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Elliott D. Pollack & Company
The Anemia Continues
(and other complaints about the
housing market)
Arizona State University
December 3rd, 2014
Presented By:
Elliott D. Pollack
CEO, Elliott D. Pollack & Company
Elliott D. Pollack & Company 1
Welcome to Arizona
Elliott D. Pollack & Company
Year Rank
2003 4
2004 2
2005 2
2006 2
2007 17
2008 46
2009 49
2010 49
2011 28
2012 9
2013 10
2014* 12
Year Rank
1991 19
1992 23
1993 5
1994 2
1995 2
1996 2
1997 2
1998 1
1999 2
2000 5
2001 9
2002 10
Arizona Employment Growth
Arizona’s Rank Out of 50 States Source: Arizona State University, U.S. Bureau of Labor Statistics
*YTD October 2014 vs. YTD October 2013 2
Elliott D. Pollack & Company
Year Rank # MSA’s
2003 3 25
2004 3 25
2005 1 26
2006 1 27
2007 9 28
2008 24 28
2009 23 24
2010 23 23
2011 14 25
2012 9 27
2013 7 28
2014* 12 28
Year Rank # MSA’s
1991 4 19
1992 4 19
1993 2 19
1994 1 19
1995 1 20
1996 1 21
1997 1 22
1998 1 23
1999 3 24
2000 9 25
2001 7 26
2002 5 25
Phoenix-Mesa Employment Growth (Ranking among all metro areas greater than 1,000,000)
Source: Arizona State University, U.S. Bureau of Labor Statistics
*YTD October 2014 vs. YTD October 2013 3
Elliott D. Pollack & Company
U.S. Seasonally Adjusted Non-Farm Employment
2005 – 2014* Source: Bureau of Labor Statistics
128,000
130,000
132,000
134,000
136,000
138,000
140,000
*Data through October 2014.
Peak 138.4 million Jan. 2008
Feb. 2010
8.7 Million U.S.
Jobs Lost (6.3%)
10 Mil. Jobs Added
(115.1% Recovered)
139.7 million October 2014
(000’s)
4
Elliott D. Pollack & Company
Greater Phoenix Has Gained 75% of Lost Jobs
60,200 Jobs (25%) Still to Recover
1,650
1,700
1,750
1,800
1,850
1,900
1,950
2,000
Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted
Data through October 2014.
1,930,800 July 2007
1,685,500 Sept. 2010
245,300 Phoenix
Jobs Lost (13%)
185,100 Jobs
Regained (75%)
5
Elliott D. Pollack & Company
Employment Levels:
Greater Phoenix back to Peak in 2016 or 2017? Source: ADOA
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
2,400.0
Jan-
95
Jul-9
5
Jan-
96
Jul-9
6
Jan-
97
Jul-9
7
Jan-
98
Jul-9
8
Jan-
99
Jul-9
9
Jan-
00
Jul-0
0
Jan-
01
Jul-0
1
Jan-
02
Jul-0
2
Jan-
03
Jul-0
3
Jan-
04
Jul-0
4
Jan-
05
Jul-0
5
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
Jan-
13
Jul-1
3
Jan-
14
Jul-1
4
Jan-
15
Jul-1
5
Jan-
16
Recession Periods
Peak
*Based on seasonally unadjusted monthly data
6
Elliott D. Pollack & Company
Why has Greater
Phoenix growth in this
cycle been subpar
relative to its historical
norm?
7
Elliott D. Pollack & Company
(1) Significant slowdown in
population flows
(2) Steeper housing decline and
modest recovery
8
Elliott D. Pollack & Company
The Greater Phoenix
Unemployment Rate is now 5.8%.
At the same point in the last two
cycles, it was 4.0% and 3.8%,
respectively.
Source: Bureau of Labor Statistics
9
Elliott D. Pollack & Company
Since the Recovery
Greater Phoenix has created
174,000 jobs.
By Comparison, for the first 48
months of the previous two
recoveries, Greater Phoenix
created 256,900 and 225,300 jobs,
respectively.
