West Valley economic forecast portends all

A leading economist told hundreds of West Valley leaders Wednesday that Arizona remains a few years away from digging out of the recession and the reason isn't solely about money, unemployment and a housing market gone bust.

"The problem isn't just financial now, it's psychological," Elliott D. Pollack told those attending WESTMARC's annual meeting and economic forecast breakfast at Glendale Civic Center. "Even those who own homes, have steady jobs, have savings, are taking a step back and deciding not to spend any money."

Pollack is chief executive officer of a Scottsdale-based economic and real estate consulting firm that specializes in Arizona economics and real estate.

Much of Pollack's presentation centered on how the economy in Arizona deteriorated in the first place. The culprit, Pollack said, was the real estate industry.

"From 2001 to 2006, the Valley overbuilt. They did 10 years' worth of building in six years, moved four years' worth of employment into those six years, which is why job growth continued to look so good for that time. But now we have tens of thousands of excess homes that we need to absorb. It's going to take a few years for things to turn around."

Pollack said the problem is the same across the nation. While an average of 1.2 million homes usually sit empty, now there are approximately 2.2 million.

"If the Obama administration really wanted to help, they'd go out and buy a million homes and burn them to the ground," Pollack joked.

The over-saturation of the housing market has caused a ripple effect across nearly every aspect of the economy, Pollack said. And until construction stops and those excess homes are occupied, the economic climate will continue to be poor.

"There will be virtually no improvement in the housing situation in 2009," Pollack said. "It's an ugly story. Foreclosures will still be very high."

The foreclosure epidemic was something Pollack said people should get used to, at least in the near future.

"The worst of the foreclosures is probably still ahead of us, actually," Pollack said. "Almost regardless of what the banks or the Obama administration do."

Pollack said people should not lose hope, however, noting the economic fundamentals of the greater Phoenix area have been sound in the past and have not changed "one iota." Spending, though, will be way down, compared to the 1950s, he said.

"The party is over for quite some time," Pollack said. "But when the national economy begins to turn around, we here in the Valley will do quite well."

Outgoing WESTMARC Chairman Ray Jones began the meeting by addressing the economic downturn that Pollack elaborated upon.

"It has been a tough year, and next year will be, too," said the president of Aricor Water Solutions. "But a lot of positive things have happened, as well. There are still a lot of great things going on in the West Valley, and that's a testament to the resilience of the community."

Jack Lunsford, WESTMARC president and CEO, tried to ease the minds of those worried about the future of the organization.

"The condition of WESTMARC is good, and we're proud to say that, especially with what is going on around us," Lunsford said. "We are aware of the challenges we will face in 2009, and we will meet them."

New Chairman Mike Woodard compared WESTMARC to the Super Bowl-bound Arizona Cardinals, holding up a No. 11 Larry Fitzgerald jersey to illustrate his point.

"The Cardinals were a football team that nobody thought could go this far," said the director of research for Blue Cross/Blue Shield of Arizona. "They surprised the world. They showed that with strength and with unity of purpose, anything is possible."

Woodard promised that WESTMARC would follow the same path.

"Like that football team, WESTMARC will provide a better future to the West Valley through the strength of its ideas and the power of its collaborations," Woodard said.

WESTMARC is a broad-based coalition of business, government and education serving the 15 communities in western Maricopa County that represent more than 35 percent of the county's population.

Jeff Dempsey may be reached at 623-876-2531 or jdempsey@yourwestvalley.com.