“How can you afford not to buy a house now?  Just hold it for five years and you’ll make a killing,”  Marshall Vest, Chief Economist at the Eller School of Business, told a group of Realtors Thursday.   The investor activity in Arizona is ratcheting upwards.

Vest sees that job growth is forthcoming, “we need job growth to solve our problems in Real Estate,” he said. Unemployment in Arizona is 9.4%, in Phoenix it is 8.4% and in Tucson, 8.3%, but Yuma is 23.2%.  “We are now at the 1982 level of manufacturing and at the 1983 level in construction.”  He sees slow growth in employment during 2011 and by the second half of 2013, a recovery of jobs lost.

Additionally the local market did not see the 5-6% upswing in retail sales shared by the rest of the country, retail sales are at the lowest point, and because many of the municipals depend upon sales tax for revenue, they are finding it extremely difficult to balance their budgets.  Vest is looking at a 6 to 7% gain in retail sales this year, partially attributed to pent up demand.  He sees 2011 as much better than 2009, which he termed a “disaster” and 2010 which was better.  This will impact job growth positively.

Restaurant and Bar sales are up which is good for tourism and with the Gem and Mineral Show and Accenture Match Play around the corner, Tucson should benefit.

Credit creation is the key and will improve the mobility of people which will positively impact the absorption rate of housing statewide.  As credit expands, spending will improve which will lead to more hiring which will strengthen the housing market.  This will also help stabilize the public sector budgets.  New housing starts will increase then, but until that time, there is additional “pain”.

Vest attributed the market meltdown to the creation of subprime and Alt A paper, the securitization of housing loans to a pool of mortgages which were then sold off.  “We are now de-leveraging” from the expansion of credit and nationwide approximately 11% of all outstanding household credit is in some form of delinquency, Vest said.

Vest sees continued improvement and thinks by 2014, we should be back to “normal”, not the “new normal”.

Resources:

Eller School of Business, University of Arizona

http://ebr.eller.arizona.edu/newsroom/video/

Tags: Consumer Education, Financing

This entry was posted on Saturday, January 29th, 2011 at 7:16 am and is filed under Statistics, Tucson Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.