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Greater Phoenix economic fundamentals have not really changed (even with SB1070). The long term economic outlook remains favorable.
Shorter Term Considerations: We will benefit from the U.S. recovery; Housing is very affordable again; Single family permitting is probably bottoming; Employment has probably bottomed; So has population; Consumer spending will be up a little; California is still a complete disaster;
Longer Term Considerations: People will start moving here again; We will again create jobs at a rapid pace as the local recovery takes hold; But, these will be lower quality jobs; We anticipate base industries will not grow as strongly; The jury is still out on whether state policymakers will help to turn this around.
Subject National economy Greater Phoenix Outlook Summary Good News Recovering Bad News Very slowly Housing Commercial real estate State government Retail sales At or past bottom At or near bottom Sales tax revenues no longer falling Past bottom; pent up demand Still many negatives. No quick fix for population flows. Recovery will be slow and take a long time. Revenue growth too slow to fix problem soon. Consumers need to restructure balance sheet will prevent big recovery.
Greater Phoenix Forecast 2010 2011 Indicator 2009 2010 2011 Population 0.9% 1.0% 2.0% Employment -7.8% -1.0% 2.0% Retail Sales -10.6% 1.0% 8.0% Building Permits -41.0% 20.0% 50.0% Source:
140 120 100 80 60 40 20 23.2 17.3 47.3 38.1 Greater Phoenix Net Migration 1975 2011 56.1 42.4 38.0 35.4 32.3 Source: University of Arizona 74.5 66.5 58.5 59.4 36.9 30.3 6.3 44.8 54.5 70.2 105.9 98.5 85.5 80.682.8 74.268.7 76.175.4 67.1 86.3 Recession Periods 122.1 121.5 84.2 68.1 36.5 24.3 56.4 0 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 *Forecasts from UofA 2010q3
18% Multi-Family Year-End Vacancy Rates Maricopa County 1986 2011* Source: ASU Realty Studies Recession Periods 15% 12% 9% 6% 3% 0% 6.2% 4.1% 3.3% 2.8% 1975 1976 1977 3.9% 6.1% 4.4% 6.1% 7.7% 6.9% 10.1% 10.6% 13.0% 14.1% 13.4% 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 10.0% 9.5% 8.0% 1990 1991 1992 1993 1994 4.0%3.8% 4.5%4.5%4.8% 5.1% 5.9% 6.8% 8.2% 9.4% 9.6% 7.9% 5.3% 5.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 8.5% 10.8% 14.2% 12.9% 2007 2008 2009 2010 2011 *2010-2011 are forecasts from the Greater Phoenix Blue Chip 11.8%
Apartment Sales: Price per Square Foot Maricopa County 1982 2009 Source: Kammrath & Associates $150 $100 $103.0 $103.0 $98.7 $86.3 $50 $0 $35.8 $38.9 $42.6$42.6 1982 1983 $37.4 $37.0 $36.7$30.9$28.6 $29.8$24.7 $29.7 $36.2$39.6 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 $55.7 $62.9 $69.3 $57.7 $58.9$62.7 $58.4 $45.0$47.8 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 $56.9
Multi-Family Construction Activity Source: PMHS Absorption Chg in Inventory* 2005 4,756 (5,169) 2006 (4,653) (3,828) 2007 (5,846) 4,979 2008 (4,466) 3,234 2009 (5,319) 6,831 2010 q2ytd 10,221 3,171 *There were 19,949 condo conversion in the Greater Phoenix area from q1 2005 through q4 2009.
There are currently 293 multi-family units under construction (q2 10).
