Apparently The Economist magazine had an unflattering article on Phoenix recently and our Elliot Pollack, economic guru, shot back.
Let’s examine the basic facts. The City of Phoenix is the economic and social hub of the Greater Phoenix area. During the past three years, Greater Phoenix has been the most rapidly growing of all 28 major employment markets in the U.S., and has consistently ranked at or near the top in terms of growth.
Phoenix sounds like one of the best places in the United States to own real estate. It is.
[Hat tip to Elizabeth Scott at North American Title Company.]
UPDATE: Here’s The Economist article.
{ 26 comments… read them below or add one }
Cbass 08.23.07 at 7:12 pm
As I understand it 40% of our economy is based on housing related activity. Therefore I have to conclude that a slowdown in the RE sector will affect Phoenix worse than most. In addition the speculation that drove prices up reminds me of Chirstmas. What do I mean by that? Well at Christmas time there is always one toy or game or whatever that everyone has to have. People wait in line for hours till stores open to be one of the lucky few. Remind you of anyting that took place in the valley lately??? Then the patient folks who come in after the holiday season pick up the same toy up for 25%+ discount. Housing is going to be no different in my opinion.
We will see who is right (The Economist or Elliot Pollock) over the next year and a half or so I guess.
MPS 08.24.07 at 12:03 am
That was a very slanted article. There is a buzz in this city that was not here when I first arrived several years ago. To mention downtown Phoenix and only describe the contsruction woes from the light rail is ignorant. What about the new med school that just opened? What about the convention center, hotel, gene research and ASU campus, the Phoenix Suns, first place D-backs and the real estate is still cheap compared to other cities of this size. Into the ashes? More like “out of the sand”. A new city is emerging.
John L. Wake - Realtor 08.24.07 at 7:01 am
The real estate market is slow right now but Phoenix will be one of the first markets to bounce back.
Pollack and MPS give some of the reasons why.
RE Investor 08.24.07 at 11:47 am
As much as I think that some RE in Phoenix is still overvalued, I have to agree with the assertion that Phoenix is the best place to own RE. When I look at my current portfolio of homes, the real drops in value even in this credit crunch environment has been in the outlying areas. Inner areas - close to employement centers - across the board have held up surpisingly well considering the problems in the industry right now. Rents have actually increased as well YOY (in my properties at least).
As far as the slant on that article, it was clear to me where it was going upon reading the first two sentences. That light rail debacle is a mess, but to judge the whole economic future of a city of 3 million plus people on a small stretch of businesses along the light rail is ridiculous. As far as the education issue, that is a direct result of the illegal immigration problem - as is the crime issue. I have a child (5 year old) in the Gilbert school district, and that is a fine school district. The teachers I have spoke to regarding this unanimously say the problem lies with them having to “accomodate” alot of the “anchor babies” in the classroom at the expense of the english speaking kids. Also, because of the transient nature of the illegals, it is hard for teachers to depend on their continued attendance.
I feel that when the new laws take effect in January, sanctioning employers for hiring illegals, and they begin to “self deport” because they can’t find work, that will cut down crime, education, hospital/healthcare overcrowding problems etc. Some do not want to admit what the problem is, and when people do speak up, they cry racist. It is not a racist issue, it is a security, fairness to LEGAL foreign nationals and crime issue.
Just my thoughts
John L. Wake - Realtor 08.24.07 at 1:33 pm
RE Investor,
Thanks for the comment.
Paul Cooper 08.25.07 at 10:28 am
Anyone what to guess how many homes will be put on the market from people or relatives of people who own homes that are affected from the new law that takes effect in January, sanctioning employers for hiring illegals???? Anyone want to take a crack at it knowing how big the hespanic population is in the Phoenix area and how a tight group they are????
John L. Wake - Realtor 08.25.07 at 11:02 am
Paul, That could happen.
But don’t forget that their work will go to someone, although it may be at a higher wage.
The “legals” may find more work at higher wages which will allow some to buy a home where they couldn’t earlier, which could partially or completely offsetting the effect of any departure of illegals.
