WHERE ARE ARIZONA DEMOGRAPHICS TAKING US? HOW GROWING SLOWER, OLDER AND MORE DIVERSE AFFECTS REAL ESTATE March 2017 Tom Rex Office of the University Economist and Center for Competitiveness and Prosperity Research, L. William Seidman Research Institute
OVERALL POPULATION Annual population estimates are expressed as of July 1. Estimates for Arizona and its counties are available back to 1929 from the U.S. Department of Commerce, Census Bureau. In addition, the Arizona Office of Employment and Population Statistics (OEPS) has produced annual estimates since 2000. The 2016 population of Arizona was 6.836 million according to the OEPS and 6.931 million according to the Census Bureau. Using OEPS estimates, two thirds of the population lived in the metro Phoenix area (Maricopa and Pinal counties), less than 15% in the Tucson area (Pima County), and less than 19% in the balance of the state (the other 12 counties).
Annual Population Change, United States (Census Bureau) 3,600,000 3,000,000 2,400,000 1,800,000 1,200,000 600,000 0 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 2016
Annual Population Change, Arizona (Census Bureau) 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Annual Population Change, Arizona 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2001 2003 2005 2007 2009 2011 2013 2015 OEPS Census Bureau
Annual Population Change Within Arizona (Census Bureau) 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Metro Phoenix Metro Tucson Balance of State
Annual Population Change Within Arizona (OEPS) 150,000 125,000 100,000 75,000 50,000 25,000 0-25,000 2001 2003 2005 2007 2009 2011 2013 2015 Metro Phoenix Metro Tucson Balance of State
Annual Average Population Change by Economic Cycle, Arizona (Census Bureau Through 2000, OEPS Since) 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1970-75 1975-82 1982-91 1991-2001 2001-10 2010-16
Annual Average Population Change by Economic Cycle Within Arizona (Census Bureau Through 2000, OEPS Since) 120,000 100,000 80,000 60,000 40,000 20,000 0 1970-75 1975-82 1982-91 1991-2001 2001-10 2010-16 Metro Phoenix Metro Tucson Balance of State
Arizona s Share of the National Population (Census Bureau for Nation) 2.25% 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Census Bureau Estimates OEPS Estimates
Annual Population Percent Change, Arizona (Census Bureau Through 2000, OEPS Since) 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
COMPONENTS OF POPULATION CHANGE Population change consists of the sum of: Net natural change (births minus deaths) Net migration (in-migration minus out-migration) When possible, net migration is split into two pieces: Net domestic migration Net international migration
Births and Deaths
4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 Net Natural Change, United States (National Center for Health Statistics) 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Births Deaths Net Natural Change
Net Natural Change, Arizona (Arizona Department of Health Services) 120,000 100,000 80,000 60,000 40,000 20,000 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Births Deaths Net Natural Change
Crude Rates of Net Natural Change, Arizona (Arizona Department of Health Services) 25 20 15 10 5 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Births Deaths Net Natural Change
50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Births by Race/Ethnicity of Mother, Arizona (Arizona Department of Health Services) 5,000 0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 White non-hispanic Hispanic or Latino Other
Total Fertility Rate (Arizona Department of Health Services and World Bank) 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Arizona Replacement Rate United States
Total Fertility Rate by Race/Ethnicity, Arizona (Arizona Department of Health Services) 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Hispanic NH Black NH Asian NH White NH Native American
Migration Net international migration as a share of the nation s population change since 1970 has averaged 38.5%, but has varied from less than 20% to more than 50%. Net migration international and domestic as a share of Arizona s population change has averaged 66.7% since 1970, but has varied from negative to 80%.
Components of Population Change, United States (Census Bureau and National Center for Health Statistics) 2,100,000 1,800,000 1,500,000 1,200,000 900,000 600,000 300,000 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Net Natural Change Net International Migration
Components of Population Change, Arizona (Census Bureau, OEPS, and Arizona Department of Health Services) 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0-20,000-40,000 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Net Natural Change Net Migration
Components of Population Change, Arizona (Decennial Census Counts and Vital Records) 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 1950-60 1960-70 1970-80 1980-90 1990-2000 2000-10 Population Change Net Migration Net Natural Change
Components of Population Change, Arizona, 2010 Through 2016 (Census Bureau Estimates) Population Change Net Migration Net Natural Change Births Deaths Net International Migration Net Domestic Migration -400,000-200,000 0 200,000 400,000 600,000
Migration From Another State or From Abroad, United States (Census Bureau) 12,000 10,000 8,000 6,000 4,000 2,000 0 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Number in Thousands (left axis) Percent (right axis)
Percentage of the U.S. Population Moving in a Year (Census Bureau) 25% 20% 15% 10% 5% 0% 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008 2014
Net Migration Rate, Arizona (University of Wisconsin) 40 35 30 25 20 15 10 5 0 1950-60 1960-70 1970-80 1980-90 1990-2000 2000-10
Net Domestic Migration, Arizona (Internal Revenue Service) 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 0-25,000 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 In-Migration Out-Migration Net Migration
DEMOGRAPHIC CHARACTERISTICS OF THE POPULATION Characteristics of the population include race/ethnicity, age, homeownership, etc. The decennial census was the primary source of this information through 2000. The American Community Survey (ACS) has provided such information annually since 2005, but survey error is a concern.