Source: Bureau of Labor Statistics
10
Elliott D. Pollack & Company
Since the Recovery the
Greater Phoenix population has
increased by 217,600 persons.
By Comparison, for the first 5 years
of the previous two recoveries,
Greater Phoenix population
increased by 608,700 and 482,900
persons, respectively.
Source: Arizona Department of
Administration 11
Elliott D. Pollack & Company 12
Good News!
Elliott D. Pollack & Company
Good news - housing fundamentals are
positive!
(1) Economic growth is accelerating
(2) Mortgage rates are low & lending is loosening up a bit
(3) Affordability is still good and price gains are slowing
(4) Foreclosure & delinquency rates are low & distressed sales are
less than 10% of the market
(5) Investors are leaving creating more opportunity for buyers
needing financing
(6) International demand for housing still strong
(7) Construction is up - apartments and office buildings
13
Elliott D. Pollack & Company
United States Real Gross Domestic Product*
Annual Growth 1970 - 2015** Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators
0.2%
3.3%
5.2%
5.6%
-0.5%-0.2%
5.4%
4.6%
5.6%
3.2%
-0.2%
2.6%
-1.9%
4.6%
7.3%
4.2%
3.5%3.5%
4.2%
3.7%
1.9%
-0.1%
3.6%
2.7%
4.0%
2.7%
3.8%
4.5%4.5%
4.8%
4.1%
0.9%
1.8%
2.8%
3.8%3.4%
2.7%
1.8%
-0.3%
-2.8%
2.5%
1.8%
2.3%2.2%2.2%
3.0%
-4%
-2%
0%
2%
4%
6%
8%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
* Based on chained 2009 dollars.
** 2014 and 2015 are a forecast from the Blue Chip Economic Indicators, November 2014.
Recession Periods
3.7% = 40-year avg during expansion
3.1% = 20-year avg during expansion
2005
14
Elliott D. Pollack & Company
Mortgage Rates are Low
and Lending is Loosening Up A Bit
15
Elliott D. Pollack & Company
30-Year Conventional Mortgage Rate
1972 – 2014* Source: Federal Reserve
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Recession Periods
16 *Data through October 2014.
Elliott D. Pollack & Company
Net Percentage of Large U.S. Banks
Reporting Eased Standards versus Tougher Standards
on Residential Mortgage Prime Loans 2007 Q1 – 2014 Q3
Source: Federal Reserve
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
Recession Periods
17
Elliott D. Pollack & Company 18
Affordability still good.
Elliott D. Pollack & Company
Greater Phoenix
Housing Opportunity Index
1991 – 2014 Source: NAHB-Wells Fargo
63.961.6
77.0
66.7
62.2
65.066.4 67.6
70.7
64.8
70.0
75.473.8
67.5
41.0
26.6
33.2
71.6
82.9 83.586.0
80.9
70.668.3
0
20
40
60
80
100
1991
Q3
1992
Q3
1993
Q3
1994
Q3
1995
Q3
1996
Q3
1997
Q3
1998
Q3
1999
Q3
2000
Q3
2001
Q3
2002
Q3
2003
Q3
2004
Q3
2005
Q3
2006
Q3
2007
Q3
2008
Q3
2009
Q3
2010
Q3
2011
Q3
2012
Q3
2013
Q3
2014
Q3
Note: HOI is a measure of the percentage of homes sold in a given
Area that are affordable to families earning the area’s median income
During a specific quarter. Data for 1996 Q3 is an estimate. 19
Elliott D. Pollack & Company
Foreclosures and
Delinquency Rates Low
20
Elliott D. Pollack & Company
U.S. Completed Foreclosures
2000 – 2014* Source: CoreLogic Recession Periods
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
21 *Data through September 2014.
Elliott D. Pollack & Company
Delinquency Rate
on Single Family Residential Mortgages
1991 – 2014* Source: Federal Reserve
1.4%
11.3%
7.4%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Recession Periods
22 *Data through Q2 2014.
Elliott D. Pollack & Company
Investors no longer buying in mass.
23
Elliott D. Pollack & Company
Percentage of Homes Purchased with Cash
Maricopa County – Single Family & Condo
2003 – 2014* Source: Cromford Report
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
24 *Data through October 2014.
