Patsy Crouser and her husband, Kenneth, both retired schoolteachers, have long planned to relocate from a soggy suburb of Portland, Ore., to sunny Phoenix or Palm Springs, Calif. They’ve checked out prospective neighborhoods and regularly scan real estate listings.
But in the past few months, “we’ve put on the brakes” on any move, says Crouser, 66. With dozens of houses sitting on the market in their neighborhood, she wonders how long it would take the couple to sell their own property. She also frets about the depth of the recession.
“We’re sick of the weather in the Pacific Northwest and need to be in the sunshine more,” she says. “But now we think it’s best just to wait and see.”
In their newfound hesitation, the Crousers have company. Now that Sunbelt meccas in Florida, Nevada, Arizona and California lead the nation in foreclosures and overall economic distress, the question arises for older Americans: Is a region that once boomed because of favorable climate, low taxes and swaths of golf courses and new housing development no longer such a desirable retirement destination?
Trouble in Paradise
Signs of the slowdown in major Sunbelt retirement destinations are clear. In Phoenix, housing prices have fallen more than 30 percent in a year, and jobs continue to disappear. In southern Florida, the condominium market is overbuilt, and home foreclosures continue to rise in Orlando. Las Vegas convention attendance has dropped 30 percent; the housing market is down more than 30 percent; and Nevada’s unemployment, announced Aug. 21, reached 12.5 percent.
The decline signals a major retrenchment for a region that has epitomized American growth. Between 2000 and 2008, the U.S. population grew 8 percent, but Arizona grew more than three times as fast, Nevada nearly four times as fast and Florida nearly twice that rate. At the peak of housing construction, five of the nation’s 10 fastest-growing cities were in these three states. Phoenix, for instance, grew from 983,403 people in 1990 to 1,552,259 in 2007.
All that is changing, demographers and economists agree. Growth is braking across metropolitan areas such as Las Vegas, Phoenix and Tampa, U.S. Census data as of July 2008 show. For the first time, more people left Florida last year than moved in.
“During an economic retrenchment, there’s normally a slowdown in mobility,” says William Frey, a demographer at the Brookings Institution. “People get gun-shy about moving.”
For many older Americans, there’s a realization that they’ll have to work later in life, now that the economic downturn has hit their investment funds and flattened their stock portfolios. “Today, it’s more difficult to retire and move on,” says Steve Cochrane, managing director at Moody’s Economy.com. And job growth in states like Arizona and Nevada isn’t expected to rebound before 2012.
Real estate agent Dan Suppo of Chandler, Ariz., which had been one of Phoenix’s fastest-growing suburbs, sees it all the time: vacationing couples on the verge of retirement, who think they’d like to move to Phoenix, but wonder if they can afford the change. “It’s much more difficult to make a sale these days,” he says.
What’s the Problem?
Some experts say the Sunbelt slump was inevitable. Demographer Richard Florida believes that excessive real estate speculation, overdevelopment and fictitious housing wealth combined to create an illusory boom in the Sunbelt that was financially and ecologically unsustainable. “Much of the cities’ development came from, well, development itself,” Florida wrote in a recent essay in the Atlantic magazine. “At a minimum, these places will take a long, long time to regain the ground they’ve recently lost in local wealth and housing values. It’s not unthinkable that some of them could be in for an extended period of further decline.”
Other experts note that as more newcomers moved to the Sunbelt and demanded the sort of services they had come to expect elsewhere—health care and social services, transportation alternatives to driving, well-funded universities—the role of state government and demands on state budgets expanded. Tax increases didn’t keep pace, not even with the tax bases bolstered by new residents. Now these same Sunbelt states face massive financial headaches.
Florida, in particular, may have trouble recovering from the downturn, Cochrane says. The state’s property tax laws penalize part-time residents or out-of-state homeowners, while hurricanes have created billions in property losses, left the insurance industry in disarray and made obtaining affordable home insurance difficult for many prospective homeowners. And now the job market is in free fall.
For workers on the verge of retirement who still have assets at their disposal, or retirees who still have the means to relocate as well as the “desire to be near a golf course and water, there are plenty of alternatives” to the Sunbelt’s traditional retirement destinations, Cochrane says. Texas cities like Austin and San Antonio are showing new appeal for Northerners. Cochrane also predicts that “the Sunbelt will move north a bit,” as new retirees disperse to places like Asheville, N.C., or to the Atlantic seacoast near Charleston or Savannah.
In the long run, however, even Florida retains the fundamentals that made the Sunbelt so attractive for retirement, most demographers and economists agree. “There are long-term forces at work,” and they haven’t essentially changed the Sunbelt’s appeal, argues Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at Arizona State University. “We’ve seen in the United States a continual movement of population to the West and the South, and fundamentally, I think that is going to continue.”
And paradoxically, these tough times may signal the perfect time to move to a Sunbelt city, if getting a good real estate deal is your sole concern. “This is kind of a golden era for those who have capability to move to Phoenix and have reasonable credit and can get a conventional mortgage,” McPheters says. “Prices are down 50 percent from the peak in 2006. You have opportunities to buy housing in Arizona that you haven’t seen in 10 years.”
Moreover, McPheters says, “three years after the official end of the recession is declared, expect Arizona and Nevada to be among the top five states for employment growth. In every single recession, Arizona has recovered in three or four years, and this time I expect it will snap back in pretty much the same way.”
Is that enough to entice the Crousers back to the hunt? “It’s not like we’d never do it,” Patsy Crouser says. “Just not right now.”
Michael Zielenziger writes about business and the economy. He lives in the San Francisco Bay area.