3% increase in jobs since Jan. 2007, this month's employment continued to show evidence of a slowdown in Silicon Valley. The annual growth rate peaked in September 2006 at 2.8%, and has been on the decline ever since (see graph).(Continued...)

Job growth is still positive, but at just over 1% it is unlikely to keep up with the growth of the working-age population. The jobs picture may well continue to weaken, driven by actions like the recent layoffs at Yahoo and planned layoffs at the Mercury News, both of which won't show up in the jobs data until next month.

Sheila Bair, chair of the Federal Deposit Insurance Corp. (FDIC), warned last week that "Silicon Valley is not immune" to the economic challenges brought on by the national mortgage crisis. With foreclosures exceeding home sales in California last month, industries tied to the housing market are feeling the pain. Construction firms in Silicon Valley lost 500 jobs in January, and the financial activities sector dropped 1,200 jobs.

In more encouraging news, Silicon Valley added 4,500 manufacturing jobs in the past year: a small but significant reversal of the decade's trend of devastating losses in manufacturing, the region's largest employment sector.

Highlights of the local jobs report:

• The San Jose metro area lost 13,100 non-farm jobs in January, due in part to seasonal declines. The retail sector eliminated 3,500 jobs, accompanied by declines of 2,500 jobs in leisure and hospitality (mostly in restaurants), 1,900 jobs in construction, and 1,600 jobs in professional & business services.


• Over the year, the San Jose metro area added 11,400 jobs, a 1.3% increase from January 2007.


• The biggest year-over-year gains were in manufacturing (+4,500 jobs), educational & health services (+3,300 jobs), trade, transportation & utilities, which includes retail (+2,000 jobs), information (+1,900 jobs), and government (+1,000 jobs).


• The construction and financial activities sectors -- both strongly tied to the housing market -- continued to weaken, with construction losing 500 jobs over the year and financial activities losing 1,200 jobs. The region also lost 300 jobs in leisure & hospitality and 100 jobs in professional & business services.


• For January 2008, the unemployment rate stood at 5.3%, up 0.2 percentage points from last month and up 0.5 points over the year. That translates to 4,900 more unemployed residents (by official measures) than in January 2007.


• Seven years after the tech crash, Silicon Valley holds 151,000 fewer jobs than it did in January 2001.

[ Continue reading Silicon Valley Jobs Report: Job growth slows, but remains positive; housing crisis impacts economy ]

3 out of 10 elders face inadequate incomes in Santa Clara County

In high-priced Silicon Valley, families of all types and ages find it hard to make ends meet. But older adults face particular challenges.

A new standard developed by UCLA indicates that the basic costs of living for elders (age 65+) in Santa Clara County range from $17,632 for a single senior homeowner with no mortgage, up to $47,354 for a couple with a mortgage -- and at least 31% of elder households in the county do not have enough income to meet these minimum standards of living.

The Elder Economic Security Standard Index, released today by the UCLA Center for Health Policy Research and the California Elder Economic Security Initiative, measures the costs for older adults of meeting their basic needs for housing, food, transportation and other necessities.

Here are the annual costs of basic needs for older adults living in Santa Clara County:

Elder Standard Per Year

Elder Person:
Owner w/o mortgage: $17,632

Owner w/ mortgage: $37,641

Renter, one bedroom: $25,391

Elder Couple:
Owner w/o mortgage: $27,345
Owner w/ mortgage: $47,354
Renter, one bedroom: $35,104

Source: UCLA Center for Health Policy Research. Standard per year is based on basic monthly costs for housing, food, transportation, health care (assuming good health), and miscellaneous needs.

(Continued...) As of 2006, at least 31% of households including elders had incomes below these standards, meaning that they face serious challenges in affording the basic necessities of life.

This points at the urgent need in Silicon Valley for initiatives to tackle the high cost of living, including affordable housing for families of all types and income levels; affordable and accessible health care providers; public transit that meets the needs not only of commuters, but also of retirees and transit-dependent residents; and planning future development so that grocery stores, pharmacies, clinics, hospitals, parks, community centers, and other amenities are nearby and accessible by walking or transit for all neighborhoods. We've made progress on many of these fronts, but with more than three out of ten elder households still struggling to make ends meet, it's clear we need to do more.


Source: Elder Standard Index from UCLA/WOW. Housing and population data from the American Community Survey was used to approximate the number of Santa Clara County households containing seniors which fall below the income levels provided in the Elder Standard Index. Because the Index does not provide standards for elders living in larger households, the standard for an elder couple was also used for elders in households of three or more, resulting in a conservative estimate of elders living below the standard.