Elliott D. Pollack & Company
International Demand for Housing Strong.
How to catch a Canadian.
25
Elliott D. Pollack & Company
International Immigration
as a Percentage of Total Population Net Change
2001 – 2013 Source: U.S. Census Bureau
Data for 2010 not available
47.1% 47.5%
45.4%
42.6%
38.1%
41.6%
36.2%
32.1% 32.5%
31.1%
38.1% 37.4%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013
26
Elliott D. Pollack & Company
Construction up –
Apartments and Office Buildings
27
Elliott D. Pollack & Company
Greater Phoenix
Multi-Family Housing Deliveries
2000 – 2016* Source: CBRE
8,144
9,092
6,167
4,511 4,586 5,025
3,433
5,221
4,621
7,656
1,426
617 1,060
3,186
4,668
6,518 6,351
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
*2014 – 2016 forecast is from CBRE as of third quarter 2014.
# of units
28
Elliott D. Pollack & Company
Greater Phoenix
Office Building Completions (square feet)
2000 – 2015* Source: CBRE
*2014 currently under construction
2015 planned construction
29
2,980.3
4,794.7
2,345.5
675.5
1,458.0 1,166.1
2,567.0
5,023.6
3,856.8
1,815.5
1,154.6
439.1 317.1 208.9
2,787.3
6,868.9
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
(000s)
Elliott D. Pollack & Company
Bad News.
30
Elliott D. Pollack & Company
Bad news- people aren’t buying. Why?
(1) Fewer people moving
(2) Fewer people moving to Arizona
(3) Slower employment growth
(4) Negative Equity
(5) “Penalty Box”
(6) Millennials
(7) Student loan debt
(8) SB 1070
(9) FINANCING !!!!
31
Elliott D. Pollack & Company
Distribution of Movers in U.S. by Type*
1990-2013 Source: U.S. Census Bureau
*Excludes movers in the same county
7.9 7.9 7.9 8.2 7.9 8.0 8.0 7.9 8.4 8.8 7.6 8.1 7.7 7.8 7.8 8.0 7.4
6.3 6.4 6.2 5.9 6.8 7.0
7.1 7.1 6.9 6.7 5.7
6.5 6.4 6.4
7.5 8.4
7.8 7.8
7.6 7.3 7.4 5.7
4.9
4.7 4.7 4.3 4.8
5.1 4.8
1.4 1.3 1.4 1.2
0.8
1.4 1.3 1.2
1.4
1.7
1.8 1.6
1.3 1.3 1.9
1.3
1.2
1.1 1.1 1.0 1.1
1.2 1.0
0.0
5.0
10.0
15.0
20.0
Diffeferent county, same state Different county, different state From Abroad
11.5
12.8
18.9
Movers
(in
mill
ions)
32
Elliott D. Pollack & Company
Arizona Rank
Population Growth
1991-2013 Source: Census Bureau
6 4
2 2 2 2 2 2 2 2 3 2 2 2 2 2
5
8
19
14 13
7 8
33
Elliott D. Pollack & Company
5 2
7
1
Arizona Population Growth Was
Slow But Still Top 10 in 2013
8
Source: U.S. Census Bureau
3
9
6
Growing
Declining
Top 10
10
Alaska
Hawaii
4
34
Elliott D. Pollack & Company
Arizona Population
Annual Percent Change 1975–2013 Source: AZ Dept. of Administration
2.8%2.7%
3.4%3.7%
4.8%
2.9%3.4%
2.8%2.7%
3.3%
3.8%3.9%3.9%
2.9%2.5%
1.7%
2.8%
3.4%
3.8%
4.4%4.4%
3.5%3.3%
3.1%2.9% 3.0%
2.2%2.3%2.6%
3.1%
3.5%
3.2%
2.6%
1.5%
0.3%0.2%
0.6%0.9%
1.3%
0%
2%
4%
6%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Recession Periods
Pre-2008 Avg. 3.2%
35
Elliott D. Pollack & Company
Arizona Population
Annual Net Change 1975–2013 Source: AZ Dept. of Administration
61.662.0
79.0
91.0
121.0
77.593.6
79.879.1
98.2
116.4
124.7128.8
98.187.0
61.9
104.5
127.2
149.7
179.6187.4
154.4150.1146.4
140.5151.8
111.9
123.7
143.1
171.4
198.9191.9
158.6
93.7
20.412.5
36.6
60.4
82.5
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Recession Periods
36
Elliott D. Pollack & Company
1
7
3
2
5
10 4
8
