making lemonade lemons out of lemons by: jim rounds senior v.p., elliott d. pollack & company
DESCRIPTION
Making Lemonade Lemons out of Lemons By: Jim Rounds Senior V.P., Elliott D. Pollack & Company. The economy’s impact on:. Your job? Your home? Your future?. U.S. Summary. U.S. Y/Y Job Losses - Recent Recessions Duration in Months – BLS - May. 2001. 1991. 1980/81. 1974. - PowerPoint PPT PresentationTRANSCRIPT
Elliott D. Pollack & Company
Making LemonadeLemons out of Lemons
By:Jim Rounds
Senior V.P., Elliott D. Pollack & Company
Elliott D. Pollack & Company
Your job?
Your home?
Your future?
The economy’s impact on:
Elliott D. Pollack & Company
U.S. Summary
Elliott D. Pollack & Company
U.S. Y/Y Job Losses - Recent RecessionsDuration in Months – BLS - May
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
0 3 6 9 12 15 18 21 24 27 30 33
1974 Recession 1980/81 Recessions 1991 Recession
2001 Recession Current Recession
1980/81
1974
20011991
Elliott D. Pollack & Company
US New Job Data Change from Prior Month (S/A)
June 2010 - June 2011Source: Bureau Labor of Statistics
(250)
(200)
(150)
(100)
(50)
0
50
100
150
200
250
(000’s)
?
Elliott D. Pollack & Company
Recession Indicators Summary:Still Moving Upward
(Just Slowly)
Real GDP Real Income Employment Industrial Production Wholesale – Retail Sales
Elliott D. Pollack & Company
Household Net Worth ($$$)1970 – 2010*
Source: Federal Reserve
0
10
20
30
40
50
60
70
•Data through fourth quarter 2010.
Recession Periods($ in trillions)
But still feel poor…
Elliott D. Pollack & Company
Consumer Confidence1978 – 2011*
Source: The Dismal Scientist
20
30
40
50
60
70
80
90
100
110
120
130
140
150
*Data through March 2011
Recession Periods
1985 Benchmark = 100
Elliott D. Pollack & Company
Jobs are being created but not quickly enough.
Those that have jobs are spending a little more but will remain cautious.
Most of those that don’t have jobs probably won’t anytime soon.
Wealth levels are improving but people still feel poor.
Congress and the President have done little to positively influence confidence.
Consumer Summary:
Elliott D. Pollack & Company
BusinessDepends on the sector…
Elliott D. Pollack & Company
Doin’ God’s Work
Elliott D. Pollack & Company
Corporate Profit (Billions of Dollars, SA)
1975-2010*Source: Freelunch.com
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
*Data through fourth quarter 2010
Recession Periods
Elliott D. Pollack & Company
Corporate Profit By Industry ($Billions)2010 q4
Source: BEA
435.8
241.5
121.2
44.7
104.7
38.222.5
0
50
100
150
200
250
300
350
400
450
500
Financial Manufacturing Retail Trade Wholesale Trade Information Transp. &Warehousing
Utilities
Elliott D. Pollack & Company
U.S. Real Exports as a Percent of Real GDP
1971 – 2010* Source: Bureau of Economic Analysis
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1971 Q
1
1973 Q
1
1975 Q
1
1977 Q
1
1979 Q
1
1981 Q
1
1983 Q
1
1985 Q
1
1987 Q
1
1989 Q
1
1991 Q
1
1993 Q
1
1995 Q
1
1997 Q
1
1999 Q
1
2001 Q
1
2003 Q
1
2005 Q
1
2007 Q
1
2009 Q
1
Recession Periods
*Data through fourth quarter 2010
Elliott D. Pollack & Company
Hours WorkedPercent Change from Year Ago
1976 – 2010** Source: Bureau of Labor Statistics
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Recession Periods
**Data through fourth quarter 2010
Elliott D. Pollack & Company
Capacity Utilization Rate1970 – 2011*
Source: The Conference Board
65
70
75
80
85
90
Jan-
70
Jan-
71
Jan-
72
Jan-
73
Jan-
74
Jan-
75
Jan-
76
Jan-
77
Jan-
78
Jan-
79
Jan-
80
Jan-
81
Jan-
82
Jan-
83
Jan-
84
Jan-
85
Jan-
86
Jan-
87
Jan-
88
Jan-
89
Jan-
90
Jan-
91
Jan-
92
Jan-
93
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
*Data through February 2011
Recession Periods
This is where investment occurs.
