Is the Western growth machine coming out of its coma?
I like to keep an eye on what the housing market’s doing in the West. That’s not because I’m invested in it -- my family and I have been happy renters since we sold our house a year ago. I’m interested in the housing market because this one data set can tell so much about a place. That’s particularly true in the many Western communities that have tied their economic fate to growth.
The greater Phoenix, Ariz., metro area is surely the best example of this. Housing values climbed steadily there from the 1980s until 2003, then they went berserk, doubling between 2003 and 2007. Thousands of acres of desert and farmland were gobbled up by the building frenzy that resulted, and construction jobs were plentiful. Then the collapse hit. The average house lost half its value between 2007 and 2009. Growth ground to a halt, Arizona lost some 40,000 construction jobs and the population of Phoenix actually started shrinking. The pattern was mirrored in Las Vegas and other growth-happy places.
For the next two years, housing markets stagnated or even kept dropping, leading many -- myself included -- to wonder whether the growth machine was permanently broken.
Starting several months ago, however, story after story popped up indicating that the Phoenix housing market, at least, was recovering. I spoke with Phoenicians who were in the market for a new home, but sales were so brisk that the good ones were snatched up as soon as they were listed. In the beginning, there was a caveat: Yes, sales did go up, but they were driven in part by the fact that houses were so cheap, or foreclosed-upon, and purchased en masse by investors and rich Canadians.
Now, however, the Arizona Republic reports that Phoenix is months into a steady climb in housing values. In fact, Phoenix, with a 19 percent jump over the past year, led the nation in home price recovery, according to the Case-Shiller Home Price Index. Even Las Vegas is showing very subtle signs of pulling out of its real estate coma.
Before we all start banging our heads against the walls and lamenting the return of the desert-gobbling growth machine, though, it’s worth considering a few things. First off, Phoenix’s median home price is currently just $117,000, still far below the 2006 peak of $228,000. Las Vegas’ apparent recovery is so slight, and prices remain so far below the peak, that it’s hardly worth noting. Also, as this nifty interactive map from the Arizona Republic shows, Phoenix’s recovery is being driven not by price jumps out on the fringes, where most of the new building was occurring during the boom, but in the more central zones.
It appears, then, that people are less interested in living way out in the exurbs, with those three hour commutes, than they are in living close to downtown, the light rail, and an actual community. (In fact, prices in parts of Surprise and El Mirage, once fast-growing exurbs, have dropped in the last year). While it’s too early to call this a trend, it’s certainly an encouraging sign. It raises the possibility that if there is a full-on growth machine recovery, there will be more infill development instead of more sprawl.
At this point, though, more building is not much of an issue. This chart from the Federal Reserve Bank of St. Louis shows construction employment in Arizona, Nevada, Colorado and Utah. Houses just aren’t being built at that mass-production rate they once were, and it appears as if, rising home prices and all, such construction is still years away. (Note: The graph uses a log scale for number of jobs for presentation's sake).
Jonathan Thompson is a senior editor for High Country News. His Twitter handle is @jonnypeace.