Arizona’s housing industry, gloomy economics and $15K tax credits

Posted By Mike Padgett

Feb. 11, 2009

PHOENIX, Ariz. – Arizona’s housing industry is expected to hit bottom sometime in the second quarter, after which a gradual recovery is expected, according to an international economic and financial consulting group.

The forecast was part of a recent economic webcast by IHS Global Insight. The analysis of the housing industry across the United States came from Luke Tilley, senior economist with IHS’ U. S. Regional Services. Tilley lumped the high-growth states of Arizona, California, Nevada and Florida in a category he calls volatile.

The root cause of the current national recession “was the overinvestment in housing, which of course in turn led to a financial crisis and everything that we find ourselves in now,” Tilley said.

Despite the financial and employment pains facing Arizona, California, Nevada and Florida, “the good news is they’re poised to return to above-average growth, and they’re going to be some of the stronger areas coming out of this (recession),” Tilley said.

Those four high-growth states, collectively, in 1995 had 19 percent of the U.S. households and 22 percent of the nation’s housing starts. “But when we were in the heart of the housing boom, the (above-mentioned) states had 20 percent of U.S. households and 29 percent of the housing starts,” Tilley said.

“It was clear that starting in 2005, there was excess building, excess building that was just unsustainable,” he said. “There was entirely too many houses being built in these four states.”

Tilley said the housing industry in California and Florida should reach bottom during the first quarter of 2009. Arizona’s housing industry likely will bottom out in the second quarter, followed by Nevada in the third quarter.

“Those are when we think that these states are going to reach their construction bottoms,” Tilley said during the webcast. “Obviously, people have started to pick up all of the excess housing that’s on the market, the glut that’s out there.”

A few days after the IHS Global Insight webcast, Arizona economist Elliott Pollack offered his views of the local economy to the Maricopa County Board of Supervisors.

“It will be either a bad year or a horrible year. There is very little optimism,” he said, according to a county press release.

Pollack is chief executive of Elliott D. Pollack & Co. He told the county officials during the Feb. 9 meeting that 90 percent of the region’s housing industry has evaporated in recent years because “we built 10 years of housing in the first half of this decade.”

At the same time, job growth in Arizona in 2006 was the second highest in the country. But one year later, Arizona’s job growth had fallen to 22nd place. And in 2008, it plummeted to 48th in the nation.

Worsening the situation is the deceleration of the state’s population growth, leaving many new homes unsold and frustrated owners of resale homes taking their properties off the market.

However, despite that gloomy scenario, Pollack says there is a silver lining to the current housing market – the lower prices of new and resale houses are making homes affordable to more families.

And finally, according to news reports today, Washington lawmakers have erased a proposal to include a $15,000 homebuyer tax credit in the mega-billion stimulus package. The lack of the connection lawmakers have with voters is evidenced by the results of a recent poll by Voter Roll Call of Verona, N.J. The poll, released Feb. 9, showed that the proposed tax credit was favored by 64 percent of Americans. More than 1,200 registered voters were called in the survey. The results were released by the National Association of Home Builders.

 

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Feb 11th, 2009

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