Scottsdale Economy

Articles about the economy and consumer tips

The Scottsdale economy received a minor setback as new home sales fell in January. The Commerce Department released their month-end performance report showing that new home sales dropped from a 10-month high. Sales decreased 9.2% to an annual rate of 494,000 units (adjusted seasonally.) December's sales results were 544,000 units. Economists say, however, the overall housing market recovery remains on course.

Scottsdale Economy: Facing Challenges

The Scottsdale economy received a setback as new home sales fell in January

A survey of economists regularly polled by Reuters had originally forecast new home sales at an estimated 520,00 units. New home sales typically account for roughly 8.3% of the housing market.

As always, there were wide variations in the number of new home sales in parts of the U.S. The drop in January reflected the lowest level of home sales since July 2014. 

The Scottsdale economy experienced a slowdown in new home construction during January. The result will likely be a continuing shortage of inventory in what has been described as a "tighter than normal" supply by economists. The decline was the largest decrease in nearly six years.

To add to the new construction concerns, builder sentiment – a survey measurement of home builder outlooks and opinions – fell 3% from an upwardly revised January poll conducted by the National Association of Home Builders (NAHB.) Builder sentiment is rated on a numerical score, or index, and now stands at 58. The builder sentiment forecast had been for a continuation of last month's index of 60. Economists regard an index of 50 or above as a positive builder sentiment. The index one year ago was at 55.

A monthly measure of builder sentiment fell three points from an upwardly revised January reading. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) now stands at 58. The expectation had been for sentiment to remain flat at 60. Anything above 50 is considered positive sentiment. The index stood at 55 in February of 2015.

Home builders cite a variety of factors that have slowed new home construction growth. Among them are higher costs for land and labor.

"Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market," said NAHB Chairman Ed Brady, "Of note, they expressed optimism that sales will pick up in the coming months."

However, some home builders are not quite as optimistic. Over 75% of builders surveyed by the NAHB said they anticipate the skilled labor shortage to get worse before it gets better. In fact, the high cost of labor is ranked as the primary concern among those surveyed. The number of unfilled construction jobs rose in December, despite the fact that overall unemployment decreased. According to the Bureau of Labor Statistics there were approximately 207,000 unfilled jobs in the construction sector at the end of December. That number eclipses the previous mark of 168,000 in March 2015. The total is the highest in nearly nine years.

As this news begins to impact the Scottsdale economy and affects the housing industry, NAHB officials cite land and labor issues as major obstacles. However, more alarming is the report of buyer demand for new homes. The recent survey results show the index that measures current sales falling 3% to 65, with buyer traffic dropping 5%. The lone bright spot was that sales expectations – an optimistic outlook – rose 1% to the 65 level.

While demand for recently constructed homes is rising slightly, most of the demand is the result of a record low supply of existing homes on the market. The Scottsdale economy continues to experience that, as well. With the spring selling season just around the corner, real estate experts are concerned that the normal increase in supply – fueled by sellers putting their homes on the market for the spring – will fall far short of meeting the demand. New home supply fell in December and January.

Buyer demand in the Scottsdale economy is stronger, but has been dampened as a result of the wild fluctuations in financial markets – both domestic and overseas. Homebuyer sentiment, as gauged by another monthly index survey, dropped in January as fewer households reported growth in income.

The housing market is expected to shore up the overall economy in spite of the challenges ahead. Contending with a strong U.S. dollar, increased spending cuts by energy firms impacted by lower oil prices and a slowdown in global demand, the economy still shows slight gains. The economy grew at an annual rate of just under 1% during the fourth quarter of 2015. And growth projections for the first quarter of this year are slightly above 2%.

Another bright spot on the Scottsdale economy: in January, the new home inventory increased 2.1% to right at 238,000 units. That's the highest level in over six years. Still, at January's pace of sales economists say it would take 5.8 months to sell the supply of new homes on the market. That's up from 5.1 months back in December. In addition, the median sales price of a newly constructed home nationwide dropped 4.5% from a year ago. The median sales price nationwide is $278,800.

See more articles pertaining to the Scottsdale economy in the Scottsdale Economy section of our site below Scottsdale Real Estate Categories in the column to your right. You can find information here on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and of course, all the latest Scottsdale real estate news that affects all of these categories.

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The Scottsdale economy is full of them –– older Americans who collectively have more debt than ever before. Baby boomers who've lived in the generation of rising housing prices, more expensive cars, and the staggering cost of higher education, now find themselves nearing retirement owing money. Recent data released by the Federal Reserve Bank of New York says the average borrower aged 65 has 47% more mortgage debt and 29% more auto debt than the same age borrower in 2003 (after adjusting for inflation).