Elliott D. Pollack & Company
Profits are high, but…
Business spending on plant will be slow, but getting closer to seeing some limited investment.
Hiring will still be relatively slow, but more pressure to hire by the end of the year.
Lots of money sitting on the sidelines.
Business Summary:
Elliott D. Pollack & Company
U.S. Summary:
Recovering but not recovered.
Lots of small shocks thus far but none have been game changers (oil spikes,
Middle East, Japan, etc.)
Debt Ceiling???
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ARIZONA
Elliott D. Pollack & Company
The “Lemons”
Elliott D. Pollack & Company
9
4
15
2
10
3
7
Job Growth 2006
11
15
6
22
8
Source: US BLSSource: US BLS
13
Jobs growing
Jobs declining
Top 10
Hawaii
Alaska
Elliott D. Pollack & Company
4
22
25
3
1
8
Job Growth 2007Source: US BLSSource: US BLS
11
1028
36
15
7
206
9
45
Jobs growing
Jobs declining
Top 10
Hawaii
Alaska
Elliott D. Pollack & Company
11
47
1
1745
6
10
3
8
14
34
46
42
2
4
7
9
15
Job Growth 2008Source: US BLSSource: US BLS
50
Jobs growing
Jobs declining
Top 10
Hawaii
Alaska
Elliott D. Pollack & Company
5
49
23
3545
4
32
8
24
47
50
44
1
16
3
Alaska 2
13
1830
Job Growth 2009Source: US BLSSource: US BLS
46
Jobs growing
Jobs declining
Top 10
Hawaii
Elliott D. Pollack & Company
19
49
43
2544 38
3
42
28
50
Hawaii
40
1
35
12
Alaska 2
47
1748
4
8
5
37
Jobs growing
Jobs declining
Top 10
6
7
9
10
Job Growth 2010
Elliott D. Pollack & Company
3
May 2011 v May 2010
36
4
23 39
2
50
7
Job Growth Update: Arizona Ranked 36th
46
33
1
5
38
Alaska 11
45
3422
37Jobs growing
Jobs declining
Top 10
Hawaii
13
9
18
6
810
Elliott D. Pollack & Company
How did we go
from 2ndto 49th in
the rankings?
Elliott D. Pollack & Company
How did AZ go from 2nd to 49th? Financial meltdown. Credit crunch/freeze. Overextended consumer. Excess single family inventory. Housing prices decline.
Loss of wealth incl. home equity. Can’t sell homes or retire. Homebuilding crash. Population inflows weaken in AZ. Household formations decline. Household size increases.
Excess commercial construction
Construction job losses. All sector job loses.
Elliott D. Pollack & Company
How does AZ go from 49th to 2nd? Slow recovery. Credit frees up slowly. Consumers more confident.
Overall US economy improves. Stock market improves. Limited AZ job and population growth.
Excess housing absorbed. Smaller household size. Housing prices rise. Construction kicks in.
All sector job gains; more robust %s. Even more people move to AZ.
Elliott D. Pollack & Company
In 2008, 2009, and 2010 no one showed up!
