More earth fissures plague Q.C., Pinal area

August 22, 2008 - 6:16PM

Sarah J. Boggan, Tribune

More dangerous earth fissures are popping up in the Queen Creek area. So the Arizona Geological Survey has already revised and reissued maps that were released just this past April of the area's dangerous cracks.

SPECIAL REPORT: Buyers beware, does your area have fissures?

SLIDESHOW: Rain aggravates Queen Creek fissures

Assessment shows effects of fissures

The revised maps of the Chandler Heights area, which includes portions of Queen Creek and unincorporated Pinal County, show more fissures have surfaced near the infamous "y-crack" fissure, near Hunt Highway and Sossaman Road, where a horse was swallowed up last summer.

The maps also show new cracks adjacent to Goldmine Equestrian Estates in Queen Creek.

Fissures are cracks in the earth caused by groundwater pumping. Geological survey officials call them "serious geological hazards" and say they are found in the valleys of central and south-central Arizona. Pinal County is home to three-quarters of the state's known earth fissures.

Heavy rains and surface runoff during the monsoon season can turn a barely visible crack in the earth into a 20-foot deep, steep-walled gully that can threaten homes, cut across roadways and endanger humans and animals.

Maps show there are more than 200 earth fissures in the Chandler Heights area.

Mike Conway, with the Arizona Geological Survey, said the new cracks aren't a surprise.

"We suspected there were more fissures there, but they had been covered over by either construction or road grading," he said. "They weren't evident during original mapping, but the monsoon rains caused them to open. We suspected they were there all along."

Local activist Silvia Centoz, who lives in unincorporated Maricopa County just outside Queen Creek, has long told people about the dangerous cracks in the earth and has pushed for mandatory disclosure to protect property owners and homebuyers in the area.

"It's disclosure in the right direction," Centoz said. "I'm just glad that the AZGS is doing everything that they can to bring the maps up to snuff. We still have a few places where we have hidden or buried fissures that are still going to surface. I hope that in time those will get added to map."

As part of the statewide fissure mapping project, Conway said geologists will continue to add fissures to the released maps. This week, the survey released new maps of Mesa and Scottsdale.

Conway said they are planning to release maps of Luke Air Force Base in the West Valley and the Picacho Peak area in Pinal County where the first earth fissure in the state was discovered.

The mapping project was mandated by 2006 legislation as a way to improve disclosure of properties affected by earth fissures.

Arizona Department of Real Estate officials have said the updated information is listed in public reports filed with the agency, and the dangerous cracks can be avoided or mitigated.

As part of the 2006 legislation, people who have fissures on their properties must disclose them.

To view the updated maps and download them for free, visit the geological survey's Fissure Earth Center online at

Foreclosures still hurting resale market

August 20, 2008 - 8:53PM
Edward Gately, Tribune

Foreclosures continued pushing down resale home prices across the Valley last month, with Scottsdale's median price falling below $500,000 for the first time since 2005.

For the traditional sales market, the Valley median price was $200,750, while the foreclosed properties had a median price of $159,205, according to the latest Arizona State University report. That compares with $218,000 and $169,890 last month, and $270,000 and $220,075 in July 2007.

Foreclosure activity represented 3,470, or 42 percent, of the 8,165 transactions that took place last month. Foreclosed transactions are homeowners losing their property to successful individual bidders or the lender of record.

The median price, including foreclosures, in Scottsdale was $450,000, compared to $501,135 in June and $595,500 in July 2007. The prevalence of foreclosures is hurting the market, said Janine Brown, president of the Scottsdale Area Association of Realtors and a real estate agent with John Hall & Associates.

"I don't think that we have seen that type of number for a while," she said. "Even with the tick back in our median price, we had a huge tip up in 2005. It's kind of hard if you have a really nice house and you want $250,000 for it and the guy next door let his go on short sale for $175,000. That's going to affect your home price."

Foreclosures are negatively affecting Scottsdale, and not just through lower home values, she said.

"If you go in and you've got a house that's in foreclosure or bank owned, and the bank's not maintaining the property, that affects your entire neighborhood," Brown said.

The Scottsdale market is gradually showing improvement with more first-time homebuyer activity in central and south Scottsdale, she said.

"And once that market gets a good upward tick, it starts to move the other markets because if you can sell your house for $250,000, it's real possible your next one might be $300,000, and if you can sell your $325,000 house, your next one might be $400,000," she said.

Home prices are being impacted by the large number of vacant homes, said Jay Butler, director of realty studies at ASU's Morrison School of Management and Agribusiness at the Polytechnic campus.

"We keep adding to the (foreclosure) inventory," he said. "The uncertainty of the economy and other things just make buyers reluctant to make any commitment and even those who are willing to make the commitment, tightening underwriting guidelines make it more difficult to borrow."

While foreclosures are hurting the market, one encouraging sign is more buyers are showing an interest because prices have come so far down, said Alicia Conley, a real estate agent at Royalty Real Estate Services in Mesa. Her territories include Chandler, Ahwatukee Foothills and Maricopa.

"It's really nice to see some of the things that were going on in a more neutral market starting up," she said. "You're starting to see people hold open houses. When's the last time you saw an open house sign? Those things are happening."

Real-estate appraisers call for reform after investigation

by Mitch Weiss - Aug. 21, 2008 12:00 AM
Associated Press

CHARLOTTE, N.C. - Four national associations of real-estate appraisers have asked Congress for major regulatory reforms in the wake of an Associated Press investigation that identified key failings within the existing system.

Led by the Chicago-based Appraisal Institute, the groups said Wednesday they want Congress to approve more money so that state appraisal boards can boost enforcement efforts. They also called on lawmakers to increase the oversight authority of the federal agency charged with monitoring the appraisal industry.

"We have been deeply troubled by the lack of responsiveness by some federal and state appraiser regulators in carrying out (the law)," said Bill Garber, the director of governmental and external relations at the Appraisal Institute, the nation's largest association for real-estate appraisers.

The AP's investigation found that since 2005, more than two-dozen states and U.S. territories violated federal rules by failing to investigate and resolve complaints about appraisers within a year. Some complaints sat uninvestigated for as long as four years and as a result, hundreds of appraisers accused of wrongdoing remained in business.

Experts told the AP the failings helped contribute to the current crisis in America's housing market.

"We hope this article proves to be a catalyst for modernizing the existing appraisal regulatory structure and making it more effective," they wrote to the Senate Banking Committee. The other groups signing the letter are the American Society of Appraisers, American Society of Farm Managers and Rural Appraisers, and the National Association of Independent Fee Appraisers.

Reps. Paul Kanjorski, D-Pa., and Judy Biggert, R-Ill., the co-sponsors of appraisal-reform legislation that passed the House last year, said earlier this week it was unlikely Congress would have time to address the AP's findings before adjourning for the year. But the staff of Sen. Bob Casey, D-Pa., who sponsored similar legislation in that chamber, said he plans a renewed effort to move it forward in the wake of the AP's report.