Arizona Still Top 10 in Attracting
Domestic Migrants as of 2013
6
U.S. Census Bureau
Positive Domestic Migration
Negative Domestic Migration
Top 10
9
Alaska
Hawaii
37
Elliott D. Pollack & Company
Arizona Domestic Migration
Ranking Source: U.S. Census Bureau
Year Rank
2005 2
2006 3
2007 4
2008 3
2009 11
2011 12
2012 3
2013 6
*No data available for 2010
38
Elliott D. Pollack & Company
1
9
4
3
6
7
5 8
California, New York & Florida Attracted
Most International Migrants in 2013
2
U.S. Census Bureau
18
Alaska
Hawaii
Positive International Migration
Negative International Migration
Top 10
10
39
Elliott D. Pollack & Company
Arizona International Migration
Ranking Source: U.S. Census Bureau
Year Rank
2005 8
2006 9
2007 8
2008 9
2009 8
2011 8
2012 18
2013 18
*No data available for 2010
Immigration represented 14% of total population increase in 2013.
That compares to 37% nationally.
40
Elliott D. Pollack & Company
How quickly are population
flows going to recover?
41
Elliott D. Pollack & Company
SLOWLY!
Still buffering, seriously?
42
Elliott D. Pollack & Company
Fewer people mean fewer
houses.
43
Elliott D. Pollack & Company
Greater Phoenix Population
Source: AZ Dept. of Administration; University of Arizona Forecasting Project; EDPCo
Greater Phoenix Population Estimates and Projections
Population 2014 2015 2016
EDPCO Forecast as of 2014 Q4 4,403,752 4,483,020 4,572,680
Net Change 65,080 79,268 89,660
% Change 1.5% 1.8% 2.0%
U of A Forecasting Project Forecast as of 2014 Q4 4,403,817 4,473,290 4,550,366
Net Change 65,145 69,473 77,076
% Change 1.5% 1.6% 1.7%
Arizona Dept. of Administration Forecast as of 2012 Q4 4,393,500 4,478,700 4,577,100
Net Change 64,200 85,200 98,400
% Change 1.5% 1.9% 2.2%
44
Elliott D. Pollack & Company
Greater Phoenix Population
Source: U.S. Bureau of Census; Arizona Department of Administration; University of Arizona Forecasting Project YEAR POPULATION APR
1960 726,183 6.9%
1970 1,039,807 3.7%
1980 1,600,093 4.4%
1990 2,238,498 3.4%
2000 3,251,876 3.8%
2010 4,192,887 2.6%
2015* 4,481,056 1.3%
2020* 4,974,545 2.1%
*Forecasts as of 2014 Q4 45
Elliott D. Pollack & Company
If you believe that
population forecast,
it implies an average of
more than 21,100 single family units
will be built each year
from 2014 through 2020 (only if
homeownership comes back).
46
Elliott D. Pollack & Company
Employment
47
Elliott D. Pollack & Company
Greater Phoenix Employment*
Annual Percent Change 1975–2013 Source: Arizona Department of 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%
1.7%
-2.5%
-7.8%
-1.9%
1.5%2.6%2.8%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
Not seasonally adjusted
Recession Periods
Pre-2008 Avg. 4.6%
48
Elliott D. Pollack & Company
Greater Phoenix Employment*
Annual Net Change 1975–2013 Source: Arizona Department of Administration
Recession Periods
-16.4
21.1
39.3
65.357.8
22.819.2
-0.4
37.9
77.971.6
40.231.2
53.9
23.821.8
-3.5
11.2
49.8
70.882.188.8
70.575.1 66.853.6
20.1
-0.1
24.1
64.4
104.597.4
31.6
-47.9
-146.8
-32.4
25.7
43.948.5
-160.0-140.0-120.0-100.0
-80.0-60.0-40.0-20.0
0.020.040.060.080.0
100.0120.0
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
(000s)
*Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990.
