Sacramento's economy will lag the nation into recovery, asCalifornia state budget shortfalls and a soft housing market hinderits progress. Employment growth will resume this year, though, awelcome turnaround after losing a combined 86,000 jobs in 2008 and2009. During 2010, local Employment will rise by 0.7% with theaddition of 5,300 jobs, 30 basis points shy of the US job growthforecast. Despite this small step in the right direction, theunemployment rate will remain well above average in the near term.As of mid-2010, local unemployment had fallen from its peak in thefirst quarter, but at 12%, it remained approximately 200 basispoints above the US figure.

In addition to elevated joblessness, Sacramento continues toface challenges stemming from the housing crash, with the metroarea registering one of the higher foreclosure rates in the nation.Local home prices have declined more than 50% from peak levels oflate 2005 and could slip farther if government programs aimed atcurtailing foreclosures fall short, resulting in more deeplydiscounted bank-owned inventory and hampering the onset of asustainable growth cycle.

While far-reaching suburban submarkets have been more severelyaffected by the housing downturn and recession, no area or propertysector has been completely immune to deteriorating commercial realestate fundamentals or rising distress. As of early July,approximately $1. 7 billion of local commercial real estate wasconsidered troubled, placing Sacramento in the mid-tier when scaledto size and compared to other markets nationwide. Lodgingproperties account for the largest share of distressed dollarvolume in the metro area, totaling $490 million and comprising 29%of the total.

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