Phoenix's new normal

Let's take a random walk through the "news from home." Much rejoicing must have come to the Real Estate Industrial Complex from the recent BusinessWeek story headlined, "A Phoenix housing boom forms in hint of U.S. recovery." Maybe it's even real and Homey was wrong when he predicted that the old growth machine — with championship golf! — isn't coming back. If so, a new housing boom would be the worst possible event in the long run. Any chance to learn the lessons of the crash will be lost, along with the opportunity to reset for a more sustainable future.

I suspect the bluster of a "boom" cloaks a recovery from a very deep bottom, so naturally the percentage gains will look impressive. In addition, we don't have the research to indicate the subdivisions that are being abandoned to "investors" — or just abandoned — as qualified buyers snap up the new stuff from the likes of Pulte. Population has increased, but not at the rates of the 1990s and 2000s. Also, the labor force for the metropolitan area is only slightly larger than it was in 2006, hardly the spectacular growth seen in the previous decades.

Some macro realities will not go away: most Americans are much poorer after the recession; wages are stagnant and have been falling on average for years; unemployment remains high and many may never find work again; "consumers" are still carrying more debt than historic norms; changing tastes and demographics, with talented young people and many boomers preferring real cities, not Sun City; Phoenix still has a low-wage economy. All these factors will be headwinds against the triumphal return of the Growth Machine.

In any event, the same dreary pattern continues: Single-family house sprawl ever farther into the desert. Like the Bourbons, the Real Estate Industrial Complex has learned nothing and forgotten nothing. Two-thousand square miles and spreading out. Near total car dependence. Any serious discussion of water supplies, environmental degradation, carrying capacity or the affects of climate change is forbidden in the public square, and the occasional horrified outsider's take is quickly shot down by the local-yokel propaganda machine and even often sensible people.

There's no Plan B. No innovative approaches. In Fountain Hills, created as a low-density bedroom community (by bulldozing one of the most enchanting saguaro forests in the state), the council wants to attract employers and add to its population. Just like Goodyear and Maricopa and Prescott Valley. There's only one plan, the same old real-estate hustle. And, as is to be expected when you attract such a narrow slice of the Big Sort, even a trails plan brings out worries of "one-world government." The only one-world government are the land grifters profaning the desert.

And there is a market for Phoenix. I heard from a former Seattle-area resident who moved to there and wrote:

It is not that I’m 'entranced' with Metro Phoenix…  But I would say I do love the Southwest and for better or worse Phoenix is where there are jobs here. But having lived here now for a couple of years (and having traveled here at every opportunity for 20 years) I like it much better than I ever would have imagined. It’s an easy and enjoyable place to live. I don’t have the bias of what used to be, and honestly even if there was something in downtown Phoenix I wouldn’t go there just as I avoided downtown Seattle at all costs…

If one doesn't have urban values to begin with, the asteroid belt of the newer parts of Phoenix can indeed be pleasant. (My correspondent also wanted me to take on Seattle's smugness, an irony when I consider the smugness of north Scottsdale, et al). I write the journalism and literature of exile and estrangement. If you're happy in a new subdivision of a "master planned community," if you think the finest achievement of a civilization is more freeways, you won't get it. I avoid the white-right apartheid suburbs at all costs.

Unfortunately, my interest in "what used to be" remains, partly as a historian but as important for what is says about the region's continuing missteps and challenges. And I am a central Phoenix Phoenician. So it's interesting to see these jobs announcements trumpeted by the governor and local officials — and they are invariably in the suburbs. Chandler gives GM an incentive to bring an innovation center. A "digital health-care service" for Scottsdale. Union Bank opens a mortgage operations center in Tempe. Few of these will change the basic, low-quality jobs mix or even provide jobs outside the housing sector to support population growth.

