San Diego Union-Tribune


Region’s annual price gains only up 1.6% for Dec.; they were up 30% in March


San Diego was one of the hottest home markets in the nation throughout the pandemic. Not anymore.

America’s Finest City saw its annual price gain drop to 1.6 percent in December, said the S&P CaseShille­r Indices released Tuesday. That’s down from a 30 percent rise in March.

San Diego was among the top three fastest-appreciati­ng markets in the 20-city index for nearly two years of the pandemic. Now it is in the bottom four with Portland, up 1.1 percent in a year; Seattle, down 1.8 percent; and San Francisco, down 4.2 percent.

Miami was the top market, with prices growing 15.9 percent in a year. It was followed by Tampa, up 13.9 percent, and Atlanta, up 10.4 percent.

CoreLogic chief economist Selma Hepp wrote that the West and Mountain West are seeing prices drop the

quickest, but all markets are affected by rising interest rates.

“The rapid reversal of price growth is evident across markets,” she wrote.

The interest rate for a 30-year,

fixed-rate mortgage hit a low of 6.27 percent in December, said Freddie Mac, down from a high of 7.08 percent in November. However, rates were on the rise this week, around 6.78 per

suppliers of raw materials for the industry and companies that package the chips into their final products.

While some critics have questioned the wisdom of giving grants to a profitable industry, semiconduc­tor executives argue that they have little incentive to invest in the United States, given the higher costs of workers and running a factory.

The administra­tion does not plan to fund entire projects. Biden administra­tion officials say they plan to offer grants of between 5 percent to 15 percent of a company’s capital expenditur­es for a project, with funding not expected to exceed 35 percent of the cost. Companies can also apply for a tax credit reimbursin­g them for 25 percent of project constructi­on.

Limiting foreign dependence

Commerce Secretary Gina Raimondo describes the program as foremost a national security initiative.

While the United States is still a leader in designing chips, most manufactur­ing has been sent offshore. Today, more than 90 percent of the most technologi­cally advanced chips, which are critical for the U.S. military and the economy, are produced in Taiwan. That has prompted concerns about the supply’s vulnerabil­ity, given China’s aggression toward Taiwan and the potential for a military invasion of the island.

At the same time, China has increased its market share in less advanced chips that are still critical for cars, electronic­s and other products. The United States manufactur­es 12 percent of chips, though none of the world’s most advanced.

Chip shortages during the pandemic forced factories to halt work and brought home in a tangible way how vulnerable the supply chain is to disruption. Workers at Ford Motor factories in Michigan and Indiana worked a full week just three times last year because of a chips shortage, Raimondo said in a speech at Georgetown last week. That helped create a car shortage and raise the price of cars, stoking inflation.

The Commerce Department says the program will also provide the Department of Defense and the national security community with a domestic source of the world’s most advanced chips.

Building chip hubs

According to Raimondo, the goal is to build at least two U.S. manufactur­ing clusters to produce the most advanced types of logic chips, as well as facilities for other kinds of chips, and complex supply networks to support them.

Commerce officials have declined to speculate where these facilities might be, saying they must review applicatio­ns. But chipmakers have already announced billions of dollars in plans for new investment­s around the United States.

TSMC, which produces most of the world’s leadingedg­e chips, has been busy expanding in Arizona, while No. 2 Samsung is growing in Texas. Micron, which makes advanced memory chips, has announced big expansion plans in New York. And Intel, a U.S. technology giant that is investing heavily to try to capture a technologi­cal edge, has broken ground on a “megasite” in Ohio.

Still, there is skepticism about how much the program can do. One 2020 study, for example, found that a $50 billion investment in the industry would increase U.S. market share only to 14 percent.

Protecting taxpayer funds

The stakes are high for the Biden administra­tion to prove the foray into industrial policy can work.

However, critics have argued that the federal government may not be the best judge of winners and losers. If the administra­tion gets it wrong, it could face intense criticism.

The Commerce Department said it would look closely at companies that applied for funding to try to ensure that they were not being given more taxpayer dollars than they needed.

In a decision that may irk some companies, the department said projects receiving grants would be required to share a portion of any unanticipa­ted profits with the federal government, to ensure that companies gave accurate financial projection­s and didn’t exaggerate costs to get bigger awards.

The Commerce Department also said it would dole out funding over time as companies hit project milestones, and give preference to those that pledged to refrain from stock buybacks, which tend to enrich shareholde­rs and corporate executives by increasing a company’s share price.

Companies are also barred from making new, high-tech investment­s in China or other “countries of concern” for at least a decade, to try to ensure that taxpayer money does not go to fund new operations in China.

But analysts said it remained to be seen how difficult it would be to enforce these provisions. Company finances can be opaque, and when a company saves a dollar in the United States, it may then choose to invest it elsewhere.

Helping workers by attaching big strings

The program also includes some ambitious and unusual requiremen­ts aimed at benefiting the people who will staff semiconduc­tor facilities.

For one, the Commerce Department will require companies seeking awards of $150 million or more to guarantee affordable, highqualit­y child care for plant constructi­on workers and operators. This could include building company child care centers near constructi­on sites or new plants, paying local child care providers to add capacity at an affordable cost or directly subsidizin­g workers’ care costs.

Raimondo has said child care will draw more people into the workforce, when many businesses are struggling in a tight employment market.

Applicants are also required to detail their engagement with labor unions, schools and workforce education programs, with preference given to projects that benefit communitie­s and workers.

Other provisions will encourage companies, universiti­es and other parties to offer more training for workers, both in advanced sciences and in skills like welding.

The Commerce Department said it would give preference to projects for which state and local government­s were providing incentives with “spillover” benefits for communitie­s, like workforce training, education investment or infrastruc­ture constructi­on.

San Diego is one of the bottom four cities when it comes to how quickly home prices are appreciati­ng.
FOR THE U-T HAYNE PALMOUR IV San Diego is one of the bottom four cities when it comes to how quickly home prices are appreciati­ng.
 ?? SUSAN WALSH AP ?? Commerce Secretary Gina Raimondo calls the program a national security issue.
SUSAN WALSH AP Commerce Secretary Gina Raimondo calls the program a national security issue.
 ?? PHILIP CHEUNG NYT ?? Intel, which built this factory in Chandler, Ariz., has broken ground on a “megasite” in Ohio.
PHILIP CHEUNG NYT Intel, which built this factory in Chandler, Ariz., has broken ground on a “megasite” in Ohio.

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