by Calculated Risk on 2/06/2008 01:42:00 PM

From the WaPo: Housing Crisis Casts a Cloud Over Sun Belt (hat tip Atrios)

When residents of Maricopa, Ariz., south of Phoenix, vote in the presidential primaries Tuesday, it will be against a backdrop of vacant storefronts and sprawling, terra-cotta-roofed subdivisions that are studded with for-sale signs as far as the eye can see.

The state government is staring at a billion-dollar shortfall in its $11 billion budget. Forecasters expect a region that grew 7 percent in 2006 to contract this year. Retail sales, which rose 16 percent in 2006, are dropping. Dennis Hoffman, an economics professor at Arizona State University, said he had never seen such a sharp turnabout in 25 years studying the local economy.
...
The decline in residential activity is leading to downturns in retail and commercial construction as well. While long-planned projects in close-in communities are being built, many economists expect few to come in behind that construction for several years.
...
Many business people and economists here do not expect things to pick up until the area works through its inventory of about 37,000 unsold homes, which could take three or four years.
emphasis added

This is the normal pattern; residential investment leads non-residential investment in structures - both up and down. Builders are finishing up "long-planned projects" keeping non-residential construction spending strong, but few new projects are getting started, and, according to Richmond Fed President Jeffrey Lacker yesterday, a "dramatic change" is probably underway in commercial real estate (CRE). In other words, the expected slump is here.