Under the current regulatory system, created in the wake of the savings and loan crisis in 1989, states license appraisers and discipline those who break the law. An independent federal agency, the Appraisal Subcommittee, is responsible for conducting field reviews and audits of the states, and maintaining a national registry of appraisers.

Traditional home resales still outnumber foreclosures in July

by Kerry Fehr-Snyder - Aug. 20, 2008 11:59 AM
The Arizona Republic

The Valley as a whole ended the traditional home resale season on a low note as foreclosures and depressed home values continued to dominate the landscape, but parts of the Southeast Valley in July bucked that trend.

Valleywide, foreclosures represented 42 percent of the resale market in July. That compares to 14 percent in July 2007. Overall in the Southeast Valley, traditional sales eclipsed foreclosure sales, and the median price on traditional resales topped the median price on foreclosures.

Mesa: 315 foreclosures, $160,000 median price; 485 traditional sales, $179,000 median price.

Chandler: 120 foreclosures, $198,405 median price; 320 traditional sales, $239,750 median price.

Tempe: 15 foreclosures, $213,560 median price; 100 traditional sales, $248,500 median price.

Gilbert: 170 foreclosures, $231,000 median price; 345 traditional sales, $240,000 median price.

Ahwatukee: 15 foreclosures, $238,925 median price; 100 traditional sales, $295,000 median price.

Some parts of the Southeast Valley have seen a more stable market than others in outlying areas like the city of Maricopa and Queen Creek. In cities closer to the urban center like Tempe or Chandler, homes tend to be more expensive and therefore less attractive to investors, said Jay Butler, director of Realty Studies at Arizona State University's Morrison School of Management and Agribusiness at Polytechnic in Mesa.

"The East Valley is not immune but is doing better than other areas," Butler said. "It's more stable, and the university provides some stability too."

Butler said one of the groups hurt most by the current real estate crunch is homeowners who are struggling to make their mortgage payments and maintain their properties while homeowners around them rent their houses or let banks foreclosure on their loans.

"There's a lot of frustration out there right now," Butler said.

Summary of Key Provisions of H.R. 3221 - The Housing Stimulus Bill

National Association of REALTORS® Summary of Key Provisions of H.R. 3221 - The Housing Stimulus Bill (as of 8/22/08) H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the House on July 23, 2008, by a vote of 272-152. On Saturday, July 26, 2008, the Senate passed the bill by a vote of 72-13. The President signed the bill on July 30, 2008. The bill includes the following provisions: GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008). View 2009 FHA and GSE loan limit estimates (PDF) FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008). View 2009 FHA and GSE loan limit estimates (PDF) FHA Reform Chart (PDF) Homebuyer Tax Credit - a $7500 tax credit that would be would be available for any qualified purchase between April 9, 2008 and June 30, 2009. The credit is repayable over 15 years (making it, in effect, an interest free loan). First-time homebuyer tax credit chart Frequently asked questions about the first-time homebuyer tax credit Additional Property Tax Deduction – HERA provides a one-year benefit that will be available to all homeowners. Under current law, property taxes are deductible only if an individual itemizes his/her deductions on Schedule A of their tax return. The new provision will permit a deduction of up to $500 ($1000 on a joint return) for all individuals who utilize the standard deduction and do not itemize. Instructions will be provided on the 2008 tax return when it is distributed at year-end. FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 85% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008. FHA Foreclosure Rescue Chart Seller-funded downpayment assistance programs – codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members. This prohibition does not go into effect until October 1, 2008. More about the seller-funded downpayment assistance provision Tips to finding downpayment assistance programs (PDF) VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008. Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009. GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail. Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages. National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing. CDBG Funding – Provides $4 billion in neighborhood revitalization funds for communities to purchase foreclosed homes. More about the CDBG funding provision LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient. Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator. Modification of $250,000/$500,000 Exclusion – The sole real-estated related "pay-for" among the tax incentives modifies the $250,000/$500,000 exclusion of gain on the sale of a principal residence. Beginning in 2009, the exclusion, as it applies to a second home (or rental property) that is converted to a principal residence will be allocated. When the second home is sold, any gain attributable to use as a second home (or rental property) will be taxed at capital gains rates. Any gain attributable to use as a principal residence will remain excludable, up to the $250,000 and $500,000 limits. A formula is provided for computing the proper treatment of these gains. View some examples that illustrate the application of this new rule (PDF)

Delay in Amaranth construction blamed on economy

by Elias C. Arnold - Aug. 20, 2008 12:00 AM
The Arizona Republic

A principal with Montage Holdings said the housing market slowdown has delayed construction at the master-planned Amaranth community in Goodyear's far south, but he still expects the area to meet long-term population projections.

"Long term, we're optimistic. We're just not on as tight a schedule as we were," said Joe Porter, who supervises planning for Amaranth.

Scottsdale-based Montage Holdings owns nearly 10,100 acres in Goodyear's Sonoran Valley area. The project, near the community of Mobile, could turn into 42,000 homes and 20 million square feet of commercial space.

By 2030, the Sonoran Valley, which will include Amaranth, is expected to have more than 50,000 residents, slightly smaller than Goodyear's population today.

But a glut of houses on the market and the nation's credit crunch have slowed the economy, delaying by nearly a year the company's timeline to start selling houses.

Porter said that long-term population projections for the area are still good.

"Everybody, in doing those projections, assumes peaks and valleys," he said.

The company could begin selling houses in early 2010, but it is still a tough projection to make, Porter said.

Defaults on 'Liar Loans' Rise

The next category of mortgages going bad are the so-called “liar loans.” They were approved without the borrower having to prove that they had an income or assets.

Some home owners with these loans are stuck. They can’t refinance because housing prices in the market where they were the most common have declined.

Losses on liar loans could total $100 billion, according to Moody's Economy.com. That's on top of the $400 billion in expected losses from subprime loans. Moody’s warns that these troubled loans could prolong the credit crisis another two years.

Fannie Mae and Freddie Mac, the largest buyers and backers of mortgages, lost a combined $3.1 billion between April and June. Half of their credit losses came from sour "liar loans," or known as Al-A.

News of these losses are driving down stock prices for Fannie Mae and Freddie Mac, making it more likely that the U.S. Treasury Department – and ultimately taxpayers – will have to bailout the quasi-public banks.

Source: The Associated Press, Alan Zibel (08/18/08)

Maricopa County cuts 2008 property tax rate

August 18, 2008 - 8:29PM

Michelle Reese, Tribune

The Maricopa County Board of Supervisors set the tax rate for property owners on Monday, touting it as the lowest rate in 29 years.

The board dropped the rate at which it taxes all property in the county to $9.29 per $100 of assessed value, which is about 10 percent of the market value of a typical home.

The reduction means a savings of about $16.14 on a median-priced house valued at $219,500, according to a news release from the clerk of the Board of Supervisors.

The county-set rates make up about 12 percent of a homeowner's property tax bill. The bulk of the bill comes from school district tax rates. Those rates were projected by the districts in the last few weeks, and are now set for 2008 property tax bills.

While some rates are going down, the tax bill homeowners will receive in a few weeks will be based on a home valuation set nearly two years ago. Tax bills are computed through a formula that uses both the tax rates and the assessed value of a property.