Elliott D. Pollack & Company
2.1%
3.7%
4.2%
4.7%
3.9%
3.3%
3.0%
3.1%
4.3%
5.1%
4.2%4.4%
2.9%
2.5%
1.3%
2.4%
2.8%
3.5%
4.3%
4.6%
4.2%4.2%
3.8%
4.3% 4.3%
3.1%
3.2%3.3%
3.4% 3.4%
2.7%2.5%
1.6%
1.0%0.9%
0.9%
1.5%
0%
2%
4%
6%
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Greater Phoenix Population Annual Percent Change 1976–2012*
Source: Arizona State University & Department of Commerce, Research Administration
2008 and 2009 are estimates put out by ADES and may be subject to substantial revision.
* 2011 & 2012 forecast is from Elliott D. Pollack & Co. Recession Periods
*2000-2010 estimates based on 2010 Census release
?
Elliott D. Pollack & Company
Greater Phoenix Y/Y Job Losses - Recent RecessionsDuration in Months – BLS - April
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
0 3 6 9 12 15 18 21 24 27 30 33 36
1974 Recession 1980/81 Recession 1991 Recession
2001 Recession Current Recession
1980/81
1974
2001 1991
= J
ob
Gro
wth
Elliott D. Pollack & Company
AZ New Job Data Change from Prior Month (S/A)
May 2010 - May 2011Source: Bureau Labor of Statistics
(20)
(15)
(10)
(5)
0
5
10
15
20
(000’s)
About 2k not S/A
Elliott D. Pollack & Company
Greater Phoenix Employment* Annual Percent Change 1975–2012**
Source: Department of Commerce, Research Administration
-3.7%
4.9%
8.7%
13.3%
10.4%
3.7%
3.0%
-0.1%
5.8%
11.2%9.3%
4.8%3.5%
5.9%
2.5%
2.2%
-0.3%
1.1%
4.9%
6.6%7.2%7.3%
5.4%5.4%
4.6%3.5%
1.2%
-0.1%
1.5%
3.9%
6.2%5.4%
1.6%
-2.5%
-7.9%
-2.1%
1.0%
2.0%
-10%-8%-6%-4%-2%0%2%4%6%8%
10%12%14%
*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
** 2011& 2012 forecast is from Elliott D. Pollack & Co.
Recession Periods
Elliott D. Pollack & Company
This is NOT a multi decade recovery…
Think 2015 – 2016 for full recovery, but growth before
then.
Elliott D. Pollack & Company
Employment Levels: Greater Phoenix back to Peak in 2015?
Source: ADOC
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
2,400.0
Recession Periods
Peak
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Single Family Housing
Elliott D. Pollack & Company
Across the US, underproduction has been
occurring.
This helps with the oversupply.
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U.S. Single-Family Starts1978–20111/
Source: Census Bureau
1.4
1.2
0.9
0.7 0.7
1.1 1.1 1.1
1.2 1.11.1
1.00.9
0.8
1.01.1
1.2
1.1
1.21.1
1.3 1.31.2 1.3
1.4
1.5
1.6
1.7
1.5
1.0
0.6
0.4 0.5 0.5
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
(Millions)
1/ Through Febuary 2011
Recession Periods
Over-supply
Under-supply
LTA: 1.2
Elliott D. Pollack & Company
In AZ, because of the weak population inflows, this underproduction only
recently started.
Elliott D. Pollack & Company
Single-Family Permits vs. Population DemandGreater Phoenix 1975–2015
Source: PMHS / RL Brown
8,705
11,081
22,281
28,851
18,843
11,485
10,64911,625
19,44718,125
22,598
23,222
17,94415,085
12,00010,61413,698
18,379
22,652
27,426
28,54329,609
31,715
36,001
35,30834,701
36,151
38,914
47,720
60,892
63,570
42,423
31,172
12,582
8,0276,822
5,000
7,0008,000
15,000
25,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
# Permits Recession Periods
* 2011 - 2015 forecast is from Elliott D. Pollack & Co.
Elliott D. Pollack & Company
Single-Family Vacant UnitsMaricopa County 1993–2010
Source: PMHS
13,60015,25014,800
13,550 13,92514,725
17,55020,000
18,725
23,85024,725
16,75519,400
30,200
51,725
60,175
106,125101,625
0
20,000
40,000
60,000
80,000
100,000
120,000
Elliott D. Pollack & Company
How Investors Impact the Market:
Investors temporarily create demand.
