ELLIOTT D. POLLACK
& Company
FOR IMMEDIATE RELEASE
February 13th, 2017
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
It seems that President Trump, for better or worse, is generally sticking to the narrative he laid out in his campaign. This probably indicates that we will soon see more detail on the personal and corporate tax cuts, the extent of the cuts and changes in regulation, and if, on the international trade front, his plans include a leveling of the tariff playing field or something more severe. Hopefully, there is no trade war in our future. Also, more clarity on the much needed infrastructure building program is likely to come soon.
In addition, it is now becoming evident that certain industries will need more labor and that the labor force required will likely have to come, at least in part, from other countries. A significant portion of our construction labor includes foreign born individuals, many of Hispanic origin. Also, there appear to be about 500,000 tech jobs in the country that are going unfilled due to lack of skills in the existing labor force. How these issues are addressed will go a long way in determining how successful the President’s plans will be.
There was not much news on the national front last week. What news there was didn’t change the current picture. The Arizona news, mainly related to housing and commercial construction, was positive. Let’s take a quick look.
U.S. Snapshot:
- Growth in consumer credit slowed in December to an annualized growth rate of 4.5% compared to 8.1% in November. Non-revolving credit (auto loans and student loans) rose at a 5.1% annualized rate in December compared to a 5.9% annualized rate in November. Revolving credit, mainly credit card debt, was up at an annual rate of 2.9% compared to November’s 14.4% Thus, consumers were cautious with their credit cards over the Christmas season.
- Consumer sentiment seems to be easing back but remains very strong, at 95.7 for the preliminary February reading. While nearly 3 points lower than post-election results, it is still the 6th highest level of the cycle. A year ago the reading was 91.7.
- The 30-year fixed rate mortgage decreased a modest 2 basis points to 4.17% last week. Rates are about the same level at which they started the year and have been flat over the past three weeks. A year ago, the 30-year fixed rate mortgage was at 3.65% (see chart below).
- According to the National Association of Realtors, single family home prices were up to a median of $235,000 nationally in the 4th quarter of 2016. This is down 2.6% from the 3rd quarter, but, up 5.7% from a year ago.
Arizona Snapshot:
- The comparable Greater Phoenix home price data show a median price of $235,600 which is up 6.6% from a year ago. Greater Tucson’s median home price stood at $190,100, a 2.3% gain from the 4th quarter of 2015.
- According to the Central Arizona Home Builders Association, January 2017 single family home permits in Greater Phoenix were up 10% from January 2016 to 1,318 permits. This compared to 1,194 permits a year ago.
- The ratio of new single family home prices to resale single family home prices stands at 148% as of January. This ratio remains high compared to historic levels (see chart below).
- According to CBRE, the Greater Phoenix industrial market continues to improve. In the 4th quarter, as it was for 2016 as a whole, absorption continued to exceed new supply. (9,497,677 square feet vs. 5,857,002 square feet for 2016). Thus, vacancy rates continued to decline. As of the 4th quarter of 2016, industrial vacancy rates stood at 8.0% in Greater Phoenix compared to 10.1% a year ago. Rental rates averaged 63 cents compared to 58 cents a year ago.
- According to CBRE, the Greater Phoenix office market also continued to perform well as absorption outpaced change in inventory for the 4th quarter and the year as a whole (3,219,853 square feet absorbed and 1,045,156 square feet change in inventory for the year as a whole). Vacancy rates improve to 17.4% in the 4th quarter compared to 19.3% a year ago. While still high, at least the movement in vacancy rates was in the right direction.
- According to CBRE, there was improvement in the retail market as well. The improvement, however, was less robust than in other commercial markets. Absorption and change in inventory were much closer together (1,321,833 square feet absorbed vs. 1,204,766 changed in inventory in 2016). Vacancy rates in the 4th quarter were 8.9% compared to 9.1% a year ago.
