On Labor Day 2009 I did a video blog "The Economy and Me: My Hometown, Phoenix AZ" in which I discussed the fundamental problems of our state. On March 17, 2010 I wrote a blog "Phoenix Economic Crisis in Six Paragraphs" that outlined six fundamental problems we face. Two days later I wrote Part Two "We Will Still Need To Wear Shades" of how these six underlying points needed to be addressed if we were going to restore ourselves. These six essential problems still exist and actually were postponed due to 2010 being a year of respite where the inevitable was forestalled by loose money policies of the Federal government.
The points are:
- Residential Mortgage/Lender Crisis
- State Government Insolvency
- Commercial Real Estate
- Immigration and Population
- Denial and Acceptance
These points remain essentially the same although some events over time have modified or accelerated them. The underlying problem to everything is simple: too much debt and the only way to resolve any of these points is deleveraging and bringing down the debt load of governments and individuals. The standoff between debtors and lenders cannot be forestalled any longer, the moment of who draws guns first has arrived.
The Real Estate problem, both Residential and Commercial along with the Mortgage/Lender Crisis, is heading for a Double Dip that is far worse than the first. At what point people are on the Denial and Acceptance continuum depends on what position they hold in the market. There is not much to be said that hasn't already been said on this topic except that City of Phoenix core has stayed relatively stable to what it had already dropped to. The city is ringed by cheaply built cookie cutter suburbs, mostly sub-prime, that are falling apart and much more underwater than residential and commercial real estate in Phoenix. The entire metro area will not escape another drop though with a few small exceptional pockets.
We are in the same position I stated in my video blog of Labor Day 2009. It haunts of an era gone by of the old western town before there is a standoff. Everyone has gone inside, locked the doors and drawn the blinds hoping nothing will happen but knowing that something will. Some are in acceptance and others are in denial. What will occur is a white hat and a black hat representing the debtors and the loan holders, who is wearing what hat depends on point of view, will have a gunfight and one of them will lose triggering off other bullets to fire. When it's all over the dust will eventually settle and the town will inevitably come out and life will begin again. It will take time to reshape what we have and into something more sustainable and substantive but there is every reason to believe Arizona has all the basic elements needed to get fundamentals right again.