How many of those homes will come back on the market
and add to the supply?
But, how many will be kept as permanent rental units or purchased by current renters?
Elliott D. Pollack & Company
Home Prices Indices 2000 – 2011 (January) Source: Macro Markets, LLC; AMLS
70
90
110
130
150
170
190
210
230
250
MLS Index Case-Shiller Index Trendline (4.0%)
Recession Periods
Weak Pop/Emp
Investors
?
Elliott D. Pollack & Company
Negative Equity in Homes Affects Ability to Sell or Buy
Source: First American Core Logic
50% of homes in Arizona have negative
equity.
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Persons per Household
Elliott D. Pollack & Company
Household Formations
Fewer during recessions (doubling up, living at home with mom & dad, etc).
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Persons per HHSource: U.S. Census Bureau & American Community Survey
2000 2009
Single Family Owner Occupied 2.83 3.02
Single Family Renter Occupied 3.20 3.72
Apartments 2.10 2.21
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Commercial
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Commercial Markets
(Not making things worse anymore)
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APARTMENTS
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Multi-Family Year-End Vacancy RatesMaricopa County 1986–2012*
Source: ASU Realty Studies
6.2%
4.1%3.3%
2.8%
3.9%
6.1%
4.4%
6.1%
6.9%7.7%
10.1%10.6%
13.0%14.1%
13.4%
10.0%9.5%
8.0%
4.0%3.8%4.5%4.5%4.8%
5.1%5.9%
6.8%
8.2%
9.4%9.6%
7.9%
5.0%5.3%
8.5%
10.8%
14.2%
10.3%9.9%
8.5%
0%
3%
6%
9%
12%
15%
18%
*2011 -2012 are forecasts from the Greater Phoenix Blue Chip
Recession Periods
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OFFICE
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Office Space Year-End Vacancy RatesMaricopa County 1986–2012*
Source: CB Richard Ellis
26.7%
22.8%
24.0%
26.7%26.4%
25.4%
22.7%
18.8%
14.8%
11.7%
9.5% 9.2%9.5%
10.0%9.9%
16.0%
18.8%18.3%
16.4%
12.6%
11.1%
13.9%
19.1%
24.5%
26.2%
24.6%22.8%
0%
5%
10%
15%
20%
25%
30%
35%
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
*2011 -2012 are forecasts from the GPBC
Recession Periods
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INDUSTRIAL
Elliott D. Pollack & Company
Industrial Space Vacancy RatesMaricopa County 1980 – 2012*
Source: CB Richard Ellis
8.4%
9.4%
11.1%
9.7%
12.8%
13.2%
16.4%15.2%
14.6%
12.8%14.0%
14.8%
13.6%
10.8%
7.4%
6.6%5.7%
7.0%7.1%8.1%
7.4%
9.8%10.3%
9.7%
8.5%
5.6%
6.7%
8.4%
12.5%
16.1%
14.7%13.9%
12.3%
0%
5%
10%
15%
20%
* 2011 - 2012 are forecasts from the GPBC
Recession Periods
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RETAIL
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Retail Space Vacancy RatesMaricopa County 1985–2012*
Source: CB Richard Ellis**
6.6%
8.9%
10.0%
11.8%13.1%
14.2%13.5%
12.7%
11.1%
9.8% 8.7%
7.9%7.5%
6.3%5.5%
5.3%6.6%7.3%
7.4%
6.1%5.3%
5.1%6.2%
7.5%
11.4%12.2%12.3%
11.4%
0%
5%
10%
15%
20%
* 2011-2012 are forecasts from the GPBC** Data prior to 1992 is from Grubb & Ellis
Recession Periods
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Financial Problems…
Elliott D. Pollack & Company
U.S. Problem Commercial Real Estate Loans RiseDelinquency Rates at Commercial Banks
1991 – 2010* Source: Federal Reserve
0
2
4
6
8
10
12
14
1991 Q
1
1991 Q
4
1992 Q
3
1993 Q
2
1994 Q
1
1994 Q
4
1995 Q
3
1996 Q
2
1997 Q
1
1997 Q
4
1998 Q
3
1999 Q
2
2000 Q
1
2000 Q
4
2001 Q
3
2002 Q
2
2003 Q
1
2003 Q
4
2004 Q
3
2005 Q
2
2006 Q
1
2006 Q
4
2007 Q
3
2008 Q
2
2009 Q
1
2009 Q
4
2010 Q
3
* Data through fourth quarter 2010
Recession Periods
Temporary before flat
again?
