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America’s boomtowns adapt to a slowdown

Since 2000, hundreds of communities across the U.S. have seen unprecedented growth in new homes and income. Will they be able to survive?
Image: Queen Creek, Ariz.
A realty sign stands in front of one of the many homes in foreclosure in the Villages of Queen Creek in Queen Creek, Ariz., on Sept. 26, 2007. Ross D. Franklin / AP file
/ Source: Business Week

Across the nation, once-quiet farming villages and industrial towns were transformed over the past decade into boomtowns. Their rapid growth was fueled by cheap land, nearby job centers, easy transportation and a steady influx of homebuyers seeking large spaces at affordable prices.

Low interest rates and easy mortgages brought about a real estate explosion in much of the country in recent years. But in boomtowns, development powered on at a supercharged pace — sometimes sparked by a new sewer line, a new regional mall or a new highway exit.

It was good while it lasted. But the housing crisis and the recent economic downturn have forced many of America's fastest-growing towns to adapt to the new reality of falling home prices and rising unemployment. And it's not clear whether the builders will return or whether the nation's next boomtowns will rise elsewhere.

"The boomtowns of this decade are not booming so much in the last couple years," said William H. Frey, a demographer at the Brookings Institution in Washington, D.C. "It's possible those places will come back again. A lot depends on where the economy grows and where the new knowledge centers are." worked with the Little Rock firm Gadberry Group to come up with the town in each state that experienced the most growth since 2000. We weighted a number factors, including growth in households from 2000 to 2008 and from 2007 to 2008, the emergence of new neighborhoods, the average length of residence and the change in household income.

Remarkable growth
We expected to find towns with rapid growth in California, Nevada, Arizona, Florida and other states where the housing boom was most pronounced — and we did. In Queen Creek, Ariz., a Phoenix suburb, and Summerlin South, Nev., on the edge of Las Vegas, the number of households increased 600 percent from 2000 to 2008 — more than any of the other towns in the ranking.

We also found some remarkable areas of growth in Indiana, Illinois, South Carolina, Minnesota and Idaho. "Boomtown" is a relative term, however, in New York, Rhode Island, New Hampshire, Pennsylvania and other states where the population has been flat or falling. The number of households in working-class Allentown, Pa., for example, grew just 4 percent since 2000.

While it's impossible to know how these towns will do during the recession, they boomed for a reason. People chose to live in these places because they were well connected or, like the Charlotte suburb of Indian Trail, N.C., or Wesley Chapel, Fla., in the Tampa Bay metro area, were located in a beautiful part of the world. People flooded into Oswego, Ill., about 50 minutes by train to Chicago, because of its convenient location, good schools and the beauty of its setting along the Fox River. That isn't likely to change. And Hoboken, N.J., located across the Hudson River from New York City and filled with young professionals who worked at Citibank, Morgan Stanley and other now-struggling Manhattan financial firms, is entering an economic slowdown. But Hoboken's easy access to the city by train, bus and ferry will always remain appealing.

"As a demographer, I find it interesting to know where the growth is happening," said Gadberry Group principal Larry Martin, whose data help retailers identify store locations. "Things are happening that are attracting new households. It could be a new industry, or the fact that school districts are recognized for doing tremendous work."

A municipal transformation
An explosion of development began in Queen Creek, a rural hamlet about 30 miles outside Phoenix, after the town installed its first sewer line in 1999. The population swelled from about 3,200 people in 1996 to 25,000 people today, said town manager John Kross, adding that the town's growth-management plan actually kept growth from really getting out of hand.

New residents, looking for affordable homes with land, mostly came from more expensive urban areas in Arizona, he said. And with the new houses came new shops and offices. About a million square feet of retail space opened in downtown Queen Creek this spring, Kross said. The town accommodated the growing population with new parks and trail systems, widened roads, and a new municipal building.

But like other Arizona markets, Queen Creek home prices began tumbling a couple years ago. Last year just 180 building permits were issued, compared with about 1,200 a year during the peak of the boom.

"It has been quite a ride," Kross said. "Within 10 years' time, we transformed into a full-service municipality."

When the construction boom crashed a few years ago in the farming town of Elk Grove, Calif., south of Sacramento, it caught retail developers off guard. The launch of the 1.1 million-square-foot Elk Grove Promenade open-air shopping mall, originally set for 2008, has been pushed off until the end of next year even though the project is nearly complete. Not only is the developer struggling financially, but the mall is located on the edge of a rural expanse where Elk Grove was expected to develop.

"When everything was booming, the builders said, 'We're going to get ahead of the game,'" said Garrick Brown, director of research for Colliers International in the Sacramento regional office. "Usually retailers follow rooftops. In this case, they followed building permits."