Strong Housing Pace Forecast for State

California’s major urban counties such as Los Angeles and San Francisco are emerging once again as centers of population growth, a development that is expected to help sustain the current surge in housing demand and construction, according to a study released Tuesday.

In its fourth annual report, the Center for Continuing Study of the California Economy said that although the state’s economy remains on a moderate growth path, solid job gains and the first sustained increase in real household income in nearly a decade will support high levels of residential construction.

Stephen Levy, the report’s principal author and a senior economist at the private, Palo Alto research organization, explained: “The cumulative effect of moderate income growth year after year” is that people are finally beginning to believe that the economic recovery is real, and they are willing and able to spend. The report said the state’s economy is expected to outperform the national economy, which will mean relatively more jobs in California. In addition, changing demographics will result in the rising importance of Latinos and Asians in the growth and geographical distribution of the state’s population.

Inland counties will experience faster growth rates relative to coastal urban areas, which will continue to be the economic and demographic base of California.

Levy said growth in California’s diversified economy over the next five years will be led by high technology and business services, which already are providing the largest numbers of new jobs. Aerospace will continue on a moderate growth pattern. But, he added, “California will continue to grow because of consumers and international finance, not primarily aerospace” as in the past.

The state’s agriculture sector, which has been suffering, is expected to recover slowly while manufacturing is expected to increase moderately during the next five years.

Job gains will help boost the state’s total population to 28.8 million in 1990, up 9.1% from the July, 1985, estimate of 26.4 million. Nearly 70% of the growth is expected to occur among the state’s Latino and Asian populations, which tend to concentrate in urban areas.

For that reason, Los Angeles County and, to a lesser extent, San Francisco and Alameda counties have re-emerged as sites for population growth, Levy said, noting that Los Angeles’ growth has been slow for some years while San Francisco’s population has been declining.

Los Angeles County alone will add nearly 500,000 residents by 1990, far exceeding the gain in any other county, and 35,000 will be added to the population of San Francisco County over the next five years, according to Levy.

The major suburban growth areas of the 1970s--Contra Costa, Santa Clara and Orange counties--will remain strong areas for job growth, the study said, but rates of population growth will be close to the state average.

The center predicted that California will add 1.2 million households by 1990, or an average of 240,000 per year. That will help sustain the strong recovery in housing that began in 1983 and has accelerated with the recent drop in mortgage rates.

Per-capita income statewide will increase 11.2% to $17,431 by 1990. Marin and San Mateo are the wealthiest counties in the San Francisco Bay Area, and Orange County has the highest per-capita income in the Southland.

Average household income in the state, after discounting for inflation, is expected to rise to $45,856 in 1990 from $43,357 in 1985. Levy said household income was flat from 1979 to 1983.

WHERE SOUTHLAND GROWTH WILL BE

Population in thousands, ranked by 10-year percent change.

1985 1995 % change Riverside 820.6 1,132.2 38.0 San Bernardino 1,086.4 1,481.4 36.4 Ventura 600.2 733.9 22.3 San Diego 2,131.6 2,605.1 22.2 Imperial 106.0 128.2 20.9 Orange 2,127.9 2,461.5 15.7 Los Angeles 8,085.3 8,974.0 11.0

WHERE WEALTHIEST HOUSEHOLDS WILL BE Ten largest counties in California, ranked by average household income in 1990.

Marin $60,897 San Mateo $59,001 Santa Clara $56,046 Orange $55,260 Contra Costa $53,578 Ventura $51,186 Monterey $50,449 Santa Barbara $48,891 San Francisco $48,495 Los Angeles $46,990