Making Lemonade Lemons out of Lemons By: Jim Rounds Senior V. P. , Elliott D. Pollack & Company
The economy’s impact on: n Your job? n Your home? n Your future? Elliott D. Pollack & Company
U. S. Summary Elliott D. Pollack & Company
U. S. Y/Y Job Losses - Recent Recessions Duration in Months – BLS - May 2001 1991 1980/81 1974 Elliott D. Pollack & Company
US New Job Data Change from Prior Month (S/A) June 2010 - June 2011 Source: Bureau Labor of Statistics (000’s) ? Elliott D. Pollack & Company
Recession Indicators Summary: Still Moving Upward (Just Slowly) Real GDP n Real Income n Employment n Industrial Production n Wholesale – Retail Sales n Elliott D. Pollack & Company
Household Net Worth ($$$) 1970 – 2010* Source: Federal Reserve ($ in trillions) Recession Periods But still feel poor… • Data through fourth quarter 2010. Elliott D. Pollack & Company
Consumer Confidence 1978 – 2011* Source: The Dismal Scientist Recession Periods 1985 Benchmark = 100 *Data through March 2011 Elliott D. Pollack & Company
Consumer Summary: n Jobs are being created but not quickly enough. n Those that have jobs are spending a little more but will remain cautious. n Most of those that don’t have jobs probably won’t anytime soon. n Wealth levels are improving but people still feel poor. n Congress and the President have done little to positively influence confidence. Elliott D. Pollack & Company
Business Depends on the sector… Elliott D. Pollack & Company
Doin’ God’s Work Elliott D. Pollack & Company
Corporate Profit (Billions of Dollars, SA) 1975 -2010* Source: Freelunch. com Elliott D. Pollack & Company Recession Periods *Data through fourth quarter 2010
Corporate Profit By Industry ($Billions) 2010 q 4 Source: BEA Elliott D. Pollack & Company
U. S. Real Exports as a Percent of Real GDP 1971 – 2010* Source: Bureau of Economic Analysis Recession Periods *Data through fourth quarter 2010 Elliott D. Pollack & Company
Hours Worked Percent Change from Year Ago 1976 – 2010** Source: Bureau of Labor Statistics Recession Periods **Data through fourth quarter 2010 Elliott D. Pollack & Company
Capacity Utilization Rate 1970 – 2011* Source: The Conference Board Recession Periods This is where investment occurs. *Data through February 2011 Elliott D. Pollack & Company
Business Summary: n Profits are high, but… n Business spending on plant will be slow, but getting closer to seeing some limited investment. n Hiring will still be relatively slow, but more pressure to hire by the end of the year. n Lots of money sitting on the sidelines. Elliott D. Pollack & Company
U. S. Summary: Recovering but not recovered. Lots of small shocks thus far but none have been game changers (oil spikes, Middle East, Japan, etc. ) Debt Ceiling? ? ? Elliott D. Pollack & Company
ARIZONA Elliott D. Pollack & Company
The “Lemons” Elliott D. Pollack & Company
Job Growth 2006 Source: US BLS Alaska 10 7 9 5 4 3 22 Hawaii 1 2 Jobs growing 15 8 11 6 Top 10 Jobs declining Elliott D. Pollack & Company 13
Job Growth 2007 Source: US BLS Alaska 7 15 8 5 28 36 Hawaii 2 1 22 Jobs growing Top 10 Jobs declining Elliott D. Pollack & Company 11 10 6 20 9 4 3 45
Job Growth 2008 Source: US BLS Alaska 8 34 46 45 Hawaii 15 42 17 47 Jobs growing Top 10 Jobs declining Elliott D. Pollack & Company 2 1 7 11 10 9 4 14 3 6 50
Job Growth 2009 Alaska 2 Source: US BLS 30 47 50 45 Hawaii 18 44 35 49 Jobs growing Top 10 Jobs declining Elliott D. Pollack & Company 1 23 3 5 32 13 16 24 8 4 46
Job Growth 2010 Alaska 2 6 48 28 50 44 Hawaii 17 40 25 49 Jobs growing Top 10 Jobs declining Elliott D. Pollack & Company 1 43 38 12 19 47 10 9 4 8 7 35 42 3 37 5
Job Growth Update: Arizona Ranked 36 th May 2011 v May 2010 Alaska 11 18 34 7 33 46 13 23 Hawaii 5 36 Jobs growing Top 10 Jobs declining Elliott D. Pollack & Company 4 39 50 1 22 38 3 9 10 8 45 6 2 37
How did we go from 2 nd to 49 th in the rankings? Elliott D. Pollack & Company
How did AZ go from 2 nd to 49 th? n n n Financial meltdown. Credit crunch/freeze. Overextended consumer. Excess single family inventory. Housing prices decline. n n n Loss of wealth incl. home equity. Can’t sell homes or retire. Homebuilding crash. Population inflows weaken in AZ. Household formations decline. Household size increases. n Excess commercial construction n n Elliott D. Pollack & Company Construction job losses. All sector job loses.
