Tucson, AZ Employment & Demographic Trends

Employment Trends and Forecasts

The main long-term foundational driver in terms of housing sales volume and price support is a given region’s employment base. The following table presents historical trends and a 5-year forecast of employment and unemployment levels for the Tucson, AZ MSA:

Patterns in total non-farm jobs in this region are shown graphically in the following table:

Twelve month changes in the total non-farm job base are shown in the chart below:

As shown, this region is estimated to have lost 19,625 non-farm jobs during 2009 – an unprecedented 5.1% loss of the total non-farm job base for the biggest loss in decades. During Year 2010, an additional loss of 4,850 jobs is forecast. Thereafter, the impact from the national stimulus package will increasingly be felt, and combined with improved financial markets, should lead the national economic recovery towards regional economic expansion. By 2014, a healthy 2.6% growth rate is forecast for non-farm jobs in this region.

For a complete report Click Here

Patterns in unemployment are shown below:

After reaching historic levels estimated at 7.4% unemployment in 2009, it is forecast peak at 7.5% in 2010, before gradually receding toward more normal levels thereafter.


Demographic Trends and Forecasts
The distribution of the population by age bracket in this region is shown in the chart below:




The population distribution by age compares estimates for 2009 and forecasts for 2014 with Census data from the year 2000. Changes in the population between 2009 and 2014 are more clearly shown in the next chart:

As shown, population gains are forecast for all brackets. Sizable growth is projected between 25 and 44 years - peak family formation years which will boost growth in the 5 to 14 years bracket. Growth in the 25 to 44 year age brackets will continue to be drawn to affordable housing and job opportunities. Conventional housing will perform well in select price points.

Population growth between 55 and 74 years of age will be especially intense, suggesting that move-down and age targeted/qualified housing in various forms are likely to perform relatively well once economic growth resumes. This influx of buyers into the mature housing market is significant since baby boomers now account for one-fourth of the regional population. The mature market is anticipated to perform very well in the next cycle.

For a complete report Click Here

Mark Boud

Real Estate Economics

http://www.realestateeconomics.com/

Northern California Regional Economic and Housing Trends and Forecasts

Employment Trends and Forecasts
The main long-term foundational driver in terms of housing sales volume and price support is a given region’s employment base. The following trends and a five year forecast of employment and unemployment levels for Northern California.

This region is forecast to lose 344,008 non-farm jobs during 2009 – a 4.1% loss of the total non-farm job base, for the biggest loss in decades. During Year 2010, an additional loss of 69,433 jobs is forecast. Thereafter, the impact from the national stimulus package will increasingly be felt, and combined with improved financial markets, should lead the national economic recovery towards regional economic expansion. By 2014, a healthy 2.1% growth rate is forecast for non-farm jobs in this region.

After reaching historic levels estimated at 12.1% unemployment in 2009, it is forecast to peak at 12.4% in 2010, before gradually receding toward more normal levels thereafter. State budget woes have intensified high unemployment levels.


Housing Construction Trends and Forecasts
Levels of housing construction in the Northern California closely correlate with residential permit activity. Builders cut back sharply on construction after the housing bubble burst, causing the severe decline in permit activity in 2008. Residential permit activity is anticipated to keep declining through 2009, dropping to historic lows in 2010 and remaining low through 2011.

Permit activity is expected to be at extremely depressed levels for the following two to three years before gradually increasing to improved (but still low) levels by 2013. A decline in previously permitted housing units in the outlying areas magnified the plunge.

Gradual incremental growth in the housing stock is projected due to limited development opportunities in key areas, oversupply in outlying areas, and the recessionary impact on funding and feasibility for development. Incremental increases in housing stock will be far lower than historical patterns.


Housing Price Trends and Forecasts
Declines in housing values during 2008 were devastating, with less severe drops estimated in 2009 (mostly having occurred in the 1st half) with stabilization projected during the 2nd half of the year. By 2010, demand pressures will likely cause prices to conservatively increase by 1.7%.

Median home prices have fallen 42% from their peak in 2006, to a level similar to the median price in 2002-03. Following a bottoming out in 2009, mild price appreciation patterns beginning in 2010 are likely to be relatively gradual during the next few years, but will build momentum as the economy begins to improve, distressed inventory is absorbed, and economic expansion returns.

By 2014, the median home price is forecast to increase a healthy annualized 8%. Despite this increase by 2014, the resultant forecast median price will remain well below the peak unsupportable level achieved in 2006.

Mortgage Rate Trends and Forecast
Years 2009 and 2010 will be the lowest years in terms of mortgage rates in over two decades. The super low home loan rates have been made possible by the Federal Reserve’s extraordinary efforts to prop up the housing market and the overall economy in the wake of the global financial crisis.

A window of opportunity exists to refinance or purchase a home at historically low rates, allowing for much more relatively affordable housing costs for most buyers. By 2011 mortgage rates are likely to increase as economic growth increasingly stimulates inflationary pressures, and as the world demands higher payments to service the nation’s enormous debt load.

Household Income Trends and Forecasts
Increases in median household incomes are likely to be marginal during Years 2009 and 2010 – a reflection of the current economic downturn. Thereafter, income growth is likely to begin to normalize, reaching an annualized 2.8% gain by Year 2014.