The Scottsdale economy is full of older Americans who collectively have more debt than ever.

Scottsdale Economy and Baby Boomer Debt

Less than ten years ago student debt was unheard of to most people 65 or older. Today it's one of the largest debt categories, though not as large as mortgage debt, auto loan debt and credit cards. Of course, there are more people aged 65 than ever. This phenomenon has resulted in a change in the make-up of household debt in the U.S. Before the housing crash, younger households assumed greater debts that became unaffordable when the economy worsened. According to one New York Fed economist, "The shift represents a reallocation of debt from young people, with historically weak repayment to retirement-aged consumers, with historically strong repayment."

Statistically, older borrowers have been careful not to default on their loans and are more diligent at lowering their overall debt. However, more borrowing by the older generation could signal problems if they enter retirement with unmanageable debt. For now that doesn't seem to be happening in the Scottsdale economy. Still, it's worth watching – especially as a larger number of Americans will retire without pensions and limited 401(k) assets. In addition, economists warn that retirees who have Social Security as their sole source of income could struggle with existing debt.

The recent data in the New York Fed's quarterly report on household debt was the result of millions of credit reports compiled by Equifax, a leading credit-reporting agency. The report first began in 2010 to track debt behavior trends of U.S. households in the wake of the financial crisis and the housing crash.

Household debt has risen slowly over the past two years according to the report. However, it has stayed well below the 2008 levels. Overall household debt is estimated at slightly over $12 trillion. Auto debt, student loans and credit cards have increased. Mortgage debt remained largely unchanged.

The percentage of household debt that is delinquent has gradually dropped. The report showed only 2.2% of the mortgage debt was delinquent, the lowest percentage in nine years. Analysts attribute much of the improvement to older borrowers. Most older households with debt have higher credit scores and higher net worths than in the past. They're better equipped to manage their debt in the wake of the financial crisis. Plus, they are better able to take on new debt following the crisis.

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Growth in the Scottsdale economy was sluggish during the last quarter of 2015, contributing to the overall U.S. economy which ended with a 0.7% annual rate. Economists say the slowdown was due, in part, to cautious consumer spending, reduction in businesses making investments and stagnant exports to other parts of the world.

Scottsdale Economy: What's Ahead?

Growth in the Scottsdale economy was sluggish during the last quarter of 2015.

While the fourth quarter results weren't altogether unexpected, they have raised concerns about the future. Still, most economic experts expect a return to more positive results by the end of this quarter.

Government forecasts had predicted 2% annual growth in the gross domestic product (GDP) for the third quarter of 2015. Instead, the economy grew less than half of the anticipated rate, representing the lowest expansion since the first quarter of last year.

Government economists say the disappointing fourth quarter results are temporary and expect GDP growth to return to a rate of 2.5% to 3% by the middle of 2016. Those expectations are based on improved consumer spending and continued job growth. Consumer spending during the last quarter of 2015 dipped to an annual growth rate of 2.2%, down from a 3% rate the previous quarter. Somewhat alarming was the reduction of spending on both durable goods, like automobiles, and nondurable goods, such as clothing. Given the holiday gift-giving season the results were surprising.

Since consumer spending makes up roughly two-thirds of all economic activity, most analysts are looking to strengthening employment growth to bolster the first quarter of 2016. There are concerns that global issues such as China's shaky economy and falling oil and stock prices will continue to adversely impact the U.S.

In addition to consumer spending, a sharp drop in exported goods also contributed to the weakness of the last quarter. A stronger U.S. dollar has increased the price of goods, but made them less competitive in overseas trade markets. Business investment spending also had a negative impact. Falling from a 5.3% annual growth rate to 1.8%, spending on structures mirrored a drastic drop in oil and gas drilling and exploration.

On a brighter note, new home construction enjoyed an 8.1% annual growth rate. That will provide needed housing inventory for spring home shopping in the Scottsdale economy.

The overall growth of the economy in 2015 was 2.4%, equal to the growth of the previous year. Economists predict 2016 will see growth in the 2% range. While some say it's possible we'll see a recession this year, most agree it won't happen.

The Federal Reserve in its most recent meeting issued a cautious look at the U.S. economy. They left interest rates unchanged after having raised short-term rates in December. That could be an indication the Fed is rethinking the planned rate hikes this year. The weakness of economic growth, lower inflation and global economic impact may have gotten the Fed's attention.

