Is Phoenix the next Detroit? (Mesa, Chandler: for sale, real estate, 2009)

[azriverfan.]

Before anyone jumps to conclusions, this isn't meant to be an anti-Phoenix thread. Anyone who is familiar with me understands that I'm overly biased toward Phoenix and could be considered a "homer" if you will. I'm writing this just to start a thought provoking discussion that all of us (both Phoenix homers and haters) can engage in.

I've had these thoughts about Phoenix the last 2 years. My concern started in 2001. I had a very good friend who was an executive at a company here. He loved Phoenix but was forced to move because of his jobs. He told me in his own words "I love Phoenix but where are the jobs?" Like many people, he moved to Phoenix in the late 90's and worked for a start-up technology company. At that time, Phoenix had a lot of promise and people in Silicon Valley and other areas were moving to Phoenix to start up these companies. Fast forward to 2005. I was telling this same person about the risining housing prices and the increased growth in the valley. He responded in a similar way: "I love Phoenix and I would live there but where are the jobs? How are so many people moving there if there are no jobs there?" I thought he was being a little negative and could have just been responding out of bitterness because he was unable to find a job in Phoenix. Now it's 2009 and the job situation is even more grim. I had another conversation with him and he responded with this: "When the smoke and mirrors cleared with the construction boom, Phoenix was revealed for what it was, a city that was overpopulated and lacked the jobs to sustain that growth. I'm not suprised"

So my concern is what happens to all these people who lack jobs. In Detroit, you had White Flight in which the affluent Caucasian population including their jobs left for the suburbs. Are we going to see a similar Phoenix Flight in which a large portion of the population leaves the valley/Arizona. While that might seem like a good thing with regard to congestion, what happens to all these homes that were built? Do they become abandoned and then turn into drop houses and drug dealing breeding grounds? What happens to abandoned strip malls? I'm already seeing this trend as once affluent areas are starting to look run down. The Dobson Ranch/Fiesta Mall area reminds me of that. Near my home on Elliot and I-10, the north side of Elliot is essentially becoming abandoned.

I want to hear both sides of this discussion. I want to hear from those that refute this theory and support it. Again, I'm not here to start controversy or paint one side. So no personal attacks, just take this as a thought-provoking project. I'm sure even those who support this theory love Phoenix and want to see it do well so keep that in mind.

[Ponderosa]

Fast forward to 2005. I was telling this same person about the risining housing prices and the increased growth in the valley. He responded in a similar way: "I love Phoenix and I would live there but where are the jobs? How are so many people moving there if there are no jobs there?" I thought he was being a little negative and could have just been responding out of bitterness because he was unable to find a job in Phoenix.

He was being a little ignorant as well. In 2005 Maricopa lead the nation in job creation. It beat the nearest county (Clark, NV) by about 30%. Tens of thousands of new jobs per year were being created here. 80000 new jobs in 2004alone. Around the same time, 1/5 of ALL new jobs in the US were in Arizona. Many were construction related - that is what we do here - but not just framers and tile guys but the people who sell the houses, engineer and build the roads, teach in the schools and so on. We're in a recession, haven't you heard? Long term there is no reason to not be bullish on job growth and growth in general here.

I sometimes think there are folks here who are very young or very new to this area and don't realize that the boom and bust is part of the economy here. In the early 80s the oil crash wiped us out, then the S&L debacle, and now the capital squeeze. It's all part of our history and, apparently quickly forgotten when good times return. We continue to do nothing to have a less volatile employment base and that is not good. But this is hardly Detroit. Detroit is being hammered by a global manufacturing sea change. Us, it's a bump in the road.

As for Ahwatukee N of Elliot. I lived out there in 1978! First in a Wood Bros then a Beauty Built right next to the little park. Things go bad here in 30 years - recession or otherwise. We do throw away our neighborhoods in the search for the latest in hometrends. Salaries rise, people "move up", the renters move in, the illegals follow and the neighborhood goes in the tank. I had to get out when all the commercial and the congestion started along 48th. Neighborhood decay with age is Phoenix too and not a sign that we are anything like Detroit. The cause here is money and upward mobility - not job loss or "white flight". Same thing going on around Fiesta Mall and Mesa in general. The originals settlers have moved on to better things - many to Gilbert and Chandler or out to Las Sendas area.

[synapse]

It's not the same. Detroit was built on the automotive industry, which truly did collapse - taken over almost entirely by Japanese automakers and innovations that passed GM and Chrysler by. Also, Detroit suffers from bad weather, tax problems, and chronic crime, and, sadly, "white flight."

