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boom cycle. Although these places drew tourists, retirees, and some industry —firms seeking
<br />bigger footprints at lower costs —much of the cities' development came from, well,
<br />development itself. At a minimum, these places will take a long, long time to regain the
<br />ground they've recently lost in local wealth and housing values. It's not unthinkable that
<br />some of them could be in for an extended period of further decline.
<br />To an uncommon degree, the economic boom in these cities was propelled by housing
<br />appreciation: as prices rose, more people moved in, seeking inexpensive lifestyles and the
<br />opportunity to get in on the real-estate market where it was rising, but still affordable. Local
<br />homeowners pumped more and more capital out of their houses as well, taking out home -
<br />equity loans and injecting money into the local economy in the form of home improvements
<br />and demand for retail goods and low-level services. Cities grew, tax coffers filled, spending
<br />continued, more people arrived. Yet the boom itself neither followed nor resulted in the
<br />development of sustainable, scalable, highly productive industries or services. It was fueled
<br />and funded by housing, and housing was its primary product. Whole cities and metro regions
<br />became giant Ponzi schemes.
<br />Phoenix, for instance, grew from 983,403 people in 19go to 1,552,259 in 2007. One of its
<br />suburbs, Mesa, now has nearly half a million residents, more than Pittsburgh, Cleveland, or
<br />Miami As housing starts and housing prices rose, so did tax revenues, and a major capital -
<br />spending boom occurred throughout the Greater Phoenix area. Arizona State University built
<br />a new downtown Phoenix campus, and the city expanded its convention center and
<br />constructed a 20-mile light -rail system connecting Phoenix, Mesa, and Tempe.
<br />And then the bubble burst. From October 2007 through October 2008, the Phoenix area
<br />registered the largest decline in housing values in the country: 32.7 percent. (Las Vegas was
<br />just a whisker behind, at 31.7 percent. Housing in the New York region, by contrast, fell by
<br />just 7.5 percent over the same period.) Overstretched and overbuilt, the region is now
<br />experiencing a fiscal double whammy, as its many retirees —some 21 percent of its residents
<br />are older than 55—have seen their retirement savings decimated. Mortgages Limited, the
<br />state's largest private commercial lender, filed for bankruptcy last summer. The city is
<br />running a $too million budget deficit, which is only expected to grow. Last fall, the city
<br />government petitioned for federal funds to help it deal with the financial crisis. "We had a big
<br />bubble here, and it burst," Anthony Sanders, a professor of economics and finance at ASU,
<br />told USA Today in December. "We've taken Kevin Costner's Field of Dreams and now it's
<br />Field of Screams. If you build it, nobody comes."
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