Arizona Economic Housing Outlook

Everything You Wanted to
Know About Arizona and
Greater Phoenix
San Jose Real Estate Investors
November 19, 2013
Presented By:
Rick Merritt
President, Elliott D. Pollack & Company
Elliott D. Pollack & Company

U.S. Economic
Overview


You Choose…


It is only because
conditions have been
so poor for so long
that we feel this
(insert word here) recovery
is OK.

When will the recovery firm up?


Good News –
The recovery
should continue
because there
are no
significant
imbalances.

Overall
• No irrational exuberance
Consumers
• Debt burden low
• Net worth improved
• Real income growth
• Liquidity improving
• Inflation low

Businesses
• No excess inventory
• No capacity issues
• Dollar not overly strong
Government
• No longer a drag on economy
• Fed policy still expansive
Housing
• Prices up but only as a rebound

Economic Crisis Du Jour
•
•
•
•
•
•
•
•
•

U.S. Debt Ceiling
ObamaCare
Middle East
European Debt
Rating Downgrade
Middle East
Fiscal Cliff
Sequestration
Middle East…


No growth for
you!?!?

United States Real Gross Domestic Product*
Annual Growth 1970 - 2014**
Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators

8%

7.3%
5.4% 5.6%

5.6%

6%

5.2%

4.6%

4.6%

4%

4.8%
4.5%
4.5%
4.1%
3.6% 4.0%3.8%

4.2%
4.2%
3.5%
3.5%
3.7%

3.2%
2.6%

3.3%

2.8%

2.7% 2.7%
1.9%

2%

3.8%
3.4%

2.8%
2.5%
2.6%
1.8%
1.6%

2.7%
1.8%

1.8%
0.9%

0.2%

0%
-0.5%

-0.2%

-0.1%

-0.2%

-2%

-0.3%

-1.9%
-2.8%

0

2

4

6

8

0

2

4

6

8

0

2

4

6

8

0

2

4

6

8

0

2

4

197

197

197

197

197

198

198

198

198

198

199

199

199

199

199

200

200

200

200

200

201

201

201

-4%

* Based on chained 2009 dollars.
** 2013 and 2014 are a forecast from the Blue Chip Economic Indicators, September 2013

3.8% = 40-year avg during expansion
3.2% = 20-year avg during expansion

Recession Periods


US Non-Farm Employment
Change from Prior Month (S/A)
June 2010 – August 2013
Source: Bureau Labor of Statistics
400
350
300

271
228

250

205
196

200

0

69

(250)

78

165 160
153
138
125
112
87

199
176 172 169
148 142
104

-37
-43
-86

(150) -130
(200)

132

205

247
219

1

(50)
(100)

230

174
166
115

95

100

225

209

144

150

50

332

311

304

Feel Better When >200k


US Non-Farm Employment
Percent of Persons Working Full Time (S/A)
1970 – 2013*
Source: Bureau Labor of Statistics


Recession Periods

*Data through August 2013.

U.S. Unemployment Rate
1970 – 2013*

Recession Periods

Source: Bureau of Labor Statistics

Underemployment = 14.3%

*Seasonally adjusted data through July 2013

Consumers
Hey, check
this out…


Wealth Effect
• Housing Prices
• Stock Market


Leads to…
• Retirement freedom
• Ability to relocate
• Comfort with additional spending


U.S. Household Net Worth
(Billions of Dollars, NSA)
1970 - 2013*

Recession Periods

Source: Board of Governors of the Federal Reserve System


*Data through first quarter 2013.

Financial Obligation Ratio**
1980 – 2013*
Source: Federal Reserve
Recession Periods

20.0%
19.0%
18.0%
17.0%
16.0%

19
80

Q
19 1
81
Q
19 2
82
Q
19 3
83
Q
19 4
85
Q
19 1
86
Q
19 2
87
Q
19 3
88
Q
19 4
90
Q
19 1
91
Q
19 2
92
Q
19 3
93
Q
19 4
95
Q
19 1
96
Q
19 2
97
Q
19 3
98
Q
20 4
00
Q
20 1
01
Q
20 2
02
Q
20 3
03
Q
20 4
05
Q
20 1
06
Q
20 2
07
Q
20 3
08
Q
20 4
10
Q
20 1
11
Q
20 2
12
Q
3

15.0%
*Data through first quarter 2013
**Ratio of mortgage and consumer debt (including auto, rent and tax payments) to disposable income.


Household Debt Composition
Percent Change Year Ago
2004 – 2012
Source: The Federal Reserve Bank of New York


Recession Periods

Rate Sensitivity
$25,000 Car Loan Payments
5-Year Term
Interest Rate

Monthly Payment

3.0%

$449.22

4.0%

$460.00

5.0%

$471.78

6.0%

$483.32

7.0%

$495.03

8.0%

$506.91

9.0%

$518.96

10.0%

$531.18


For Comparison:
Mortgage Payments
30-Year Term
Interest
Interest
Rate
Rate
3.0%
3.0%

$150,000
$150,000
Loan
Loan
$632.41
$632.41

$200,000
$200,000
Loan
Loan
$843.21
$843.21

$250,000
$250,000
Loan
Loan
$1,054.01
$1,054.01

4.0%

$716.12

$954.83

$1,193.54

5.0%
6.0%
6.0%

$805.23
$899.33
$899.33

$1,073.64
$1,199.10
$1,199.10

$1,342.05
$1,498.88
$1,498.88

7.0%
7.0%
8.0%
8.0%

$997.95
$997.95
$1,100.65
$1,100.65

$1,330.60
$1,330.60
$1,467.53
$1,467.53

$1,663.26
$1,663.26
$1,834.41
$1,834.41


How Do
We Get
Off the
Cheap
Money
Train?

