JOE FERGUSON Sun Staff Reporter azdailysun.com | Posted: Tuesday, May 24, 2011 9:00 am

Local second-home owners have long been blamed for fanning the flames of high real estate prices during the last decade.

A scarcity of land, local real estate professionals believe, spurred three-way bidding wars among locals, investors and would-be second-home owners over the last few years.

But economists point out that there are secondary economic impacts to offset the price hikes, including higher-than-average retail spending and contributions to local tax bases with fewer demands on government services.

A study in 2008 by the city of Flagstaff found second-home owners, on average, spent $102 a day on retail purchases for the 72 days that they are here.

The study by the Denver-based Economic & Planning Systems estimated this translated into $7,390 a year — although the figure could be slightly skewed by large home furnishings and appliances purchased by buyers of new second homes in the first year.

Several categories, including liquor purchases, home furnishings, home improvement and restaurants/bars had seasonal residents outspending permanent residents as a percentage of their overall spending.

However, second-home owners also spend proportionally less on groceries and on trips to general merchandise stores like Walmart and Target, the study concludes.

And overall, a second-home household spends less than a quarter of what a year-round household spends in Flagstaff.

The city’s economic development manager, John Stigmon, cites another economic study to give those shopping habits some context: They are usually significantly older than Flagstaff’s median age of 31 and significantly wealthier.

“Second-home owners have an average income of $127,000 compared to the national average of $68,000,” Stigmon said, citing a recent Buxton Retail Analysis Study. “They tend to be a little older, married and more settled because they tend to have money. Less than 10 percent are under the age of 55.”

Northern Arizona University Economics Professor Dennis Foster doesn’t believe the near doubling of the number of second-home owners has shifted the local economy to resemble communities with high concentrations of seasonal housing like Aspen or Vail.

He said scarcity of land in those mountain communities is far more pronounced than in Flagstaff.

“Those places are very hemmed in,” Foster said.

The economist contended the seasonal population hasn’t reached a tipping point at which second-home owners have become an overriding economic force in the community.

Arizona State University Professor of Real Estate Jay Butler believes second-home owners might be getting a bit of bad rap for the surge in real estate prices, which peaked in 2008.

“You had relatively high land prices in the first place,” he said.

He also points out some communities in Flagstaff like Pine Canyon were marketed primarily to second-home owners rather than residents. Empire Residential, for example, directly marketed its Flagstaff projects in the Valley for several years before declaring bankruptcy in 2008.

“They build to those who they think they can sell to,” Butler reasoned.

But Foster disagrees, saying that second-home owners who can afford to outspend the locals would have a impact in a smaller market the size of Flagstaff.

“It is certainly likely to have some upward impact on price,” Foster said.

Joe Ferguson can be reached at 556-2253 or jferguson@azdailysun.com.

Expenditures by second-home owners*

Annually Daily

Food purchases

Grocery stores 1,340 18

Beer/Wine/Liquor 260 4

Eating out at restaurants 1,380 19

Retail spending

General Merchandise 1,010 14

Electronics 430 6

Home furnishings 1380 19

Clothes/entertainment 560 8

Home improvement 1,030 14

Total spending $7,390 $102

Source= City of Flagstaff, 2008 Nexus Study

*Reflects average visitation of 72 days per year

Flagstaff Housing 2010 2000 Change

Total housing units 26,254 21,396 22.7%

Owner-occupied housing 10,842 9,304 16.5%

–Second homes 1,892 977 93.7%

Renter-occupied housing 11,994 10,002 16.5%

Sources: U.S. Census, 2010 and 2000