Race/Ethnicity
Race/Ethnicity, Share of Population, Arizona (Decennial Census) 80% 70% 60% 50% 40% 30% 20% 10% 0% 1990 2000 2010 Hispanic origin NH Black NH Asian or Pacific Islander NH White NH Native American NH Other race
Race/Ethnic Distribution, Arizona Less United States, 2015 (American Community Survey) Hispanic NH White NH Black NH Native American NH Asian NH Other -10% -5% 0% 5% 10% 15%
Race/Ethnicity, Percentage Point Change in Share, Arizona (Census Bureau) NH Other/Multiple Race NH Asian or Pacific Islander NH Native American NH Black NH White Hispanic origin -6-5 -4-3 -2-1 0 1 2 3 4 5 2010-15 2000-10
Race/Ethnicity, Projected Share of Population, Arizona (OEPS) 60% 50% 40% 30% 20% 10% 0% 2015 2020 2025 2030 2035 2040 2045 2050 Hispanic origin NH Black NH Asian or Pacific Islander NH White NH Native American NH Other race
Per Capita Income by Race/Ethnicity, Arizona, 2015 (American Community Survey) Hispanic Asian Native American Black NH White TOTAL $0 $7,500 $15,000 $22,500 $30,000 $37,500
Age As defined by generation birth dates: G.I. Generation ( Greatest Generation ): roughly 1901-1926 (ages 90 and older) Silent Generation : roughly 1927-1945 (ages 71-89) Baby-Boom Generation : 1946-1964 (ages 52-70) Baby-Bust Generation ( Generation X ): 1965-roughly 1980 (ages 36-51) Millennial Generation ( Generation Y or Baby-Boom Echo ): roughly 1981-2000 (ages 16-35) Post-Millennial Generation ( Generation Z ): roughly since 2001 (younger than 16)
Number of Births in United States and Generations 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1909 1914 1919 1924 1929 1934 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 G.I. Silent Baby Boom Baby Bust Millennial Post-Millenial
Age Distribution, Arizona Less United States, 2015 (American Community Survey) 85+ 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 <5-0.8% -0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6% 0.8%
Change in Population by Age Group, Arizona, 2010-to-2015 (American Community Survey) 105,000 90,000 75,000 60,000 45,000 30,000 15,000 0-15,000-30,000 <5 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Numeric Change (left axis) Percent Change (right axis)
Percent Change in Population by Age Group, 2010 to 2015, Arizona Less United States (American Community Survey) 20% 15% 10% 5% 0% -5% <5 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84 Age Group Overall
8% 7% 6% 5% 4% 3% 2% Share of Population by Age Group, Arizona (Census Bureau and OEPS Projections) 1% <5 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84 Age Group 2000 2010 2020 2030 2040
Change in Share of Population by Age Group, Arizona (Census Bureau and OEPS Projections) 4% 3% 2% 1% 0% -1% -2% -3% -4% 0-14 15-24 25-44 45-64 65-74 75+ Age Group 2000-10 2010-20 2020-30 2030-40
Share of Population by Age Group and Race/Ethnicity, Arizona, 2015 (American Community Survey) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% <5 5-14 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ NH White Hispanic Other
Share of Age-Group Population by Race/Ethnicity, Arizona (American Community Survey, 2015) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Total <5 5-14 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ Age Group NH White Hispanic Other
Migration Rate by Age Group, Arizona (University of Wisconsin) 70 60 50 40 30 20 10 0-10 0-4 10-14 20-24 30-34 40-44 50-54 60-64 70-74 Age Group 1950-60 1960-70 1970-80 1980-90 1990-2000 2000-10
Migration From Another State or From Abroad, United States, 2015-16, by Age Group (Census Bureau) 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% <5 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84
Percentage of the U.S. Population Who Moved in 2015-16, by Age Group (Census Bureau) 25% 20% 15% 10% 5% 0% <5 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84
Educational Attainment of Workers, Ages 25 to 64, in 2015 40% 35% 30% 25% 20% 15% 10% 5% 0% Less than high school graduate High school graduate Some college or associate's degree Bachelor's degree or higher United States Arizona
Educational Attainment, Age 25 and Older High School Graduate or More Bachelor s Degree or More 90% 35% 80% 30% 70% 25% 60% 20% 50% 15% 40% 10% 30% 5% 20% 1940 1950 1960 1970 1980 1990 2000 2010 2015 0% 1940 1950 1960 1970 1980 1990 2000 2010 2015 United States Arizona United States Arizona
Homeownership
69% 67% 65% 63% 61% 59% 57% Homeownership (American Community Survey) 55% 2005 2010 2015 Arizona United States
Homeownership by Race/Ethnicity of Householder, Arizona, 2015 (American Community Survey) Hispanic Asian Native American Black NH White TOTAL 0% 10% 20% 30% 40% 50% 60% 70%