Net Percentage of Large U.S. Banks
Reporting Tougher Standards versus Eased Standards
on Residential Mortgage Prime Loans
2007Q1 – 2013Q2
Source: Federal Reserve, Board of Governors

80%
70%
60%
50%
40%
30%
20%
10%


1
13

Q

3
12

Q

1
12

Q

3
11

Q

1
11

Q

3
10

Q

1
10

Q

3
09

Q

1
09

Q

3
08

Q

1
08

Q

3
Q
07

07

Q

1

0%
-10%

Consumer Summary:


Jobs are being created at a slow rate.



Those that have jobs are being cautious in
spending.



Unemployment will trend lower but
underemployment will remain high.



Wealth levels are improving.



People feeling better, but uncertainty across the
globe and U.S. Congressional roadblocks are
affecting confidence.


Business


Net Percentage of Large U.S. Banks
Reporting Tougher Standards versus Eased Standards
on Business Loans
1997 – 2013*
Source: Federal Reserve, Board of Governors

Recession Periods

90%
80%
70%
60%
50%

Small Firms

40%

Large &
Medium Firms

30%
20%
10%
0%
-10%
-20%

19
97
19 Q4
98
19 Q2
98
19 Q4
9
19 9 Q
99 2
20 Q4
00
20 Q2
00
20 Q4
0
20 1 Q
01 2
20 Q4
02
20 Q2
02
20 Q4
0
20 3 Q
03 2
20 Q4
04
20 Q2
04
20 Q4
0
20 5 Q
05 2
20 Q4
06
20 Q2
06
20 Q4
0
20 7 Q
07 2
20 Q4
08
20 Q2
08
20 Q4
0
20 9 Q
09 2
20 Q4
10
20 Q2
10
20 Q4
1
20 1 Q
11 2
20 Q4
12
20 Q2
12
20 Q4
13
Q
2

-30%

* Data as of July 2013 survey.


Ja
n
Ja -70
n
Ja -71
n
Ja -72
n
Ja -73
n
Ja -74
n
Ja -75
n
Ja -76
n
Ja -77
n
Ja -78
n
Ja -79
n
Ja -80
n
Ja -81
n
Ja -82
n
Ja -83
n
Ja -84
n
Ja -85
n
Ja -86
n
Ja -87
n
Ja -88
n
Ja -89
n
Ja -90
n
Ja -91
n
Ja -92
n
Ja -93
n
Ja -94
n
Ja -95
n
Ja -96
n
Ja -97
n
Ja -98
n
Ja -99
n
Ja -00
n
Ja -01
n
Ja -02
n
Ja -03
n
Ja -04
n
Ja -05
n
Ja -06
n
Ja -07
n
Ja -08
n
Ja -09
n
Ja -10
n
Ja -11
n
Ja -12
n13

Capacity Utilization Rate
1970 – 2013*
Source: The Federal Reserve Bank of St. Louis
Recession Periods

90

85

80

75

70

65

*Data through July 2013


Business Spending on Equipment
Percent Change from Prior Quarter
2005 – 2013*
Source: Bureau of Economic Analysis

Recession Periods

6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-12.0%


Business Spending on Plant
Percent Change from Prior Quarter
2005 – 2013*
Source: Bureau of Economic Analysis

Recession Periods

10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-12.0%
-14.0%


Note: Data smoothed in Q1 & Q2 of 2011

U.S. Inventories to Sales Ratio:
Total Business
1992 – 2013*
Source: U.S. Dept. of Commerce: Census Bureau
Recession Periods
1.60
1.55
1.50
1.45
1.40
1.35
1.30
1.25
1.20
1.15
1.10

* Data through June 2013.


19
76
19 Q1
77
19 Q1
78
19 Q1
79
19 Q1
80
19 Q1
81
19 Q1
82
19 Q1
83
19 Q1
84
19 Q1
85
19 Q1
86
19 Q1
87
19 Q1
88
19 Q1
89
19 Q1
90
19 Q1
91
19 Q1
92
19 Q1
93
19 Q1
94
19 Q1
95
19 Q1
96
19 Q1
97
19 Q1
98
19 Q1
99
20 Q1
00
20 Q1
01
20 Q1
02
20 Q1
03
20 Q1
04
20 Q1
05
20 Q1
06
20 Q1
07
20 Q1
08
20 Q1
09
20 Q1
10
20 Q1
11
20 Q1
12
20 Q1
13
Q
1

Hours Worked
Percent Change from Year Ago
1976 – 2013*


Recession Periods

10%

8%

6%

4%

2%

0%

-2%

-4%

-6%

-8%

-10%

*Data through second quarter 2013

Business Summary:


Businesses are in better shape.



Spending on equipment to continue to
grow modestly.



Spending on plant will soon accelerate.



Employment to continue to grow.