Just six months ago, the Maricopa County Assessor's Office sent out valuations for tax year 2009.

The taxes approved Monday are for tax year 2008.

While more than 90 percent of homeowners saw a decrease in their home valuations for tax year 2009, they won't see that reflected on their bills for another year.

"We are aware of the downturn in the real estate market, and we're acting accordingly," said Paul Peterson, public information officer for the Maricopa County Assessor's Office.

When the new tax bills arrive, homeowners may be surprised, because when the tax year 2008 values were set, the market was different.

"It's a confusing tax system that needs to be changed," Peterson said. "Most people don't understand why their taxes don't go down when their assessments go down."

Some school districts have announced decreases in their taxes for tax year 2008, including Chandler Unified.

The Chandler Unified School District projects that its tax rate will drop by 57 cents to $4.59, which is about half of what it was 10 years ago.

"Our tax rates continue to decline as we've paid off previous bonds," district spokesman Terry Locke said.

While some of that is attributed to the state taking over a bulk of construction costs for schools, Locke said the district is also watchful when it plans budgets.

"We're also being careful not to spike the tax rate. You're not seeing too many bonds sold in a given year. We may have the authorization, but we may spread that out over a five-year process."

The Gilbert Unified School District announced a 16-cent hike in its rate.

The increase is necessary because a new high school is being built in the Gilbert district, said spokeswoman Dianne Bowers. The school district is responsible for the cost of surrounding improvements such as roads, sidewalks and lighting.

The Pinal County Board of Supervisors also set tax rates on Monday. In Apache Junction, the proposed tax rate of $4.75 for the school district reflects a decrease of $1.10 from the previous year, the 12th time in a row the school district's tax rate has dropped.

The J.O. Combs School District's rate is also set by the Pinal board. It is dropping $2.41, to $7.49.

Condo living, light rail set to re-energize Mill Avenue

by William Hermann and Dianna M. Náñez - Aug. 18, 2008 12:00 AM
The Arizona Republic

Tempe's Mill Avenue has been in a state of evolution for more than three decades, going from a dilapidated strip of old buildings to a hip '80s hangout to a '90s college hotspot.

Now hit hard by a tough economy and the opening of a major retail competitor, Tempe Marketplace, the downtown district is facing its latest identity crisis.

This time, community leaders are hanging their hopes on an influx of posh high-rise condos and the December opening of light rail, changes they believe will bring Mill Avenue to a new pinnacle as a center of urban living.

When community activists saved older downtown buildings in the 1970s and early 1980s and some restaurants and shops opened on Mill, it seemed as if the street had a new lease on life.

In 1989, DMB Associates opened Centerpoint, a 21-acre project including offices, restaurants, retail and entertainment on the northwestern corner of Mill Avenue and University Drive. Though restaurants and retail came to Centerpoint and points north on Mill, big, steady crowds never followed.

Ten years later came the opening of Tempe Town Lake. Downtown is home to big nights after football games, a successful New Year's party and crowded art festivals. But consistent crowds of shoppers still are not there.

Residential space in the urban core was the missing ingredient, many say.

About 600 new residences are expected to be completed near Mill Avenue this year.

"We had an 18-hour downtown; we wanted a 24-hour downtown," Neil Calfee said. Formerly a Tempe deputy community development manager, Calfee is now Arizona State University's director of real- estate development.

Chris Wilson, vice president of Downtown Tempe Community, a non-profit organization that provides management services for the area, said residential adds a "constant factor."

"Residential is the holy grail of downtown development," he said. "Most people shop, dine and spend time within 1 or 2 miles of their home, and that gets intensified in an urban setting where they do it within a couple blocks."

City officials, developers and merchants say the fall opening of the Centerpoint Condominiums high-rise in particular will have a significant impact.

Developer Ken Losch said he will open Centerpoint in late October, despite financing complications brought on by the recent bankruptcy of his main financier, Mortgages Ltd.

Losch said several factors are coming into play that will help residential properties on Mill Avenue succeed, including the rising cost of commuting due to high gasoline prices, the opening of light rail through downtown Tempe and Tempe's proximity to jobs and freeways.

Tempe is in what Losch calls the "A Circle" for Valley development. In contrast with "C Circle" areas like east Mesa and Queen Creek, where distances to drive to work are great and house prices have plummeted, he said central Tempe has stronger real-estate values and is becoming a place where people want to live and work.

Losch said that his research shows that within a 1-mile radius of Mill, there are 11,000 jobs; within 2 miles, 20,000 jobs; and 3 miles, 60,000 jobs.

"Mill Avenue is the next spot to be in town," Losch said.

Tempe Mayor Hugh Hallman said the number of developers that are still building in Tempe is symbolic of the advantages Tempe has. The city is a Valley focal point nestled among metropolitan Phoenix, Phoenix Sky Harbor International Airport and the Valley's southeast suburbia.

"Yeah, there's lots of opportunity to look for black clouds in the economy," Hallman said. "(But) if there's anyplace to look for silver linings, it's in Tempe."

Julian Wright, who recently opened LaBocca restaurant and was the originator of The Library bar and Jax Thai Bar, agreed.

"Mill Avenue is slowly growing up," he said. "The type of projects that are being opened are starting to cater to an older, more mature clientele, people who enjoy urbanism."

Tempe realty agent Will Daly, who operates the Web site WeKnowUrban.com, said that downtown Tempe now has the finite geography that large urban areas like Chicago have. Daly said Town Lake and light rail have helped create these artificial boundaries that force cities to build upward and not outward.

"Tempe is vertical, very walkable. Everything is within walking distance," Daly said. "With the light rail, you're adding a 20-mile focal point and providing a boundary, just like the lake. Most urban settings have either a boundary or a focal point. With Mill Avenue, you've got both."

Developer Ross Robb is a veteran of downtown Tempe development. Robb oversaw the financing and administration of Hayden Square, a Mill Avenue residential and commercial center, and the Casa Loma and Andre buildings, with office and retail space.

Robb agrees that high gas prices are convincing people to move closer in, that freeways create a "power center" around Tempe and that light rail will bring people by the thousands to Mill Avenue.

"But a lot depends on the national and local economy," he said. "Whether this perfect storm happens in the next few months or 24 or 48 months, I don't know."

Sellers struggle as Valley home prices down 21%

August 14, 2008 - 10:38AM

Edward Gately, Tribune

It’s all-out war for anyone trying to sell a home in the Valley’s turbulent housing market.

Valley home prices have set a negative record, dropping 21 percent in just one year, according to the latest Arizona State University-Repeat Sales Index, which is based on repeat sales of the same homes as they sell over time. The drop in average home price was from May 2007 to May 2008.

It was even more severe than the 18 percent drop recorded from April 2007 to April 2008, and the first-ever double-digit decline of 13 percent from March 2007 to March 2008.

“Things are going down fast,” said Karl Guntermann, a real estate professor in the W.P. Carey School of Business at ASU. “Obviously it’s a very tough market to sell in. If you aren’t selling, you’re losing equity, but it’s kind of paper equity. A lot of people are losing equity, they don’t feel as wealthy and that does affect people’s spending patterns.”