How does AZ go from 49 th to 2 nd? n n n Slow recovery. Credit frees up slowly. Consumers more confident. n n n Overall US economy improves. Stock market improves. Limited AZ job and population growth. n n Excess housing absorbed. Smaller household size. Housing prices rise. Construction kicks in. n n Elliott D. Pollack & Company All sector job gains; more robust %s. Even more people move to AZ.
In 2008, 2009, and 2010 no one showed up! Elliott D. Pollack & Company
Greater Phoenix Population Annual Percent Change 1976– 2012* Source: Arizona State University & Department of Commerce, Research Administration ? 2008 and 2009 are estimates put out by ADES and may be subject to substantial revision. * 2011 & 2012 forecast is from Elliott D. Pollack & Company Recession Periods *2000 -2010 estimates based on 2010 Census release
Greater Phoenix Y/Y Job Losses - Recent Recessions Duration in Months – BLS - April 2001 1974 Elliott D. Pollack & Company 1991 = Job Growth 1980/81
AZ New Job Data Change from Prior Month (S/A) May 2010 - May 2011 Source: Bureau Labor of Statistics (000’s) About 2 k not S/A Elliott D. Pollack & Company
Greater Phoenix Employment* Annual Percent Change 1975– 2012** Source: Department of Commerce, Research Administration *Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990. ** 2011& 2012 forecast is from Elliott D. Pollack & Company Recession Periods
This is NOT a multi decade recovery… Think 2015 – 2016 for full recovery, but growth before then. Elliott D. Pollack & Company
Employment Levels: Greater Phoenix back to Peak in 2015? Source: ADOC Recession Periods Peak Elliott D. Pollack & Company
Single Family Housing Elliott D. Pollack & Company
Across the US, underproduction has been occurring. This helps with the oversupply. Elliott D. Pollack & Company
U. S. Single-Family Starts 1978– 20111/ (Millions) Source: Census Bureau Recession Periods Oversupply LTA: 1. 2 Undersupply Elliott D. Pollack & Company 1/ Through Febuary 2011
In AZ, because of the weak population inflows, this underproduction only recently started. Elliott D. Pollack & Company
Single-Family Permits vs. Population Demand Greater Phoenix 1975– 2015 # Permits Source: PMHS / RL Brown * 2011 - 2015 forecast is from Elliott D. Pollack & Company Recession Periods
Single-Family Vacant Units Maricopa County 1993– 2010 Source: PMHS Elliott D. Pollack & Company
How Investors Impact the Market: Investors temporarily create demand. How many of those homes will come back on the market and add to the supply? But, how many will be kept as permanent rental units or purchased by currenters? Elliott D. Pollack & Company
Home Prices Indices 2000 – 2011 (January) Source: Macro Markets, LLC; AMLS Recession Periods Weak Pop/Emp ? Investors Elliott D. Pollack & Company
Negative Equity in Homes Affects Ability to Sell or Buy Source: First American Core Logic 50% of homes in Arizona have negative equity. Elliott D. Pollack & Company
Persons per Household Elliott D. Pollack & Company
Household Formations Fewer during recessions (doubling up, living at home with mom & dad, etc). Elliott D. Pollack & Company
Persons per HH Source: U. S. Census Bureau & American Community Survey 2000 2009 Single Family Owner Occupied 2. 83 3. 02 Single Family Renter Occupied 3. 20 3. 72 Apartments 2. 10 2. 21 Elliott D. Pollack & Company
Commercial Elliott D. Pollack & Company
Commercial Markets (Not making things worse anymore) Elliott D. Pollack & Company
APARTMENTS Elliott D. Pollack & Company
