Slide1: Update & Outlook: After the Housing Boom ARPA Convention June 21, 2007


Slide2: 3 Major Trends Worry Meter US Outlook AZ Outlook Economic Update & Outlook


Unstoppable Trend #1: Unstoppable Trend #1 The Global Economy


Unstoppable Trend #1: Unstoppable Trend #1 The Global Economy Culture Jobs Suppliers Customers Competitors


Slide5: China economy soars 9.9% in '05 Strength in exports and investment keep GDP expanding at rapid clip; confidence about 2006. January 25, 2006: 6:40 AM EST BEIJING (Reuters) - China's gross domestic product grew 9.9 percent in 2005 and at the same annual rate in the last quarter, riding high on strength in exports and investment, the National Bureau of Statistics said Wednesday. The economy grew 10.1 percent in 2004 and 10.0 percent in 2003, the bureau said.


Slide6: 1990 2005 1980 European Union 22.1% 25.4% 25.5% China 5.0% 1.6% 1.7% United States 26.5% 28.2% 25.4% Source: World Bank U. S. Share of World GDP


Slide7: World GDP & United States http://strangemaps.wordpress.com/


Unstoppable Trend # 2: Unstoppable Trend # 2 In the Long Run We Are Older


Unstoppable Trend # 2: In the Long Run We Are Older Culture Work Medical Care Pensions Housing Immigration Unstoppable Trend # 2


The Long Term EconomicChallenge: Labor Shortages: The Long Term Economic Challenge: Labor Shortages 50 million retirees 2010 - 2030 Thousands of Births Births


The Long Term EconomicChallenge: Labor Shortages: The Long Term Economic Challenge: Labor Shortages After 2010 10,000 People Turn 65 EVERY DAY OF THE YEAR!


Unstoppable Trend # 3: Americans On The MOVE! Unstoppable Trend # 3


Unstoppable Trend # 3: Unstoppable Trend # 3 People Jobs Housing Commercial Public Sector Americans On The MOVE!


Slide14: 1 8 2 4 5 3 US Census Bureau 6 Alaska 9 7 10 7 of Top 10 Fastest Growth States for 25 Years in West Percent Change: 1980 - 2005


Slide15: 1 7 2 5 6 3 4 8 US Census Bureau 13 25 10 12 19 17 11 Arizona First in Population Growth in 2006 Percent Change 2006 vs 2005 9


Slide16: Trends Benefit the West Global Trade Population Job Growth Incomes Diversity


Slide17: (Percent Change 2006 vs 2005) 9 2 8 1 3 4 21 5 6 Arizona Led the Nation In Job Creation: 2006 16 7 10 U. S. BLS


Slide18: (Percent Change April 2007 vs April 2006 8 5 9 2 4 1 16 3 Utah, Arizona Set Over-the-year Job Growth Pace in April 13 6 10 7 U. S. Bureau of Labor Statistics 11 15 17 20


Slide19: Arizona has ranked among the top 5 job growth states for 43 consecutive months Consistent Job Creation In 2006 Arizona added 134,800 new jobs – an average of 10,000 + per month


Slide20: Metro Phoenix: More New Jobs Than 46 States in 2006 U. S. Bureau of Labor Statistics, 2006


Slide21: Worry #1: Recession Watch


Slide22: U. S Economy Slowing


Slide23: GDP – Quarterly Percent Change Yr/Yr No Growth


Slide25: U. S. Economic Sectors


Slide26: Personal Saving Rate Hits Bottom


Slide29: Quarterly GDP to Improve In Second Half of 2007 2006 2007 Blue Chip Consensus, June 2007


Slide30: Recession odds next 12 months? 25% or 1 in 4 Blue Chip Consensus, April 2007 Survey of 50 Top Economists


Economic Outlook: U. S. GDP: Economic Outlook: U. S. GDP Annual Percent Growth In Real GDP Blue Chip Consensus, June 2007


Slide32: GDP growth dips below 3% Consumers cut back spending Housing takes 1% off GDP But recession signals are weak Will rate hikes reverse in 2007? U. S Outlook Summary


Slide33: Worry # 2: Housing Market How bad will it get? 1980s? 1990s? 2001?


Slide34: Then and Now – Phoenix Single Family Resales Source: Phoenix MLS & R L Brown


Slide35: Phoenix Metro Residential Resale Frenzy Subsides: Getting Back to “Normal?” 70,000 ?


Slide36: Phoenix Metro New Permits: Getting Back to “Normal?” X


Slide38: Construction Spending Annual Rates - April 2007 vs April 2006 Source:US Census Bureau


Slide39: Worry # 3: Sub Prime Loans Affects Lenders Bond Holders Borrowers Markets


Slide41: “…six in ten Americans think the problems in the subprime mortgage market will spill over into the overall mortgage market…”


Slide42: U.S. Mortgage Facts 43 million home loans 33 million prime 6 million subprime 4 million government Current foreclosure rate is 1.2% (about 500,000 loans)


Slide44: 2006 Real GDP 2.9% Employment 1.9% 1.1% Inflation (CPI) 3.2% 2.5% 30 yr Mortgage 6.4% 6.8% 3.3% 2008 2007 2.1% 1.3% 2.5% 6.4% Outlook for the U.S. Economy Blue Chip Consensus and Global Insight , June 2007


Slide45: Resale prices drop 7% by 2008 New sales, starts up in 2008 New sales stay below 1 million Tighter lending standards Non residential drops by 2008 Construction Outlook Summary


Slide46: Thousands of Jobs Arizona Construction Jobs Leveling Off in 2007 2005 2007 2006


Slide47: Jobs Construction Jobs Sand & Gravel - Tons Tons Rock Products and Construction Move Together Over Cycle


Slide48: Arizona Job Growth Outlook: Moderate Gains Ahead Annual Percent Change In Arizona Employment Forecast Source: Arizona Blue Chip Forecast


Slide49: 93,000 New Jobs in 2007


Slide50: Arizona Construction Outlook (Percent Change in Dollar Value) Source: Arizona Blue Chip Forecast


Slide51: Arizona Economic Outlook (Percent Changes vs Previous Year) Source: Arizona Blue Chip Forecast


Slide52: Moderate growth ahead Still a top 5 growth state 93,000 new jobs in 2007 185,000 new residents But yellow flag is out – be alert! Arizona Outlook Summary


Slide53: POTENTIAL RISKS Bird flu Terrorist event Oil price spike Inflation rises Fed over-reacts Credit crunch Recession!


Slide54: lee.mcpheters@asu.edu