The declines, while painful to sellers, still haven’t matched the staggering increases in home values that peaked in 2006, he said.

“Basically around mid-2006, the increase varied anywhere from 73 percent to about 80 percent, depending on which city or region,” Guntermann said. “We’re still on average way above where we were at the beginning.”

Among East Valley cities, prices fell 25.1 percent in Mesa, 23.2 percent in Chandler, 16.5 percent in Tempe and 14.2 percent in Scottsdale/Paradise Valley.

“In general, if you don’t have to sell, you probably shouldn’t be selling,” Guntermann said. “You’re competing with banks that are selling foreclosed properties. You’re competing with someone who has a job transfer and has to sell, or maybe they lost their job and they want to relocate to another region, and they need to sell their house.”

If you have to sell your home, the two most important things to keep in mind are that you must price your house aggressively and it must be in “immaculate” condition, said Jay Thompson, a broker with Thompson’s Realty in Gilbert.

“Curb appeal has always worked. It worked 50 years ago, and it works today,” he said. “You want people, when they pull up to the front of the house, to go, ‘Wow, this house looks great,’ and they carry that same feeling through when they walk into the front door. It’s got to look good, it’s got to smell good.”

And if the foreclosure house next door or down the street is selling for less, you need to be able to show why a buyer should pay more for your house, Thompson said.

Buyers are also pickier, and they want to look at a lot more houses before making a decision, Thompson said.

“Buyers are not going to be looking at two or three houses, they’re going to be looking at 20 or 30, or 50 houses,” he said. “So your house better be the best-looking one at the best values.”

Residents working to stop new Wal-Mart at Ariz. and Riggs

by Edythe Jensen - Aug. 15, 2008 09:38 AM
The Arizona Republic

Kirk Sibley, a Chandler resident activist with a four-year history of trying to stop Wal-Mart from coming to a parcel of land at Arizona Avenue and Riggs Road, renewed his push at Thursday's Chandler City Council meeting.

He didn't have to do much persuading. With little discussion and no mention of the giant discount retailer by name, the council voted unanimously to send Diversified Partners' latest plans for the Riggs Gateway shopping center back to the Planning and Zoning Commission for a Sept. 17 hearing. The commission had earlier voted 5-0 in support of the proposal for a 30-acre center anchored by an unspecified large retailer on the northeastern corner.

David Cisiewski, attorney for the developer, said more delays could hurt the project because prospective tenants demand zoning approval before they commit to a location.

Sibley said Diversified has repeatedly declined to name an anchor tenant. However, neighbors are convinced Wal-Mart is in the plans based on information they obtained from a commercial real estate agent, he said.

The protesting residents declared a temporary victory in 2004 when Diversified canceled a former zoning request that included a Wal-Mart Supercenter on the northeastern corner. As the years went by, the neighbors said they were assured the Supercenter was off the table and they didn't renew objections when Diversified submitted a new zoning request with slightly smaller buildings.

But the residents now fear a smaller Wal-Mart will take the Supercenter's place, and that Diversified hasn't been open with their plans, Sibley said. He called for more neighborhood meetings and better communication.

Delia Garcia, a spokeswoman for Wal-Mart, said there are no plans to open a store at the Riggs Gateway site.

Residents are prepared to mobilize again and circulate referendum petitions that could force a public vote if Diversified fails to identify an anchor tenant and the council approves zoning that would allow a Wal-Mart, Sibley said.

"I don't think they want that right now, especially since this is an election year," he said.

Under Chandler's big box ordinance, Diversified would have to identify an anchor tenant if they were occupying more than 150,000 square feet. However, the largest building in the latest Riggs Gateway center plan is 131,000 square feet.

Councilman Bob Caccamo said before the meeting that he was disappointed in the proposed design.

"We were assured it was going to be an upscale retail center and it's not," he said. "It looks like the big, bland generic shopping center with tons of parking in the front and buildings set way back that were built here 20 years ago."

Fannie Mae cuts back after loss of $2.3 bil

Aug. 9, 2008 12:00 AM
Associated Press

Fannie Mae is making bold cutbacks that will send shock waves through the mortgage market, after posting a quarterly loss Friday that was three times larger than Wall Street expected.

To slow its financial decline, the mortgage finance giant slashed its dividend to 5 cents a share from 35 cents a share and said it will eliminate loans for borrowers with solid credit scores, but little proof of income or small or no down payments.

The company also is raising its mortgage fees, which will be passed onto borrowers as higher interest rates or closing costs.

With Fannie Mae and sibling company Freddie Mac becoming more risk-averse, fears are building that mortgage rates will keep climbing, making it harder for people to afford a mortgage or refinance their home, and spur even more foreclosures.

The Washington-based company lost $2.3 billion, or $2.54 a share, for the quarter that ended June 30.

The loss compares with profit of $1.95 billion, or $1.86 a share, in the period last year.

Greenspan: Housing Stabilizing Soon

Former Federal Reserve Chair Alan Greenspan in an interview with the Wall Street Journal this week says he expects U.S. home prices to stabilize in the first half of 2009.

"Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities. We won't really know the market value of the asset side of the banking system's balance sheet – and hence banks' capital – until then," he said.

Greenspan had a one-word description for the government’s response to Fannie Mae and Freddie Mac’s problems – “Bad.”

“[Congress] should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted – with necessary taxpayer support to make them financially viable – as five or 10 individual privately held units," which the government would eventually auction off to private investors, he said.

Source: The Wall Street Journal, David Wessel (08/13/08)

Option ARMs a Headache for Lenders

Countrywide Financial Corp. said in a regulatory filing Monday that the average borrower with an option adjustable-rate loan now owes 95 percent of the value of his home, up from 76 percent when the loan was made.

Seventy-two percent are making less than full interest payments and 12.4 percent are at least 90 days delinquent. The average FICO credit score has dropped to 680 from an original 715. The U.S. median is 723.

Bank of America has said about 66 percent of the option ARMs went to California and Florida borrowers.

Bank of America is not the only big lender with option ARM headaches.

Wachovia Corp said borrowers in its $122 billion "Pick-a-Pay" option ARM portfolio owed 85 percent of what their homes were worth on June 30, up from an original 71 percent. In California's Central Valley, the average was 109 percent. The average overall FICO score was down to 661 from 675.

Source: Reuters News, Jonathan Stempel (08/12/2008)

New Index Says Home Prices Rising

A new home price index published for the first time this summer by Integrated Asset Services showed that home prices rose 1.1 percent on a national level in June compared to May, although prices dropped 11.5 percent over the previous year.

The IAS360 House Price Index indicates that Midwest prices increased 4.7 percent in June, resulting in a 0.2 percent decline compared with the previous year. Prices in the West fell 0.5 percent in June and were down 16.9 percent compared to a year ago.

The index is not adjusted for seasonal forces, such as the typically stronger spring and summer selling season and appears more volatile than other indexes, observers say.