Multi-Family Year-End Vacancy Rates Maricopa County 1986– 2012* Source: ASU Realty Studies Recession Periods *2011 -2012 are forecasts from the Greater Phoenix Blue Chip Elliott D. Pollack & Company
OFFICE Elliott D. Pollack & Company
Office Space Year-End Vacancy Rates Maricopa County 1986– 2012* Source: CB Richard Ellis Elliott D. Pollack & Company Recession Periods *2011 -2012 are forecasts from the GPBC
INDUSTRIAL Elliott D. Pollack & Company
Industrial Space Vacancy Rates Maricopa County 1980 – 2012* Source: CB Richard Ellis Recession Periods * 2011 - 2012 are forecasts from the GPBC Elliott D. Pollack & Company
RETAIL Elliott D. Pollack & Company
Retail Space Vacancy Rates Maricopa County 1985– 2012* Source: CB Richard Ellis** Recession Periods * 2011 -2012 are forecasts from the GPBC ** Data prior to 1992 is from Grubb & Ellis Elliott D. Pollack & Company
Financial Problems… Elliott D. Pollack & Company
U. S. Problem Commercial Real Estate Loans Rise Delinquency Rates at Commercial Banks 1991 – 2010* Source: Federal Reserve Recession Periods Temporary before flat again? * Data through fourth quarter 2010 Elliott D. Pollack & Company
U. S. Commercial 1 Mortgage Maturities 1980– 2020* Source: Foresight Analytics Recession Periods Post 2004 - Upside Down? Borrowed Elliott D. Pollack & Company Loan Due 1/ Includes mainly office, retail, industrial and hotels Note: Forecast is from Foresight Analytics
Commercial Property Values? Elliott D. Pollack & Company
So which influence will be bigger? • Pop/Emp related gains may be offset by new leases adjusting for lower rents/less space, at least in 2011/2012. • This means the possibility of relatively flat rental and vacancy rates in 2011/2012. • 2012 -2013 should see more improvement. Elliott D. Pollack & Company
How does this impact commercial property values? Flat activity often means flat prices. But, values through 2010 were propped up by: - Owners depleting reserve funds (done); - Extend and Pretend (still pretending? ); - Interest rates low (continues but small increase); - Multi-year leases carrying higher rents (fewer). Elliott D. Pollack & Company
Commercial Summary: Flat or only slightly improving indicators but declining prices? Maybe. Will vary by location though. Elliott D. Pollack & Company
When do we get back to normal vacancy rates in commercial? Elliott D. Pollack & Company
Back to Normal Vacancy? • Office = 2014 - 2015 • Industrial = 2013 - 2014 • Retail = 2014 - 2015 Elliott D. Pollack & Company
Tax Revenues Elliott D. Pollack & Company
State forecast revisions in our future? Now ? Elliott D. Pollack & Company
But, local revenues related to single family and commercial taxation will remain weak. Elliott D. Pollack & Company
AZ Summary: Lagging the US in terms of full recovery; just now starting to expand the employment base. Elliott D. Pollack & Company
Full Recovery: 2015 -ish Fully recovered in terms of: 1) Housing oversupply; 2) Commercial vacancy rates; 3) Retail sales activity; 4) Employment levels. 5) Tax revenues? Elliott D. Pollack & Company
The “Lemonade” Elliott D. Pollack & Company
Pre 2007 • A leader in population growth, • A leader in employment growth, • A leader in income growth. Elliott D. Pollack & Company
Post 2007 • Below average performance in many economic categories, but this is a temporary condition and is already improving… Elliott D. Pollack & Company
How Arizona Ranks Among the States in Percentage Growth Source: U. S. Bureau of Census; Bureau of Labor Statistics; Bureau of Economic Analysis DECADE POPULATION EMPLOYMENT PERSONAL INCOME 1950 - 1960 4 TH 3 RD 4 TH 1960 - 1970 3 RD 4 TH 1970 - 1980 2 ND 3 RD 1980 - 1990 3 RD 5 TH 1990 - 2000 2 ND 3 RD 2000 – 2006 3 rd 2 nd 3 RD 2007— 2010 44 th 49 th 46 th Elliott D. Pollack & Company