I do wonder about the city of Phoenix. A report came in about a distribution center going in at 75th Avenue and Buckeye (that's taking advantage of light rail!...WBIYB), but that's about it. The Labor Department statistics I've seen don't drill down historically to the city level on employment. But I wonder, as power and wealth is sucked out to Scottsdale, Chandler and Gilbert, if the city is actually losing employment? The Central Corridor suffered serious job losses in the 2000s, but nobody wanted to talk about it or track it. And even an answer here doesn't get to the issue of whether Phoenix is losing, gaining or retaining well-paying jobs. If not, then the donut hole Mexican Detroit theory gains traction, no matter how many new restaurants have opened in the core. Meanwhile, most arts organizations are in serious trouble, no matter what is said publicly. Unemployment remains high. The economy is astonishingly limited for such a populous state. And it's not just per-capita income that's underperforming. In the Census Bureau's three-year tracking of median household income Arizona is below the U.S. average ($48,319 vs. $51,027) for 2009-2011, but the state's median household income has been falling since 1999-2001. This is a place far from recovery and even in the 2000s boom, the economy was troubled beneath the real-estate froth.

The Phoenix City Council has lost the cohesion it had in the 2000s, indeed through most of the city's history. As a result, Phoenix is unable to address its challenges or reach for greatness. Greg Stanton was not wrong during his mayoral campaign to say Phoenix was at the most profound turning point in its history. But that turn won't be avoided by developments in Desert Ridge or building the South Mountain Freeway. Meanwhile, the madness at the Legislature continues. Little of it is home grown. Look deeper into any crazy initiative and you'll find the fingerprints or ALEC or the NRA. So pay attention to North Carolina, where Republicans have gained control of the Legislature and are moving to take Charlotte-Douglas International Airport away from the city. The Kookocracy would love to get its hands on Sky Harbor.

In everything I read and hear from sources is Arizona's continued parochialism. Is Phoenix attracting the world's attention like Austin? No, only to the extent that Arizona's reputation for intolerance and craziness rubs off. Even Joel Kotkin, the most widely published apologist for Sun Belt car-dependent sprawl is reduced to using Houston as his model. But Houston is an alpha city with major headquarters and oil. And even here, the metric is merely population growth, not quality. The world keeps changing. Massive disruptions are coming. They're already here. But the hands-over-ears "never is heard a discouraging word" denial continues. It won't turn out well, no matter how many crapola stucco houses are built.

 

 

 

 

Comments

[Joanna]

"I suspect the bluster of a "boom" cloaks a recovery from a very deep bottom, so naturally the percentage gains will look impressive."

From bubble height to deep bottom, the value of my house depreciated almost 60%. The houses that are selling in my NW Phoenix neighborhood are maybe 10% above the deep bottom. While the trend is better than it was, I'm not thrilled and not willing to sell. Yet.

[Jason]

Jon,

Loved when you lived and wrote from Phoenix about Phoenix. I just moved back after 10 years away (Boston for school, DC and NYC since) and am buying a house in a historic neighborhood right near where you grew up.

There are a LOT of people moving back 'in town' who grew up in central Phoenix, moved to the burbs, and now see the vibrancy. Now if only the ACA could prove its worth (doubtful) or see a homegrown firm launch downtown, we'd be set.

[Skip]

While there does seem to be an "upsurge" in the housing market in Phoenix, it also appears that there will NOT be the past practice of lending 125% of the appraised value, and also the appraised values are much more in line with what they should be.. The problem that we could easily face, here in Phoenix and all over the rest of the Country, is the call by President Obama that the banks/lending institutions take a better look at those with low Credit scores..and I believe an example that went with his speech was a 591!! NOW...I guess they (Washington, the President, Fannie and Freddy) did not learn ANYTHING from the almost total collapse of the home Mortgage business... Fanny and Freddy (under the idiot Barney Frank) were warned, as early as 1993...and they did NOT heed the warning. Now the President wants to start that all over again?? People have a low credit score for a reason...fail to pay their obligations!! Here we go again, the President will pull us down more and more with his idiotic ideas..

[phxSUNSfan]

I thought you were going to write about gay families in Phoenix. You disappointed me!

