(Updated March 2015) As of August 2014, the sales housing market in Phoenix is soft. According to CoreLogic, Inc. and analyst estimates, new and existing home sales decreased by 9.4 percent to 99,700 homes sold during the 12 months ending May 2014, compared with 110,100 homes sold during the previous 12 months. Although sales volume has declined, the average sales price increased by 13 percent to $241,900 during the same period.
According to preliminary building permit data, 3,500 single-family homes were permitted during the second quarter of 2014, down from the 3,700 homes permitted during the second quarter 2013. Rental housing market conditions remain slightly soft but are improving, as of September 2014. According to RealData, Inc., the apartment vacancy rate for the second quarter of 2014 was 6.9 percent, down from the 7.8-percent rate recorded in the second quarter of 2013.
The economy in the Phoenix-Mesa-Scottsdale housing market area (Phoenix HMA) is primarily based on the trade, professional and business services, government, and education and health services sectors. Leading employers in the Phoenix HMA include Bashas’ Inc., US Airways, and Banner Health System. After several years of strong growth from the late 1990s mid-2000s, nonfarm payrolls began to decline in 2008. During the 12 months ending March 2010, nonfarm payrolls declined by 7.1 percent, or by 130,900 jobs, to 1,921,000 jobs compared with nonfarm payrolls during the previous 12 months.
The sales market in the HMA is soft; however, the number of home sales and the median home sales price were up in the first quarter of 2010. During the 3-year forecast period, after accounting for the current supply of excess vacant units that need to be absorbed, demand is estimated for 55,500 new homes (see Table 1). In addition, builders should be aware of the 149,000 other vacant units currently in the HMA, a portion of which may become available to satisfy some of this demand.
The rental market in the HMA is currently soft. The rental vacancy rate is estimated at 13.6 percent, up from 9 percent, as of 2000. The average monthly rent for apartments declined from $781 to $768 during the first quarter of 2010 compared with the average rent during the first quarter of 2009, according to Real Data, Inc. To allow for the excess vacant units to be absorbed, demand for new rental units is not expected during the 3-year forecast period.
The economy in the Phoenix-Mesa-Scottsdale HMA has remained weak since 2008, after several years of strong growth in the mid-2000s. During the first 3 years of the 2000s, nonfarm payrolls grew at a modest pace in the HMA at an average of 1 percent, or 13,800 jobs, a year. Following that 3-year period, nonfarm payroll growth increased significantly to an average rate of 5 percent, or 88,100 jobs, a year from 2003 through 2006. In 2007 nonfarm payroll growth slowed to average 2 percent, or 30,700 jobs, a year as the housing market began to soften. By 2008, the economy was in a recession and nonfarm payrolls declined 3 percent, followed by a decline of 8 percent in 2009, for a total decrease of nearly 200,000 jobs.
During the first quarter of 2010, the number of jobs continued to decline; however, the rate of decline has started to slow. In the 12 months ending March 2010, nonfarm payrolls decreased by 7.1 percent, or by 130,900 jobs, to 1,701,100 jobs compared with nonfarm payrolls in the previous 12 months. During the 12 months ending March 2010, the unemployment rate was 8.8 percent, up from 6.2 percent during the previous 12 months. See Figure 1 for labor force, resident employment, and unemployment trends in the HMA since 1990.
During the 12 months ending March 2010, the construction sector lost the largest number of jobs, declining by 37,900 jobs, or 30 percent, to 90,500 jobs. Since 2007, 88,300 construction jobs have been lost due to soft market conditions in residential and commercial real estate. Also during the 12 months ending March 2010, manufacturing employment declined by approximately 12 percent, or 15,100 jobs, to 111,300 jobs. The number of manufacturing jobs peaked in the late 1990s and has since declined below the 1990 level. Of the service-providing sectors, the professional and business services sector had the largest number of losses, declining by 28,800 jobs, or nearly 10 percent, to 272,100 jobs (see Table 2). Job declines among other service providing sectors ranged from 3.3 percent in the government sector to almost 7 percent in the transportation and utilities sector.
The only sector that grew during the 12 months ending March 2010 was the education and health services sector, which was up 2.6 percent, or 5,800 jobs, to 225,800 jobs. The education and health services sector continues to grow rapidly and has been the fastest growing sector in the HMA during the past 20 years, having increased by approximately 150 percent. Most of the growth in this sector has occurred to accommodate the rapidly growing population.
The trade sector is the largest nonfarm payroll sector in the HMA, with approximately 17 percent of total employment (see Figure 3). The trade sector has been the largest sector in the HMA going back to 1990, except in 2007, when employment in the professional and business services sector peaked. Bashas’ supermarkets is included in the trade sector and is the leading employer in the HMA, with 10,460 employees.
In 2010, construction will begin on two expansion projects at Chandler Regional Medical Center that will cost $135 million and add 200 new jobs in the education and health services sector in 2011 and 2012. Other expansions in 2010 will add jobs, including 650 jobs at the new Talking Stick Resort in Scottsdale, 450 jobs at United Services Automobile Association in north Phoenix, and 350 jobs at Conair Corporation in Glendale.
During the 3-year forecast period, nonfarm payrolls are estimated to increase by approximately 87,900 jobs. Growth is expected to be stagnant through the first quarter of 2011 and increase in the second and third years of the forecast period.