Homeownership by Age of Householder, Arizona (American Community Survey) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% <35 35-44 45-54 55-64 65-74 75-84 85+ Age Group 2005 2010 2015
Homeownership by Educational Attainment of Householder, Arizona, 2015 (American Community Survey) Bachelor's degree or higher Some college or associate's degree High school graduate (including equivalency) Less than high school graduate TOTAL 0% 25% 50% 75%
Summary of Demographic Effects on Real Estate Slower: Lesser population and economic growth than what has been experienced historically lesser demand for all types of real estate. Older: As people age, they move less frequently, resulting in fewer home sales. An aging population also purchases smaller homes with smaller yards. Health-related businesses and the real estate supporting them experience greater demand. More Diverse: As the population composition shifts from non- Hispanic whites to Hispanics, residential real estate is affected. The lower incomes of Hispanics means lower homeownership and a higher proportion of lower-priced homes being sold. Demand increases for moderate-priced apartments and rental single-family homes.
Why Has the Growth Rate in Arizona in This Cycle Been So Slow? Elliott Pollack cited two factors: The subnormal national economic recovery. The slowdown in population flows nationally and locally, which has the following effects: Lower job creation in population-support activities. Slower absorption of excess inventory. Even after controlling for the national growth rate, aggregate growth rates in Arizona still are far below the historical norm. Lesser net immigration and lower domestic migration rates nationally contribute to, but do not fully explain, Arizona s much slower growth.
Annual Average Real Percent Change, Arizona Difference From U.S. Average 5% 4% 3% 2% 1% 0% -1% -2% 1969-73 1973-81 1981-90 1990-2000 2000-07 2007-15 Economic Cycle, Peak to Peak Employment Per Capita Earnings Per Worker Earnings
Percent Change, Arizona Less United States, Current Cycle Recession: Per Worker GDP Per Worker Earnings Per Capita GDP Per Capita Personal Income Gross Domestic Product Employment Expansion: Per Worker GDP Per Worker Earnings Per Capita GDP Per Capita Personal Income Gross Domestic Product Employment -10% -8% -6% -4% -2% 0% 2%
Economic Dichotomy Base (traded-sector) economic activities drive regional economies, but account for only about 30 percent of total employment. Traded economic activities are those that sell their goods and services to customers outside the region. Importing money into the region is necessary since leakages of money are inevitable no region produces all of the goods and services desired by its residents. Most traded activities can locate anywhere, since their customers are spread out across the country or the world. Economic development focuses on attracting, growing, and retaining traded activities.
Economic Dichotomy (cont d) Local (nontraded) economic activities are location specific since they sell their goods and services to customers within the region. Local activities do not display geographic concentrations across the country. Their presence is largely proportional to a region s size, as defined by purchasing power. While an integral part of a regional economy, nontraded activities do not import money into the region. Their presence is due to the traded activities. Traded activities drive the economy while nontraded activities respond to growth in the traded activities.
Economic Development Economic development focuses on base activities. Success is dependent on an area s business climate/competitiveness. The most important site selection factors are 1. Workforce quality and availability: largely dependent on education achievement and attainment and workforce training. 2. Physical infrastructure quality and availability: transportation, utilities, telecommunications, etc. 3. Costs: particularly labor, but also taxes (evaluated in relation to the availability and quality of public services), real estate, and energy.
Arizona s Business Climate Arizona generally compares favorably on cost measures. Arizona is in the middle of the states on the physical infrastructure. On workforce quality the most important factor Arizona compares unfavorably. Its evaluation on workforce quality has declined over time. Overall, Arizona ranks in the middle of the states on the most reliable studies of business climate: #27 according to the Beacon Hill Institute and #26 according to Forbes.