The number of households making between $100,000 and $200,000, and above $250,000, per year is likely to increase dramatically during the next five years as the population matures and as economic growth resumes.

For a full report of this are click here

Mark Boud
Real Estate Economics
http://www.RealEstateEconomics.com

RESIDENTIAL ECONOMIC REVIEW - SEATTLE-BELLEVUE-EVERETT, WA MSA EDITION

REGIONAL HOUSING SUPPLY / DEMAND AND OVER / UNDER VALUATION PATTERNS AND 5-YEAR FORECASTS

Housing Supply and Demand Trends and Forecasts
The following housing demand model generated from our economic database, presents our housing supply/demand estimates and forecasts In general, the patterns of over supply and under supply are based on a comparison between a given year’s ratio between jobs and housing relative to the long-term trend. As shown, the table presents patterns in housing over-supply and under-supply in this region since 1990, with a forecast to 2014.

The model accurately measures significant levels of distressed inventory which are likely to peak during the next 24 months, followed thereafter by a trend toward under-supply, which is likely to first occur during 2014, with the market showing tightness in 2013. Under-supply is likely to be significant after 2014.

Demand and supply estimates represent the total number of houses demanded and supplied in this particular region. The current year reflects over-supply which will likely worsen during the next 24 months before improving, then reaching equilibrium in 2013. Thereafter, another cycle of under-supply is likely to form as the economy continues to expand in an atmosphere of relatively low housing supply. Oversupply (mainly caused by distressed housing and over building during the past several years) will cause continued, but more conservative, depreciation in the current year, followed by low rates of price appreciation during the next few years. Periods of oversupply should be followed by increasing levels of undersupply as the economy begins to expand and as incremental housing supply remains very low.

It should be noted that patterns in oversupply or undersupply do not fully describe the health of the overall housing market. Absorption of housing can be strong in an atmosphere of over supply and under valuation. In order to more fully understand market health, patterns in over and under valuation must be understood. Historical and forecast median home prices are compared with our modeled estimates of supportable median home prices since 1990. Similar to our over/under supply analysis presented in the previous section, differences between our modeled estimate of supportable median home prices and actual median home prices offer measures of over-valuation or under-valuation since 1990, with forecasts during the next five years.

Our model accurately reflected serious levels of over valuation which occurred from 2005 through much of 2008. Significant drops in price during 2008, and continuing into 2009, have caused current levels of unprecedented under valuation, which have been magnified by historically low fixed mortgage rates. It must be stressed that if rates jump, the unprecedented level of under valuation would disappear. Given our forecasts for rising mortgage rates and eventual mild price appreciation, levels of under-valuation are likely to recede fairly gradually, with equilibrium forecast to appear by early 2013.

These patterns suggest that the ideal time for housing purchases and residential land purchases in this particular region is during the next 12 to 24 months. Thereafter, strong values will continue, but at a diminishing rate. Never before have housing values been so strong in this region – reflective of a severe recession, but even more reflective of the impact of extremely tight credit and artificially low mortgage rates. For those households that are secure in their jobs and can purchase a home with a fixed rate mortgage, there may never be a better opportunity in this area.

View other Areas

Overall Market Forecast
Our analysis of both housing supply and demand patterns, and housing over/under valuation is merged into a composite index that Real Estate Economics refers to as the Market Opportunity/Risk Index as presented in Exhibit D. This index includes jobs-to-housing relationships and mortgage cost-to-income relationships.

It must be stressed that the Opportunity/Risk Index tends to lead market changes by as much as 24 months. For example, as the composite index began to fall significantly below equilibrium in late 2005, it correctly predicted market troubles which first became apparent by late 2007. The index formed a floor during 2006, translating to the worst part of the real estate cycle being felt during 2008-09. The index reached and began surpassing equilibrium mid-2008, but the resultant market stability is not likely to be manifest until mid-2010.

Similarly, the high level that the index has currently reached during the 1st half of 2009 will not likely be manifest in the market until the 1st half of 2011. If relationships between this index and actual market manifestation holds true, overall market conditions should improve dramatically during 2011 from current levels. Prices will remain flat in 2010, followed by mild appreciation which will become increasingly apparent as more households recognize the severe under valuation of housing in this market area, and as the economy resumes expansion.

View other Areas

Regional Summary
With Federal Reserve Chairman Ben Bernanke’s recent announcement that the national recession is likely over, it appears that the Seattle-Bellevue-Everett, WA MSA will be among those regions lagging the recovery. This region, however, did not suffer a downturn nearly as severe as the downturns felt in California, Arizona, Nevada and other over heated and over inflated markets. Nonetheless, the Seattle region’s downturn has been painful. Having suffered through one of its biggest downturns in labor and housing in years, the region’s housing market will not fully stabilize until Year 2011.

High and increasing levels of distressed housing supply will continue in the near-term, but as distressed housing inventory continues to fall in price, sales volume will increase beyond foreclosure volume, soon beginning to burn off distressed inventory has built up over the past two years. New home builder market share will remain low because very few new homes are being built, but the few new home communities that are introduced during the next few years should sell readily during and after Year 2011 if offered at prevailing market price lines. Historic under valuation will be followed by price appreciation once economic growth emerges, which will likely begin in 2011, setting the stage for improved housing market conditions as the economy begins to expand.

View other Areas