1. "the area" is not homogenous. the northern parts of AZ and NM (even CA) to some extent are climactically and geologically quite unlike the southern parts.

2. humans have lived in the area for thousands of years. Yes, it doesn't fit into a northern European notion of "the kind of place humans should live", but it fits entirely into the southern European, north African and Arabic culture and living patterns. These cultures (along with the native Americans ones that flourished here for millenia) have developed sophisticated ways of living in this sort of climate and landscape.

3. it's not unlivable, it's just unfarmable (note that this is different from subsistence ag. or gardening).