Uncertainty over Congress, Obamacare


Government


States At Risk For Spending Cuts
Federal Spending as Percent of State GDP


Pew Center for the States

Arizona


Phoenix, Arizona
Economic Hub of the Southwest
9
10

5

Phoenix, Arizona


Arizona’s Five C’s
•
•

Cattle

•

Climate

•

Copper

•

Cotton

Citrus

How Arizona Ranks Among the States in
Percentage Growth
Source: U.S. Bureau of Census; Bureau of Labor Statistics; Bureau of Economic Analysis

DECADE

POPULATION

EMPLOYMENT

PERSONAL
INCOME

1950 - 1960

4TH

3RD

4TH

1960 - 1970

3RD

3RD

4TH

1970 - 1980

2ND

3RD

3RD

1980 - 1990

3RD

3RD

5TH

1990 - 2000

2ND

2ND

3RD

2000 – 2010

2ND

10th

7TH


“SUNBELT”
9
10
Upper Midwest
Industrial Northeast

5

Hawaii

Alaska

Where Do In-Migrants Come From
1.
2.
3.
4.

5.

California
Rust Belt (Illinois, Michigan, Pennsylvania)
Northeast (Washington D.C. to Boston)
Florida
Everywhere else


Arizona Population Distribution 2012
Source: Arizona Department of Security Department


2000 - 2012
Arizona Population Growth Distribution
Source: Arizona Department of Security Department


Greater Phoenix Population
Source: U.S. Bureau of Census; Arizona Department of Economic Security

Year
1950
1960
1970
1980
1990
2000
2010

Population
374,961
726,183
1,039,807
1,600,083
2,238,498
3,251,876
4,192,887

U.S. 2010 = 309,769,609

Arizona population growth was
slow but still Top 10 in 2012
1
9

3
5

4

6

7
10
Percent Change 2012
U. S. Census Bureau

2
8

Arizona Rank
Population Growth
1991-2012
Source: Census Bureau


Annual Percent Change 1976–2014*
Source: Arizona State University & Department of Commerce, Research Administration

6%
5.1%
4.6%

4.7%
4.3%

4.2%

4.4%
4.2%

4.3%

4.2%
4.3% 4.3%
4.2%

3.9%

4%

3.7%

3.8%

3.3% 3.1%
3.0%

3.8%
3.7%

3.5%

2.9%

3.1%
2.7%

2.8%

2.5%
2.1%

3.6%

3.0%

2.6%

2.4%

1.9%

2%

1.8%
1.5%

1.3%

0.5%

1.1%
0.6%

0.3%

0%
.

Recession Periods

* 2013 & 2014 forecast is from Elliott D. Pollack & Co.

Job Growth 2006

Alaska
24

Source: US BLS

10
7

9
5
4

14

23

Hawaii

1

3

15

8
2

Jobs growing
Top 10

Jobs declining

11
6

50

Job Growth 2010
Source: US BLS

Alaska
2

8

48
18

27
39
50

32

41

Hawaii

23
49

Jobs growing
Top 10
Jobs declining

1
7

46
9

4

40

10

43

3

6

5

Job Growth 2013
YTD July 2013 vs YTD July 2012
Source: US BLS

Alaska
50

6
10

21
4

1

49

9
2

11

23
Hawaii

7

Jobs growing
Top 10
Jobs declining

5
38

8
3

Job Growth 2013
July 2013 vs July 2012
Source: US BLS

Alaska
50

9
16

19
6

2

8

29

42
1

24

35
Hawaii

4

Jobs growing
Top 10
Jobs declining

7
40

5

10

3

Arizona Rank
Employment Growth
1990-2013*


*Year-to-date through July

State Job Growth 2013
YTD July 2013 vs YTD July 2012
Source: US BLS

20

North Dakota
Utah
Texas
Idaho
Colorado
Washington
Arizona
Georgia
Nevada
Montana
California
North Carolina
Minnesota
Delaware
Florida
Tennessee
Mississippi
New Jersey
Indiana
South Carolina
Oregon
Massachusetts
Hawaii
Maryland
Vermont


3.97%
3.27%
2.94%
2.81%
2.59%
2.08%
2.07%
2.06%
1.95%
1.91%
1.89%
1.88%
1.87%
1.78%
1.77%
1.76%
1.72%
1.63%
1.60%
1.58%
1.49%
1.49%
1.45%
1.45%
1.43%

1
2
3
4
5
6
7
8
9
10
11
12

13
14
15
16
17
18
19
20
21
22
23
24
25

Iowa
Louisiana
South Dakota
Michigan
New Hampshire
Virginia
Missouri
Kentucky
New York
Kansas
Oklahoma
Illinois
New Mexico
Wisconsin
Nebraska
Connecticut
Alabama
Arkansas
West Virginia
Ohio
Pennsylvania
Rhode Island
Maine
Wyoming
Alaska

1.39%
1.25%
1.23%
1.23%
1.21%
1.13%
1.12%
1.09%
1.09%
1.06%
1.03%
0.99%
0.77%
0.76%
0.71%
0.70%
0.62%
0.60%
0.58%
0.47%
0.39%
0.38%
0.20%
0.13%
0.00%

26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

Top Sources of New Jobs
Arizona

Job Growth

Wage

Total

67,600

$45,237

1

Food Services

10,100

$16,452

2

Health Care

8,900

$47,847

3

Construction

8,200

$47,020

4

Financial Activities

7,400

$59,564

5

Wholesale Trade

6,200

$69,918

6

Administrative Services

5,700

$32,741

7

Retail Trade

4,400

$29,843


*Job growth July 2013/ July 2012

Top Sources of New Jobs
U.S.

