An economic forecast for the state of Arizona and metro Phoenix predicts that the state will continue to add a significant number of residents, housing units, and jobs, despite the fact that the state will have to contend with inflation, supply chain issues, and a low supply of homes in the rapidly growing region.
According to Lee McPheters, a research professor of economics and director of the JPMorgan Chase Economic Outlook Center at Arizona State University, the state of Arizona added 98,000 residents last year, which was less than the expected 107,000 residents. This is despite the fact that Arizona is one of the states with the highest rate of population growth in the country.
McPheters stated on May 4 at the Economic Club of Phoenix’s economic panel, which included several experts from Arizona State University’s W.P. Carey School of Business, “Unfortunately, there’s a somewhat somber story behind that.” McPheters’s comments were made in reference to the recent government shutdown. We had a very high death rate, and deaths effectively cancelled births, so we grossly underestimated the number of pandemic-related deaths in Arizona. “We had a very high death rate, and deaths effectively cancelled births.”
According to McPheters, the majority of the increase in residents was due to net migration, but Arizona did not receive the 20,000 to 25,000 that the region typically receives from natural increases. This is because Arizona did not receive natural increases. Covid-19 has been responsible for the deaths of 30,189 people in Arizona over the past two years. Arizona has the second-highest death rate per capita in the country, with 411 deaths for every 100,000 residents, trailing only Mississippi. Mississippi has the highest death rate.
It is anticipated that this year and 2023 will see the addition of nearly 110,000 new residents. Lee McPheters made the following prognostication: “Net migration will continue to be very, very strong.”
Even though the rate of construction is decreasing, the state continues to construct more single-family homes and apartments for multiple families so that it can keep up with the expanding population. In the previous year, the state of Arizona issued over 46,000 permits for single-family homes. The majority of these permits were issued in the Phoenix metropolitan area, which was also the region in which home prices increased at the quickest rate.
According to Mark Stapp, who serves as the Fred E. Taylor professor of real estate and executive director of the real estate development master’s program at the University of Arizona, the Phoenix metropolitan area has a current existing home inventory of approximately 8,500 properties, which is less than one month’s worth of homes on the market.
Stapp commented that “That is an astonishingly low figure.” “What this means is that there is significant upward pressure being applied to pricing.”
While wages have increased by 6.4% over the same time period, home prices in the metro area have increased by 32%. According to Mark Stapp, the increase in the price of homes has resulted in a decrease in people’s ability to afford their monthly mortgage payments.
According to Stapp, “This is causing us to have a problem with our ability to afford it.” Since the fourth quarter of 2007, this level of a monthly principal and interest payment requiring 31% of a median income has not been seen.
According to Stapp, this is the consequence of 11 years of inadequate construction in the metropolitan area of Phoenix. According to the opinions of various experts, the year 2016 was the very last time that deliveries were higher than absorption.
In recent years, there has been a significant increase in the construction of multifamily housing in response to rising demand. Nearly 17,000 multifamily permits were issued in the Phoenix metropolitan area in 2021, and 18,000 are expected to be issued this year. This is the most permits that have been added to the area since the 1980s.