Economist Elliott Pollack is bullish on 2019.
“Enjoy yourself,” he said. “It’s going to be great year.”
The CEO of Elliott D. Pollack and Company presented his annual economic forecast to Pinal Partnership at Rawhide Friday morning.
A recession is anticipated, but Pollack said it would not happen in 2019 though it is possible later.
“Not all recessions are the same,” he said. “What you’re looking at is short and shallow.”
With home prices now back above recession levels, Arizona real estate has fully recovered, Pollack said.
Taking nearly a decade, the recovery was old but strong, he said. Consumer confidence is high, and labor is coming back. The greater Phoenix area is responsible for 88 percent of the state’s job growth.
Lack of labor is a concern nationwide, however. Pollack said there are 7 million unfilled jobs in the nation. That means companies will have to pay higher wages to fill those jobs, causing the employment-cost index to rise, which leads to higher prices.
The stock market has been a roller-coaster ride this year. Pollack said though bear markets are reason to be concerned, “the stock market is a bad predictor of recession.”
In attendance, Maricopa City Councilmember Marvin Brown said he was concerned about the national debt, which is now at $21.9 trillion. It is a problem of many nations.
“The U.S. is the prettiest house on a very ugly block,” Pollack agreed. “Ultimately some generation is going to pay for all this debt, but it’s not your generation.”
With representatives of Central Arizona Project and Global Water in the room, he also pushed back on the notion that Arizona will soon face a water shortage. He said farmers and ranchers continue to turn their homes over to development, which uses less water than agriculture.
“Water flows toward money, and money is in industry and housing,” he said. “There will not be a water shortage in the greater Phoenix area in my lifetime or the lifetime of anyone in this room.”
Pollack also said the media is making more out of a trade war than it deserves. He called it a trade skirmish that “would have a minor impact on the U.S. economy.” Further, he said, China cannot win a trade war because 20 percent of its gross domestic product comes from exports while in the United States it is less than 10 percent.
Real estate in the Valley and Pinal County is in a good situation. New home inventory is low with no signs of an oversupply of homes. Builders are battling supply-side constraints, meaning production is unable to keep pace with demand.
Pollack predicted the entire demand for new housing will be from the millennial generation. “There’s going to be a lot more of them, and a lot more of them will be buying houses.”
The impact of the Great Recession on millennials is still playing out. That generation saw greater acceptance of large amounts of student debt, delayed marriage, often moved back into the parental home to save money and became less materialistic than their parents’ generation.
A new report by Bank of America found millennials now prioritize home-ownership over marriage and starting a family. No. 1 on their list of priorities is being able to retire.
While many millennials still believe outmoded information about homeownership, probably passed down to them by their parents, their buying behavior will dictate the future economy.
Pollack told real estate agents to expect millennial homebuying to “skyrocket over the next five years.”