Kibbe on Marketing: The Tortoise and the Hare

My husband and I just returned from our much-needed annual vacation in Phoenix. Although life has us here in New England, we are Westerners at heart. Still, I found the contrasts in the economy startling between New Hampshire and Arizona as all parts of the country slowly recover from the recession.

In 2007 before the beginning of the end, Phoenix had a dynamism that bordered on frenzy. Business development – to say nothing of construction development – was growing so quickly it nearly crackled with friction.

At that time, biotech companies of all sizes were setting up shop in the West’s Most Midwestern Town. Tech incubators appeared on every street corner it seemed. Even an old shopping mall on the border of Phoenix and Scottsdale was turned into SkySong, a gigantic public-private business generation facility, provocative (or wacky, I’d call it) architecture and everything.

Arizona, and Phoenix in particular, saw hundreds of thousands of new residents relocating to the Valley. All those people needed homes, so build them they did. All those people needed to shop, so build them they did. There were more places to part you with your disposable income than was believable. And with all these new desert dwellers, home prices shot up to levels that were just laughable.

Meanwhile, New Hampshire more or less plodded along. Vast swaths of single-family homes have never appeared here, in part, because the Granite State never had to accommodate such overwhelming and constant growth. Our E-Coast simmered down to a low bubble after the early promise of the 2000s. Biotech, for some unknown reason, never really got a foothold here in a big way. Manufacturing had been dwindling for decades, but held on with precision engineering and other niche markets.

Not to be left out of the party, home prices in New Hampshire did have their day. We came here in 2000 and lost our bid on one house in a bidding war. Quickly learning from that experience, we finally purchased the home we have today by offering above-asking price.

Comparing the economies of New Hampshire and Arizona was truly a case of the tortoise and the hare race in more ways that most realized.

Then the crash came. Places like Arizona, Florida and Nevada were decimated. From 2008 through most of 2010, the vibe I had previously felt in Phoenix had been obliterated. There was more confusion than panic at first. Then when things didn’t bounce back quickly like the tech-focused recession of 2001, the business climate was stunned and collapsed.

To make some simple yet startling illustrations – imagine if entire blocks of homes in Bedford or Concord went into foreclosure, imagine if half the stores on Daniel Webster Highway in Nashua shuttered. And yes, I mean beautiful, big homes and big brand stores. That’s what happened in Phoenix. I believe at one point, one in five homes was in financial distress. Certain business sectors held on – solar energy being an obvious one – but nobody had any money to invest or grow. The few that did were terrified and hid. Bank presidents were having their own homes repossessed as the financial industry collapsed.

Meanwhile, New Hampshire more or less plodded along. Sure, we had our 300, 400, 500 homes go into foreclosure each month. And to those that experienced it, such a process is devastating. But Phoenix had four times as many homes foreclose each month as New Hampshire had in a year.

Yes, New Hampshire had layoffs, and to the dozens that were pink-slipped, it was crushing. But rarely did we see entire companies fold.

Home prices in the Granite State drifted down from modest highs, but didn’t experience a tsunami plunge like those in the Sun Belt. They never reached the stellar heights of other boom states, so they never had far to fall.

2010 saw most states in the country begin to take their first steps out of their sickbeds, and by 2011, there were even some signs of stabilization.

Now in 2012, I saw Phoenix begin to shine again. Well, maybe that’s too strong a word. Phoenix will never be the way was in 2005 – nor will New Hampshire for that matter. I think that’s a very good thing. Growth and building in Phoenix was bloated to an almost obscene proportion, and certainly completely unrealistic and utterly unsustainable. While today there is renewed sense of sobriety, I truly hope it continues. Memories can be very short.

One huge concern I have for Phoenix as it begins to move forward again is the housing market. There are still an egregious amount of foreclosures and short sales. Those who kept their heads during the recession and didn’t have to live with a horror-show local economy are snapping up homes like candy. I know…we’re thinking about it, too. Just a simple example, you can buy a cute 3-bed, 2-bath home for about $125,000 in some areas. But not for long.

Investors from all over the globe, particularly Canada, are buying two or three or more properties at a time and renting them out. Banks and Realtors are thrilled to get the inventory off the books, so the more, the merrier. I’m sure the same thing is happening all over the country as investors buy distress properties by the armful.

But what’s going to happen to the stability of Phoenix and other communities when they are filled with renters instead of owners? Obviously, these investors will hold on to their homes until prices come back up – and they will – and sell them for huge profits. That will burden additional would-be buyers who will, once again, be priced out of the market, to say nothing of renters who may face eviction. Business will suffer as a renter population is more transient by nature. And one has to assume banks make more money on mortgages than rents. If nobody is going to the bank for a mortgage, how do they stabilize and grow again? By deposits alone?

I dearly hope my beloved Valley of the Sun takes a closer look at what’s happening at its housing market and how it will impact Arizona in the long term.

New Hampshire’s businesses, on the other hand, have been playing their cards so close to their collective vest, they are in danger of missing opportunities. The fear of seeing what happened in places like Arizona and Florida has made them vulnerable to not moving quickly enough to capture new opportunities.

Biotech is a sector whose time has come, as just one example. With an educated workforce, colleges and universities everywhere, access to Boston’s resources – and yes, our low taxes – I’m stymied as to why Pharma still hasn’t found New Hampshire.

In the fable, the tortoise won the race through consistent forward motion while the hare burned out quickly. But what do many tortoises do when they’re frightened? Let’s hope New Hampshire doesn’t stay instead its shell.


Cindy Kibbe is owner of Cindy Kibbe Creative Communications, a writing services firm based in New England. She was an editor for a regional business publication for nearly a decade. She can be reached at cindy@kibbecreative.com.