Phoenix is overly dependent on real estate, sure, but it has lots of other industry, including hotels and resorts, with a great deal of tourism that Detroit simply does not have. Phoenix has a strong service economy, lots of restaurants, so most of the jobs lost were in fact in real estate and construction, not high-tech sectors, of which Phoenix does not have enough, but has enough to get by. It has very little problems with "white flight" or other issues of the like.

Once the housing market recovers - and it will - Phoenix will start to accelerate again. And there are already sectors of Phoenix accelerating, if you look around downtown. It's unusual in a down economy to have a major building going up downtown, and yet that's precisely what's happening. Phoenix hit a major speed bump but it's not like the bust that Detroit hit.

[ArizonaBear]

Originally Posted by azriverfan.

Before anyone jumps to conclusions, this isn't meant to be an anti-Phoenix thread. Anyone who is familiar with me understands that I'm overly biased toward Phoenix and could be considered a "homer" if you will. I'm writing this just to start a thought provoking discussion that all of us (both Phoenix homers and haters) can engage in.

I've had these thoughts about Phoenix the last 2 years. My concern started in 2001. I had a very good friend who was an executive at a company here. He loved Phoenix but was forced to move because of his jobs. He told me in his own words "I love Phoenix but where are the jobs?" Like many people, he moved to Phoenix in the late 90's and worked for a start-up technology company. At that time, Phoenix had a lot of promise and people in Silicon Valley and other areas were moving to Phoenix to start up these companies. Fast forward to 2005. I was telling this same person about the risining housing prices and the increased growth in the valley. He responded in a similar way: "I love Phoenix and I would live there but where are the jobs? How are so many people moving there if there are no jobs there?" I thought he was being a little negative and could have just been responding out of bitterness because he was unable to find a job in Phoenix. Now it's 2009 and the job situation is even more grim. I had another conversation with him and he responded with this: "When the smoke and mirrors cleared with the construction boom, Phoenix was revealed for what it was, a city that was overpopulated and lacked the jobs to sustain that growth. I'm not suprised"

So my concern is what happens to all these people who lack jobs. In Detroit, you had White Flight in which the affluent Caucasian population including their jobs left for the suburbs. Are we going to see a similar Phoenix Flight in which a large portion of the population leaves the valley/Arizona. While that might seem like a good thing with regard to congestion, what happens to all these homes that were built? Do they become abandoned and then turn into drop houses and drug dealing breeding grounds? What happens to abandoned strip malls? I'm already seeing this trend as once affluent areas are starting to look run down. The Dobson Ranch/Fiesta Mall area reminds me of that. Near my home on Elliot and I-10, the north side of Elliot is essentially becoming abandoned.

I want to hear both sides of this discussion. I want to hear from those that refute this theory and support it. Again, I'm not here to start controversy or paint one side. So no personal attacks, just take this as a thought-provoking project. I'm sure even those who support this theory love Phoenix and want to see it do well so keep that in mind.

Yes and no.

It seems that the older areas built/platted before 1960 here in the Phx area are becoming the epicenters of affluence and civilty whereas especially the outer suburbs going to the dogs.

Oversimplication I realize but still..............

[fcorrales80]

To answer the question in one word...NO!

Detroit suffers from an amazing and socially devastating rift in race, economy, education, discrimination, and on and on. Phoenix is expected to be a leader in growth (population and economy) once again by 2013. This cycle has happened in Phoenix before as noted by another poster. In 1983, Phoenix suffered an EVEN worse recession. Unemployment hit a historic high in Phoenix of nearly 12%! Then in the 90's and 2000's had one of the lowest unemployment rates in the nation between 3.9-4.6%. That is a likely scenario again as after each recession Phoenix has suffered through, has likewise seen unmatched growth...Phoenix is prime for this type of growth YET again. Housing prices are low again (just like after 1983 and the other times), plenty of commercial/office/industrial space available at a low cost (again), BUT this time downtown Phoenix has sustained growth and unlike the suburban areas has a relatively low office vacancy rate and an the LOWEST foreclosure rates in the state and compared to other cities nationally. This was not the case in the 1980's and 1990's but is today. This puts downtown Phoenix in the position that Seattle, San Diego, Boston, Denver, etc were in before they saw their downtown's boom and high-rises, rise after recessions in those cities.

[Steve-o]

Originally Posted by synapse

It's not the same. Detroit was built on the automotive industry, which truly did collapse - taken over almost entirely by Japanese automakers and innovations that passed GM and Chrysler by. Also, Detroit suffers from bad weather, tax problems, and chronic crime, and, sadly, "white flight."

