Long-Term Population Growth will Support Housing Market

Implications: Arizona has now surpassed Nevada as the fastest growing state in the country.  This growth will continue and eventually turn current residential market conditions around.

Analysis:  

Those that know me best know how I view government data. It is great for understanding trends and it is the best (and only, in many cases) tool we have for base population, employment, permit, and a host of other data points. However, the actual numbers reported in government data- which are regularly adjusted after initial reporting- are typically highly questionable. I chuckle as I see investors react immediately to data releases like job growth. When the figures on growth come out 80,000 jobs short of expectations, stocks go down; 80,000 jobs above, stocks go up. Does anyone question the margin of error in these numbers? In typical fashion, three years later, the numbers are adjusted, and the Bureau of Labor Statistics adds or subtracts 30,000 jobs.

Despite my objectionable stance against the actual figures reported by government agencies, I applaud the most recent state growth figures reported by the Census Bureau. Arizona is now tops in job growth, having slightly edged out Nevada for the number one spot. I still hold my belief that the numbers are likely not entirely right (how can they be? they are truly estimations), and I really don’t care that Arizona is first, per se. What I like about the data is that it reflects the strong growth Arizona is experiencing. As a resident, I see the additional people, see the demand for products and services, experience the additional people of freeways, and see the growth in housing expanding the boundaries of the metro area.

As for the future, those following the metro area and its growth should expect the same. The next decade will bring greater growth than the last. The primary reasons are similar to those in the past: affordability, desirable climate, and a pro-growth government.

We remain affordable relative to neighbors, which makes us desirable to individuals that cannot afford the quintessential symbol of the American Dream (home ownership). Walk into most any new home sales office in the Phoenix or Tucson areas and ask who their buyer is; you are usually going to hear California as a major source. Californians cannot afford to live in California. In California, homes ninety from major employment centers cost more than Arizona homes thirty minutes from major employment centers. For those still willing to experience the commute from ninety minutes out, they can find an Arizona home ninety minutes from employment at a fraction of the cost than can be found in California.

Climate has been and will continue to be a key reason for those considering a move. People are seeking warmth; they want to be outside, to be able to enjoy their weekends and time out-and-about. This want is the reason many people consider Arizona for vacation and residency. Many Midwesterners have made the annual “snowbird” trek to Arizona for a number of years; with hurricanes and higher costs in Florida (the mainstay “snowbird” area for those in the Northeast), the Arizona buzz seems to be growing. Northeasterners are increasingly considering Arizona over Florida.

As Nevada and Florida officials can attest, people that visit the same place on numerous occasions, often eventually take-up residency in that place. And, if they don’t take up residency, they, at the very least, purchase a vacation home in their favorite vacation place. Arizona’s climate will only drive further growth in coming years.

Arizona is a business owners dream. Taxes are low and government supports growth. Infrastructure improvements and expansions are typically considered long before growth in a particular area. Arizona’s pro-growth government will continue to drive employment into the state, and thus further population growth.

As you dig into the current numbers, remember this about Arizona and the future numbers. The growth drivers that have made us number two in population growth for so long are the same drivers that pushed us into the number one spot recently. And, these same growth drivers will keep us at the number one or number two spot during the next decade.