THE AVENUE DECEMBER 29, 2009
Las Vegas…Phoenix…Boise? Say what? That’s a frequent reaction from reporters and others looking this month at the list of especially weak performers in the first edition of the Mountain Monitor, our new Intermountain West companion of the Metro Program’s national MetroMonitor recession and recovery index. It underscores how easily it is to miss things when it comes to regional economic health.
The interesting thing, in this respect, is how different Boise’s reputation has been during this decade from that of its southerly neighborhoods.
Readers, after all, have seen the forlorn photos of Sun Belt “For Sale” signs and empty dining rooms in newspapers, and so they get it that Las Vegas and Phoenix represent Ground Zero of last year’s real estate crack up. What they haven’t fixed on, however, is the equally brutal breakdown up north, in part because neither the media nor regular people have tended to view northerly, technology-oriented Boise as also a real-estate-focused Sun Belt location like those other metros.
In this respect, Boise has received extremely good press this decade, and has rarely been described as over-dependent on a real estate. Instead, the metropolitan area has been lauded repeatedly as one of the most productive, steady, and successful regional economies among U.S regions. In late 2007 USA Today extolled the balance and diversity of the Treasure Valley’s economy, noting that “Idaho’s economy has clicked in every sector: farming, technology, tourism, construction, service industries.” This June, U.S. News & World Report declared the Treasure Valley the nation’s fourth-best place to live, noting its high quality of life, affordability and strong economy. And why not: Idaho has ranked high on productivity and other measures of growth nearly every year since 1987, a run of good times unmatched by any other state. By many measures Boise really was more diversified than Las Vegas and Phoenix.
And yet, notwithstanding all that “balance” and steadiness it’s now clear that Boise shared the fatal flaw that led Las Vegas and Phoenix into disaster. To be blunt, all three of the westernmost big metros in the Mountain West got way too entangled in hyperactive real estate activity. Construction and real estate industry concentration figures tell the story. In Las Vegas and Phoenix, famously, the share of employment in the main construction industries and real estate reached 13.4 and 12.8 percent of all non-farm jobs in 2006—astonishing numbers that gave those metros a reputation. But as it happens, Boise was right there with them, despite its other strengths, and by 2006 had located its own 12.8 percent share of employment in building housing and offices and selling property. By comparison, the average for large metros around the country on this remained just 8.0 percent, and it was 10 percent for the other Intermountain West metros. The inevitable consequence: Each of these metros was devastated by the contraction of its real estate economy once the national and local housing bubble burst after years of easy credit and a proliferation of exotic and usually subprime mortgages. The final result: Boise now resides with Phoenix and Las Vegas among the most troubled metros in the country, according to the new Monitor, with employment off 10.1 percent from its pre-crash peak, output off 5.5 percent, and housing prices down 8.8 percent.
In the end, then, the “who knew” aspect of Boise’s downfall carries with it an important lesson for metro leaders everywhere. Who knew that a little too much real estate speculation could have such disastrous impacts on even an otherwise balanced economy?