Economic Forecast: Building Permits in Phoenix to Rise in 2008 Along with Arizona Mortgage Activity

What a difference six months makes.

The current issue of the Greater Phoenix Blue Chip Economic Forecast shows the Phoenix housing market expected to end the year with 45,943 new home permits, down from the 53,371 predicted in the June report.

In 2007, meanwhile, the Blue Chip panel forecasts 41,767 single-family home permits, a 16 percent drop from the 49,766 units predicted in June. Numbers are expected to rise again in 2008though, with 45,519 new homes predicted for the Phoenix area due to increased Arizona mortgage demand around that time.

Those numbers are off sharply from the record 63,000 permits reported in 2005 and the 60,000 issued in 2004. Home construction in the state has slowed.

The panel of economists notes, however, that 2006 has been a good year for commercial construction, while 2007 is expected to be even better. Vacancy rates are expected to remain relatively low and absorption strong, according to Contributing Editor Elliott Pollack.

Greater Blue Chip Editor Tracy Clark said that although the forecast for the area is for gradually slowing growth, the economy remains in good shape. It helps that mortgage rates are low, both in absolute terms and relative to other metro areas, he said.

“The primary cause of the slowing trend is the national economy and not anything unique to the local area,” Clark said.

The Greater Phoenix Blue Chip Economic Forecast is published quarterly by the JPMorgan Chase Economic Outlook Center, an affiliate of the L. William Seidman Research Institute in the W.P. Carey School of Business at Arizona State University.

The current slowdown in demand for Arizona home loans mirrors problems facing other states. Many believe it’s cyclical, however, and housing markets around the country will soon pick back up.