On a serious note. I completely agree with this: "I suspect the bluster of a "boom" cloaks a recovery from a very deep bottom, so naturally the percentage gains will look impressive." As for jobs in the Central City and downtown, I wonder what effect the universities and medical schools/centers have had on employment. With more to come, what growth potential is presented.

I have also heard conflicting stories about the arts in Phoenix. I read on Rogue that it is struggling but I heard from others that donations and funding are gaining; hence, the new home and expansion of the Arizona Opera on Central Ave, and the new art installations at PAM.

[morecleanair]

Have the lending institutions been scared into constricting and complicating new loans and re-fis?
Apparently not, if we're bouncing back from the abyss. Banks like Wells Fargo are deluged and backlogged on mortgage apps from last fall! And God help you if your income is retirement-derived . . no matter the net worth of your liquid investments . . . .

[100 Octane]

I have a friend in local real estate, claims things are the same as the mid 2000s only prices are lower, more cash buyers, loans harder to get. Everything sells.
Northbound on the 51 on weekday mornings there is traffic build up/slowing at the Camelback exit. Very consistent. Did not see that a few years ago. Traffic seems to be heading westbound.
Speaking for myself, I have had a full time job and a part time job since 2008. One caters to the well off, the other to middle class with disposable income. Both employers doing well.
My two cents.

[soleri]

Arizona Opera just fired its director, and the Phoenix Symphony is looking for a new music director. Ballet Arizona recycles it tried-and-true repertoire in order to keep its seats filled. Phoenix Little Theater is building an impressive new home next to the old one. There's not too much otherwise pointing to a vibrant arts scene in the city core.

The restaurant metric is interesting. There's been a boom in north-central Phoenix, and Changing Hands is renovating the old Beef Eaters on west Camelback for a bookstore and higher-end restaurant. These are good signs, but the poverty you see at the bus stops is unmistakeably ominous. Chris-Town is virtually Third World now while even the retail at the Biltmore Fashion Park is gradually exiting, leaving room for more restaurants.

The new real-estate action is mostly for apartments. Here, the boom is mostly on the periphery but there are some complexes being built close to downtown and in midtown and uptown. What is telling is that many of them are also social housing for the elderly, Native Americans, or the handicapped. What you really don't see is much higher-end production in the core, although Cityscape is building some. There's a big new complex at 36th St & Campbell that appears upscale, but that's as close as you get. And then there's this: Chateaux on Central might have sold one of its deeply discounted units but is otherwise floundering.

The overall sense I get is that Phoenix is emerging from its worst depression in modern history but that the damage that was inflicted is ongoing. There is money (!), of course. People have refinanced their houses, or gave their overpriced houses back to the bank. Others are simply bottom-feeding and buying rental properties. This gives a stronger sense of vibrancy to the better parts of the city. What I don't really get, however, is any sense that Phoenix has figured out what to do with those parts that are swamped by poverty.

If Republicans have their way (and I believe they will), Phoenix shall be punished for being poor and Hispanic. Education funding will be eroded. Obamacare will be lacerated. College tuitions will increase to exclude most of the poor and near-poor. Increasingly, the well-to-do will privatize most of their own civic functions so there won't be much need for governmental funding for anyone (since Jesus and his wife Ayn Rand have pointed the way to a higher truth that only the rich understand). The poor ye shall always have, so incentivize them with hunger.

[cal Lash]

"you can tell whose on the way to heaven by their accumulation of wealth"
calvin
and their number of wives and kids
joseph

[homeless]

With up to date marketeable technical skills and age below 40 the Seattle model is great.

With a networth of $1 million per person or a liveable pension the Seattle model is great.

Facing age discrimination and being on the wrong side of the 2008 financial collapse hunkered down in low wage lower priced Phoenix is preferred.

With a high school education, good work ethic but no marketeable technical skills Phoenix provides greater opportunity than educated Seattle.

Seattle is an exclusive model for the relatively young and well educated or wealthy. Unfortunately that doesn't encompass all groups.

