Presented by Beacon Economics
Welcome to The Regional Outlook, a forecast for five of California’s largest regional economies. Each quarter, find updated analysis that goes beyond the state and national level to present a snapshot of employment, home prices, consumer spending, personal income, and other leading economic indicators within key areas of the state. Visit your region of interest and subscribe for email delivery.
Similar to the rest of the San Francisco Bay Area and the state as a whole, the East Bay’s economy continues to show strength with unemployment rates and non-farm employment numbers at or near record levels heading into Summer 2019. While the East Bay has historically been more affordable than other parts of the Bay Area, home prices and apartment rents are continuing to rise at a faster rate than California as a whole.
Employment Growth Continues… But More Slowly
From April 2018 to April 2019, the unemployment rate in the East Bay declined by 0.1 percentage points, falling to 3.0%. Outside of San Francisco (MD), the South Bay, and Orange County, which had unemployment rates of 2.1%, 2.5%, and 2.8%, respectively, the East Bay had the lowest unemployment rate of any major metropolitan region in the state and a much lower rate than California overall (4.3%). The state’s unemployment rate remained unchanged year-over-year.
Over the same annual period, total nonfarm employment in the East Bay region increased by just 1.8%, lower than the region’s 2.2% growth rate during the 12 months prior, but higher than the state’s 1.6% gain. In absolute terms, the East Bay added 21,000 jobs from April 2018 to April 2019, a decline from the 25,300 jobs created the year before, and less than both San Francisco (61,400) and San Jose (29,000).
From April 2018 to April 2019, the East Bay’s Logistics sector experienced the largest job growth in percentage terms, expanding by 1,700 positions or 4.6%. Health Care, the region’s largest job sector, grew by 4.5%, experiencing the second largest jump in percentage terms and the largest absolute increase at 7,800 positions added. In terms of job losses, the Other Services sector experienced the greatest drop in both relative (-4.8%), and absolute (-2,000) terms. The Finance sector bore the second largest decrease at -3.1% or 1,200 job losses.
Beacon Economics is forecasting the unemployment rate in the East Bay to remain in a narrow range around its current reading through 2019. Total nonfarm employment in the region is expected to expand in percentage terms by 1.4% over the year, with job growth edging down in 2020.
East Bay Home Prices Still Growing As Surrounding Areas Decelerate
From the first quarter of 2018 to the first quarter of 2019, the median price of an existing single-family home in the East Bay increased by 4.2% to reach $749,300, significantly lower than the median home price in either San Francisco (MD) or San Jose (MSA), which hit $1,425,900 and $1,130,500, respectfully. However, the East Bay’s growth in home prices (4.2%) ran counter to San Francisco (MD), where prices decreased by 1.1% and to San Jose (MSA) where prices fell by 8.3%. The slowdown in price gains in the Bay Area (and even the absolute declines) is a common theme throughout California due to eroding affordability, changes in the mix of sales, and possibly limitations on federal deductibility of state and local taxes that went into effect in early 2018.
Home sales fell in the East Bay, and across the Bay Area, in the first quarter of 2019 compared to the first quarter of 2018. This decline in sales also occurred in the state as a whole. Sales of existing single-family residences in the East Bay fell 11.8% from the first quarter of 2018 to the first quarter of 2019, a greater drop than in San Francisco (MD) (-5.9%), but less than the decline in San Jose (MSA) (-18.2%).
From the fourth quarter of 2017 to the fourth quarter of 2018, the average apartment rent in the East Bay rose 3.1% to $2,313/month, outpacing rental price increases in San Francisco (+2.6%), but trailing increases in the South Bay (+3.3%). While East Bay rents remain significantly lower than in San Francisco (MD) ($3,376) and San Jose MSA ($2,804), they are higher than every other region in the state. It is worth noting that the East Bay apartment vacancy rate the lowest in the Bay Area at 3.9% compared to the San Jose MSA’s 4.1% and San Francisco’s (MD) 4.0%. Similar to the single-family housing market, the apartment market remains extremely tight with new construction not even close to meeting years of lagging supply in the East Bay and throughout the whole Bay Area and state.
** The East Bay refers to the Oakland-Fremont-Hayward Metropolitan District, covering Alameda and Contra Costa Counties.