Not seasonally adjusted
49
Elliott D. Pollack & Company 50
Elliott D. Pollack & Company
U.S. and Greater Phoenix
Negative Equity Share
2010–2014 Source: CoreLogic
24.9% 22.5% 22.3%
14.5%
10.7%
41.9%
25.6%
19.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2
U.S. Greater Phoenix
51
Elliott D. Pollack & Company
U.S. and Greater Phoenix
Percent of Borrowers with Home Equity
Between 0% and 20%
2010–2014 Source: CoreLogic
21.7% 22.3% 22.8% 21.4%
19.0%
20.9% 21.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2
U.S. Greater Phoenix
52
Elliott D. Pollack & Company 53
Elliott D. Pollack & Company
Year U.S.
Foreclosures % chg year
ago Greater Phoenix
Foreclosures % chg year
ago
2002 230,750 4,288
2003 253,584 9.9% 4,788 11.7%
2004 273,930 8.0% 3,881 -18.9%
2005 290,872 6.2% 1,108 -71.5%
2006 379,380 30.4% 935 -15.6%
2007 587,872 55.0% 9,550 921.4%
2008 972,933 65.5% 38,427 302.4%
2009 1,009,284 3.7% 47,054 22.5%
2010 1,145,292 13.5% 49,338 4.9%
2011 930,633 -18.7% 42,518 -13.8%
2012 821,689 -11.7% 22,629 -46.8%
2013 618,493 -24.7% 9,686 -57.2%
U.S. and Greater Phoenix Annual Foreclosures
2002–2013 Source: CoreLogic; Information Market
54
Elliott D. Pollack & Company
U.S. Foreclosure Lag
2002–2021 Source: CoreLogic
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
CompletedForeclosures
3-Year Lag (FHA) 7-Year Lag (Fannie/Freddie)
Sept. 2014
Recession Periods
55
Elliott D. Pollack & Company
Greater Phoenix Foreclosure Lag
2002–2021 Source: Information Market
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
CompletedForeclosures
3-Year Lag (FHA) 7-Year Lag (Fannie/Freddie)
Oct. 2014
Recession Periods
56
Elliott D. Pollack & Company
Greater Phoenix Short Sale Lag
2002–2021 Source: Cromford Report
0
500
1,000
1,500
2,000
2,500
Short Sales Foreclosures 1-Year Lag (FHA)
2-Year Lag (Fannie/Freddie; 20%) 4-Year Lag (Fannie/Freddie; 10-19%)
7-Year Lag (Fannie/Freddie; 3.5-9%)
Oct. 2014
Recession Periods
57
Elliott D. Pollack & Company
Millennials
58
Elliott D. Pollack & Company 59
Priorities..
Elliott D. Pollack & Company
Percent of 18-34 Year Olds Living With Parents
U.S.: 1983 – 2013 Source: US Census Bureau
26.7%
31.2%
24.0%
25.0%
26.0%
27.0%
28.0%
29.0%
30.0%
31.0%
32.0%
Recession Periods
18-34 year olds represent 23.5% of total population (74.3 million persons).
60 3.3 million more 18-34 year olds now living with parents.
Elliott D. Pollack & Company
10.2%
13.9%
8.0%
10.0%
12.0%
14.0%
16.0%
Percent of 25-34 Year Olds Living With Parents
U.S.: 1983 – 2013 Source: US Census Bureau Recession Periods
25-34 year olds represent 13.6% of total population (42.8 million persons).
61 1.5 million more 25-34 year olds now living with parents.
Elliott D. Pollack & Company
Millennials
• 30-34 year olds in 2012 had the lowest
homeownership rate of any similarly aged
group before them.
• Five years prior, this exact same group (at 25-
29 years old) had the highest homeownership
rate than any group before them.
