Tucson’s economy is stronger than was predicted last year and is expected to get better in the next two years despite a few dark spots, a University of Arizona economist said.
“The economy here locally is really doing quite well, much better than I thought it would be when I was standing here last year,” said Marshall J. Vest, director of the the Eller College of Management’s Economic and Business Research Center.
Overall the economy in Tucson and Arizona is growing, though a housing slowdown will temper growth in 2007 and 2008, Vest told a gathering of more than 700 Tucson business leaders Friday.
Housing was a key to the forecast drawn up by UA economists, Vest said.
The rate of home sales has plummeted more than 20 percent since early last year, though inventories of properties for sale are still rising. Now sellers are holding out, hoping for last year’s prices, while buyers are waiting for prices to drop, Vest said.
The forecast predicts Tucson’s average home will see a 5 percent drop in value this year. But with an 86 percent increase over the past five years, most homeowners have some cushion.
Home building has slowed, which should eventually lead to the loss of 20,000 Arizona construction jobs in 2007 and 2008 from the current 250,000, Vest said.
But that will be offset by gains in other jobs, leaving the state with more net jobs.
“We’re forecasting gains of about 2 1/2 percent in 2007,” for both Tucson and Arizona, he said.
He is predicting slower job growth for Tucson in 2008: 1.4 percent.
There is little chance a poor housing market will drag the local economy down, because property owners here have a lot of equity – just over half of the value is borrowed against, he said.