Denver-based IAS specializes in residential real estate valuations and the disposition of bank-owned properties.

Source: Reuters News (08/12/2008)

Pinal County home resale prices dive

August 12, 2008 - 7:05PM

Edward Gately, Tribune

Those willing to endure the high cost and headache of commuting can find bargains on existing homes in the south East Valley.

For the second quarter, the median resale home price in Pinal County was $143,100, down from $156,160 in the first quarter and way down from $220,000 in the fourth quarter of 2005, according to the latest report from Arizona State University's Morrison School of Management and Agribusiness at the Polytechnic campus.

The median price in Pinal County was 72 percent of the median price in Maricopa County.

"If they buy cautiously, the buyers have great opportunities there," said Jay Butler, director of realty studies in the school. "If you're looking for a home, and either work in Pinal County or travel is not an issue, it's good prices for fairly good-size homes."

The abundance of foreclosure houses on the market is driving prices down across Pinal County, he said.

"Even though your area may not have any foreclosures, the activity surrounding you will probably force the home prices down," Butler said.

Of the 2,100 recorded home resales during the second quarter, 845, or 40 percent, were foreclosures, Butler said. Although that was down from the first quarter, when 785, or 47 percent, of home resales were foreclosures, it still represents a dominant segment of the market, he said.

Johnson Ranch, a 2,014-acre, master-planned community off Hunt Highway, includes row after row of bank-owned houses, said Shawn Stagg, a real estate agent with US Preferred Realty in Mesa. He has sold houses in Johnson Ranch for about five years.

Banks want to liquidate as soon as possible and are willing to sell the houses strictly at fair market value, he said. That makes it hard for homeowners to sell a property at anything above that, he said.

"It's pretty dismal now," Stagg said. "The last time I checked ... there was a considerable amount of homes in Johnson Ranch for sale, and I'd say probably 60 percent of those are probably either short sale or bank-owned."

A short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the borrower.

Housing values have plummeted across much of Johnson Ranch, Stagg said.

"People who purchased when the market was really high, they've definitely taken a 40 percent hit," he said. "Most of what's selling out there now are the single-family, 1,600-square-foot or less homes, and some of them are starting to go for like $90,000. That's an outstanding deal."

Gina Rayer, a real estate agent with Pinal County Properties in Casa Grande, said sellers are having to accept less and offer more in order to attract buyers. Sales have risen, but prices haven't followed suit, she said.

"They're offering to pay closing costs, different things like that," she said. "They also make their homes much more attractive than a lot of these foreclosure homes."

Many foreclosure houses were left in bad shape by previous owners, and it can take longer for buyers to get into them, Rayer said.

"With a foreclosure it takes 45 days as opposed to a regular (home), which takes 30 days or even less," she said. "For the banks that own the homes, it takes them longer with their paperwork and reviewing everything."

Quiet zone debated for city rife with noisy freight trains

by Marjon Rostami - Aug. 12, 2008 12:00 AM
The Arizona Republic

In Maricopa, it's clear where the housing developments stop and the once-booming city came to a screeching halt when the real-estate market went bust.

Neighborhoods are left unfinished, roads dead-end into dirt and empty houses with For Sale signs line the street.

The Pinal County city about 20 miles south of Ahwatukee grew from about 1,500 people in 2000 to 38,000 today. For those who've stayed through the recent bad times, little things to improve the quality of life have become major lobbying points to the City Council.

Mike Careccia and his wife moved to Maricopa from Florida eight months ago to be near his grandkids. But they second-guess the move every time they hear the train.

"By 8 in the morning, I've already counted 28 horns," he said. "We knew the trains came through here, but we didn't know how bad it would be."

On an average day, about 40 freight trains pass through Maricopa, said Zoe Richmond, a spokeswoman for Union Pacific. That number is about to double. Union Pacific will begin work on a second track through Maricopa this year or in early 2009.

Twice as many trains a day mean at least 1,280 horns blowing at between 96 and 110 decibels as they pass through four crossings over a 5-mile stretch in Maricopa. According to Federal Railroad Administration rules, federal law requires trains to begin blowing their horns 15 to 20 seconds before approaching a crossing and sounding the horn four times as they pass.

Careccia is heading an effort to persuade the mayor and council to approve a quiet zone, where trains could not blow their horns unless there was a perceived danger. Careccia said he hopes the timing of the second track will help push the quite zone through the approval process.

But Mayor Anthony Smith said there is no such plan for the near future. The city budget was passed last month without additional funding in the capital-improvement program that would be required to upgrade crossings, he said.

A municipality has the power to enforce a quiet zone if it meets crossing standards set by the Federal Railroad Administration.

To do that, crossings must be upgraded with a four-quadrant gate system, additional warning lights and a system connected to the traffic signals, Richmond said. A crossing that currently has only one of those safety measures, such as a one-arm crossing, would cost more than $900,000 to upgrade.

Smith said he is in contact with Union Pacific to compromise on a more cost-effective solution for the possibility of a quiet zone within the next few years. Since Union Pacific is already doing some construction on the crossings for the new rail line, which will be parallel to the existing one, Smith would like to see the company help shoulder some of the costs.

Councilman Joe Estes said he is an advocate for quiet zones in the city and that the benefits outweigh the costs.

"As a city, we're looking at ways to save money, but there are things that I think are almost a necessity, especially when they impact the quality of life for so many of our residents," he said. "We've got houses and businesses that back right up to the tracks."

John Donahue said he runs his chiropractic office about 200 yards from the tracks.

"When I have patients on the table and they're supposed to be relaxing, well, they can't when the horn blows right in your ear," he said.

Careccia said the city must focus on quality-of-life issues, and this one is key.

"Maricopa is a diamond in the rough. It just needs to be dusted off a little," he said. "This is my little project, trying to be a champion of the neighborhood trying to do one small thing that can make our lives better."

Consumer bankruptcies rise in state

by Russ Wiles - Aug. 7, 2008 12:00 AM
The Arizona Republic

Arizonans continue to struggle with mounting debts, a sluggish housing market and job losses, and those strains showed up in a bankruptcy surge in July.

Consumer bankruptcies in the Phoenix area more than doubled to 1,251 last month compared with July 2007.

Nearly four in five involved Chapter 7 filings, which offer a "fresh start" with the dismissal of most types of debt. Chapter 7 filings jumped 118 percent, compared with a 90 percent rise for Chapter 13 filings, which feature debt-repayment plans.

Total statewide filings doubled to 1,782 in July, with Chapter 7 bankruptcies accounting for the lion's share of those, too.

In June, there were 1,118 filings in the Valley and 1,577 in the state.

"The environment today is very stressful," said Jack Craven, president of Debt Settlement USA in Scottsdale. "There's a lot of pain out there."

Rather than a single catalyst, Craven said consumers are being hit from various sides at once, including weak real-estate prices, job losses, big medical bills, an inability to refinance home mortgages and rising prices for gasoline.

Bankruptcies are increasing at a faster pace in Arizona than nationally, where consumer filings in July rose 48 percent from a year earlier, the American Bankruptcy Institute and National Bankruptcy Research Center reported. The nation's July filing total of 94,124 represented a 14 percent increase from June.