62
Elliott D. Pollack & Company
U.S. Median Age at First Marriage
1890-2013 Source: U.S. Census Bureau
18
20
22
24
26
28
30
Men Women
Baby Boomers
Gen X
Millennials
63
Elliott D. Pollack & Company
U.S. Homeownership Rates
By Age of Householder
1990 – 2013 Source: US Census Bureau
41.8%
34.1%
57.4%
48.1%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
25 to 29 years old 30 to 34 years old
Recession Periods
64
Elliott D. Pollack & Company
U.S. Homeownership Rates by Age
%-Point Change from 2006-2013 Source: US Census Bureau
65
-3.7
-5.8
-8.3
-5
-4.3
-0.1
-9.0
-8.0
-7.0
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
Total Under 35 35-44 45-54 55-61 65+
Elliott D. Pollack & Company
Homeownership Rates
1986 – 2014* Source: US Census Bureau
69.0%
64.4%
72.4%
60.9% 60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
72.0%
74.0%
U.S. Greater Phoenix
Recession Periods
*Data through the third quarter of 2014. 66
Elliott D. Pollack & Company
Change in Greater Phoenix occupied
housing units Source: American Community Survey
2006 2013 2006-2013
Owner-occupied 68.6% of total
occupied
61.0% of total
occupied
-25% of total
change
Renter-occupied 31.4% of total
occupied
39.0% of total
occupied
125% of total
change
67
Elliott D. Pollack & Company 68
Greater Phoenix Occupied Housing Units
Net Change 2006 – 2013 Source: American Community Survey
126,321
-31,153
157,474
-50,000
0
50,000
100,000
150,000
200,000
Total Occupied Housing Units Owner-Occupied Renter-Occupied
Elliott D. Pollack & Company 69
Greater Phoenix Renter-Occupied Housing Units
Net Change 2006 – 2013 Source: American Community Survey
113,908
7,224
34,412
1,930 0
20,000
40,000
60,000
80,000
100,000
120,000
SF Detached Renter-Occupied
SF Attached Renter-Occupied
Multi-Family Renter-Occupied
Other Renter-Occupied
A total increase of 157,474 renter-occupied units between 2006-2013
Elliott D. Pollack & Company
Student Loan Impact on Home Buying
70
Elliott D. Pollack & Company
Student Loan Impact on Home Buying
• Purchasing power for a home is reduced by $52,500 for every
$250 monthly student loan payment.
• As of 2013, 42.2 million people have some student debt.
• 29 million (or 34%) of the 86 million people under 40 have some
student debt. These 29 million individuals translate into 16.8
million households.
• 5.9 million (or 35%) of the 16.8 million households pay more than
$250 per month in student loans. This is up from 2.2 million
households (or 22%) in 2005.
• Most households paying $750+ per month in student loans are
priced out of the market (approximately 2.0 million people).
Source: Federal Reserve Bank of New York; John Burns Consulting; Elliott D. Pollack & Co.
71
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SB 1070
72
Elliott D. Pollack & Company
Survey Regarding Arizona’s
Population
Are there too many illegal aliens in Arizona?
17% - Yes
22% - No
61% - No Comprende
73
Elliott D. Pollack & Company
What they Wanted to Say:
74
SB 1070:
“If you are an illegal immigrant
we don’t want you.”
Elliott D. Pollack & Company
What the World Heard:
75
SB 1070:
“If you are an immigrant we
don’t want you.”
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Elliott D. Pollack & Company
Ability to Qualify
77
Elliott D. Pollack & Company
Tougher Qualifications 2002-2006 was not normal. 2009-present is not normal.
(1) More paperwork
(2) Automated underwriting standards make it difficult for
self-employed, commissioned sales people and affluent
retirees
(3) Lower debt to income ratios
(4) Longer lockout period after a foreclosure
(5) Higher down payment requirements
78
Elliott D. Pollack & Company
Real Issues
(1) FHA loan limit ($271,050 vs. the previous $346,250)
(2) Freddie/Fannie “put-backs”
(3) FHA vs. Freddie/Fannie (Increased standards & Longer
Lockout Periods)
(4) Dodd-Frank created a cloud
79
Elliott D. Pollack & Company
FHA Loan Limit
Impact on Greater Phoenix
New Home Sales Source: U.S. Dept. of HUD/FHA; ASU Housing Reports
80
2013 2014
FHA Loan Limit $346,250 $271,050
% of Homes
Under FHA Limit
70.9% 42.3%
Switching from FHA to Fannie/Freddie requires higher down
payments, higher FICO scores, and other more stringent
overall requirements.
