To an uncommon degree, the economic boom in these cities was propelled by housing appreciation: as prices rose, more people moved in, seeking inexpensive lifestyles and the opportunity to get in on the real-estate market where it was rising, but still affordable. Local homeowners pumped more and more capital out of their houses as well, taking out home-equity loans and injecting money into the local economy in the form of home improvements and demand for retail goods and low-level services. Cities grew, tax coffers filled, spending continued, more people arrived. Yet the boom itself neither followed nor resulted in the development of sustainable, scalable, highly productive industries or services. It was fueled and funded by housing, and housing was its primary product. Whole cities and metro regions became giant Ponzi schemes.
 

Phoenix, for instance, grew from 983,403 people in 1990 to 1,552,259 in 2007. One of its suburbs, Mesa, now has nearly half a million residents, more than Pittsburgh, Cleveland, or Miami. As housing starts and housing prices rose, so did tax revenues, and a major capital-spending boom occurred throughout the Greater Phoenix area. Arizona State University built a new downtown Phoenix campus, and the city expanded its convention center and constructed a 20-mile light-rail system connecting Phoenix, Mesa, and Tempe.

And then the bubble burst. From October 2007 through October 2008, the Phoenix area registered the largest decline in housing values in the country: 32.7 percent. (Las Vegas was just a whisker behind, at 31.7 percent. Housing in the New York region, by contrast, fell by just 7.5 percent over the same period.) Overstretched and overbuilt, the region is now experiencing a fiscal double whammy, as its many retirees—some 21 percent of its residents are older than 55—have seen their retirement savings decimated. Mortgages Limited, the state’s largest private commercial lender, filed for bankruptcy last summer. The city is running a $200 million budget deficit, which is only expected to grow. Last fall, the city government petitioned for federal funds to help it deal with the financial crisis. “We had a big bubble here, and it burst,” Anthony Sanders, a professor of economics and finance at ASU, told USA Today in December. “We’ve taken Kevin Costner’s Field of Dreams and now it’s Field of Screams. If you build it, nobody comes.”