Factors making the Arizona numbers worse include the weak housing market and relatively steep job losses. For example, Phoenix homes logged the third-worst average decline in May from April among 20 cities tracked by Standard & Poor's and Case-Shiller. Meanwhile, Arizona shed a net 17,000 jobs over the past year through May, ranking fifth-worst among the states.

Good Deals Lure Foreign Home Buyers

International real estate purchases in the U.S. continue to be a significant share of business for many real estate professionals, according to the 2008 National Association of Realtors® Profile of International Home Buying Activity.

This new research indicates that international buying activity in the U.S. is widespread. NAR estimates that between 150,000 and 190,000 homes were sold to foreign nationals from May 2007 to May 2008. Recent foreign buyers purchased properties in every state and the District of Columbia. The most popular states where international buyers purchased homes are Florida, California and Texas. Arizona, New York, Washington and Nevada were also popular.

The typical international buyer purchased a single-family vacation home costing $297,400. Four in 10 paid for their U.S. property with cash, compared with 7 percent for all domestic buyers. The typical international owner stayed at his or her U.S. property for 2.6 months during the year, according to the NAR findings.

Foreign exchange rates have helped make U.S. homes more affordable for international buyers. The euro, for example, has strengthened 24 percent versus the U.S. dollar over the past two years. Home prices are also now more affordable in places such as Florida and Arizona, contributing to those states’ popularity among foreign buyers.

“Many international buyers recognize that real estate is an excellent investment and are drawn today by abundant inventory, low interest rates and a softer dollar. These conditions allow them to own their own a piece of the American dream,” Gaylord said.

International buyers are distinct from domestic buyers. International buyers tend to purchase more expensive properties, which cost an average of 36 percent more than the typical domestic buyer’s home purchase. In fact, more than 14 percent of properties sold to international buyers sold in excess of $750,000. Foreign buyers also show a greater preference for condos and townhouses compared to domestic buyers.

People from North America, Europe and Asia accounted for more than 85 percent of recent foreign home buying transactions. The top six countries of origin for foreign home buyers, in rank order, were Canada, the United Kingdom, Mexico, China, India and Germany. This year, Canada replaced Mexico as the country with the largest share of foreign buyers in the U.S. The percentage of Canadian buyers doubled from last year, from 11 percent to 23.5 percent.

“This survey confirms a pattern that we have observed for some years in Florida and other markets that are attracting buyers from overseas,” said Tony Macaluso, 2008 chair of NAR’s international business group. “This latest research enhances our understanding of this audience and provides insight for the increasing number of REALTORS® with international clients.”

Of the REALTORS® surveyed, 26 percent served international clients in the past year and about half of those clients ended up purchasing a home. The primary reasons some clients did not eventually buy a house were home price concerns, immigration laws, and property taxes. “If visa regulations that favor longer stays for overseas buyers such as retirees from abroad were in place, these sales levels would be even higher,” Macaluso said.

REALTORS® who have sold homes to international clients reported that their transactions with these clients accounted for about 16 percent of their entire business. For about 8 percent of Realtors® who work with foreign buyers, more than half of their transactions were international sales.

The 2008 NAR Profile of International Home Buying Activity is based on responses from approximately 4,000 REALTORS® who serve foreign buyers. It describes international home buying activity in the U.S. over the 12-month period from May 2007 to May 2008 and updates information from the 2007 survey. The full report is available at REALTOR.org.

Source: NAR

Big Gain in Pending Home Sales Index

Some improvement is projected for existing-home sales in the months ahead, with broader gains seen by the fourth quarter as buyers take advantage of new provisions provided through the recently passed housing stimulus bill, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in June, rose 5.3 percent to 89.0 from a downwardly revised reading of 84.5 in May, but remains 12.3 percent below June 2007 when it stood at 101.4.

Lawrence Yun, NAR chief economist, says sales have been in a pattern of rising and falling within a fairly narrow range.

“The vacillation of data from one month to the next indicates a housing market in transition,” he says. “The rise in pending home sales was broad-based with all four regions showing gains. This is welcome news because a rise in contract activity is necessary for an overall housing recovery. With a tax credit now available to first-time home buyers, increases in home sales could be sustained with the momentum carrying into 2009.”

Across the Region

Here's a deeper look at the index throughout the country:

• South: jumped 9.3 percent to 92.4 in June but is 16.6 percent below June 2007.
• West: rose 4.6 percent to 101.0 in June but remains 1.7 percent below a year ago.
• Northeast: increased 3.4 percent to 79.6 but is 15.4 percent below June 2007.
• Midwest: rose 1.3 percent in June to 79.6 but is 13.3 percent below a year ago.

Sales gains have been consistently strong in recent months in Sacramento, Calif.; Las Vegas; and Ft. Myers, Fla., where affordability conditions have greatly improved.

The pickup in contract signings appears to be broadening with many affordable markets in mid-America now showing year-over-year gains, including Columbus, Ohio; Charleston, W.V.; Oklahoma City; and Colorado Springs, Colo. Pending sales have fallen significantly in Texas markets and in the Pacific Northwest - two regions with very strong local economies.

Housing Stimulus Bill Expected to Help

NAR President Richard F. Gaylord says the housing stimulus package will provide long-term relief. “Provisions to stem foreclosures are helpful, but a greater lift to the economy should come from higher mortgage limits, enhancements to the FHA loan program and the first-time home buyer tax credit,” he says.

“These are excellent tools that will help buyers get into the market to take advantage of the unprecedented drop in home prices in many areas, as well as a wide selection of inventory, to make an investment in their future,” Gaylord said.

With roughly 2.5 million first-time home buyers taking advantage of the temporary tax credit, existing-home sales are likely to rise 7.0 percent to 5.51 million in 2009 from a expected total of 5.15 million this year.

More Market Forecasts

Yun says home prices did not fall as much as anticipated in the second quarter.

“Buyers entering the hardest-hit markets, in some cases with multiple-bid offers, may have put a floor on prices,” he says. “In addition, rising commodity prices and higher construction costs have resulted in a very unusual market today with existing-home prices being less than replacement building costs in some areas."

Home prices are projected to increase 3 to 6 percent in 2009, Yun adds.

“Builders need to further cut production to help trim inventory," Yun says. "However, new-home sales are expected to bottom around the second quarter of next year with slight gains in the second half of 2009,” Yun said. New-home sales are forecast to drop 8.8 percent to 464,000 in 2009 from 509,000 this year. Housing starts, including multifamily units, should fall 8.8 percent next year to 795,000 from 960,000 in 2008.

Other NAR predictions influencing the market:

• Mortgage rates. The 30-year fixed-rate mortgage, which also has been vacillating, is likely to trend up to 6.5 percent by the end of 2008, and then hold at that level for most of next year. NAR’s housing affordability index is forecast to remain favorable this year, averaging 13 percentage points higher than in 2007.

• GDP. Growth in the U.S. gross domestic product (GDP) is expected to be 1.7 percent this year and 1.5 percent in 2009. The unemployment rate is projected to average 5.5 percent in 2008 and 6.0 percent next year.