Elliott D. Pollack & Company
FHA Loan Limit
Impact on Greater Phoenix
New Home Sales Source: U.S. Dept. of HUD/FHA; ASU Housing Reports
81
2013 2014
FHA Loan Limit $271,050 $346,250
% of Homes
Under FHA Limit
50.7% 65.9%
IF…
Elliott D. Pollack & Company *Data through Q3 2014
Average Borrowers Credit Scores
on All New FHA Loans
2007– 2014* Source: U.S. Dept. of HUD/FHA
632
703
681
600
620
640
660
680
700
720
740
Recession Periods
82
Approximately 40% of people are not eligible for FHA Loans
Elliott D. Pollack & Company *Data through Q3 2014
Average Borrowers Credit Scores
on All New Fannie Mae Loans
2004 – 2014* Source: Fannie Mae
716
762
744
640
660
680
700
720
740
760
780
800
Approximately 63% of people are not eligible for Conventional Loans
Recession Periods
83
Elliott D. Pollack & Company
Size of Median Down Payment
by Home Sales Price Source: Redfin; Bloomberg
84
Cheapest 25% of homes Middle 50% of homes Highest 25% of homes
2001-2007
average 2013
4.2% of
sales price
7.5%
2001-2007
average 2013
8.2%
8.8%
2001-2007
average 2013
19%
20.9%
78.6% 7.3% 10.0%
Elliott D. Pollack & Company
Mortgage Credit Availability Index
2004 – 2014* March 2012 = 100
Source: Mortgage Bankers Association Recession Periods
85
750
1,000
500
250
0
2004 2006 2008 2010 2012 2014
*A decline in the MCAI indicates that lending standards are tightening,
while increases in the index are indicative of loosening of credit.
Elliott D. Pollack & Company
Median Price of New Homes as a
Percent of the Median Price of Resale Homes
Maricopa County
2000–2014* Source: Information Market
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
200.0%
220.0%
*Data through October 2014
Recession Periods
86
Elliott D. Pollack & Company
A dimmer switch…
Not a light switch…
Bad
Good
Bad
Not great OK
Good
Great
Mediocre
Terrible
Housing
87
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Multi-Family
89
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Elliott D. Pollack & Company
Apartments
26-27 year lag
1955-2038 Source: U.S. Census Bureau
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Baby Boomers
Gen X
Millennials
2014
91
Elliott D. Pollack & Company
Multi-Family Year-End Vacancy Rates
Maricopa County 1975–2015* Source: ASU Realty Studies / Hendricks Berkadia**
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%
6.8%
7.8%
10.2%
12.5%
13.4%
10.8%
7.5%
6.3%6.7%6.8%
6.9%
0%
3%
6%
9%
12%
15%
18%
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
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
2013
2014
2015
*2014 -2015 are forecasts from Elliott D. Pollack & Co.
**Data prior to 2005 is from ASU
Recession Periods
92
Elliott D. Pollack & Company
Multi-Family Housing Market Source: PMHS and Hendricks Berkadia
Absorption Completions
2007 (3,121) 3,800
2008 (4,466) 5,900
2009 9,100 6,231
2010 11,619 200
2011 7,729 303
2012 2,950 910
2013 3,230 2,350
2014* 5,480 4,140
*Data through third quarter 2014.