[pina]

King County prosecutor's office and the Seattle police department have far greater documented incidents of white power racial discrimination than metropolitan Phoenix law enforcement. Actors of documented racism in King County remain employed whereas in Phoenix they would have been dismissed.

[Rogue Columnist]

If homeless is not writing in jest, he or she needs to be challenged.

I wish everything didn't devolve into Phoenix vs. Seattle. Much of the city of Seattle is a high-talent, high-wage place. You get what you pay for. But the metropolitan area has plenty of places for others to "hunker down." Tacoma, Everett, etc., etc. And the economy is much more diverse, providing more opportunities for everybody.

How about Phoenix vs. Dallas, or Houston, or San Diego, or Denver, or Atlanta. These are the peers Phoenix is competing against whether it wants to or not. By sticking its head in the sand, Phoenix ignores its continued slide. By this logic, El Paso or Fresno are even better places.

As for Pina, it is impossible to make comparisons. Seattle PD polices a very dense city with a liberal population skeptical of the police and lots of activists ready to record what is sometimes brutality and sometimes just what happens when somebody chooses to fight the cops. Seattle faces protests, anarchist outbreaks and violent street people in a dense setting. How is Phoenix PD really doing? I'm not sure we know. And to ignore Arpaio and MCSO while making these comparisons takes some brass.

[cal Lash]

Is that the Pina that didnt get the PPD chiefs job?

[headless lucy]

Seattle is a very gloomy place and it rains here all the time. Don't come here. Stay in Phoenix.

You have to be very special and incredibly smart just to carry on a conversation with the street people (many of whom make $30,000+ a year selling the 'Homeless Newspaper' to international travelers itching for an opportunity to ride the monorail and partake of a cup o' Joe from the very first Starbucks).

I know it would be a very intimidating place for most Arizonans. You guys can just stay where you are and take potshots at Saguaro Cacti with your shotguns.

http://www.telegraph.co.uk/gardening/3300373/Long-arms-of-the-law.html

>>>>>>>>>>>>>>>>>:D

[cal Lash]

Headless lucy. just visited with Ed Abbey. we are inviting u to the next Sahuaro Dance calling for the destruction and desert renewal of the Valley of the Sun outside 27 ave d 64 st and North and South Mountains

[Rogue Columnist]

Lucy: Perfect.

[Ruben A. Perez]

Adios Paolo Soleri.

[headless lucy]

Safety tip: Hunters,don't stand underneath the Saguaro limb when you take your shot at it.

Ouch! That'll leave a mark!

[headless lucy]

re cal lash -- Thanks for the compliment.

The great thing about the proposed desert renewal is that all of the soil nutrients north of S. Mountain Park have been carefully preserved under a protective coating of asphalt and cement.

[cal Lash]

Headless Lucy, I read very few novels and my Edward Abbey is Desert Solitaire however The Good News by Abbey, is a fun read.

[Emil Pulsifer]

Side note: three new replies in the Hair On Fire thread.

[Emil Pulsifer]

I have only a short time left online tonight. In passing, in response to the discussion in the comments about Seattle PD, I wanted to mention this:

Seattle PD Chief John Diaz recently announced that he is stepping down. The decision may have something to do with the 2011 formal finding by the U.S. Department of Justice that the department's officers engaged in a "pattern and practice" of excessive force. According to the head of the Justice Department's Civil Right Division, the department's practices to assure accountability and public trust are "broken" and that the only sure fix is through court-ordered, long-term reform and an outside special monitor to oversee it. The federal report found that "starting from the top, SPD supervisors often fail to meet their responsibility to provide oversight of the use of force" by officers.

The report concluded that fully one of every five instances of force by Seattle officers violates the Constitution's protections against illegal search and seizure.

This can't be said of the Phoenix PD. And despite the horrendous abuses in Arpaio's jails (and other Arizona prisons), it can't even be said of Arpaio, since, for whatever reason, the U.S. Department of Justice has declined to make the kind of categorical accusations leveled against Seattle PD.