Elliott D. Pollack & Company
U.S. Commercial1 Mortgage Maturities1980–2020*
Source: Foresight Analytics
$17.6$18.9$21.2$23.9
$26.6$30.0$34.2
$39.2$48.3$58.3
$65.3$73.1
$79.4$79.6
$78.5
$67.1$60.0
$48.4$43.7$44.6$46.7
$53.6 $62.7
$76.7$88.1
$101.9
$118.3
$134.0
$166.4
$177.9$197.2
$218.9$225.9 $226.5
$199.4$198.0
$177.3$183.7
$87.1
$44.8$34.2
$0
$50
$100
$150
$200
$250
1/ Includes mainly office, retail, industrial and hotelsNote: Forecast is from Foresight Analytics
Recession Periods
Post 2004 - Upside Down?
Borrowed Loan Due
Elliott D. Pollack & Company
Commercial Property Values?
Elliott D. Pollack & Company
So which influence will be bigger?
• Pop/Emp related gains may be offset by new leases adjusting for lower rents/less space, at least in 2011/2012.
• This means the possibility of relatively flat rental and vacancy rates in 2011/2012.
• 2012-2013 should see more improvement.
Elliott D. Pollack & Company
How does this impact commercial property values?
Flat activity often means flat prices. But, values through 2010 were propped up by:
- Owners depleting reserve funds (done);- Extend and Pretend (still pretending?);- Interest rates low (continues but small
increase);- Multi-year leases carrying higher rents
(fewer).
Elliott D. Pollack & Company
Commercial Summary:
Flat or only slightly improving indicators but declining prices?
Maybe. Will vary by location though.
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When do we get back to normal vacancy rates in
commercial?
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Back to Normal Vacancy?
• Office = 2014 - 2015
• Industrial = 2013 - 2014
• Retail = 2014 - 2015
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Tax Revenues
Elliott D. Pollack & Company
Gains Needed to Reach Previous Peak
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 6 11 16 21 26 31 36 41 46
Realized Percent Loss
Re
qu
ire
d P
erc
ent
Ga
in
Sales Tax: -23% / 30%
Corporate Income Tax: -58% / 139%
Individual Income Tax: -36% / 55%
?
Now
State forecast revisions in our future?
Elliott D. Pollack & Company
But, local revenues related to single family and
commercial taxation will remain weak.
Elliott D. Pollack & Company
AZ Summary:
Lagging the US in terms of full recovery; just now starting to expand the employment base.
Elliott D. Pollack & Company
Full Recovery: 2015-ish
Fully recovered in terms of: 1) Housing oversupply; 2) Commercial vacancy rates; 3) Retail sales activity; 4) Employment levels. 5) Tax revenues?
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The “Lemonade”
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• A leader in population growth,
• A leader in employment growth,
• A leader in income growth.
