AZ Real Estate Demographic Shift - Crucial Developments

Cromford Daily Observation(s) - The demographic situation in the 15 Arizona counties is as follows:

County	Median Age July 2010	Median Age July 2015	5 Year Change in Population Under 5	5 Year Change in Population of 65 and Over
Apache	32.5	34.2	-9.2%	+19.7%
Cochise	39.6	40.8	-5.1%	+14.6%
Coconino	30.9	30.9	-8.0%	+32.1%
Gila	47.9	49.7	-2.7%	+17.4%
Graham	31.7	32.6	-7.3%	+12.4%
Greenlee	34.9	33.6	+4.6%	+10.7%
La Paz	54.0	55.4	-9.6%	+11.7%
Maricopa	34.7	36.1	-3.0%	+27.0%
Mohave	47.8	50.4	-15.7%	+20.6%
Navajo	34.7	36.5	-10.9%	+24.2%
Pima	37.7	38.4	-4.7%	+21.8%
Pinal	35.4	38.7	-21.1%	+46.9%
Santa Cruz	35.6	37.1	-11.8%	+22.2%
Yavapai	49.4	52.6	-12.2%	+26.0%
Yuma	33.7	34.6	+0.9%	+19.3%

The 21% decline in under 5s in Pinal County is very ominous for the elementary schools in that county, representing a 6,297 reduction from 29,882 in 2010 to 23,585 in 2015. At the same time the growth in retirees is phenomenal, with 47% more people at 65 plus and 60% more at 85 plus. Pinal county has shown a huge swing from young to old with a 3.3 year increase in the median age over just 5 years. This is due to a combination of growing 55+ active adult communities attracting people from far afield and a low fertility rate for the existing population.

Retirees are already dominant in Gila, Yavapai and especially La Paz counties.

A third of the counties lost population overall, which is a negative sign for their housing markets. These are:

1. Cochise -4.1%
2. Santa Cruz -2.0%
3. La Paz -1.4%
4. Gila -0.7%
5. Apache -0.1%

This shift towards an aging population is not a small, insignificant change. It is a dramatic change compared with Arizona's experience prior to 2007. A lot of this change is probably caused by the unusually low immigration rates we have seen since 2007. In the distant past immigrant parents have tended to have larger families than native born parents and so contributed disproportionately to growing Arizona's economy. Retirees contribute relatively little to growing the local economy as they are usually not fertile and not working.

...we humans seem to have largely ignored the potential deceleration in our economy that low fertility rates are likely to create.

The fraction of the United States population age 60 or over will increase by 21 percent between 2010 and 2020, according to an academic study published in 2014 by the Rand Corporation. Between 2010 and 2050 the fraction will grow by 39%. Coupled with the historically large reduction in fertility rates that is currently underway, we are witnessing huge changes in the demography of the nation. These demographic changes are likely to have detrimental effects on the economy and sectors of the housing market may be significantly affected going forward.

We already see explosive growth in Arizona population counts for people over 60 while the population under 18 is barely growing (and under 5 is in decline). This is unexpected given that we have a relatively large number of women of child bearing age. It is generally accepted that people tend to consume more than they earn during their later years, but consume less than they earn while they are in their working years. It is very possible that the shift towards an older population is the primary cause of the relatively slow growth in GDP in the USA. It follows that similar effects are likely to be at work in other developed countries. We have not experienced an era like this before, so there is little experience to draw on just yet. However, I believe the rapidly changing demographics are likely to become the most significant factor driving housing demand over the next ten to fifteen years.