Job Growth
Total

Wage

2,296,000

$49,200

1

Food Services

387,800

$16,242

2

Administrative services

354,700

$34,870

3

Retail Trade

353,200

$27,729

4

Health Care

322,200

$45,407

5

Professional services

237,900

$83,357

6

Construction

166,000

$52,294

7

Financial activities

124,000

$80,097


*Job growth July 2013/ July 2012

Arizona Job Losses Exceeded U.S.
Source: Bureau of Labor Statistics, Seasonally Adjusted Data


Arizona Jobs Regained Since Bottom of Cycle
Most Industries Yet To Regain Lost Jobs


Greater
Phoenix
Economy


Phoenix Moving Up:
Rank of the Largest CMSA’s/MSA’s
Source: U.S. Department of Commerce, Bureau of the Census
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26

1980

1990

2010

2012

New York
Los Angeles
Chicago
Philadelphia
Detroit
San Francisco
Washington, DC
Dallas
Houston
Boston
Nassau-Suffolk
St. Louis
Pittsburgh
Baltimore
Minneapolis
Atlanta
Newark
Orange County, CA
Cleveland
San Diego
Miami
Denver
Seattle
Tampa
Riverside

New York
Los Angeles
Chicago
Washington, DC
San Francisco
Philadelphia
Boston
Detroit
Dallas
Houston
Miami
Seattle
Atlanta
Cleveland
Minneapolis
San Diego
St. Louis
Pittsburgh

New York
Los Angeles
Chicago
Dallas
Philadelphia
Houston
Washington DC
Miami
Atlanta
Boston
San Francisco
Detroit
Riverside

New York
Los Angeles
Chicago
Dallas
Houston
Philadelphia
Washington DC
Miami
Atlanta
Boston
San Francisco
Riverside

Greater Phoenix

Detroit
Seattle
Minneapolis
San Diego
Tampa
St. Louis
Baltimore
Denver
Pittsburgh
Charlotte
Portland
San Antonio
Orlando

Greater Phoenix


Greater Phoenix
Tampa
Denver
Cincinnati
Portland
Milwaukee
Kansas City
Sacramento

Seattle
Minneapolis
San Diego
St. Louis
Tampa
Baltimore
Denver
Pittsburgh
Portland
Sacramento
San Antonio
Orlando

Greater Phoenix

Top 20 Largest CMSA’s/MSA’s
Source: U.S. Department of Commerce, Bureau of the Census

CMSA/MSA

Population

New York

19,831,858

Los Angeles

13,052,921

Chicago
Dallas

6,700,991

Houston

6,177,035

Philadelphia

6,018,800

Washington DC

5,860,342

Miami

5,762,717

Atlanta

5,457,831

Boston

4,640,802

San Francisco

4,455,560

Riverside

4,350,096

Greater Phoenix

4,329,534

Detroit

4,292,060

Seattle

3,552,157

Minneapolis

3,422,264

San Diego

3,177,063

Tampa

2,842,878

St. Louis

2,795,794

Baltimore

9,522,434

2,753,149

WHY GREATER PHOENIX
GROWS


Ten Factors Contributing to
Greater Phoenix’s Growth
1.
2.
3.
4.
5.
6.
7.
8.
9.

Climate
Lifestyle
Geographic Location
Pro-Growth Attitude
Competitive Tax Structure
Focused Incentives
Leadership with Common Sense
Low Cost of Living
Congressional delegation working for State’s Long-Term
Needs
10. Business & Government Headed in Same Direction

No Natural Disasters
•
•

•
•
•
•


No hurricanes
No tornadoes
No earthquakes
No tsunamis
No fires
No mudslides

People and companies
vote with their feet…


…People have been
voting for Greater
Phoenix for decades.


Greater Phoenix’s economic
fundamentals have not changed
with the recession (even
housing has returned to more
affordable levels).
The long term economic outlook
remains favorable.

MYTHS


Age: Phoenix is all old
retired Midwesterners
living in Sun City


MEDIAN AGE
Source: U.S. Bureau of the Census

Male

Female

Total

Greater Phoenix

32.9

34.6

33.7

United States

35.4

38.2

36.8


Arizona will run
out of water


STATEWIDE WATER DEMAND Current
Source: AZ DWR


GREATER PHOENIX WATER DEMAND
Source: Arizona Department of Water Resources

Municipal
41.4%

Agricultural &
Other
58.6%

COMPARISON OF WATER USAGE
AGRICULTURE vs. RESIDENTIAL
Source: Arizona Water Resources Assessment, AZ DWR

ACRE FEET OF WATER
PER ACRE

8

5.74
6
4

1.81
2
0

AGRICULTURE

SINGLE FAMILY
RESIDENTIAL

Wages...


Median Household Income - Phoenix Peer Metro Areas
Adjusted for Cost of Living
2010
City

Nominal

Nominal Rank

Adjusted

Adjusted Rank

Dallas

$54,539

8

$57,959

3

Atlanta

$55,464

7

$58,077

2

Austin

$56,218

6

$58,867

1

Salt Lake City

$57,138

4

$56,797

5

Denver

$59,007

3

$57,233

4

Phoenix

$52,796

10

$52,481

8

Las Vegas

$53,505

9

$52,599

7

Seattle

$64,028

1

$52,828

6

Portland

$55,521

6

$49,929

9

San Diego

$60,231

2

$45,595

10


What Makes Greater Phoenix Tick?
Current Economic Base
1.
2.
3.
4.