Phoenix is overly dependent on real estate, sure, but it has lots of other industry, including hotels and resorts, with a great deal of tourism that Detroit simply does not have. Phoenix has a strong service economy, lots of restaurants, so most of the jobs lost were in fact in real estate and construction, not high-tech sectors, of which Phoenix does not have enough, but has enough to get by. It has very little problems with "white flight" or other issues of the like.

Once the housing market recovers - and it will - Phoenix will start to accelerate again. And there are already sectors of Phoenix accelerating, if you look around downtown. It's unusual in a down economy to have a major building going up downtown, and yet that's precisely what's happening. Phoenix hit a major speed bump but it's not like the bust that Detroit hit.

First off, Detroit's "bad weather" is hardly a factor in its decline, lets not be silly. Remember, at one time, Detroit's population was extremely healty and had growth rates that would make Phoenix jealous. I dont think people, unlike Zonies, give a crap about weather, especially when a place like Detroit (while in its prime) offered so much. It really was a great place to live, and sadly the Big 3 let things slip away.
Now that Ford has turned itself around and now makes products that are just as reliable, if not more, than their Japanese counterparts, things will get better. GM and Chrysler? Time will tell. Japanese auto manufacturers have been hit hard by this recession, and several recalls to boot (lethal ones at that)! Detroit will roar again, and when it does, expect many Michiganders stuck in AZ to head back to Detroit, as it really can be a great place when times are good. Detroit has given this country A LOT, unlike PHX. Sadly, time has not been kind to Detroit. Only time will tell how the future will treat it. Hopefully things will get better, because Detroit used to be a great place, and Michigan is an incredible state.

Now, as for PHX becoming Detroit? VERY unlikely. I can see parts of PHX that are in serious decline and will continue to decline, but thats normal for ANY large city to experience. PHX's economy isnt focused largely on one sector, which might be its saving grace, for now. The problem with PHX's economy, was the ridiculous boom, driven by idiots who got in over their heads, lent money by stupid institutions who didnt care, and fueled by a massive construction boom that tried to keep up. THATS what killed PHX during this recession. PHX was hit incredibly hard, and your homes lost more value than any other city in the nation. Driving around there a few weeks ago, I just couldnt believe how many homes there were for sale, it was almost laughable. Scary at the same time, but simply astonishing. If thats not a sign that there are tons of people in PHX without many ties, I dont know what is. They tried to abandon ship and it bit em in the butt. Long story short, PHX's economy isnt great, by any means, no matter how many jobs it adds---theyre entry level jobs and not anything spectacular. That right there alone might be PHX's saving grace. IF PHX starts bringing in the heavy-hitting Fortune 500 companies, etc, I can only imagine just how bad it would be if this country was to ever face another recession as the one we're just climbing out of. But will PHX be Detroit? No, never.

[fcorrales80]

Originally Posted by Steve-o

First off, Detroit's "bad weather" is hardly a factor in its decline, lets not be silly. Remember, at one time, Detroit's population was extremely healty and had growth rates that would make Phoenix jealous. I dont think people, unlike Zonies, give a crap about weather, especially when a place like Detroit (while in its prime) offered so much. It really was a great place to live, and sadly the Big 3 let things slip away.

I agree with most of this except weather, fortunately or unfortunately, is a HUGE factor for many people including businesses. One reason some German companies I work with have a presence in Phoenix IS because of weather, surrounding environment, resort lifestyle amenities, accessibility to other cities, low cost of operation, and on and on BUT weather was a huge draw. Much of our growth can be attributed to climate and much of the midwest's demise can be link to weather and cost of business operation in that weather.

Now that Ford has turned itself around and now makes products that are just as reliable, if not more, than their Japanese counterparts, things will get better. GM and Chrysler? Time will tell. Japanese auto manufacturers have been hit hard by this recession, and several recalls to boot (lethal ones at that)! Detroit will roar again, and when it does, expect many Michiganders stuck in AZ to head back to Detroit, as it really can be a great place when times are good. Detroit has given this country A LOT, unlike PHX. Sadly, time has not been kind to Detroit. Only time will tell how the future will treat it. Hopefully things will get better, because Detroit used to be a great place, and Michigan is an incredible state.

Very true about the auto industry. I also see GM turning things around and chipping away at the Japanese slip ups especially with better MPG cars, better safety and reliability, and MUCH better styling than before. I've actually seen more new American cars that turn my head than Japanese and I usually say; "THAT was a FORD, CHEVY, CADY, BUICK...a 'friggin' BUICK" LOL!