Single-Family Vacant Units Greater Phoenix 1993 2010q2 Source: PMHS 120,000 100,000 102,275 101,625 80,000 60,000 51,650 58,050 40,000 20,000 29,775 23,825 15,42514,975 14,725 19,800 24,450 19,325 13,681 13,725 13,750 17,525 17,525 17,125 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Investors: 40% Market? Percent of Non-Owner Occupied Sales of Total Sales Greater Phoenix Source: DataQuick 50% 40% 30% 20% 10% 1998Q1 1998Q3 1999Q1 1999Q3 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 0%
$325.0 $300.0 $275.0 $250.0 $225.0 $200.0 $175.0 $150.0 $125.0 $100.0 $75.0 $50.0 Greater Phoenix Median Price of Single Family Homes - Resale 1982 2010* Source: Realty Studies Recession Periods $265.0 $216.8 $200.0 $175.0 $158.0 $136.0 $146.9 $145.5 1999 Q3 2000 Q1 2000 Q3 2001 Q1 2001 Q3 2002Q1 2002 Q3 2003 Q1 2003 Q3 2004 Q1 2004 Q3 2005 Q1 2005 Q3 2006 Q1 2006 Q3 2007 Q1 2007 Q3 2008 Q1 2008 Q3 2009 Q1 2009 Q3 2010 Q1 *Data through second quarter 2010 1999 Q1 (000)
Commercial 1 Mortgage Maturities 1980 2020* Source: Foresight Analytics $250 $200 $150 $100 $50 $0 $21.2 $23.9 $26.6 $30.0$34.2 $17.6 $18.9 1980 1981 1982 1983 1984 $58.3 $39.2$48.3 $79.4 $65.3 $73.1 $79.6 $78.5 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 $67.1 $60.0 $48.4 $43.7 $44.6 $53.6 $62.7 $46.7 1996 1997 1998 1999 2000 2001 2002 2003 2004 $118.3 $101.9 $76.7 $88.1 $134.0 $166.4 $225.9 $226.5 $218.9 $197.2 $177.9 $199.4 $198.0 $183.7 $177.3 $87.1 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1/ Includes mainly office, retail, industrial and hotels Note: Forecast is from Foresight Analytics $44.8 $34.2
14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 4.9% -3.7% 8.7% 13.3% Greater Phoenix Employment* Annual Percent Change 1975 2011** Source: Department of Commerce, Research Administration 10.4% 3.7% 3.0% -0.1% 1975 1977 1979 1981 1983 5.8% 11.2% 9.3% 6.6%7.2% 7.3% 5.9% 5.4% 5.4% 6.2% 5.4% 4.8% 4.9% 3.5% 2.5% 4.6% 3.5% 3.9% 2.2% 1.5% 1.1% 1.2% 1.6% -0.3% 1985 1987 1989 1991 1993 1995 1997 *Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990. ** 2010 & 2011 forecasts are from Elliott D. Pollack & Co. -0.1% -2.5% -1.0% -7.9% 1999 2001 2003 2005 2007 2009 2011 2.0% Recession Periods
Greater Phoenix Y/Y Job Losses - Recent Recessions Duration in Months - BLS 0.0% -1.0% -2.0% 1980/81 2001 1991 July -3.0% -4.0% -5.0% -6.0% -7.0% 1974-8.0% -9.0% -10.0% 0 3 6 9 12 15 18 21 24 27 1974 Recession 1980/81 Recession 1991 Recession 2001 Recession Current Recession
Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 2,400.0 2,200.0 2,000.0 1,800.0 1,600.0 1,400.0 1,200.0 1,000.0 Employment Levels: Greater Phoenix back to Peak in 2014 Source: ADOC Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jan-95 Jul-95 Jan-96 Jul-96 Peak Recession Periods
Arizona Employment Rank Among 50 States 1980 2010 Growth Over Previous Year Source: Arizona State University Recession Periods 1 6 7 9 2 1 1 3 5 2 2 2 2 1 2 5 8 4 2 2 2 11 12 16 21 18 19 20 22 22 26 28 31 36 38 35 41 42 46 47 49 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 YTD July 2010 = 42
How did we go from 2 nd to 49 th? Base industries of Arizona were impacted a) Semi-conductors b) Tourism c) Retirement Go into durables Jobs being sent overseas
How did AZ go from 2 nd to 49 th? Financial meltdown. Credit crunch/freeze. Overextended consumer. Excess single family inventory. Loss of wealth incl. home equity. Can t sell homes or retire. Homebuilding crash. Population inflows weaken. Excess commercial construction Construction job losses. All sector job loses.
How did we go from 2 nd to 49 th? People can t move here. Population Growth U.S. Arizona 2007 0.9% 3.1% (195,000) 2009 0.9% 0.8% (55,000)
How did we go from 2 nd to 49 th? Housing boom turns into bust Permits 2004 2005 2006 2007 2008 2009 U.S. 7.4% 6.5% -14.6% -28.6% -40.5% -28.5% Greater Phoenix 27.6% 4.4% -33.3% -26.5% -59.6% -26.5%
How did we go from 2 nd to 49 th? Commercial Construction Peak to Current 2009 Percent Decline Office Retail Industrial U.S. -15.4% -51.4% -57.5% Greater Phoenix -63.3% -60.3% -65.8%
How does AZ go from 49 th to 2 nd? Wait. Slow recovery. Credit frees up. Consumers more confident. Overall US economy improves. Stock market improves. Excess housing absorbed. People start to move to AZ again. Housing prices rise. Construction job gains. All sector job gains. More people move to AZ. Improved government revenue. Grow our base industries!!!
How do we go from 49 th to 2 nd? 2010 will be better than 2009 2011 will be better than 2010. It will be 2012 or 2013 before the State is growing rapidly again.
CONCLUSION: Recovery in Greater Phoenix will be painfully slow.