High-tech (Semi-conductors)
Aerospace & Defense
Advanced Business Services
Transportation, Distribution, &
Wholesale Trade
5. Tourism
6. Retirement & Second Home


Greater Phoenix Top Employers
Semiconductors
Intel Corp.
IBM
Freescale Semiconductor
Avnet Inc.
General Dynamics
Motorola Satellite Comm. Inc.
Microchip Technology Inc.
Jabil Circuits Inc.
Medtronic Inc.
ON Semiconductor
Microsemi Corp.
Financial Services
Wells Fargo & Co.
Bank of America
JPMorgan Chase & Co.
American Express
Charles Schwab & Co. Inc.
USAA
Vanguard Group
Discover Financial Services LLC

#FTE Aerospace
#FTE
11,000 Raytheon Co.
11,500
3,000 Honeywell Aerospace
10,000
3,000 Luke Air Force Base - 56th Fighter Wing 5,600
2,600 Boeing Co.
5,000
5,400 Orbital Sciences
1,500
1,700 Other
#FTE
1,600 Apollo Group Inc.
10,000
1,400 US Airways
9,200
900 Freeport-McMoRan Copper & Gold Inc.
8,100
800 Southwest Airline
4,400
700 FedEx Express
3,900
#FTE United Postal Service
3,100
13,700 Ebay
2,000
12,500 GoDaddy.com Inc.
2,600
11,400 W.L. Gore & Associates Inc.
2,000
7,800 Insight Enterprises Inc.
1,500
3,500 ConocoPhillips Co.
1,000
3,000 Empire Southwest LLC
900
2,100 PING Inc.
800
1,900 Henkel
750

Notes : Al l rounded numbers a re es tima tes of ful l time equi va l ents provi ded by ea ch empl oyer.
Source: Phoeni x Bus i nes s Journa l Book of Li s ts ; Ari zona Republ i c


Expansions and Relocations
Source: Arizona Commerce Authority

Apple: U.S. manufacturing facility (GT Advanced Technologies) – 700 jobs in the first year.
State Farm: State Farm, selected Arizona as one of its four regional headquarters - 1.9 million SF of office
space in Tempe, 7,000 new jobs with a capital investment of $600 million.
Composite Mirror Applications: Composite Mirror Applications is a defense contractor that develops and
produces carbon fiber reinforced composite mirrors and structures.
Garmin: 140 jobs and $11 million capital investment.
Asurion: Mobile tech support center - 450 new jobs and $12 million in capital investment.
GoDaddy: Global Technology Center, 150,000-square-foot facility, 1,300 employees.
General Motors: Fourth IT Innovation Center in Chandler, 1,000 jobs, $21 million in capital investment.
STEALTH Software: Site of its U.S. headquarters, 200 jobs.


Employment Composition
Greater Phoenix vs. U.S.
Source: Arizona Department of Economic Security, U.S. Department of Labor

Sector
Natural Resources & Mining
Construction
Manufacturing
Goods Producing
Trade
Transportation, Warehousing
Information
Services
Government
Service Producing
Non-FarmWage & Salary

PHX-MSA

US

0.2%
5.1%
6.4%
11.7%

0.5%
4.3%
8.9%
13.7%

17.5%
3.6%
1.6%
7.9%
44.0%
13.7%
88.3%

15.3%
3.6%
2.1%
5.9%
42.1%
17.3%
86.3%

100.0%

100.0%

Greater Phoenix Employment*
Annual Percent Change 1975–2014**
Source: Department of Commerce, Research Administration
13.3%

14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%

8.7%

5.8%
4.9%

7.3%
7.2%
6.6%
5.4%
5.4% 4.6%
4.9%
3.5%

4.8% 5.9%
3.5% 2.5%

3.7%
3.0%

2.2%
1.1%

-0.1%

6.2%

5.4%

3.9%

3.0%

2.6%
2.4%
1.6%
1.5%

1.5%
1.2%
-0.1%

-0.3%

-2.5%

-3.7%

-1.9%

13

20

11

20

09

20

07

20

05

20

03

20

01

20

99

19

97

19

95

19

93

19

91

19

89

19

87

19

85

19

83

19

81

19

79

19

19

77

-7.9%

75
19

11.2%
9.3%

10.4%

*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
** 2013 & 2014 forecast is from Elliott D. Pollack & Co.


Recession Periods

Ja
n
Ju -95
Ja l-95
n
Ju -96
Ja l-96
nJu 97
Ja l-97
n
Ju -98
Ja l-98
nJu 99
Ja l-99
n
Ju -00
Ja l-00
n
Ju -01
Ja l-01
n
Ju -02
Ja l-02
n
Ju -03
Ja l-03
nJu 04
Ja l-04
n
Ju -05
Ja l-05
nJu 06
Ja l-06
n
Ju -07
Ja l-07
n
Ju -08
Ja l-08
n
Ju -09
Ja l-09
n
Ju -10
Ja l-10
nJu 11
Ja l-11
n
Ju -12
Ja l-12
nJu 13
Ja l-13
n
Ju -14
Ja l-14
n
Ju -15
Ja l-15
n16

Employment Levels:
Greater Phoenix back to Peak in late-2015 or early 2016?
Source: ADOA
Recession Periods

2,400.0

2,200.0

2,000.0


Peak

1,800.0

1,600.0

1,400.0

1,200.0

1,000.0

*Based on seasonally unadjusted monthly data

Phoenix-Mesa Employment Growth
(Ranking among all metro areas greater than 1,000,000)
Source: Arizona State University, U.S. Bureau of Labor Statistics

