By Melissa Johnson | Rose Law Group Reporter
“In the post 2007 World – 2016 just looks like an excellent year,” economist Elliot Pollack stated at the end of his annual economic forecast at Friday’s Pinal Partnership breakfast.
Pollack said 2016 will be the first real year of expansion in employment.
“The real estate market is growing rapidly, and I expect the boom in real estate to really power us through the next few years in terms of demand growth and employment growth,” Pollack said.
Millennials rent an average of six years longer than previous generations, which is great for the apartment market and driving up rents, he said, but means they have delayed purchasing homes; something that will change in the next few years as millennials come back to the market and begin to start their families.
Potential new homebuyers are not buying because of several factors including negative equity and FHA loan limits.
Pollack referenced a Metro Study that says there are still 52,000 lots left, of which 27,000 are zombie lots. Zombie lots and subdivisions are those built in 2010 and haven’t had any activity over the past six years. They are too far out, too big, too small and there’s currently no market for them but that will change over the next few years, specifically in Pinal County as the lots become more attractive simply because they have to be. That’s where the lots are.
Consumer credit and net worth are increasing slowly but the millennials’ delay in housing can be attributed to the triple in student loan debts, Pollack said.
Additional good news for the housing market is the economic growth on the horizon, loosening mortgage rates and lending standards and affordability. The economy still has a long way to run, he said, and there is no recession on the horizon. Feds increased interest rates, and after a decade, they are finally on track to getting interest rates in the mid fours, a sign they are happy with things. Pollack predicts that by the election, the economy will be strong.
Oil prices are lower, which is putting an average $750 per year in our pockets to spend elsewhere. As we continue to evolve into our “post 2007 World,” retail is going to end up being for services, and to look at things consumers will ultimately go home and buy online. Malls will be about entertainment rather than shopping.
Downtown Scottsdale and downtown Tempe have shortages in office space and in about two years when vacancy rates get back down to 15%, there will be an area-wide boom in office space.
Pollack says the industrial market is strong with 20 to 100 thousand square foot units coming back to the market.
“The only thing that bothers me about the economy right now is the excessive inventory.”
He says now is the time buy autos as “inventory to sales ratio increased which means manufactures are accumulating too much stuff.”
Pollack said he is concerned about the decrease in population growth: Arizona lost 55 percent of its construction jobs and has only recovered about 14 percent. Labor shortages, mainly attributable to SB1070, will continue to be an issue
“Every skilled position is a problem and will constrain the home building recovery; it will stretch out building times and the only way to solve is for homebuilders to pay more,” Pollack said.
People move to Arizona mainly for employment opportunities as well as affordable housing and moderate costs of living.
Pinal County Supervisor Anthony Smith asked Pollack, “What about [the] Pinal County [economy]?”
Pollack said the county needs to bring jobs and large sport or entertainment events, or nothing will change.