Paul Cooper 08.25.07 at 11:17 am
I hope you are right. I assume most of these jobs are outside working jobs. And I don’t want to stereotype, but I don’t know many who would work outside in 110 degree heat that are not of hyspanic origin. I could be wrong though…
Michael Blakley 08.25.07 at 11:29 am
The economic guru seems not to have taken on The Economist at all. Its article didn’t focus on growth or the real estate market. The main points were about the crime, the poor schools, and the cultural dissipation and blandness. Phoenix has this museum and that theatre? Yeah, okay. But where are the vibrant, funky little neighborhoods? Where’s the identity?
KG 08.25.07 at 7:47 pm
Phoenix has always had an identity issue. We’re the 5th largest city but with no identity.
You think San Fran and the Wharf, San Diego-Gaslight District, Chicago-Millenium Park, Boston-Faneuil Hall and Boston Common.
But what do people think about Phoenix? I think they are making headway and once lightrail is running, downtown will be more vibrant.
Cbass 08.25.07 at 9:21 pm
Lightrail is not going to magically create an identity for down town PHX. People keep talking about it like it is going create something it is not. People who use mass transit are people who can not afford a car or tree huggers. That being said they don’t have money or won’t spend it to generate the economic returns people are expecting from lightrail. What a joke. The only economic impact from light rail is from the construction itself.
John L. Wake - Realtor 08.25.07 at 11:14 pm
I don’t golf (as my high school buddies will verify) but many non-Arizonans associate Phoenix with golf, resorts, winter vacations, the “Phoenix” Open, the Barrett-Jackson Car Auction, the Cactus League, desert mountains, gorgeous desert and with, er… with Scottsdale.
It’s actually a pretty upscale identity to outsiders.
Let’s not tell them about August… but then again the sunsets are spectacular in August.
KG 08.26.07 at 5:19 am
Cbass-aren’t they going to be building lofts around the lightrail stops? Below the lofts won’t there be businesses? I grew up in Long Island. Most everyone who used the LIRR to get into the city had 2 cars and were not tree huggers.
John–I think the problem is most of the attractions are once a year events…Phoeinix Open, Barrett-Jackson, and this year the Super Bowl.
The media doesn’t help much either. When the Suns were in the playoffs, TNT would show a cactus and a cowboy on a horse just before cutting to a commercial. Not very good identity for the 5th largest city.
John L. Wake - Realtor 08.26.07 at 8:45 am
“When the Suns were in the playoffs, TNT would show a cactus and a cowboy on a horse just before cutting to a commercial.”
That’s so true!
BTW, when you look at metropolitan statistical areas, metro Phoenix is the 13th largest U.S. city. The the next decade or two the Phoenix population should pass metro San Francisco, Boston and Detroit to become the 10th largest city where it will probably stay for decades.
http://en.wikipedia.org/wiki/United_States_metropolitan_area
KG 08.26.07 at 9:45 am
I was just talking about the city itself being the 5th largest. I’m surprised we are only the 13th largest MSA.
Chicago, Philly, DC and Detroit are losing population so we’ll be moving up the list soon!
Ken44 08.26.07 at 10:08 am
Face it overall prices simple are not crashing in Cal and as long as Cal is at least twice as expensive a Phx metro people will be coming in droves. I’m in San Diego right now and home prices are still outrageous! A $300,000 home? Great. Expect the worst schools and to find gang-tags everywhere. Forget it.
Sure the summer weather is horrible and maybe there’s little community spirit. However a family income of $60,000 buys a much better standard of living in East Mesa for example than in most of Southern Cal.
KG 08.26.07 at 10:51 am
Prices may not be crashing, but foreclosures are through the roof. Even starting to see foreclosures in exclusive areas of North County.
John L. Wake - Realtor 08.26.07 at 11:17 am
His point is that Californians will continue to move to Phoenix in droves and that’s true.
Maybe not as much as when the price differential was greater. It used to run that the median price in California was about 2 and a half times the median Phoenix price. Now it’s running roughly 2 times. Still, many Californians can sell and buy a fantastic home for the same money here or buy a lesser home outright in cash.
