Remember that huge rush of folks moving to Phoenix at the height of the housing boom? It looks like there weren’t as many of them as we were told there were: [Hat tip to both M and L for catching this one!]
For decades, everyone assumed Arizona’s population-projection figures were reliable. Turns out they are not.
Metropolitan Phoenix’s housing boom of 2003-06 skewed the state’s population numbers, leading to projections that planners, economists and government officials agree are inflated. As a result, cities and towns across Arizona, particularly in the Valley where most of the state’s residents live, are struggling to figure out what’s the real population base and how it might grow in the future.
Nobody can say how off the mark the state’s population projections are. But some of the area’s top economists and the Arizona Department of Commerce are now working on a better way to calculate projections without relying so much on housing.
Here’s the problem with relying on housing figures for determining population growth:
During the height of the boom in 2005, state and census estimates showed a record 196,000 people moved to the Phoenix area. That startling figure led to projections for the Valley’s population to more than double to 12 million as soon as 2030.
But those projections, based largely on housing permits and occupancy numbers, didn’t accurately reflect how many people were moving to the Valley.
The large number of investor-owned properties inflated figures. And the number of building permits exceeded the number of houses actually sold. For example, a record 62,000 new homes went up in metro Phoenix during 2005 but only about 40,000 of those were bought by people who moved into them.
How one determines the real rate of growth in the state has concerned both M and L [and myself] for awhile. Housing will not recover until inventory is drastically reduced. Inventory will not diminish without people to fill vacant houses. Knowing the rate at which the population grows is one of the keys to determining when housing is likely to recover.
M has been looking at reports of school district enrollments, which have been shrinking in a number of districts across the Valley. This is one indicator that recovery is a long way off. Another interesting metric is one L sent me- the data for driver’s licenses surrendered from other states.
You cannot make too many assumptions based on the MVD data. According to the Arizona Workforce website:
It is understood that this is not an actual count of population in-migration. We do not know if the driver’s license represents one person or a family of four. We also cannot measure those leaving the state (out-migration) with this method. Therefore, net-migration is not measurable.
In spite of the limits of the data, it appears that population growth probably leveled off after 2004, just as sales and building really took off.
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Consequently, a lot of homes were built in anticipation of people that never came. How many of these homes are there?
Jay Butler, director of realty studies at Arizona State University Polytechnic, says part of the current formula for projecting Arizona’s population assumes 1 to 2 percent of the state’s homes are vacant.
"Now we know at least 10 percent of the new homes built during the boom were vacant, and foreclosures are leaving more homes empty," Butler said. "We have tried to go to door to door in the past to track vacant homes, but now with the Valley’s size, it’s a daunting task. No one really knows how many homes are empty."
We hear a lot about the housing market hitting the "bottom", without the "bottom" being clearly defined. I believe that the vacancy rate, more than sales or price, is the key to determining the bottom of the housing market. High vacancies are indicative of excessive supply. Therefore prices and homebuyer confidence are likely to continue to deteriorate until the vacancy rate starts to improve.
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Twist,
The best data for migration within the US comes from the IRS. I have access to the data but can only justify the geography of NJ. Otherwise it costs $300.
I can tell you that 2004 had many Garden Staters moving to th lovely state of AZ, along with Florida and the Carolinas and Texas.
Metro-
You would think that the AZ Dept. of Economic Security would spring for the $300, wouldn’t you?
You would think. But then you would have to crunch the numbers too, and if their math is as bad as the NAR’s….. well you know.
http://calculatedrisk.blogspot.com/2008/06/nar-corrected-nj-q1-home-sales-down-30.html
BTW the IRS data is households which make it ideal for studying RE.
Don’t know if this made the side bar last week but it’s a good haha to the builders.
http://www.news-press.com/apps/pbcs.dll/article?AID=/20080614/RE/806150382/1076&ref=patrick.net
And with flights like this….
http://www.usatoday.com/travel/flights/2008-06-16-phoenix-landing-gear-fire_N.htm
metro (#3) -
Oops! didn’t see you were in the claws of Igor. Have no idea why he took exception to that one.
John-
I fly SW from AUS to PHX now and then- maybe Igor didn’t want to worry me!
Just got back from a drive up around Happy Valley Rd to Carefree and down Pima to the 101 and back West tonight… with the windows down and the a/c turned off!
My arm & hair are on fire, and my shirt is smoldering.
I’m going to get a couple gallons of ice water and go lay in the pool until tomorrow morning!
The gear might have started on fire when the sun, the heat, and the furnace like waves coming off the asphalt conspired and spontaneous combustion resulted!
And to think, it’s only the middle of June!
Yee haw! Can’t wait until it warms up a little!
Oops… 9 was a reply to 6.
I like what Marcy commented on page 4 of the article comments.
“If you see Jay Butler or Elliot Pollack quoted in an article you should file the article in the fiction pile.”
“If you see BOTH Jay Butler and Elliot Pollack quoted in an article keep the article in case you run out of toilet paper.”
Cute.
And from Julie on page 1
“Well, as soon as they commented Jay Butler they lost me. I’m beginning to wonder how many feet he can fit in his mouth?”
Twist:
These population statistics are a problem in a lot of places. LOTS of towns and cities use these forecasts to plan for new schools, roads, etc.
In Oregon, the district I work for, is floating a bond for a new high school. It won’t be needed for ten years, if then. They’re using the state’s straight line projections on population.
The growth projections also use the ‘new houses equal new population” statistic, but also largely ignore the very volatile effects of immigration.
But in a serious economic contraction, the US population often contracts.
I think John Hopkins studied the recessions of the 1970s, and concluded that net population contraction in the US was about 60 thousand people. About as much, the report said, ‘as a colonial war’.
And immigration rises AND falls, highly correlated with job growth in the US.
So, expect the population growth numbers for MANY cities and towns…. to be WAY off.
How far off? Dono. But hey, if I had Jay Butler’s job, I would pull an encouraging number out of my ….