• Inflation. As measured by the Consumer Price Index, inflation is seen at 4.1 percent in 2008 and 2.6 percent next year. Inflation-adjusted disposable personal income is estimated to grow 1.7 percent this year and 1.1 percent in 2009.

Source: NAR

Fed Leaves Key Interest Rate Alone

The Federal Reserve yesterday left the key interest rate unchanged at 2 percent, while stressing in their post-meeting statement that they’re concerned about both the struggling economy and high inflation.

"Although downside risks to growth remain, the upside risks to inflation are also of significant concern," the Fed said.

Observers say that the Fed is unlikely to change the key rate this year. "They really went right down the middle," says U.S. Global Investors research director John Derrick. "They are basically in risk-assessment mode."

Source: The Wall Street Journal, (08/05/2008)

What's Fair Got to do With it?

Is it fair that prudent taxpayers and home owners should bail out people who borrowed foolishly and companies whose executives were responsible for the credit crunch?

The answer is “no,” but that doesn’t make the bailout a mistake, says Zvi Bodie, finance professor at Boston University. "My own view is that the world isn't fair," says Bodie. "But would it be fair to put the economy into a deep recession or depression? I don't think so."

If the monetary and fiscal authorities are right in their judgment that the risk of an economic plunge of frightening proportions is real, then the actions they're taking are fair to all of us, Bodie contends.

The U.S. economy in 2008 — with a 5.7 percent unemployment rate and economy expanding at a 1.9 percent average annual rate — is far from Depression-era statistics and only time will tell whether monetary and fiscal authorities exercised sound judgment or panicked. In the meantime, history rewards the bold — not the timid — when the financial system is threatened with collapse, according to Bodie.

Source: Business Week. Chris Farrell (08/05/2008)

Fed Expected to Leave Rates Alone This Week

The Federal Reserve, which meets Tuesday, is widely expected to leave key interest rates at 2 percent, which would keep the prime-lending rate for consumers at 5 percent.

The Fed has signaled that its next move on rates is probably up, although the timing is unclear.

Charles Plosser, president of the Federal Reserve Bank of Philadelphia, last month said the Fed probably will need to boost rates "sooner rather than later" even if employment and financial conditions haven't revived.

Richard Fisher, president of the Federal Reserve Bank of Dallas, opposed the Fed's decision in June to leave rates unchanged. He said he preferred a rate increase then to fend off inflation.

Source: The Associated Press, Jeannine Aversa (08/03/08)

How the New First-Time Buyer Tax Credit Works

Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit equal to 10 percent of the property up to a maximum of $7,500.

Here’s how it works:

• The credit is $3,750 for married couples filing separately. Unmarried people who jointly purchase a home will be able to divide the $7,500 credit.

• This program is actually a loan, which home buyers must repay over 15 years at zero percent interest beginning in the second year after they purchase the home. A home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.

• The credit applies only to homes purchased on or after April 9, 2008, and before July 1, 2009.

• High-income home buyers don’t qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.

Source: The Washington Post, Michelle Singletary (07/03/08)

Uncle Sam's tax credit an incentive to buy a home

Arizona Republic, Russ Wiles

Aug. 3, 2008 12:00 AM

The new housing-relief bill will give some people an opportunity to hit a tax trifecta.

Homeowners already enjoyed the ability to deduct mortgage interest and property taxes. They also have an opportunity to exclude capital-gains tax on most, if not, all profits on a primary residence.

Now there's a new credit, or dollar-for-dollar tax reduction, for "first-time" home buyers - a valuable break that will help a lot of people get in the door.

The home-buyer tax credit is a big part of the housing-relief legislation passed by Congress and signed by President Bush. At an estimated cost of $4.8 billion over 10 years, it amounts to nearly one-third of the $15.1 billion in total incentives.

Already, real-estate groups are praising the legislation, which also strives to help imperiled borrowers refinance into government-backed mortgages, shore up Fannie Mae and Freddie Mac and more.

"This is the most important housing bill in a generation," said Kieran Quinn, chairman of the Mortgage Bankers Association. "The tax incentives will encourage potential buyers to get off the sidelines and help stabilize home prices."

Still, the devil is in the details, and there are a lot of details involving the tax credit.

Phoenix tax attorney Bob Kamman describes the credit as "the most complicated tax incentive I can remember."

In short, there are some weird definitions and other not-so-obvious nuances.

For example, the credit applies to "first-time" home buyers, but in truth you can qualify even if you have owned other dwellings before.

According to tax researcher CCH Inc. in suburban Chicago, the legislation defines first-time buyers as anyone who has had "no ownership interest in a principal residence during the three-year period" before a home was bought.

Among other things, this allows renters who own a vacation home to qualify with the purchase of a primary residence, notes CCH in a report.

But higher-income people aren't eligible for the tax credit, which is worth the smaller of $7,500 or 10 percent of a home's purchase price.

The credit starts to phase out for married couples with income over $150,000 and ends completely above $170,000. For singles, the phase-out range is $75,000 to $95,000.

Another interesting twist is that two or more unmarried people can buy a home and share the credit.

You can't use the credit to help finance a home at the time you close on a transaction. Instead, you claim the credit later, when filing your 2008 or 2009 tax return. The credit applies to homes bought between April 9, 2008, and June 30, 2009.

Still, it will provide help for buyers struggling to handle expenses in the early going.

"People (often) don't get much help on their tax returns in the year they purchase a home because they have deductible interest and taxes for only part of a year, and they might not even qualify to itemize," said Mark Luscombe, a principal tax analyst for CCH.

The credit is refundable, so it will help even those people with little or no tax liability.

But there's a big drawback: The credit eventually has to be repaid, although you have 15 years to do it. This feature basically makes it an interest-free loan from Uncle Sam, payable in $500 annual installments.

If you sell, move out or otherwise stop using the home as your primary residence, you'll need to repay any remaining credit balance in the same year.

"Someone thinking of buying a house, taking the credit and renting out the house in a couple years after moving to a new principal residence ... shouldn't," Kamman said.

There's also a provision that would bar you from taking the credit if you sell or otherwise dispose of a home during the same year you apply for the credit. Nor is the tax break available to non-resident aliens.

In short, repayable credits aren't as good as straight credits, but they're certainly attractive to buyers who can qualify and sort everything out.

Once again, the government is dangling incentives to get people into homes, offering just about everything but the kitchen sink.

Escaping the 'mental recession' in 20 steps

by Chad Graham - Aug. 3, 2008 12:00 AM
The Arizona Republic

Plenty of Americans have faced far scarier economic times than these and came out just fine.

As a child during the Great Depression, "we existed on what we could grow in our garden and the kindness of a grocer who extended credit for the meager food we couldn't grow for ourselves," said Lee Mahrer of Gilbert.

"When our shoes wore out to the point of having a large hole in the sole, we cut out cardboard to fit and bridged the gap."

That's the first lesson in how to cope with the current turbulence: Get perspective.

That can be difficult because the problems hit on such a primal level.