Phoenix-Mesa Employment Growth (Ranking among all metro areas greater than 1, 000; 2011 May/May) Source: Arizona State University, U. S. Bureau of Labor Statistics YEAR 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Elliott D. Pollack & Company RANK 4 5 2 1 1 1 2 1 3 8 6 5 3 4 1 1 10 29 31 31 15 # of MSAs 20 20 21 23 23 24 26 26 28 28 29 29 30 31 32 32 32
Greater Phoenix Population Source: U. S. Bureau of Census; Arizona Department of Economic Security Year 1950 1960 1970 1980 1990 2000 2010 U. S. 2010 Elliott D. Pollack & Company Population 331, 770 726, 183 1, 039, 807 1, 600, 093 2, 238, 498 3, 251, 876 4, 192, 887 308, 745, 538
Why are households not forming? 1. Lack of jobs, 2. Inability to sell home elsewhere and move to Greater Phoenix, 3. Lack of jobs, 4. Lack of jobs, 5. Lack of jobs… Elliott D. Pollack & Company
These will improve over time. Elliott D. Pollack & Company
Surprising Econ Fact: If marginal household size was still at 2000 levels, there wouldn’t be any excess single family housing! Elliott D. Pollack & Company
Properties in the Foreclosure Process Maricopa County 2002 – 2011 Source: The Information Market Elliott D. Pollack & Company Recession Periods *Data through April 2011.
Also now more competitive in terms of housing prices (and commercial prices). Elliott D. Pollack & Company
Housing Affordability Index 2000 q 2 Source: NAHB Elliott D. Pollack & Company
Housing Affordability Index 2006 q 2 Source: NAHB Elliott D. Pollack & Company
Housing Affordability Index 2010 q 2 Source: NAHB Elliott D. Pollack & Company
Housing Opportunity Index* Greater Phoenix vs. US 1992 -2011** Source: NAHB Elliott D. Pollack & Company *Data through Q 1 2011. ** Years 2002 & 2003 only have one data figure
Negative Equity in Homes Affects Ability to Sell or Buy Source: First American Core Logic 50% of homes in Arizona have negative equity. (National average about 25%) Elliott D. Pollack & Company
Benefits of the “SUNBELT” Industrial Northwest 9 10 5 Hawaii Alaska Elliott D. Pollack & Company
What about the bad national press? Yes, SB 1070 Elliott D. Pollack & Company
Between 1987 and 1992 • • Governor impeached Real estate depression Defense cutbacks AZ Scam Martin Luther King Holiday Crisis Keating 5 Every S&L taken over by RTC Elliott D. Pollack & Company
No long-term effects in the past. Going forward? Elliott D. Pollack & Company
Benefiting from basic demographic changes… Elliott D. Pollack & Company
Retirement Home Buying Cycle Net Change in Maricopa County Population Ages 55 to 69 1991 -2030 Source: U. S. Bureau of the Census, Arizona Department of Economic Security Elliott D. Pollack & Company
Trade-Up Home Buying Cycle Net Change in Maricopa County Population Ages 34 to 44 1991 -2030 Source: U. S. Bureau of the Census, Arizona Department of Economic Security Elliott D. Pollack & Company
Starter Home Buying Cycle Net Change in Maricopa County Population Ages 25 to 34 1991 -2030 Source: U. S. Bureau of the Census, Arizona Department of Economic Security Elliott D. Pollack & Company
One survey shows that over 80% of current single family RENTERS would like to soon own. Some of these homes are thus permanently absorbed. Elliott D. Pollack & Company
Thus, we will also likely see a permanent increase in the percentage of all single family homes that are maintained as rentals. Up from 11% to as high as 14%15% possibly(? ). Elliott D. Pollack & Company