[ Continue reading 3 out of 10 elders face inadequate incomes in Santa Clara County ]

Silicon Valley Jobs Report: Modest growth in November, but more jobs are needed

Today's employment report from the state shows that the San Jose metro area experienced moderate job growth in November, adding 11,700 jobs over the past 12 months for an annual growth rate of 1.3%. Most of the region's major industries added some jobs over the year, with the biggest gains in educational & health services, professional & business services, and manufacturing.

While it is a positive sign that Silicon Valley is adding jobs broadly across most sectors of the economy, job growth of only 1.3% over the year is inadequate to bring employment and incomes back up to the point where Silicon Valley's working and middle-class families can make ends meet.

This is especially the case now that Santa Clara County is beginning to see more rapid population growth, perhaps spurred by people who left during the dot-com bust moving back in. With population growth for 2006-07 at 1.67% -- the highest in the Bay Area -- the demand for employment is rising faster than job creation. Even though the region added jobs over the past twelve months, unemployment rose from 4.4% in November 2006 to 5.0% in November 2007.

At the same time, home sales plunged yet again in November. Just 1,317 homes were sold in Santa Clara County, (Continued...) down 35.1% from November of last year, and far below the 2,624 homes sold in Nov. 2004.

The ongoing housing market crash may signal a decline next year in jobs in the construction and financial activities sectors -- which could put more people out of work. (Construction jobs fell by 1,000 this month, but much of that is probably a seasonal decline due to winter weather.)


Highlights of the jobs report:

• The San Jose metro area added 1,800 non-farm jobs in November. Nearly all of these jobs were in the retail sector, likely reflecting an increase in hiring for the holiday season.
  
  
• Over the year, the San Jose metro area added 11,700 jobs, a 1.3% increase from November 2006.
  
  
• The biggest year-over-year gains were in educational & health services (+3,200 jobs), professional & business services (+2,200 jobs), manufacturing (+1,700 jobs), information (+1,400 jobs), government (+1,200 jobs), and leisure & hospitality (+1,100 jobs).
  
  
• For November 2007, the region's unemployment rate stood at 5.0%, up 0.1 percentage points from last month and up 0.6 points over the year. That translates to 5,800 more unemployed residents than in Nov. 2006.
  
  
• Seven years after the tech crash, Silicon Valley still holds 153,600 fewer jobs than it did in November 2000.
  

(The San Jose Metropolitan Statistical Area (MSA) encompasses Santa Clara and San Benito Counties.)

[ Continue reading Silicon Valley Jobs Report: Modest growth in November, but more jobs are needed ]

The ballooning housing crisis: San Jose, Morgan Hill and Gilroy most at risk

Thousands of Silicon Valley families have lost their homes to the ongoing housing crisis, with ten of thousands more impacted as the ripple effects of the crisis continue to spread. Sunday's Mercury News mapped out foreclosures in Santa Clara County so far this year, focusing on the hard-hit East Side neighborhoods of San Jose. Unfortunately, the picture of the housing crisis in Silicon Valley is even worse than revealed by foreclosures alone.

A Working Partnerships analysis of houses currently in foreclosure or pre-foreclosure shows where we can expect more families to face losing their homes in the coming months.

San Jose and South County both have reason for concern: in San Jose, 38.7 houses per every 10,000 residents are currently in foreclosure or pre-foreclosure, with an even higher rate of 43.9 per 10,000 in Morgan Hill and a shocking 62.3 per 10,000 in Gilroy. (Los Altos, on the other hand, is getting along fine with just 3.6 per 10,000.)

Not everyone who's currently in pre-foreclosure (those who, after one or more payments, have received a Notice of Default on their loan) will ultimately have their home foreclosed upon. Some will be able to sell and pay off the mortgage, work out a deal to give up the house without a formal foreclosure, or in the best case scenario, find the money to bring the mortgage current and keep their house. But unless they get help, all of the homeowners currently in pre-foreclosure will be struggling to pay their bills and save their homes.

And the problem won't end there; the biggest wave of ARM (Adjustable Rate Mortgage) rate resets is projected to continue through the end of 2008 and possibly the first half of 2009, sparking still more foreclosures.

Given how many American families have been or will be impacted by the housing crisis, President Bush's proposal for selective, voluntary rate freezes by lenders is wholly inadequate to the scope of the problem. The Federal Reserve's proposal today looks like it may help to curb some of the worst abuses (something the Fed should have stepped forward to do a long time ago), but also does not adequately tackle the big picture. We need to help those currently affected, fix the laws and practices that encouraged irresponsible or predatory mortgage loans, and make homeownership affordable for working families. The Center for Responsible Lending discusses proposals that could help embattled homeowners and help prevent this crisis from recurring.

On a local scale, homeowners who need help can contact Neighborhood Housing Services Silicon Valley, Project Sentinel, or ACORN Housing.

(Thanks to Brian Darrow for the map.)

[ Continue reading The ballooning housing crisis: San Jose, Morgan Hill and Gilroy most at risk ]