The median single family home price in metro San Diego in July was $495,500.
http://www.arizonarealestatenotebook.com/2007/08/15/san-diego-county-median-home-prices-in-july/
While in metro Phoenix the median single family resale home price in July was $265,000.
http://www.arizonarealestatenotebook.com/2007/08/10/updated-august-2007-arizona-home-price-graphs/
Michael Blakley 08.26.07 at 4:40 pm
“Upscale” doesn’t mean anything, in terms of identity. In fact, to resort to a word like that is sort of pathetic. San Francisco isn’t Fisherman’s Wharf, for heaven’s sake, it’s not the Olympic Club. It’s the Mission District, it’s Chinatown, it’s the Castro, it’s places that develop organically, places where nobody with money realizes you can get the best food in town. What PHX lacks are those interestingly dense, densely interesting places that realtors ignore until money grows there.
Paul Cooper 08.26.07 at 5:00 pm
I can still see many people in denial. And as long as we have that, there will be no bottom in the market. And BTW, if so many Californians are moving to Phoenix, how come Phoenix has the highest inventory in it history even when factored by its population increase??? Why nobody is buying this record number of houses? Comparative year over year sales numbers are through the floor. 1 out of every 63 homes in the phoenix area is up for sale compared to 1 out of 138 homes in San Diego. So if so many people are moving here how come we have the highest inventory in our history???
As I said…. too many people still in denial…. and that means no bottom…
Paul Cooper 08.27.07 at 4:58 am
I can still see many people in denial. And as long as we have that, there will be no bottom in the market. And BTW, if so many Californians are moving to Phoenix, how come Phoenix has the highest inventory in it history even when factored by its population increase??? 1 in every 63 homes is for sale in Phoenix while only 1 in 138 homes in San Diego. Why nobody is buying this record number of houses? Comparative year over year sales numbers are through the floor. So if so many people are moving here how come we have the highest inventory in our history???
As I said…. too many people still in denial…. and that means no bottom…
RE Investor 08.28.07 at 6:51 am
I think the reason we have a bigger problem than San Diego can be summed up in one word. Wages. We have notoriouly low wage growth for our region. The cities need to focus on bringing high quality job growth to Arizona. This continued growth of 6.00 an hour service jobs, call centers and construction jobs needs to be less emphasized and more emphasis put on biotechnology, information technology, medical campuses etc. Unfortunately it seems that AZ government is more focused on butt kissing to the special interests that want to make AZ a cheap illegals and low wage paradise for companies to locate their lowest skilled, and lowest paid workers. And for gods sake, they need to get rid of this “right to work” law. It just reenforces the low paying jobs, because higher quality employees don’t like being employed “at will”, they want job security (if there still is such a thing) and will move to LA or San Diego. I can understand the argument that with outsourcing to China, India etc. we have to compete, but somehow San Diego, San Francisco, Washington State, Utah and other surrounding states seem to do just fine. Nevada does not count as they only have one industry, but Phoenix is more like LA or San Diego in diversity of industry, we just don’t have law makers with a backbone and vision.
Ken44 08.28.07 at 8:45 am
The inventory has now hit 56,000
Why the huge sudden surge?
Does anyone know which areas are getting hit the hardest?
For example I’ve been watching Mesa closely this year and although the inventory is still high it hasn’t grown all that much since the beginning of summer.
RE Investor 08.28.07 at 9:04 am
If I had to make a guess it is people being scared in to selling. Either by the media’s 24/7 pounding on the housing “crash” and their fear that if they don’t sell now, they will get less later on. Kind of like the “If I don’t buy now, I never will be able to” hype of 2 years ago. Phoenix RE is also seasonal, so we will start to see more inventory towards the winter months. Of course the media will latch on to that and harp on the “doom of Phoenix” for the next 3 months and scare more people. Apparently we are all living in a black hole and are all going to be in soup kitchens in 3 years……
John L. Wake - Realtor 08.28.07 at 11:27 am
“they need to get rid of this “right to work” law”
My gawd! What’s next? Will you want us to go on daylight savings time?
Old Zonie 08.31.07 at 2:28 pm
Unfortunately, as a long time Arizona resident, I agree with the author. Phoenix used to be paradise and populated with people who’s desire was to live a southwestern lifestyle. The past five years have destroyed all that was desirable in the valley. When I drive through Phoenix and the surrounding area now, I can’t tell if I’m in Houston, Dallas, etc. It appears to be a suburb of southern California (with matching attitudes)? I believe the housing inventory will remain excessive as more longtime residents look to get out (legal or illegal).