At the city level, median home prices have followed the same upward trend, with the cities of San Bernardino (28.3%), Perris (28.1%), and Moreno Valley (24.1%) experiencing the largest increase in prices in the region over the past year. At the same time, residential foreclosure rates have tapered off significantly. The entire Inland Empire experienced a 23.1% drop in the number of foreclosure filings, to 1,615, from the second quarter of 2013 to the second quarter of 2014. The cities with the largest percentage decreases in foreclosure filings over the last year include Perris (-48.8%), Rancho Cucamonga (-41.7%), and Temecula (-40.2%).

Rising home prices across the region—and the ensuing positive equity growth—likely explain the drop in filings, as banks are more willing to work with homeowners once struggling to keep up with their mortgage payments, to refinance at more favorable interest rates.

The rising value of homes will not of course affect everyone evenly.

While rising single-family home prices are a boon to current homeowners, they are not as beneficial to prospective home buyers in the area. As home prices continue to rise, would-be buyers are beginning to feel less inclined to make real estate purchases as compared to one year ago.

There has been a 10.1% decrease in the number of home sales throughout the Inland Empire from the second quarter of 2013 to the second quarter of 2014. Over the past five years, home sales have dipped 30.7%, which is partially explained by a continued decline in foreclosure filings and fewer distressed home sales in the sales mix. Still, median home prices in the Inland Empire remain relatively affordable compared to the surrounding counties of Los Angeles ($468,660) and Orange ($631,430). The Inland Empire's comparative affordability should continue to attract prospective buyers feeling “priced-out” of the nearby coastal markets.

Beacon Economics is forecasting home prices in the Inland Empire to grow at an average annual rate of approximately 8.4% from the second quarter of 2014 to the end of 2020. With single family homes in the region relatively more affordable than in nearby Los Angeles and Orange Counties, Beacon Economics is forecasting the number of home sales to rise at an average annual rate of 9.0% over the same time period.

Employment in the Inland Empire continues to expand, growing by 2.9% (or 35,900 positions) to 1.26 million nonfarm jobs from the second quarter of 2013 to the second quarter of 2014. With job growth continuing at a steady pace, the unemployment rate in the Inland Empire has gradually declined. At 8.5%, the unemployment rate is 1.8 percentage points lower than it was one year ago, and 6.0 percentage points lower than it was at its peak (14.5%) in the first quarter of 2010.

An area of concern, however, is that lower unemployment is being driven by a shrinking labor force, which declined by 0.4%, to 1.8 million, over the last year.

Overall, employment growth in the Inland Empire was led by the construction sector, which increased its employment base by 5.4%, to 71,600 jobs, over the past year. The 3,700 additional construction jobs added in the region were largely fueled by non-residential construction activity.

Other sectors that showed significant employment growth over the past year were the leisure and hospitality (4.6%), administrative support (4.3%), and the transportation and utilities (4.3%) sectors. Beacon is currently forecasting the region's unemployment rate to drop to 6.1% by the end of 2020.

Beacon Economics, LLC is an independent research and consulting firm whose clientele span the public and private sector. The firm's clients include banks, investment firms and hedge funds, the State of California, real estate companies, private foundations and nonprofits, cities and counties, public and private universities, and trade and business organizations.