Economic Competitiveness Elliott D. Pollack & Company
Arizona’s government officials are even getting involved… Elliott D. Pollack & Company
Government isn’t going to turn everything around by itself. But, govt. can impact the economy at the margin (with the right policies). Elliott D. Pollack & Company
Old Competitiveness Map – AZ will be Moving Up! Elliott D. Pollack & Company
Rules if NOT Competitive: n If it’s perception, fix the perception (example: effective tax rates). Doing that! n If it’s reality, implement some strategic reforms. Doing that! n Regarding the previous map, we now have the tools, we just need to implement them properly and our ranking will improve. Elliott D. Pollack & Company
Being addressed now… Elliott D. Pollack & Company
In 2012 Elliott D. Pollack & Company
What We’ve Done: Arizona Competitiveness Package n Arizona Competes Fund • n Arizona Job Training Fund • n Job Creation/Capital Investment - $9, 000 Tax Credit per Job Income Tax Reform (FY 2014 – FY 2017) • • n Grants for Customized Training - $12 - $15 Million Annually Quality Jobs Tax Credit • n Deal Closing Grants/Loans - $25 Million Annually Sales Factor – 100% Corporate Income Tax – 4. 9% Property Tax Reform • • • Accelerated Depreciation (2012) Personal Property Exemption (2012) Class 1 Property Assessment Ratio – 18% (2013 – 2016) Elliott D. Pollack & Company
What about the rest? Elliott D. Pollack & Company
In 2012 Elliott D. Pollack & Company
Economic Development Summary: n Policymakers finally started to understand how our economy functions and how to improve our position. n We have the economic development “tools” but need to see if the state can use them properly. n More is to be done in terms of government policy, but so far so good. Elliott D. Pollack & Company
Economic Development Summary: n In terms of other business development factors: ¨ Competitive in terms of single family prices, ¨ Competitive in terms of commercial rental rates and prices, ¨ Competitive in terms of labor and land costs. Elliott D. Pollack & Company
Economic Development Summary: n We will continue to grow faster than the rest of the country over the long run. n If we do things right we might even grow in terms of quality…hmmm…maybe. n Coordination among all of the E. D entities will be critical. Elliott D. Pollack & Company
Arizona Summary Elliott D. Pollack & Company
AZ Summary: Lagging the US in terms of full recovery; just now starting to expand the employment base. Elliott D. Pollack & Company
Full Recovery: 2015 -ish Fully recovered in terms of: 1) Housing oversupply; 2) Commercial vacancy rates; 3) Retail sales activity; 4) Employment levels. 5) Tax revenues? Elliott D. Pollack & Company
The long term economic fundamentals have not really changed. The long term economic outlook remains favorable (2015+). AZ will be a national growth leader by mid decade. Elliott D. Pollack & Company
There is a BOOM for Arizona out there somewhere. Elliott D. Pollack & Company
But, can we also grow in terms of quality? Elliott D. Pollack & Company
ELLIOTT D. POLLACK & Company • Economic and Fiscal Impact Analysis/Modeling • Real Estate Market and Feasibility Studies • Litigation Support • Revenue Forecasting • Keynote Speaking • Public Finance and Policy Development • Land Use Economics • Economic Development 7505 East Sixth Avenue, Suite 100 Scottsdale, Arizona 85251 480 -423 -9200 P / 480 -423 -5942 F / www. arizonaeconomy. com / info@edpco. com Elliott D. Pollack & Company 118
Скачать презентацию Making Lemonade Lemons out of Lemons By Jim
caa50be1372e6c7827952c82f552d922.ppt