I'd argue what Detroit has given compared to Phoenix...Phoenix lead the nation in creation of military aircraft since WWII and innovations in medical and health care innovation including the development of the artificial heart (a UofA research development but trials in Phoenix and with ASU scientists aswell), as an example.

Now, as for PHX becoming Detroit? VERY unlikely. I can see parts of PHX that are in serious decline and will continue to decline, but thats normal for ANY large city to experience. PHX's economy isnt focused largely on one sector, which might be its saving grace, for now. The problem with PHX's economy, was the ridiculous boom, driven by idiots who got in over their heads, lent money by stupid institutions who didnt care, and fueled by a massive construction boom that tried to keep up. THATS what killed PHX during this recession. PHX was hit incredibly hard, and your homes lost more value than any other city in the nation. Driving around there a few weeks ago, I just couldnt believe how many homes there were for sale, it was almost laughable. Scary at the same time, but simply astonishing. If thats not a sign that there are tons of people in PHX without many ties, I dont know what is. They tried to abandon ship and it bit em in the butt. Long story short, PHX's economy isnt great, by any means, no matter how many jobs it adds---theyre entry level jobs and not anything spectacular. That right there alone might be PHX's saving grace. IF PHX starts bringing in the heavy-hitting Fortune 500 companies, etc, I can only imagine just how bad it would be if this country was to ever face another recession as the one we're just climbing out of. But will PHX be Detroit? No, never.

Good information here and if you think homes for sale in Phoenix was scary or laughable, you should see Vegas and CA and FL cities where 1 in 20, 1 in 30 houses are in foreclosure and many more on sale or vacant. I do agree that if Detroit gets better, some Michiganders will move back but the majority won't. Whole families have moved here from not only Michigan but from nearly every state and this is especially true for the Midwestern states. In Phoenix, there is actually less homes on the Market than before and is approaching lows that haven't been seen in a while. So your observation may have been biased based on the area you were in or some other factors...

[yukon]

Hopefully, Phoenix will take after Dallas rather than Detroit in future growth. This is not a dig against Detroit, but a comment based on business growth and diversification over several decades.

I lived in AL in the late 70's, lots of people were moving to AL from Detroit. Why? No jobs - auto industry in a slump. Fast forward to the 80's. Again, lots of people moving from Detroit to AL and other states. Why? No jobs - auto industry having problems. Lather, rinse and repeat for the 90's and mid-2000's.

I moved to Dallas in the 80's. I believe the insurance industry crashed first in Dallas, mid 80's?. Ouch, lots of jobs went away as insurance was a huge industry in Dallas. Fast forward to late 80's, savings & loan debacle. Yep, lots of jobs lost and a good bit of unemployment. Then we have the 90's, I believe that time it was real estate development and related industry that died. Followed by the dot.com bust in the late 90s, and telecom in early 2000 or so (I may be off a few years here and there). Point is, though, by the time the dot.com bust hit, followed by the telecom bust, the overall economy of Dallas was not as severely affected as it had been by the busts in the 80s and 90s. The difference? Dallas got smart and started courting other industries and helping small business develop. They reduced their dependency on one major industry.

And yes, Dallas did have a housing bust, so did Houston, mid 80s maybe? Neither city really bubbled like Phoenix, but they overbuilt and had the apartment/condo conversion craze. Properties purchased for investment in once nice areas lost significant value as the areas were abandoned and values plummeted. I prepared many a tax return for clients who took a beating when they sold their investment properties.

I'm looking from afar, and it appears to me the housing and finance bust is causing business developers in Phoenix to wake up and start thinking diversify. Your state, county and city leaders are starting to do what they can to offer incentives for business to relocate or start up in AZ, and I think in time it will pay off.

Detroit, it seems, never learned the meaning of diversify.

[GQpilot3]

I was starting to get a bit worried this would happen to phoenix as well. However i really enjoyed my time out there and would really love to see it better itself through all the hardship. I'd hate to see it go any lower than it already has. Even the patrons in the scottsdale nightlife seemed to become somewhat ghetto before i left which really shocked me but it may have just been a fad. As for becoming detroit tho it's still somewhat desireable so I can't see that happening.

[twiggy]

Good thread, especially since l was just reading this article, lts crossing a lot of peoples minds right now :
Arizona Capitol Times » Blog Archive » Arizona needs a more diversified economy to avoid future plunges
Of course these things always concern me. lol (twlggy the worry wart) lol