The Arizona summer slump is behind us and we have good reason to believe that the market will start to find a new normal. New listings are being added to the market at a much slower pace and demand is starting to come back as people finally accept that sub 4% interest rates are long gone. We are by no means out of the woods, but the data suggests that we have found some stability and now we wait to see how long it will last.
It may be tempting for you to click on the doom and gloom headlines of the national news outlets, but I want to caution you about taking the broad brush stroke of the national lens to apply to Arizona. This week I had the opportunity to pour over the latest jobs reports, and it’s clear that Arizona is performing differently than the US as a whole. Here are few data elements where we are outperforming the US:
- Unemployment: Arizona’s unemployment rate 3.3% versus national rate of 3.5%
- Population growth: Arizona is the 2nd fastest growing state in the country
- Income growth: Arizona’s personal income is up 8.4% versus national 6.2%
- Rental Vacancy Rates: Arizona’s rental vacancy is 5.3% versus the national of 6.0%
As you can see, Arizona is doing well on many economic fronts. Due to the strength of our population, employment, and income rates; we aren’t likely to see a full scale crash reminiscent of 2008. In 2008, the makeup of our employment base consisted of historically low earning employment sectors such as hospitality and agriculture. The people migrating to Arizona in the early 2000’s were primarily retirees living on fixed incomes. Today we have a much more diversified employee base with new jobs being created in higher paying sectors like semiconductor manufacturing and healthcare. Thus, we are attracting younger and higher skilled employees to our market.
The one place we are not outpacing the US is in new home growth. Arizona actually is down -1.1% year over year versus the rest of the country being up 6.5% for new housing permits. This is yet another reason why we aren’t likely to see a housing crash… we aren’t building fast enough to keep up with the population increase. Prices do not tend to crash during periods of supply deficits. As the second fastest growing state, it’s safe to assume that pulling back on building will only put further strain on the housing inventory in the future.
Is it helpful to understand how the overall economy, job market and population plays into the housing market? Drop a note with your thoughts.
Lindsay Fricks
Team Lead, Lindsay Fricks Group at NORTH&CO.
Source: Arizona Commerce Authority, Seasonally Adjusted July 2022
