Arizona’s Lost Decade: Making the Case for a Blueprint for a Sustainable Recovery
Mar 4th, 2010
Housing affordability reached crisis proportions in Arizona between 2004 and 2007. Speculation fueled production that outstripped housing demand. The Arizona economy grew at consistently high rates placing Arizona at the top of state employment growth. Just two years later in 2009 a survey of the top 100 job markets by the publisher bizjournals.com found that Arizona went from #1 to #84 nationally. The state’s overreliance upon real estate development, sales, and supporting services placed the economy at risk when the Metro Phoenix real estate boom abruptly ended.
According to University of Arizona Economist Marshall Vest, “residential building activity (as measured by building permits) has fallen to less than 85% of its peak level. That compares to declines of 74% and 71%, respectively, during the two earlier periods” (the recessions of 1974-75 & 1981-82). “Arizona has been hit harder than any state, with the exception of Nevada,” Vest continues. “Arizona’s economy entered the recession three months earlier than the national economy, and will likely emerge later.”
Economists predict that it could be 2013-2014 before Arizona employment levels reach the 2005 level, although incomes may take significantly longer to recover. If that proves true, then Arizona’s three year boom could be followed by a seven year bust. Indeed, even with recovery five years out, it is reasonable to predict that it could take the next decade for families, business and government to recover from their extensive financial losses.
Some accept the proposition that a boom or bust economy is a normal Arizona market characteristic. During boom years, there are many gains in personal and corporate wealth. Public services are expanded, infrastructure is further developed and consumer choices in housing expanded. Capital placed at risk by investors is rewarded with favorable returns on investment. Entrepreneurs find capital available for new intellectual and real property development. The bust cycle however, results in much pain and collateral financial damage, offsetting many of the gains and leaving impaired families and communities in the aftermath. The wreckage of foreclosed homes and neighborhoods, lost personal and family savings and state and local government financial shortfalls we see today should inform and inspire a better way of sustainable development policy and practice.
The Stardust Center’s Advisory Board rejects the notion that Arizona’s recovery cannot be sustained over time. Indeed the Arizona envisioned by the Stardust Board is resilient, flexible and resourceful. But a sustainable recovery means we cannot repeat past mistakes and return to business as usual. The report “Blueprint for a Sustainable Recovery” is a starting point. In rasping the gravity of the situation, the leadership of the Stardust Center Advisory Board has developed concrete, proactive steps to ensure public policy and business practices support a sustainable recovery.