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How did the Inland Empire suddenly get so expensive?

The Inland Empire, long popular as a low-cost alternative to Southern California coastal living, has become a pricier place to live amid the pandemic.

Various real estate reports show home prices in Riverside and San Bernardino counties are soaring at rates of appreciation near the top of some national rankings. A relatively new Consumer Price Index for the Inland Empire tells us it’s not just real estate driving up the cost of living.

My trusty spreadsheet, filled with Southern California CPI stats, found Inland Empire inflation outpacing the metropolitan area of Los Angeles and Orange counties after the start of “stay at home” attempts to slow the spread of coronavirus throttled the economy.

The first 10 bimonthly Inland Empire CPI reports — data through July 2020 — showed inflation averaging 2.5% a year, just below L.A.-O.C.’s 2.6%. As business limitations grew, inland inflation since summer has run at 1.9% rate vs. 1% in coastal communities.

And January’s 1.3% inflation gap — 2.2% inland vs. 0.9% coastal — is the largest to date. Also, note last month’s inflation nationwide was only 1.4%.

To be fair, we’re not talking 1970s-style hyperinflation. These gaps suggest, at a minimum, the Inland Empire’s losing some of its low-cost advantages.

Inland expansion

Inflation can be the result of more people spending. It also can be seen as a yardstick of economic health as a local merchant’s pricing power can be the byproduct of the financial strength of its customers.

Quarantining is partially to blame for above-average inflation in Riverside and San Bernardino counties. As remote jobs and learning became a coronavirus necessity, the region’s daytime population grew.

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Plus, the inland economy has looked relatively better than business conditions in coastal towns since coronavirus smacked the region. Pre-pandemic, both metros averaged 4.1% unemployment in the year ended in February. Since March, L.A.-O.C. has suffered 15.3% joblessness vs. 11.9% in the Inland Empire.

A pricier Inland Empire is also about folks moving inland to get more affordable and larger living quarters. There’s plenty of anecdotal evidence of an inland population push.

One study backing that up: DQNews says 41% of homes sold last year in this four-county region were in the Inland Empire, the largest share of local homebuying since 2011.

Also, landlords appear to have better success keeping inland apartments full. One slice of the local CPI shows a renter’s costs rising faster inland: up 2.3% the year ended in January vs. 1.1% in L.A.-O.C.

More pricing power

Less unemployment and a growing population gave inland merchants more pricing power.

Ponder regional gaps in cost-of-living changes, measuring last month’s CPI to January 2020, in two broad spending categories. Prices of goods are rising 3% a year inland vs. 0.8% in coastal communities. Inflation for services: 1.8% inland vs. 0.9% coastal.

When it comes to individual items, a huge inflation gap is found for apparel — 13.1 percentage points between 8.7% inflation inland and a drop of 4.4% in coastal counties. I’m guessing work at home is crushing clothing retailers in coastal communities.

Recreation has a 9.2-point gap — up 4% inland vs. minus-5.2% coastal. There’s not much fun to find by the coast these days.

The family-oriented nature of the Inland Empire probably meant more home cooking in the pandemic era, too. That might explain groceries’ 6.5-point gap — 9% inflation inland vs. 2.5% coastal.

And that typically youthful population of Riverside and San Bernardino counties boosted education and childcare costs to create a  4.6 point gap — 2% inflation inland vs. down 2.6% coastal.

There’s also big Inland Empire inflation gaps for car insurance (up 6.7% vs. 2.5% coastal); electricity (up 11.2% vs. 7.4% coastal) and nonalcoholic beverages (up 4.6% vs. 1.5% coastal).

Inflated coast

Some L.A.-O.C. consumers are paying more than inland peers.

Take the cost of dining out, which has increased 4.4% in a year in L.A.-O.C. vs. 2.7% inland.

And then there’s the biggest coastal-leaning inflation variance: Alcoholic beverages, with an 8.5 point gap — up 11.6% in L.A.-O.C. vs. 3.1% inland.

Can you blame coastal folks for drinking more in these crazy times?

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