Saturday, February 5, 2011

Phoenix-area housing recovery pushed back again as jobs lag, foreclosures mount

Metro Phoenix home values won't recover to pre-boom levels until 2015, according to industry experts.

The latest forecasts for the housing market's recovery have been pushed out by another year because of slower-than-expected job and population growth and a bigger glut of home foreclosures than anyone expected.

Phoenix's housing recovery will remain slow until enough new jobs are created to attract tens of thousands of new residents annually to the region again, economic-growth experts said at Urban Land Institute Arizona's annual forecast conference on Thursday.

Real-estate experts said the Valley is likely still only halfway through its foreclosure problem, meaning it could drag on another three to five years and result in nearly 300,000 houses being taken back by lenders.

Since the start of the economic downturn in mid-2007, more than 150,000 houses have been foreclosed.

"Phoenix needs jobs. No jobs, no housing-market recovery," said Gadi Kaufmann, managing director of Robert Charles Lesser & Co., a Washington, D.C.-based real-estate consulting firm.

This year's theme of the annual conference hosted by the real-estate think tank was "It's all about jobs." The conference has become a signature event for Arizonans involved in the real-estate industry because of the range of expert speakers and their frank projections.

Kaufmann said the region's home prices won't rebound even to 2003's pre-boom level until 2015. The area's housing boom ran from 2004 to early 2007, when homes prices shot up 50 percent.

The median price of an existing Valley home is now $114,000. In 2003, the median was $155,000, according to Arizona State University's realty-studies group.

At the height of the housing boom, in September 2006, the median hit a record $267,500.

Home prices aren't expected to rise this year, but Kaufmann said they could start climbing by 5 to 7 percent a year starting in 2012.

At last year's conference, most experts agreed metro Phoenix's housing market would recover by 2014. The prediction in 2009 was for a recovery in 2012.

The latest projections are bad news for the Valley's home-construction industry, which won't rebound until prices increase and foreclosures slow.

Homebuilding, the backbone of the Valley's growth economy until the housing crash, has slowed to its lowest level since the 1970s. There were approximately 7,000 new-home permits issued in the area in 2010.

Kaufmann's forecast calls for homebuilding permits in metro Phoenix to climb to 33,000 in 2015. That was the annual residential-construction pace for the Valley during the late 1990s.

Longtime homebuilder Tom Lewis, owner of Tempe-based T.W. Lewis, said he would be happy to see even half that many housing starts in 2015.

He agreed that metro Phoenix's housing market's recovery is dependent on more jobs being created.

Eileen Klein, Arizona Gov. Jan Brewer's chief of staff, outlined the governor's new plan to entice more companies to relocate and expand in the state as part of her push to create jobs.

Klein said Arizona must offer competitive incentives for businesses creating jobs and lower tax rates.

The plan, unveiled earlier this month, calls for lowering the state's corporate-tax rate to 5 percent from 7 percent and setting up a fund to help economic-development groups draw new employers and jobs.

A recent national survey has Arizona ranked 11th among states for new-job creation during the last half of 2010. The state ranked in the bottom half of the survey last year after being in the top 10 for most of the past four decades.

"We expect to be in the top 10 for jobs this year and the top 5 in 2012," said Barry Broome, president of the Greater Phoenix Economic Council.

Arizona lost 275,000 jobs during the recent recession but added 33,000 jobs last year.

House Speaker Kirk Adams, R-Mesa, said Arizona has been resting on its growth laurels for a long time and ignoring its core economic fundamentals.

"So now, we are not as competitive for jobs as we thought we were," he said.

Several speakers at the growth conference said Arizona must continue to work to diversify its economy away from relying on low-paying construction jobs.

"Arizona has been ripped by this recession like never before," said Stephen Happel, an ASU economics professor who has lived in the state since the 1970s and tracked recessions since then.

"But what I love about Arizona is we are a growth state, and we will rebound."

by Catherine Reagor The Arizona Republic Jan. 28, 2011 12:00 AM

Phoenix-area housing recovery pushed back again as jobs lag, foreclosures mount

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