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Pollack: The slow expansion continues
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The Source for Information and Analysis on the Arizona Economy and Real Estate
EDP LogoELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
August 1st, 2016
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
A friend of mine had a plaque on his home that read, “On this site in 1887 nothing happened”.  That is the kind of feel that last week’s data left with me.  Manufacturing was weak.  Consumer confidence was flat-ish.  New home sales were up.  Housing prices continued their recovery in Greater Phoenix and in the U.S. as a whole.  In Greater Phoenix, both industrial and office markets continued to improve.  Going forward, construction, especially new housing construction, will be noteworthy.  In other words, there were few surprises. The slow expansion continues.
Overall, more of the same.  In this environment, that’s certainly not bad news.
U.S. Snapshot:
  • New orders for manufactured durable goods in June were down 4.0%.  Durable goods orders have now been down for two months in a row.
  • The Conference Board Consumer Confidence index barely moved in July, down only 0.1, finishing the month at 97.3.  The index is flat for the month and was up almost 7.0 from a year ago.
  • At the same time, the University of Michigan Consumer Sentiment index was down 3.7% for the month and now stands down 3.3% from a year ago.  The weakness centered in expectations that points to less confidence in the jobs outlook.
  • The S&P/Case-Shiller home price index (20-city composite) was up 0.9% from a month ago in May and was 5.2% above a year ago.  The gain will help more home owners get to positive equity.  This should aid people’s confidence and make housing more liquid.
  • Nationally, the homeownership rate in the second quarter continued to decline.  It now stands at 62.9% compared to 63.5% in the first quarter and 63.4% a year ago.
Arizona Snapshot:
  • The S&P/Case-Shiller home price index for Greater Phoenix increased 0.6% in May over April and now stands 5.4% above a year ago.
  • The homeownership rate in Greater Phoenix was 63.2% in the second quarter.  This was up 2.6% from the first quarter and 3.8% from a year ago.
  • According to CBRE, the Greater Phoenix industrial market continues to improve.  CBRE states that Phoenix saw a substantial increase in net absorption and a significant drop in vacancy rates from 10.1% in the first quarter to 9.1% in the second quarter.  This compares to 10.9% a year ago.  Rental rates on average are up 5.2% from a year ago.
  • CBRE also had good things to say about the office market.  Following a strong first quarter, the Phoenix office market continued to perform well in the second quarter.  Absorptions, while not as strong as in the first quarter, were still very positive.  Change in inventory was slightly negative.  Thus, vacancy rates fell to 18.1% in the second quarter, down from 18.8% in the first quarter and 20.1% a year ago.  Vacancies are not even throughout the market area.  20% of the submarkets accounted for over 90% of the market’s total net absorption.  Submarkets with the highest net absorption include Tempe, Scottsdale Airpark, and the Camelback Corridor.  Overall, rental rates now stand 7.0% over a year ago.
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