The Urban Land Institute had its annual Phoenix real estate conference on Thursday. The conference is well regarded as it tends to bring in outsiders without any axe to grind to offer their assessment of the Phoenix real estate market and its prospects. The analysis presented by the participants wasn’t too attractive.

“Growth locally (in Phoenix) really was related to the housing boom. When the rug was pulled out from under housing, the rug was pulled out from under Phoenix’s economy,” said economist Arthur Margon of New York-based Rosen Consulting.

He predicts Valley home prices will climb 1 percent in 2011 and perhaps 2 percent in 2012.

“If you can slug it out for a few years, all those frowns out there will go away,” Margon told the crowd.

Now forecasts are a dime a dozen and Margon may be right or way off, but his is just about as bearish a forecast as I have heard. The logic underpinning the forecast seems to be that the foreclosure problem isn’t going away anytime soon and that the Phoenix metropolitan area has been economically devastated by the downturn in construction and financial services.

Here are the views of Margon on the general economy.

One of the more startling statistics was how much Phoenix’s job growth had slowed.

Phoenix ranked above only Detroit for job creation on a list of the nation’s top 25 metro areas, Rosen Consulting said.

“Phoenix has been in the top five for job growth from before there was even a list,” Margon said. “This is strange.”

He said the low ranking is due to Phoenix’s dependence on industries that are “ground zero” for the recession.

“But the outlook for Phoenix job growth is phenomenal,” Margon said. “We don’t think Phoenix will crawl back up the list. It will leap back up.”

Phoenix’s key industries will get help from anticipated federal spending on infrastructure projects and the housing bailout.

That’s sobering. I wasn’t aware that the Phoenix job market was in that poor shape, bad yes, but only beating out Detroit. If you throw that into the mix, then his forecast for the real estate market starts to look a bit more plausible. In an economy that relies on migration and growth to spur home construction which in turns creates more jobs and well you see the cycle. It has elements of Ponzi in it and certainly begs the question as to how you start the whole wheel turning again.

I wouldn’t tend to write off Phoenix yet. More than one analyst has been proved wrong on that score. At the same time, I wouldn’t dismiss the forecasts that came out of this conference to readily either. Phoenix has a headwind to fight for some time.

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