Year

Rank

# MSA’s

Year

Rank

1991

4

19

2003

3

25

1992

4

19

2004

3

25

1993

2

19

2005

1

26

1994

1

19

2006

1

27

1995

1

20

2007

9

28

1996

1

21

2008

24

28

1997

1

22

2009

24

25

1998

1

23

2010

24

24

1999

3

24

2011

14

25

2000

9

25

2012

6

27

2001

7

26

2013*

5

28

2002

5

25

# MSA’s

*Year-to-date, July 2013

Greater Phoenix Employment*

Sectors in Decline

Net
Change

%
Change

-800

-1.3%

Sectors Improving

Net
%
Change Change
10,400

2.9%

Education & Health Services

9,100

3.7%

Leisure & Hospitality

8,800

5.0%

Construction

8,400

9.4%

Government

5,900

3.0%

Professional & Bus Services

5,700

2.0%


5,000

3.4%

Information

400

1.3%

Manufacturing

Other Services

200

0.2%

0

0.0%

Trade, Transp, Utilities

Natural Resources & Mining


*July 2013/ July 2012

U.S. Has Gained 77% of Lost Jobs
2 Million Jobs (23%) Still to Recover
Peak 138 million Jan. 2008

6.7 Mil. Jobs
Regained (77%)

8.7 Million U.S.
Jobs Lost (6.4%)
Feb. 2010


Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted
Slide stolen from Lee McPheters…

Arizona Has Gained 47% of Lost Jobs
167,000 Jobs (53%) Still to Recover
Peak 2,687,000 Oct. 2007

147,000 Jobs
Regained (47%)

314,000 Arizona
Jobs Lost (12%)
Sept. 2010


Greater Phoenix Has Gained 47% of Lost Jobs
133,000 Jobs (53%) Still to Recover
Peak 1,932,000 July 2007

118,000 Jobs
Regained (47%)

251,000 Phoenix
Jobs Lost (13%)
Sept. 2010


WHY?
(1) Significant declines in population flows.

(2) Steeper housing decline.
*** But, expect higher rates of growth in AZ
going forward. Full recovery in AZ will be
about the same as the U.S. – Late 2015


Population
Flows


Ja
n
A -03
pr
Ju -03
O l-03
ct
Ja -03
n
A -04
pr
Ju -04
O l-04
ct
Ja -04
n
A -05
pr
Ju -05
O l-05
ct
Ja -05
n
A -06
pr
Ju 06
O l-06
ct
Ja -06
n
A -07
pr
Ju 07
O l-07
ct
Ja -07
n
A -08
pr
Ju 08
O l-08
ct
Ja -08
n
A -09
pr
Ju 09
l-0
O 9
ct
Ja -09
n
A -10
pr
Ju -10
O l-10
ct
Ja -10
n
A -11
pr
Ju -11
O l-11
ct
Ja -11
n1- 12
A
12 pr
12 -J u
- l
13 Oct
A -J an
pr
-1
3

SRP Residential Utility Hookup Percentage Growth
Greater Phoenix 2003 – 2013*
Source: SRP

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

*Data through April 2013.

19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12

Residential Customers Over Prior Year

APS: Slowest Growth in over 50 years
1954 – 2013*

8%

7%

6%

5%

4%

3%

2%

1%

0%

*Data through second quarter 2013
Source: APS

How quickly are population
flows going to recover?

No one knows but not as
rapidly as we would like.

Housing


Fewer people mean fewer
houses.


Housing
Not a light switch…

Good
Bad

A dimmer switch…

Mediocre
Not great
Bad

Terrible

OK
Good
Great

Ja
n
O -89
ct8
Ju 9
l
A -90
pr
Ja 91
nO 92
ct9
Ju 2
l
A -93
pr
Ja -94
n
O -95
ct9
Ju 5
l-9
A 6
pr
Ja -97
n
O -98
ct9
Ju 8
l-9
A 9
pr
Ja -00
n
O -01
ct0
Ju 1
l-0
A 2
pr
Ja -03
n
O -04
ct0
Ju 4
l
A -05
pr
Ja -06
n
O -07
ct0
Ju 7
l
A -08
pr
Ja -09
n
O -10
ct1
Ju 0
l
A -11
pr
Ja -12
n
O -13
ct1
Ju 3
l-1
A 4
pr
-1
5

Home Prices Indices
Greater Phoenix
1989 – 2013*

Source: Macro Markets, LLC; AMLS

MLS Index


Case-Shiller Index

Recession Periods

240

220

200

180

160

140

120

100

80

60

Trendline (4.0%)
*Data through July 2013.

Greater Phoenix
Single Family Permits
Source: RL Brown
Year

Permits

% chg

2004

60,872

27.6%

2005

63,570

4.4%

2006

42,423

-33.3%

2007

31,172

-26.5%

2008

12,582

-59.6%

2009

8,027

-36.2%

2010

6,822

-15.0%

2011

6,794

-0.4%

2012

11,615

71.0%

2013*

10,083

8.7%


*Data YTD Sept 2013 v. Sept 2012

Single Family Permits
Greater Phoenix 1975–2016*
Source: RL Brown & Elliott D. Pollack & company

# Permits
(000)

70

63.6
60.9

60

47.7

50

42.4

40
28.9

30

23.2
22.3

20
10

11.1
8.7

18.8

22.6
19.4

18.1

11.5 11.6
10.6

27.4

22.7
17.9
18.4
15.1
12.0 13.7
10.6

38.9
34.7
36.0
36.2
31.7 35.3
29.6
28.5

31.2
25.0
20.0
16.0
13.5
11.6
8.0 6.8
6.8

12.6

19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15

0

*2013 – 2016 forecast is from Elliott D. Pollack & Company

Single-Family Vacant Units
Greater Phoenix 1993–2011
Source: PMHS

120,000
102,275
101,625

100,000
83,475

80,000
58,050

60,000

51,650

40,000
20,000

23,825
19,800
14,725
14,975
17,525
17,525
15,425 13,725 13,750
13,681

29,775
19,325
24,450
17,125


11
20

10
20

09
20

08
20

07
20

06
20

05
20

04
20

03
20

02
20

01
20

00
20

99
19

98
19

97
19

96
19

95
19

94
19

19

93

0

New Residential Foreclosure Notices
Greater Phoenix
Source: Information Market
10,000

