Pollack: Phoenix single-family permitting remains strong

Pollack

Pollack

ELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE

September 17th, 2018

The Monday Morning Quarterback

A quick analysis of important economic data released over the last week

Although the media continues to have a field day writing about the “trade war” that is potentially facing us, the reality of the impact is expected to be relatively mild for the economy overall.  That was the conclusion of a question asked for the latest Blue Chip Consensus Forecast.  The panelists were asked if they had included an explicit effect on growth for the current Trump Administration trade constraints.  Thirty-four percent of those responding to the question said they had.  The effect would reduce real GDP by 0.1 of a percentage point in 2018 and 0.2 of a percentage point in 2019.

The tariff aspect has its own effect, of course, as it would add to costs and thus potentially add to inflation.  In fact, 27% of those responding to the Blue Chip Consensus Forecast said they had raised their estimates of personal consumption expenditures (consumer spending) by 0.1 percentage point for both years to take into account the effect.  Thus, while there is an impact, most believe it will be relatively mild for the economy as a whole.

In other economic news, the Blue Chip consensus still believes that 2019 will be another year of growth, albeit at a somewhat slower rate than this year.  Consumers are controlling their credit cards, but, credit for auto and student loans continues to expand more rapidly than incomes.  Consumer sentiment remains high.  Retail sales remain strong.  Consumer prices increased at a rate that was below expectations.  And, industrial production remains strong.

In Greater Phoenix, permits for new single family homes remain strong.  And in Tucson, the market for resale housing remains tight causing existing home prices to continue to rise.

U.S. Snapshot:

  • The latest Blue Chip consensus forecast suggests that real GDP growth will be 2.9% on a year over year basis in 2018.  In 2019, the year over year gain is expected to be 2.6%.  Thus, while the economy is expected to modestly slow next year, it is expected to be another year of growth.

  • Total outstanding consumer credit grew by 5.1% at an annual rate in July.  It was 4.6% above year earlier levels.  Revolving credit, mainly credit cards, grew at a 1.5% annual rate in July and was 4.4% over year earlier levels. This continues the pattern of the last several months: consumers used credit cards sparingly.  On the other hand, non-revolving credit, mainly auto loans and student loans, continued to expand rapidly.  It grew at a 6.4% annual rate for the month and was 4.7% above year earlier levels.

  • The University of Michigan Consumer Sentiment index hit 100.8 in September.  That compares to 96.2 last month and 95.1 a year ago.  It was the second highest level since 2004.

  • Retail sales increased by 0.1% in August and stood at 6.6% above year earlier levels.  The near term outlook remains positive.

  • Total manufacturing and trade sales were up 0.2% in July when compared to June and stood 8.1% above year earlier levels.  This is a strong performance.  The manufacturing and trade inventories to sales ratio increased to 1.34.

  • The consumer price index for all urban consumers (CPI-U) increased 0.2% in August on a seasonally adjusted basis.  The index was up 2.7% above year earlier levels (see chart below).  The index for all items less food and energy rose 0.1% for the month and was 2.2% above a year ago.

  • Industrial production in August increased 0.4% over July and 4.9% above a year ago (see chart below).

Arizona Snapshot:

  • According to the Home Builders Association of Central Arizona, Greater Phoenix new home permits in August were up 15.6% from a year ago.  That’s 2,115 permits vs. 1,829 a year ago.  Year-to-date through August, there have been 16,018 units permitted compared to 13,581 a year ago.  That’s an 18% increase for the first 8 months of the year.

  • Total active listing of homes in Greater Tucson stood at 2,944 in August compared to 3,500 a year ago. That’s a 15.9% decline.  This suggests a tight resale market in Pima County.  The total number of units sold was even with a year ago at 1,346.  This reflects a lack of supply.  In that regard, the median price of an existing home sale in the Tucson area was $216,950.  That’s 13.0% above year ago levels.  This also suggests a very tight market.

About EDPCo

Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.

For more information, contact –

Elliott D. Pollack & company
7505 East Sixth Avenue, Suite 100
Scottsdale, Arizona 85251
480-423-9200

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