Pre 2007
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• Below average performance in many economic categories, but this is a temporary condition and is already improving…
Post 2007
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How Arizona Ranks Among the States in Percentage Growth
Source: U.S. Bureau of Census; Bureau of Labor Statistics; Bureau of Economic Analysis PERSONAL DECADE POPULATION EMPLOYMENT 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 – 2006 3rd 2nd 3RD
2007—2010 44th 49th 46th
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Phoenix-Mesa Employment Growth(Ranking among all metro areas greater than 1,000,000; 2011 May/May)
Source: Arizona State University, U.S. Bureau of Labor Statistics
YEAR RANK # of MSAs
1991 4 20 1992 5 20 1993 2 20 1994 1 20 1995 1 21 1996 1 23 1997 2 23 1998 1 24 1999 3 26 2000 8 26 2001 6 28 2002 5 28 2003 3 29 2004 4 29 2005 1 30 2006 1 31 2007 10 32 2008 29 32 2009 31 32 2010 31
32 2011 15 32
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Greater Phoenix PopulationSource: U.S. Bureau of Census; Arizona Department of Economic Security
Year Population1950 331,7701960 726,1831970 1,039,8071980 1,600,0931990 2,238,4982000 3,251,8762010 4,192,887
U.S. 2010 308,745,538
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Why are households not forming?
1. Lack of jobs,2. Inability to sell home elsewhere and
move to Greater Phoenix,3. Lack of jobs,4. Lack of jobs,5. Lack of jobs…
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These will improve over time.
Elliott D. Pollack & Company
Surprising Econ Fact: If marginal household size was still at 2000 levels, there wouldn’t be any excess single family
housing!
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Properties in the Foreclosure Process Maricopa County 2002 – 2011
Source: The Information Market
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
*Data through April 2011.
Recession Periods
Elliott D. Pollack & Company
Also now more competitive in terms of housing prices (and
commercial prices).
Elliott D. Pollack & Company
Housing Affordability Index2000 q2
Source: NAHB
65.5 64.463.5 60.7
57.1
51.3
45.4
34.5
27.5
0
20
40
60
80
Las Vegas Phoenix Albuquerque Tucson Salt Lake City Denver Seattle Los Angeles San Diego
Elliott D. Pollack & Company
Housing Affordability Index2006 q2
Source: NAHB
58.5
44.541.6
31.229.9
27.4
16.1
4.61.9
0
20
40
60
80
Denver Salt Lake City Albuquerque Tucson Flagstaff Phoenix Las Vegas San Diego Los Angeles
Elliott D. Pollack & Company
Housing Affordability Index2010 q2
Source: NAHB
81.7 80.880.0
74.1 73.2 72.2
57.454.9
44.0
33.0
0
20
40
60
80
100
Las Vegas Phoenix Albuquerque Tucson Salt LakeCity
Denver Seattle Flagstaff San Diego Los Angeles
Elliott D. Pollack & Company
Housing Opportunity Index* Greater Phoenix vs. US
1992-2011** Source: NAHB
0
10
20
30
40
50
60
70
80
90
100
Phoenix MSA U.S.*Data through Q1 2011.** Years 2002 & 2003 only have one data figure
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Negative Equity in Homes Affects Ability to Sell or Buy
Source: First American Core Logic
50% of homes in Arizona have negative
equity.
(National average about 25%)
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5
910
Benefits of the “SUNBELT”
Alaska
Hawaii
Industrial Northwest
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What about the bad national press?
Yes, SB1070
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• Governor impeached• Real estate depression• Defense cutbacks• AZ Scam• Martin Luther King Holiday Crisis• Keating• Keating 5• Every S&L taken over by RTC
Between 1987 and 1992
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No long-term effects in the past.
Going forward?
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Benefiting from basic demographic changes…
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Retirement Home Buying CycleNet Change in Maricopa County Population Ages 55 to 69
1991-2030Source: U.S. Bureau of the Census, Arizona Department of Economic Security
0
5,000
10,000
15,000
20,000
25,000
30,000
Elliott D. Pollack & Company
Trade-Up Home Buying CycleNet Change in Maricopa County Population Ages 34 to 44
1991-2030Source: U.S. Bureau of the Census, Arizona Department of Economic Security
-5,000
0
5,000
10,000
15,000
20,000
25,000
Elliott D. Pollack & Company
Starter Home Buying CycleNet Change in Maricopa County Population Ages 25 to 34
1991-2030Source: U.S. Bureau of the Census, Arizona Department of Economic Security
0
5,000
10,000
15,000
20,000
25,000
Elliott D. Pollack & Company
One survey shows that over 80% of current single family RENTERS would like to soon
own.