8,675
7,800

8,000
6,062

6,000
4,014

4,000

3,221
2,367

2,000

1,087

1,095

983

0


1,274
682

772

Total Pending Foreclosures
Greater Phoenix
Source: Information Market
47,144

50,000

42,152

40,000

30,000

24,469

24,393

16,829

20,000
7,312
6,894

10,000

4,936

7,066

5,002

0


3,141

2,483

Greater Phoenix Single Family
Lender Owned Sales*
June 2003 – June 2013
Source: TheWilcoxReport.com
4,247

4,500
4,000
3,500

3,008

3,000
2,384

2,500
1,381

2,000
1,500

720

1,000
500

348
84

121

0


9

2

104

Total Single Family Units Occupied by Renters
2000 - 2011
Greater Phoenix
Source: American Community Survey

25%

21.8%
20.3%
18.1%

20%

16.4%
15.3%
14.1%

15%

11.7%

12.4%

11.6%

10%
5%

0%


11.3%

11.7%

11.7%

Greater Phoenix
Housing Affordability Index
2004 – 2013*
Source: National Association of Realtors
100
83.6

80

80.8

83.6
77.7

76.4

76.2

73.5
70.9

60.3

68.8 69.0 69.5 69.7

68.6 67.0 67.0

66.5
63.0

65.3

64.4

60
49.3

40
32.4
27.4

20

0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2


19
98
19 Q1
98
Q
19 3
99
Q
19 1
99
Q
20 3
00
20 Q1
00
Q
20 3
01
Q
20 1
01
Q
20 3
02
20 Q1
02
20 Q3
03
Q
20 1
03
Q
20 3
04
20 Q1
04
Q
20 3
05
Q
20 1
05
Q
20 3
06
Q
20 1
06
20 Q3
07
Q
20 1
07
20 Q3
08
Q
20 1
08
20 Q3
09
Q
20 1
09
Q
20 3
10
Q
20 1
10
20 Q3
11
Q
20 1
11
Q
20 3
12
Q
20 1
12
20 Q3
13
Q
1

Investor Activity:

Percent of Non-Owner Occupied Sales of Total Sales
Greater Phoenix
Source: DataQuick

50%

40%

30%

20%

10%

0%


Number of Active Subdivisions
Greater Phoenix
Source: CRA
800
663

700

600

568

574

665

672

687

693

710

597 607

536

512

500
400
322

300

275

255
208

200
100
0


181

In a weak economy,
population growth fails to
translate into household growth,
but when the economy begins to
strengthen, there is
pent-up demand for housing.
Source: Linneman Letter

Many renting will now buy.
Many doubled-up will now buy.
Some population growth is back.
Employment growth is occurring.
Retirees less tied to current homes.


Pent-Up Demand
Household
Formations:
lower during
recessions
(doubling up,
living at home
with mom &
dad, etc.)

Percent of 18-34 Year Olds Living With Parents
U.S.: 1983 – 2012
Source: US Census Bureau


Recession Periods

Housing is a
market of markets


The outlook for housing is
still reasonably good


Source: U.S. Bureau of Census; Arizona Department of Administration; University of Arizona Forecasting Project

YEAR

Population

1950

374,000

1960
1970

726,183 6.9%
1,039,807 3.7%

1980
1990
2000

1,600,093 4.4%
2,238,498 3.4%
3,251,876 3.8%

2010

4,192,887 2.6%

2020
(forecast)

5,011,767 1.8%


Greater Phoenix Employment
Source: U.S. Bureau of Census; Arizona Department of Administration; University of Arizona Forecasting Project

YEAR

1950

74,400

1960
1970

181,700
327,200

1980
1990

636,200
1,013,300

2000
2010

1,578,400
1,686,800

2020
(forecast)

EMPLOYMENT

2,312,700

Headwinds for Single Family Market
•
•
•
•

Shortage of construction workers
Shortage of finished lots
Rising material prices
Rising interest rates


Multi-Family


Multi-Family Year-End Vacancy Rates
Maricopa County 1975–2014*
Source: ASU Realty Studies / Hendricks & Partners**

Recession Periods

18%
15%

14.1%
13.0% 13.4%

13.4%
12.5%

12%

10.6%
10.1%

9%

7.7%
6.9%
6.2%

6%

6.1%

3.9%
4.1%
3.3%
2.8%

6.1%
4.4%

10.2%

10.0%
9.5%

10.8%

9.6%
9.4%

8.0%

8.2%
6.8%

5.1%
5.9%
4.8%
4.5%
4.5%
3.8%
4.0%

7.9% 7.8%
6.8%

7.5%

7.1%
6.3% 6.6%

3%

19
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
2099
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
14

0%

*2013 -2014 are forecasts from the Greater Phoenix Blue Chip
**Data prior to 2005 is from ASU


*Data through second quarter 2013.

