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Southern California Reels From Rare Tropical Storm, Multifamily Developer Confidence Rises, Workers

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Multifamily Developer Confidence Rises

Cars remained stuck Monday in some flooded areas in Cathedral City, California, near Palm Springs, a day after Tropical Storm Hilary hit Southern California with record rainfall. (Getty Images)

By Lou Hirsh

CoStar News

August 21, 2023 | 3:46 P.M.

Southern California Reels From Rare Tropical Storm

Southern California authorities were assessing damage from heavy rains and winds created by the state’s first tropical storm in more than 80 years in the form of what was originally Hurricane Hilary before hitting land as a tropical storm with record rainfall in cities including Los Angeles, San Diego and Palm Springs.

Roads were closed throughout Southern California Monday as first responders conducted rescues of stranded drivers caught in floodwaters. Multiple flights were delayed or canceled, repair crews responded to reports of downed trees and power lines along with mudslides, and local media reported that heavy rains caused a partial roof collapse at an apartment building in the Los Angeles area.

Much of this came after a magnitude 5.1 earthquake hit the Ojai area about 60 miles north of Los Angeles Sunday afternoon, though no serious damage was reported. No California fatalities were reported from the events as of Monday, but at least one person reportedly drowned in the Mexican town of Santa Rosalia when the storm hit the Baja peninsula before reaching Southern California.

Los Angeles city officials Monday reported at least 459 incidents involving downed trees, with 47 of those cleared. About 18,000 municipal electric customers in Los Angeles were still experiencing power outages as of midday Monday, and schools remained closed in much of the Los Angeles and San Diego areas.

Weather authorities said what was now called a tropical cyclone had mostly cleared out of California by mid-day Monday and entered southwestern Nevada, heading north toward Oregon and Idaho. Authorities declared official disaster areas in California and Nevada, making them eligible for federal assistance as regions recover from storms. Authorities said the last major wave of rainstorms and heavy flooding to hit California, last December and January, caused more than $1 billion in damage.

Tropical storm Hilary was among the latest severe weather events that analysts said have been caused by climate change in California, which has been inundated with devastating wildfires amid dry conditions for the past six years. Weather events have led major insurance companies to pull out of California this year, after exits by insurers in Florida and Louisiana.

Multifamily Developer Confidence Rises

Despite high interest rates, lingering construction cost inflation and supply chain delays for key equipment, multifamily developers are generally more confident than a year ago about their business prospects, according to the National Association of Home Builders.

The trade group’s multifamily production index, based on nationwide surveys, was at 56 for the second quarter, with numbers above 50 indicating generally positive outlooks among developers for future construction conditions. A separate index gauging multifamily occupancy prospects was at 89, indicating high perceived demand.

By product type, developers are most bullish on production prospects for garden-style and low-rise apartments, which registered at 64, and subsidized units, earning an overall 55 score. They were less optimistic on production conditions for mid- and high-rise units in larger projects, which scored a 47, and for condos and other types of units built for sale, scoring 45 in the second quarter.

Garden- and low-rise units tied with subsidized apartments for multifamily occupancy prospects at 91, followed by mid- and high-rise units at 83. The trade group said overall multifamily demand remains solid, especially as consumers face shortages and high costs for single-family homes, but there are headwinds limiting new apartment development in many parts of the country.

“Reduced availability of credit for new construction, problems getting projects approved and significant increases in operating expenses are hampering new multifamily development,” Lance Swank, president and CEO of development firm Sterling Group in Mishawaka, Indiana, and chairman of NAHB’s Multifamily Council, said in a statement. He added costs and availability of property, casualty and liability insurance have also emerged as constraints on developers.

Workers Seek Higher Pay To Switch Jobs

Current job holders on average won’t consider switching to a new position at another company unless it pays at least $78,645 — the highest reading in nearly a decade of nationwide tracking by the Federal Reserve Bank of New York.

Researchers said Monday the regional Fed’s July survey data pointed to overall satisfaction with wage compensation, non-wage benefits and promotion opportunities. The proportion of individuals who reported searching for a job in the prior four weeks declined to 19.4%, compared with 24.7% in July 2022.

“The expected likelihood of moving to a new employer declined somewhat to 10.6% from 11.0% in July 2022, while the average expected likelihood of becoming unemployed increased to 3.9% from 2.3% in July 2022, the highest reading since March 2020,” New York Fed researchers said in a statement. “This increase in the expected likelihood of becoming unemployed was most pronounced for respondents younger than age 45 and those with annual household incomes less than $60,000.”

The July survey showed some downsides to job prospects, with 19.5% reporting at least one job offer in the past four months, down from 21.1% in July 2022. Still, respondents said the average full-time offer in the past four months was $69,475, up sharply from $60,764 in the July 2022 survey. Also, respondents expecting to receive job offers in the next four months said those offers would average $67,416, a high for the Fed’s monthly survey.

The average expected likelihood of working beyond age 62 declined to 47.7% from 48.8% in July 2022, marking a continued downward trend of the past three years and the lowest reading since the regional Fed started tracking work metrics in March 2014. “The average expected likelihood of working beyond age 67, however, edged up to 32% from 31.3% in July 2022,” Fed researchers reported.

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