Some direct quotes (unattributed above) taken from here:
http://seattletimes.com/html/localnews/2017030072_doj17m.html

[cal Lash]

I note in az repulsive that Grady Gammage is the go to guy for plenty of water for at millions more.

[Emil Pulsifer]

"headless lucy" wrote:

"You have to be very special and incredibly smart just to carry on a conversation with the street people (many of whom make $30,000+ a year selling the 'Homeless Newspaper' to international travelers itching for an opportunity to ride the monorail and partake of a cup o' Joe from the very first Starbucks)."

Nobody makes that kind of money selling Real Change. The paper sells for a dollar and the vendor keeps 35 cents. Even big sellers (called "fixtures") like Edward McClain sell between 1,500 to 2,000 papers a month. Do the math and you'll find that comes to between $6,300 and $8,400 annually; and McClain ISN'T homeless. The Seattle Weekly did an expose of non-homeless big vendors of Real Change.

The math aside, common sense suggests that the idea of anyone making $30,000 a year and being homeless is nonsense. You could pay as much as $1,000 a month at an extended-stay motel (and even in Seattle lower rents than this are available) and still only spend slightly more than 1/3 of your annual pre-tax income.

[Emil Pulsifer]

Side note: a couple of new comments in the Hair On Fire thread.

[Emil Pulsifer]

Grady Gammage's essay relied in part on a straw man argument. Gammage notes that Phoenix doesn't rely on local rainfall, but on the Colorado. OK, but the work he criticized didn't say that Phoenix's water supply would be challenged by diminished local rainfall; it said that it would be challenged by diminished Colorado River flows, which could also be vulnerable to diminished rainfall, but geographic area rainfally, not Phoenix-local rainfall.

Still, Gammage manages to make some interesting points.

[Emil Pulsifer]

The number of Fortune 500 companies headquartered in Texas is roughly proportional to the size of the state's GDP (2nd in 2010) as is the number in Arizona (18th). Most of Houston's corporate HQs are oil or energy related, and that doesn't argue a diversified economy.

Austin has only one headquarters: Whole Foods Market. Don't get me wrong: Austin has a lot going for it; but my point is that the HQ thing is a red herring as an indicator of metropolitan success.

[Emil Pulsifer]

Sorry, I can't get the Texas Fortune 500 HQ list (2012) link to post.

[Emil Pulsifer]

Sorry, my mistake: vendors of Real Change pay the publisher 35 cents per paper and sell the paper for a dollar; so their profit per paper is 65 cents, not 35 cents. That brings the income range of non-homeless big vendors like McClain to $11,700 - $15,600 a year.

[Emil Pulsifer]

Excellent point about household wealth, Mr. Talton: aggregate household wealth has recovered, but most of the gains come from the stock market and have gone to the upper class; whereas most of the wealth of the middle class comes from home values, which haven't recovered as quickly; and many middle-class households sold stock when the market was in decline and thus missed out on the recovery.

http://economix.blogs.nytimes.com/2013/03/26/declining-wealth-rising-retirement-risk/

I'm not sure that Phoenix's low-wage labor market is a headwind, since it wasn't in the boom days. There is also the question of cost-of-living versus wages. What counts in attracting labor (and migration) to the state is the standard of living which must take into account four things: (1) wages; (2) cost of housing, food, energy, and services; (3) tax burden; (4) level of services provided by government. Exactly how these things balance out in Phoenix's case is a good question.

In any case, what is the worst-case scenario? Slow growth, and slow-migration. That means a slowdown in sprawl, also, and in resource usage and pollution. The status quo will abandon the population growth and housing construction model of economic development when it is clear that they have to, not before.

[Emil Pulsifer]

Side note: another new reply in the Hair On Fire thread.

[Emil Pulsifer]

One last observation: to the extent that many of the "macro" factors affect the nation as a whole, they don't make Phoenix specifically less competitive since most other cities will be suffering from similar hobbles.

