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Arizona: After The Housing Boom

Arizona: After The Housing Boom. ACMA Conference July 24, 2008. Lee McPheters Professor of Economics W. P. Carey School of Business. Economic Update & Outlook. U.S. Economy Arizona Economy Housing Slump . Worry Meter. What to Worry About: 2008. Energy/Food Prices Up

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Arizona: After The Housing Boom

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  1. Arizona: After The Housing Boom ACMA Conference July 24, 2008 Lee McPheters Professor of Economics W. P. Carey School of Business

  2. Economic Update & Outlook • U.S. Economy • Arizona Economy • Housing Slump

  3. Worry Meter What to Worry About: 2008 • Energy/Food Prices Up • Job Growth Down • Unemployment Up • Home Values Down • Stock Market Down • Debt Levels Up

  4. U.S. Economy Losing Jobs Job Growth/Loss, Thousands

  5. Consumer Credit as Percent of Disposable Income

  6. GDP Growth Weak in 1st Quarter … More of The Same Still to Come 2007 2008 Blue Chip Consensus, July 2008

  7. Fiscal Stimulus Package is Adding About 1% to GDP Growth in Quarter 2 & 3

  8. Outlook for the U.S. Economy 2009 2008 2007 1.7% Real GDP 1.6% 2.2% 0.3% 1.1% 0.6% Employment 2.9% 2.9% Inflation (CPI) 4.2% 6.3% 5.5% 5.8% 30 yr Mortgage Forecast subject to change as new information is available

  9. Arizona & US Move Together (Nonfarm Employment Percent Change 1970 - 2008) Arizona USA

  10. Arizona Now Ranks In The Bottom 3 for Job Growth (Percent Change June 2008 vs June 2007) 9 3 27 41 10 1 46 13 6 40 5 48 11 20 States Losing Jobs 2 7 U. S. Bureau of Labor Statistics

  11. Arizona Jobs:12 Mos. SectorJob Growth/Loss Overall -33,000 Health Care + 10,600 Government +9,400 Leisure/Hospitality +3,400 Trade -3,900 Prof/Biz Services -5,300 Financial -7,300 Construction -33,100

  12. Arizona Construction Jobs Peaked In Summer of 2006 Thousands of Jobs 2005 2006 2007 2008

  13. Unemployment Creeps Up Source: US Bureau of Labor Statistics and AZ Dept of Commerce

  14. 3 Year Slowdown 2007 – 2009? Annual Percent Change In Arizona Employment Forecast Source: ArizonaBlue Chip Forecast

  15. AZ Housing Slump Continues Single Family Q1 08 Permits - 30% Resales - 31% Prices (Phx) - 4.1% Permits - 57% Resales - 31% Resale Price - 15% Source: National Assoc Realtors; US Census Source: US Census, NAR (vs. Q1 07)

  16. Housing Market Drivers • Low mortgage rates • Population & job growth • Creative home finance • Move-up buyers • Boomer second homes • Investors

  17. Every time the Arizona population increases by 2.5 people, a new housing unit is needed.

  18. Arizona Ranks 2nd in Population Growth (Percent Change 2007 vs 2006) 12 17 11 4 9 1 3 25 8 6 2 13 10 5 7 US Census Bureau

  19. Arizona In-migration From California Still Strong in 2008 Source: Driver Licenses turned in to AZ Dept of Motor Vehicles

  20. Arizona Housing More Affordable Percent Families That Can Afford Median Priced Home Affordability up 58% from low point in 2006 Source: Phoenix Metro data from National Assoc. Home Builders

  21. Housing Affordability Effects • Outer urban fringe develops • Retailing follows consumers • Cross commuting increases • Infrastructure needs increase • Roadway construction increases • Population & jobs still growing

  22. Metro Phoenix Construction Single family Permits Greater Phoenix Blue Chip Forecast, 2008 Q1

  23. Metro Tucson Construction Residential Permits Economic Outlook, University of Arizona, April 2008

  24. Metro Phoenix Retail Space Millions Sq. Ft. Source: US Bureau of Labor Statistics and AZ Dept of Commerce *8.8 million sq ft now under construction Source: Realty Studies, ASU Poly Campus

  25. Metro Phoenix Retail Space Millions Sq. Ft. Source: US Bureau of Labor Statistics and AZ Dept of Commerce *8.8 million sq ft now under construction Source: Realty Studies, ASU Poly Campus

  26. Construction Outlook Summary • Resale prices fall through 2008 • New sales, starts up in 2009 • Population growth is critical • Tighter lending standards • Non residential will slow

  27. ARIZONA BLUE CHIP ECONOMIC FORECAST

  28. Arizona Retail Sales Outlook: Recession Level Growth Annual Percent Growth Forecast Source: Arizona Blue Chip Forecast

  29. Arizona Outlook Summary • Consumer in retreat • Stagnant job growth • Lots of housing inventory • 170,000 new residents? • Weak – but not yet bleak

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