93
Elliott D. Pollack & Company
Multi-Family Housing Market Source: CBRE as of Third Quarter 2014
2014 2015 2016
Projected Completions* 4,668 6,518 6,351
*Complexes with 100+ units
94
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Multi-Family Outlook
Higher population growth and continued
weak homeownership suggests the
outlook for apartments is excellent
95
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OFFICE
96
Elliott D. Pollack & Company
Office Space Year-End Vacancy Rates
Maricopa County 1986–2015* Source: CBRE
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%25.5%
23.9%
22.4%
19.8%
18.4%
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
2013
2014
2015
*2014 -2015 are forecasts from the Greater Phoenix Blue Chip
Recession Periods
97
Elliott D. Pollack & Company
Greater Phoenix Office Market* Source: CBRE
Year Absorption (sf) Chg in Inventory (sf)
2005 3,119,293 7,987
2006 3,245,888 **2,320,302
2007 1,500,704 4,905,374
2008 (603,112) 3,402,646
2009 (667,329) 1,798,415
2010 233,670 2,011,404
2011 1,857,433 3,144,910
2012 2,020,529 973,282
2013 1,721,366 (35,566)
2014*** 1,458,559 701,300
*Only includes multi-tenant space greater than 10,000 SF
** A number of buildings in downtown and mid-town are being converted to office condos.
***Data through third quarter 2014
98
Elliott D. Pollack & Company
As of third quarter 2014,
there is 565,200 square feet
of speculative office space
under construction.
Source: CBRE
99
Elliott D. Pollack & Company
Under any reasonable
employment growth scenario,
we believe it will be at least
2017-2018 before any significant
office construction occurs (although some sub-markets like
Tempe
will be sooner).
100
Elliott D. Pollack & Company
INDUSTRIAL
101
Meanwhile
At the mattress factory
Elliott D. Pollack & Company
Industrial Space Vacancy Rates
Maricopa County 1980 – 2015* Source: CBRE
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%
12.4%
10.9%11.4%11.4%
10.9%
0%
5%
10%
15%
20%
1980
1981
1982
1983
1984
1985
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
2013
2014
2015
* 2014 - 2015 are forecasts from the Greater Phoenix Blue Chip
Recession Periods
102
Elliott D. Pollack & Company
Greater Phoenix Industrial Market Source: CBRE
Year Absorption (sf) Chg in Inventory (sf)
2005 13,349,129 7,072,477
2006 6,032,175 7,829,959
2007 8,359,835 13,914,181
2008 629,838 13,467,215
2009 (4,649,352) 4,753,218
2010 4,455,097 2,451,202
2011 7,753,111 2,842,185
2012 7,405,168 3,358,724
2013 8,783,982 8,902,571
2014* 4,978,228 5,060,168
*Data through third quarter 2014
103
Elliott D. Pollack & Company
As of third quarter 2014,
there is 2.3 million square feet
of speculative industrial space
under construction.
Source: CBRE
104
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Big box / small space
105
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RETAIL
106
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Elliott D. Pollack & Company
Retail Space Vacancy Rates
Maricopa County 1985–2015* Source: CBRE**
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%12.2%
11.0%10.2%
9.9%9.0%
0%
5%
10%
15%
20%
1985
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
2013
2014
2015
* 2014-2015 are forecasts from GPBC
** Data prior to 1992 is from Grubb & Ellis
Recession Periods
108
Elliott D. Pollack & Company
Greater Phoenix Retail Market Source: CBRE
Year Absorption (sf) Chg in Inventory (sf)
2005 6,708,155 6,248,789
2006 5,244,597 4,582,618
2007 9,424,362 11,104,865
2008 3,395,986 6,229,205
2009 (1,117,100) 4,405,985
2010 (75,352) 902,380
2011 (152,647) 24,543
2012 1,879,005 184,932
2013 1,579,202 (325,959)
2014* 753,891 (146,171)
*Data through second quarter 2014
109
Elliott D. Pollack & Company
As of third quarter 2014,
there is no square feet
of speculative retail space
under construction.
Source: CBRE
110
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CONCLUSIONS:
How will it all turn out?
111
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Elliott D. Pollack & Company
No recession on the
horizon...
… It’s slow but it’s
growing.
113
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The economy is improving
in both absolute and
relative terms.
114
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Greater Phoenix–
Slow but mildly accelerating
recovery.
2015 will be better than 2014.
Full recovery down the road.
115
Elliott D. Pollack & Company
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www.arizonaeconomy.com
(Click on Subscribe to MMQ)
116