"When you think of Maslow's Hier- archy of Needs, it's food, clothing and shelter," said Kathleen Hall, founder and CEO of the Stress Institute in Atlanta.

"During this housing crisis and gas prices going up, (it) affects our food, clothing and shelter."

When people feel out of control, they can feel stress, which can manifest itself physically (one example is headaches) or mentally (one example is anger).

Some may need professional help.

ComPsych, the largest employee-assistance mental-health program in the U.S., said client requests for therapists jump by up to 20 percent during the past three months because of the financial situation, USA Today reported.

For others, financial problems have been too overwhelming.

A Massachusetts woman who was facing a foreclosure fatally shot herself this summer.

She faxed a suicide note to her mortgage company.

Legal and financial problems are thought to be reasons why Scott Coles, chairman of Phoenix-based Mortgages Ltd., committed suicide in June.

In addition to getting professional help, there are other ways to find balance.

19 expert tips to keep a steady course

Stop beating up on yourself. Feelings of shame and guilt are prevalent in bad economic times. Consumers chide themselves for buying that new car instead of saving money.

"I want people to realize . . . we're all in this together, it's affecting every one of us," said Kathleen Hall, founder and CEO of the Stress Institute in Atlanta.

Don't compare your situation with that of your neighbors or friends, either. Behind the façade, you really don't know what stress they're facing.

Be honest with your children. They're plugged in and have heard just as much about the economic gloom and doom as you have.

Some kids might internalize the problem and think they're to blame for their parents' shaky finances.

Hold a 10-minute family meeting once a week to talk honestly about the situation.

This could be a good time to starting teaching children about the importance of a budget. Have them suggest ways to save money on the grocery bill, for example.

Send them the message that "we as a family are going to be very creative, very cool and we want everybody's input if we're on the same team," Hall said.

Let go of what you can't control. Most of us don't sit on the Board of Governors of the Federal Reserve System, the Organization of the Petroleum Exporting Countries or in the U.S. Congress.

We have no influence over the rise of the middle class in India or China and their insatiable demand for gasoline.

There is no sense at staying angry over what has already happened in terms of gas prices and inflation.

Recognize what you can control. Vote this fall. Volunteer for the presidential candidate of your choice or for a political organization. Make a political contribution.

Call or send an e-mail to your U.S. senator, congressman, mayor, city council member and newspaper. Go ballistic on a blog of your choice.

Let the world know you're angry. Let everyone know how you'd fix the economy.

You'll feel better after venting.

Do a mini-meditation. The Stress Institute suggests taking a three-minute break, closing your eyes or focusing on one spot and taking several deep breaths and repeating a one- to five-word affirmation. This can be as simple as saying, "Keep letting go."

Laugh. It is linked to having healthy blood vessels, a 2005 University of Maryland School of Medicine study determined. "Laughter appears to cause the tissue that forms the inner lining of blood vessels, the endothelium, to dilate or expand in order to increase blood flow," researchers determined.

And now, for a laugh . . . Late Show with David Letterman's Top Ten Organized Crime Money-Savings Tips:

10. When taking a body out to Jersey, use mass transit.

9. Every time you kill a guy, put a nickel in a jar.

8. Tap into nearly endless supply of (FILL IN THE BLANK) hit men. (We can't repeat this. You can find the list by searching at lateshow.cbs.com/latenight/lateshow/).

7. Make threatening phone calls after 11 p.m., when rates are lowest.

6. When you whack two or three guys, stuff them in same trunk and carpool it.

5. Inexpensive pinkie ring substitute: Plastic tab-pull from half gallon of orange juice.

4. Fire pricey nickname consultants - everyone is either "Fat Tony" or "Knuckles."

3. Pasta is very inexpensive and very filling.

2. Forget expensive car bombs - just sneak up behind the guy and yell, "Ker-pow!"

1. Limit yourself to ten "fugeddaboudits" a day.

Bubble gum might reduce stress. A 2006 study by research unit of the Wm. Wrigley Jr. Co. showed that chewing gum calms some people and may increase blood flow to the brain by 25 to 40 percent.

Take a mental-health day from work and watch the movie 'WALL-E.' The Disney-Pixar flick reminds us of the importance and endurance of love.

Fat, drunk and stupid is no way to go through a downturn. The Dow Jones Industrial Average is plummeting, and Americans are loosing jobs and homes.

It seems like a perfectly good time to drink a bottle of wine, scarf down fast food and top it all off with a pint of ice cream.

It's not comfort food when you hate your bloated self in the morning.

Instead, concentrate on remaining competitive in the next five years.

Do you need a new career? Sales representatives, software developers, nurses and accountants are somewhat buffered in this downturn.

Endorphins are your best friend. These hormones are thought to make you feel pleasure and well-being. Researchers believe they can be activated by exercise, eating chocolate and having sex.

Eat a balanced breakfast. You will be less moody, and it has been shown to increase metabolism.

Drink water. Dehydration makes some people feel tired and weak.

Try all-you-can-eat baseball seats. The Arizona Diamondbacks still have home run porch seats available, which include all-you-can eat ballpark goodies from hot dogs to ice cream to soft drinks.

It's going to cost you.

Each seat is $75 and must be purchased in a pack of four and for the remainder of the season. With 29 home games left in August and September, that's $8,700 or $2,175 per person.

A parking pass is included for each set of four seats. Alcoholic beverages are additional.

Be grateful. It never hurts to take a couple of minutes and jot down a list of what you're grateful to have in your life.

Help someone in a worse situation then yourself. There are plenty of volunteer opportunities across metropolitan Phoenix, which don't require an overwhelming amount of time.

A few options range from helping sick children to helping maintain parks, to performing maintenance at a homeless shelter to giving comfort to patients in hospice.

When you understand how others handle far scarier situations with grace and dignity, you instantly will realize how lucky you are.

Save money. Don't have enough savings in case of a layoff?

Here's an easy way to start socking money away. Tally how much per day you spend on eating out, coffee drinks, vending-machine items, cigarettes and other extras. Let's say it comes to $10.

Can you cut out a few items and save $5 per day?

That's $3,650 over 2 years and more than $9,000 over 5 years.

If you were to invest that money, the interest would increase those amounts even more.

Really, those cigarettes can go. We're not going to get into all the heath problems caused by cancer sticks. You may feel relaxed by puffing away, but imagine the future medical bills if you get sick.

Save money, part three. Want cheaper auto insurance? Try insweb.com.

What doesn't kill you will make you stronger.

We found this quote attributed to author Napoleon Hill:

"The strongest oak tree of the forest is not the one that is protected from the storm and hidden from the sun. It's the one that stands in the open, where it is compelled to struggle for its existence against the winds and rains and the scorching sun."

Or, you can learn from Terry Berrettine.

The 91-year-old Sun City West resident was a teen during the Great Depression. He remembered when the banks closed and no one could access their money.

"There was just a gloom that fell over the country," he said.

But the depression didn't last forever. Berrettine became a successful entrepreneur and retired to Arizona at age 51.

Downturns and recessions "all end and the market comes back," he said.