Some of these homes are thus permanently absorbed.
Elliott D. Pollack & Company
Thus, we will also likely see a permanent increase in the
percentage of all single family homes that are maintained as
rentals.
Up from 11% to as high as 14%-15% possibly(?).
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Economic Competitiveness
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Arizona’s government officials are even
getting involved…
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Government isn’t going to turn everything around by
itself. But, govt. can impact the economy at the margin
(with the right policies).
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Old Competitiveness Map – AZ will be Moving Up!
Elliott D. Pollack & Company
Rules if NOT Competitive:
If it’s perception, fix the perception (example: effective tax rates). Doing that!
If it’s reality, implement some strategic reforms. Doing that!
Regarding the previous map, we now have the tools, we just need to implement them properly and our ranking will improve.
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Being addressed now…
Elliott D. Pollack & Company
1 Workforce skills
2 State and local tax scheme
3 Transportation infrastructure
4 Flexibility of incentives programs
5 Availability of incentives
6 Utility infrastructure
7 Land/building costs and supply
8 State economic development strategy
9 Permitting and regulatory structure
10 Higher education resources
Source: Site Selection Magazine
2010 Corporate Real Estate Executive Survey
In 2012
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What We’ve Done:Arizona Competitiveness Package
Arizona Competes Fund• Deal Closing Grants/Loans - $25 Million Annually
Arizona Job Training Fund• Grants for Customized Training - $12 - $15 Million Annually
Quality Jobs Tax Credit• Job Creation/Capital Investment - $9,000 Tax Credit per Job
Income Tax Reform (FY 2014 – FY 2017)• Sales Factor – 100%• Corporate Income Tax – 4.9%
Property Tax Reform • Accelerated Depreciation (2012)• Personal Property Exemption (2012)• Class 1 Property Assessment Ratio – 18% (2013 – 2016)
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What about the rest?
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1 Workforce skills
2 State and local tax scheme
3 Transportation infrastructure
4 Flexibility of incentives programs
5 Availability of incentives
6 Utility infrastructure
7 Land/building costs and supply
8 State economic development strategy
9 Permitting and regulatory structure
10 Higher education resources
Source: Site Selection Magazine
2010 Corporate Real Estate Executive Survey
In 2012
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Policymakers finally started to understand how our economy functions and how to improve our position.
We have the economic development “tools” but need to see if the state can use them properly.
More is to be done in terms of government policy, but so far so good.
Economic Development Summary:
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In terms of other business development factors:
Competitive in terms of single family prices,
Competitive in terms of commercial rental rates and prices,
Competitive in terms of labor and land costs.
Economic Development Summary:
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We will continue to grow faster than the rest of the country over the long run.
If we do things right we might even grow in terms of quality…hmmm…maybe.
Coordination among all of the E.D entities will be critical.
Economic Development Summary:
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Arizona Summary
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AZ Summary:
Lagging the US in terms of full recovery; just now starting to expand the employment base.
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Full Recovery: 2015-ish
Fully recovered in terms of: 1) Housing oversupply; 2) Commercial vacancy rates; 3) Retail sales activity; 4) Employment levels. 5) Tax revenues?
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The long term economic fundamentals have not really
changed.
The long term economic outlook remains favorable (2015+).
AZ will be a national growth leader by mid decade.
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There is a BOOM for Arizona out there somewhere.
Elliott D. Pollack & Company
But, can we also grow in terms of quality?
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ELLIOTT D. POLLACK & Company
7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251
480-423-9200 P / 480-423-5942 F / www.arizonaeconomy.com / [email protected]
• 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