Greater Phoenix Blue Chip

First Quarter, 2023
Elliott Pollack


Housing permits are notoriously difficult to project.  In today’s world, that statement should be in capitals, bolded and underlined.  The level of uncertainty surrounding the economy, especially related to interest rates and Fed policy, credit cycle difficulties, consumer spending and probabilities of a recession, makes this a tough time to be optimistic about housing in the near term.  In addition, affordability levels for both single-family homes and apartments remain near all-time lows.  So, projections for the near term will continue to be difficult.

Despite a somber near-term outlook, the panel remains optimistic about the housing market in 2024.  Every panel member expects single-family permits to be higher in 2024 than in 2023.  This is true despite single-family permits declining by about a third from 2021 to 2022 and expectations of declines again in 2023.  The single-family market started to tank in June of 2022 when single-family permits were down over 25% from a year earlier.  By December they were down nearly 68% from a year earlier.  For January 2023, single-family permits were down a whopping 71% from January 2022.  February 2023 was down 57% from a year ago.  As of February, the rolling 12-month total was a meager 18,800 units compared to the rolling 12-month total of 31,100 in February 2022.  By the way, in the last six months, there were only 5,500 permits issued.  Comparisons from a year ago will be difficult through mid-year.  After that, the comparisons become easier.

Interest rates are expected to fall later this year or early in 2024.  At that point, a combination of lower rates, rate buydowns on the part of homebuilders, substantial pent-up demand, changes in product types, and declines in vertical construction costs should help turn the tide.

The same general characteristics apply to apartments.  Demand is down, and money is both expensive and tight.  This makes it difficult to get projects penciled out, and financing is becoming very problematic.  In addition, many cities continue to become more bureaucratic and have longer lead times for approvals.  This is also not a good combination.

Overall, the near-term outlook for housing remains, well, ugly.  The longer-term outlook remains much better.  We will hopefully turn the corner in the not-too-distant future.  But, it would be unusual to see interest rates as low as they were in 2021 and early 2022 at any time soon.



  2023 2024
  Single Family Permits Multi-Family Permits Apartment Vacancy (Q4 %) Apartment Absorption Single Family Permits Multi-Family Permits Apartment Vacancy (Q4 %) Apartment Absorption
CBRE NA NA 6.9% 9,000 NA NA 6.7% 12,500
Elliott D. Pollack & Co. 16,000 12,000 6.0% 13,000 22,000 12,000 5.5% 13,000
Griffin Consulting 23,500 14,500 4.4% 14,000 27,000 15,000 4.5% 14,500
Land Advisors 15,960 15,960 7.6% NA 22,000 10,400 6.6% NA
Nathan & Associates 27,000 18,000 7.0% NA 32,000 7,000 5.0% NA
Southwest Growth Partners 23,000 15,000 4.6% 13,000 25,000 12,500 5.2% 14,500
U of A Eller College 22,374 13,691 NA NA 26,476 11,119 NA NA
Zonda 17,500 10,000 NA NA 22,000 10,000 NA NA
CONSENSUS 20,762 14,164 6.1% 12,250 25,211 11,146 5.6% 13,625



  Single Family Permits Multi-Family Permits Apartment Vacancy (Q4 %) Apartment Absorption
2022 Actuals 22,222 16,377 6.5% 4,700
2021 Actuals 31,069 21,592 4.4% 12,300