Multi-Family Market

• High prices paid for existing
properties
• Construction activity strong
• Over-building of market on the
horizon


OFFICE


Office Space Year-End Vacancy Rates
Source: CBRE

Recession Periods

35%
30%
25%

26.7%

26.4%
26.7%
25.4%
24.0%

22.8%

26.2%
25.5%
24.5%
23.9%

22.7%

22.0%
18.8%
18.3%

18.8%

20%

16.0%

14.8%

15%

11.7%
9.5%
9.9%
9.5% 9.2% 10.0%

19.1%

19.0%

16.4%
13.9%
12.6%
11.1%

10%
5%

19

8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
14

0%


*2013 -2014 are forecasts from the Greater Phoenix Blue Chip

Under any reasonable
employment growth scenario,
it will be at least 2016 before any
significant office construction
occurs
(although some sub-markets
will be sooner).


INDUSTRIAL


Industrial Space Vacancy Rates
Maricopa County 1980 – 2014*
Source: CBRE
Recession Periods

20%
15%
10%

16.4%
15.2%
14.8%
14.6%
14.0%
13.2%
13.6%
12.8%
12.8%
11.1%
10.8%
9.4% 9.7%
8.4%

16.1%
14.7%
12.5%

10.3%
9.8% 9.7%
8.5%
8.4%
8.1%
7.4%
7.4%
7.1%
6.6% 7.0%
6.7%
5.7%
5.6%

12.4%
11.0%
10.9%
10.0%

5%

19
8
19 0
1981
8
19 2
8
19 3
1984
8
19 5
8
19 6
1987
8
19 8
8
19 9
1990
9
19 1
1992
9
19 3
9
19 4
1995
9
19 6
9
19 7
1998
9
20 9
0
20 0
2001
0
20 2
0
20 3
2004
0
20 5
0
20 6
2007
0
20 8
0
20 9
2010
1
20 1
1
20 2
2013
14

0%


* 2013 - 2014 are forecasts from the Greater Phoenix Blue Chip

As of second quarter 2013,
there are 6.4 million square feet
of industrial space
under construction.


Source: CBRE

RETAIL


Retail Space Vacancy Rates
Source: CBRE**

Recession Periods

20%

14.2%
13.1%
13.5%
12.7%
11.8%

15%

10.0%

10%

8.9%
6.6%

12.2%
12.2%
11.0%
11.4%
10.9%
10.2%

11.1%
9.8% 8.7%
7.9%7.5%

7.4%
7.5%
6.6% 7.3%
6.3% 5.3%
6.1%
6.2%
5.3%
5.5%
5.1%

5%

19
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
1
20 2
1
20 3
14

0%

* 2013-2014 are forecasts from GPBC
** Data prior to 1992 is from Grubb & Ellis

Maricopa County Retail Sales
Percent Change Year Ago*
1999 – 2013**
Source: Arizona Department of Revenue
Recession Periods

25%
20%
15%
10%
5%
0%
-5%
-10%
-15%

Ja
n9
Ju 9
l-9
Ja 9
n0
Ju 0
l-0
Ja 0
n0
Ju 1
l-0
Ja 1
n0
Ju 2
l-0
Ja 2
n0
Ju 3
l-0
Ja 3
n0
Ju 4
l-0
Ja 4
n0
Ju 5
l-0
Ja 5
n0
Ju 6
l-0
Ja 6
n0
Ju 7
l-0
Ja 7
n0
Ju 8
l-0
Ja 8
n0
Ju 9
l-0
Ja 9
n1
Ju 0
l-1
Ja 0
n1
Ju 1
l-1
Ja 2
n1
Ju 2
l-1
Ja 2
n13

-20%


*Data through May 2013
**3-month moving average
Note: January 2010 and March 2010 retail sales are estimates.

Maricopa County Motor Vehicle Retail Sales
Percent Change Year Ago
2006 – 2013*
Source: Arizona Department of Revenue


*Data through March 2013
**3-month moving average
Note: January 2010 and March 2010 retail sales are estimates.

Available Big Box Space
Greater Phoenix Year End 2012:
272 Spaces
7.1 Million SF


Source: CBRE

What’s Happening?
• Consumers tightening their belts
and reducing debt
• Domination of retail by large
national chains
• Internet sales


Retail Market
• Population growth needed to assist
•

market
Long term viability of local retailers
questionable


CONCLUSIONS:
How will it all turn out?


The economy is improving
in both absolute and
relative terms.


Arizona & Greater Phoenix–
Slow but mildly accelerating
recovery.
• No recession on the horizon
• 2013 will be slightly better than 2012
• 2014 will be better than 2013
• 2015 should be a good year


New Greater Phoenix 2014
Forecast
Source: IHS Global Insight

• 3.3% Growth – Gross Metro Product
• 2.8% Employment Growth
• Greater Phoenix economy larger than
Oregon’s and 25 other states’


For a quick analysis of
important economic data released
each week, subscribe to the
Monday Morning Quarterback
www.arizonaeconomy.com/mmq_subscribe.htm


ELLIOTT D. POLLACK
& Company
• Economic and Fiscal Impact Analysis/Modeling
• Real Estate Market and Feasibility Studies
• Litigation Support
• Revenue Forecasting
• Keynote Speaking
• Public Finance and Policy Development
• Land Use Economics

• Economic Development
7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251
480-423-9200 P / 480-423-5942 F / www.arizonaeconomy.com / info@edpco.com

Arizona Economic Housing Outlook

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (20)

Similar a Arizona Economic Housing Outlook

Similar a Arizona Economic Housing Outlook (20)

Último

Último (20)

Arizona Economic Housing Outlook

Notas del editor