Housing bubble trouble debunked

Optimism was served in heaping portions Tuesday at the Economic Outlook 2006 breakfast sponsored by the Greater Phoenix Chamber of Commerce.

Speakers forecast a continuation of the Valley’s economic boom, and they said the unprecedented housing expansion still has a long way to run, despite dire predictions of a bubble.

"The housing bubble in Phoenix really doesn’t exist," said R.L. Brown, publisher of a monthly report on the Valley housing market. "There is no oversupply of housing in this town in any category."

That’s because newcomers continue to arrive in droves. Brown said the region will have to build an average of 68,000 new dwelling units every year for the next ten years to accommodate the projected population increase through 2015.

In comparison, a record 60,872 single-family housing permits were issued in the Valley last year.

One of the major reasons for the population growth is that housing prices here, despite recent rapid increases, are still relatively low compared with other areas, he said.

The hottest development areas are in Surprise, the Loop 303 corridor, and the Laveen-Buckeye corridor in the West Valley, the I-17 corridor in the north Valley, the Hunt High- way/Johnson Ranch region in the south East Valley and in the community of Maricopa in Pinal County, he said.

Also land speculation is intense from Coolidge to Casa Grande to Maricopa, he said.

"A whole new world is being built down the Hunt Highway . . . and the former migrant farm worker town of Maricopa is being turned into a city overnight," he said.

The next layer of development is ready to begin even further out — between Surprise and Morristown, west of the White Tank Mountains in Sun Valley, in Rainbow Valley southwest of Phoenix and toward Stanfield and Eloy in Pinal County. "Eloy is one of the hottest land speculation places in the western United States," he said.

There are a few threats to this rosy picture. Brown believes the most serious is the rapid run-up in housing prices, which could narrow the Valley’s advantage over the West Coast. Other possible deal breakers would be a terrorist incident that has a major psychological impact on consumers, degradation in the quality of life in the Valley, a national recession or antigrowth measures by government.

"Our housing market is awesome, and it is sustainable," Brown said.

Pete Bolton, senior managing director of CB Richard Ellis, took a similar upbeat view of commercial real estate markets. Available office space in the Valley is being removed from the market by conversions to office condos, which is causing vacancy rates to fall and rental rates to rise, he said. The Valley’s office vacancy rate is down to 14.4 percent.

Elliott Pollack, a Scottsdalebased economist, predicted that the national and local economies will remain strong next year, though high energy prices could keep 2006 from being as strong as this year. Hurricane Katrina could slow the national economy for the rest of this year but stimulate it next year because of reconstruction, he said.