[cal Lash]

"Hobbles " arizona legislature

[Emil Pulsifer]

Well, let me second-guess myself here. Worst-case scenario: increasingly hotter weather, starting earlier and lasting later, whether from the heat-island effect or a combination of factors, causes many new (and some old) residents to reconsider and move elsewhere. Tax receipts decline, forcing a decay of infrastructure, which further alienates residents and potential migrants; or taxes are raised and that alienates.

As Mr. Talton has pointed out countless times, the maintenance of aging infrastructure in older areas of a city (whether or not depopulated as migrants flow outward to suburbia) is dependent on new tax revenues from newly populated developments: those developments don't need the same level of maintenance, repair, and replacement precisely because they are new; but in time they too age and the Ponzi scheme continues. Or not.

Yes, as Grady Gammage points out, air-conditioning is a wonderful thing, but only inside. Being held-hostage indoors increasingly often or forced to avoid strenuous outdoor activity in order to avoid heat-stroke, isn't a recipe for the urban or suburban good life.

[Emil Pulsifer]

Skip makes a good point about the days of EZ credit being over, at least for the time being -- and this is another macro factor limiting consumer demand (and thus limited economic growth).

The thing is, as housing prices recover and homeowner equity recovers, and as the unemployment rate decreases to more normal levels (assuming this to be the case), lenders will decrease their standards naturally. Lenders make a profit by lending money, and the more money they lend, the more profit they make. Increased housing and job security will go a long way toward ameliorating the sense of emergency markets.

To some extent, lenders have already begun this process on their own, since many of those who now have less than stellar credit scores didn't get that way because they chose to be deadbeats: they got that way because of the Great Recession which destroyed more jobs than at any time since the Great Depression, and the housing market collapse which destroyed record amounts of household equity and made mortgage and credit payments difficult for countless numbers of previously "solid" borrowers, together with record numbers of foreclosures and bankruptcies resulting from the same.

So, there is already a scramble among private lenders to locate the cream of the new non-cream and increase lending to them. There have also been changes in the way credit scores are calculated and more such changes are on the way.

[Steve Weiss]

Above in the comments I read "There's a big new complex at 36th St & Campbell that appears upscale.."

Actually, the owners of this proposed condo loft development has changed its purpose to an assisted living facility, noting the aging of the neighborhood. Kind of smart, I think.

[Emil Pulsifer]

Side-note: one new reply in the Hair On Fire thread.

[phxSUNSfan]

Steve Weiss...the complex on 36th and Campbell will in fact be an upscale project called Domus. It is being developed by a Chicago based company and will managed by Scottsdale based, Mark-Taylor Residential.

This is what the Chicago developer said about infill projects and Phoenix developers:
“One of the things that struck me is that the Phoenix rental market is kind of what I call a one-trick horse,” said Bill Smith, owner of Chicago-based real-estate company Smithfield Properties, which is developing Domus. “Besides Optima, all developers out here know how to do is build four-story, wood frame, stucco buildings. We think there is a group of people that wants a more sophisticated product.”
http://www.azcentral.com/community/phoenix/articles/20130403domus-infill-project-arcadia-phoenix.html

And he is spot on; Phoenix developers do not know how to build a quality, urban project. With the exception of projects in downtown, there really aren't many of these type of buildings in Phoenix.

[Rogue Columnist]

When I was in my early 20s, I lived at 36th Street and Campbell in an apartment building with a lovely courtyard and abundant shade. There were still horse properties to the east before the horrid "Susie's Subdivision" was put in. Now, with proximity to Scottsdale, this is a prime location. Unless the city has ruined it, Campbell (and 40th Street, with La Grande Orange) is narrow. Such narrow streets are an important part of urban livability.

But...it's not downtown, not infill and not on light rail. I'm glad someone is reinvesting in the neighborhood. That lack of reinvestment is causing the once fine neighborhoods to the west and south to decline. Yet the fundamental problem of Central Corridor emptiness remains.