Greater Phoenix Real Estate Outlook (Slowly) Improving

Greater Phoenix Real Estate Outlook (Slowly) Improving

By Elliott Pollack

If the consensus of the Blue Chip forecast panel is correct, the worst is over for the Greater Phoenix real estate market and things should be getting slowly better from here. While commercial markets have a long way to go before there is any meaningful construction activity, by 2013 single family activity should double. This is significant because the local economy cannot have much of a recovery without a significant increase in construction activity.

That increase will not occur in commercial. In fact, very little new spec commercial construction is anticipated by the panel through 2013. The exceptions are the industrial and apartment markets. Industrial activity is expected to grow from 370,000 square feet in 2011 to 2.4 million in 2013. New multi-family permits are expected to increase from about 1,500 units this year to 5,700 units in 2013. Even so, these are modest numbers by historic standards. But, they should produce some increases in employment. While vacancy rates in office and retail are expected to decline, they are a long way from spurring significant increases in construction.

As for single family, 2011 levels are down some 89% from the 2005 peak. That is almost unbelievable. This was one of the reasons that employment fell so much during the recession and has been so slow to recover. Any increase, even to levels forecast by the panel, will help at this point.

The recovery and population flows are dependent on one major factor. JOBS! Thus, while the housing recovery promises to continue to be anemic, at least it should be positive enough to cease being a drag on the economy overall. A modest positive is considerably better than what we have experienced since 2007. Rates of growth we have historically grown accustomed to will have to wait until the excess supply of vacant homes becomes more normal. That is down the road.