Another bright spot was employment growth. The economy added roughly 284,000 jobs per month during the last quarter of 2015, bringing the year end unemployment rate at a low 5%. This, of course, is important because with more Americans working, more are considering purchasing their first home or upgrading to a larger one.

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Many people in the Scottsdale economy say saving money is a goal in 2016. The best way to save is to have a plan. Depending on your stage of life, a savings plan requires specific financial responsibilities and actions. While there's no such thing as a plan that fits everybody's needs, here are some suggestions.

Saving in the Scottsdale Economy

Many people in the Scottsdale economy say saving money is one of their goals in 2016.

Baby Boomers. If you're a baby boomer, aged 51-69, you're in good company. Your generation comprises over 25% of the total population of the U.S. Baby boomers are typically in better shape financially than most other folks. However, like most boomers, you probably don't have much money in your retirement account. Just 60% of baby boomers report having any money saved for retirement. In addition, most boomers don't have a retirement pension, leaving them to rely almost solely on Social Security.

The Strategy for Baby Boomers?
• Many baby boomers have gone or are planning to go back to work.
• Consider trying to get by on less by changing your lifestyle. For example, is downsizing your home an option?
• Shift your retirement savings into high gear by saving more, faster.
• Make sure your investments are allocated correctly. Statistics show less than half of all baby boomers are satisfied with theirs.
• Consider long-term care insurance.

Gen Xers. Generation X members, aged 36-50, are in the midst of advancing in their chosen professions and are busy raising children. Some are also caring for elderly parents. Their biggest challenge is managing cash. This age group is facing the most expensive years ever.

The Strategy for Gen Xers?
Pay yourself first. Set aside a certain amount of each paycheck and put it in savings. Then pay the bills, household expenses and other obligations that keep the Scottsdale economy healthy. Consider "forced savings" whereby your bank or employer automatically drafts an amount to fund a savings or retirement account. Avoid buying a more expensive home than you can afford. Paying on a big mortgage each month isn't a good idea and will hamper your ability to save.

Millennials. Millennials, aged 19-35, are surprisingly better at managing money than Gen Xers. Perhaps it's because they are concerned about the job market. Many had a harder time finding a job after college than they anticipated. However, millennials tend to make financial decisions "on the fly" and fail to prioritize long-term needs. Retirement – probably because they view it as being light years away – isn't on their radar. They are least likely to contribute to their employer's retirement plan or to open IRAs.

The Strategy for Millennials?
Most millennials rent these days. Managing that cost is most important. Consider living at home a little longer – even after college. Getting rid of student loan debt should be a priority. Consider a loan repayment plan based on your income level. Pay that debt as soon as possible. Be frugal with discretionary income. Set a budget and give yourself a monthly allowance. Failure to do so could result in splurging. Watch your credit score. Since all large purchases will probably depend on a good credit score, make sure you pay your bills on time and not get over-extended in the Scottsdale economy.

With a little planning and financial discipline you can save money at any age. Get started today. You may be surprised how easy it can be to set aside money for when you may need it the most.

Average unemployment in the Scottsdale economy mirrors that of the U.S., remaining steady at 5%. That’s a 7-year low. As the economy has grown, more people looked for employment. Job additions exceeded expectations according to recently-released November statistics.

Job Growth in the Scottsdale Economy

Job gains were solid nationwide, with employers adding 211,000 jobs during November. The construction industry was among the biggest gainers, along with private sector services. While there was weaker growth in temporary employment — even among retailers who employ part-timers for the holidays — analysts say this is a good sign of economic recovery.

The Federal Reserve has maintained interest rates at record lows to aid the economy. Most economists believe the Fed will raise interest rates, perhaps for the second time, during the first half of 2016.

A recent survey of business executives show lowered expectations for profit and growth. This is largely due to increased domestic competition and sluggish growth in the manufacturing sector. Others, however, say a boost in retail spending over the holidays may spur a better outlook for business.

One thing seems certain. If the economy can hold on, the growing trend of Baby Boomers retiring will create future job openings. It is expected there will be more than 50 million job openings in the next ten years. Roughly 30 million of the jobs will be to replace retiring Baby Boomers.

While short-term growth sounds good, analysts are quick to issue a word of caution. They say with the nation's place in an ever-important global economy there are factors that may hurt growth and prosperity. Continued instability in China's economy and the increased threats of terrorism throughout the world may impact possible improvement in the U.S. economy.

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