Fire district for county islands in Chandler OK'd

by Edythe Jensen - Nov. 22, 2008 07:00 AM
The Arizona Republic

Residents in Chandler's 45 county islands are a step closer to getting city fire service for a fee.

The Maricopa County Board of Supervisors approved formation of their fire district this week. The action comes more than a year after the city negotiated an interim agreement to answer emergency calls outside its borders after subscription provider Rural/Metro left the area.

When the district becomes official Dec. 18, members can start negotiations with Chandler for fire protection, said Assistant Fire Chief Tom Carlson. He expects the talks to go smoothly and said the city is willing to provide the service.

Costs, which will be added to county residents' property taxes, haven't yet been determined. However, Carlson said they will likely be lower than Gilbert's because Chandler won't have to build new stations or hydrants to serve the additional properties.

Ed Hurley, a county island resident and one of the interim district board members appointed this week, said volunteers collected 693 signatures to meet the 638-signature minimum. It was a difficult task at a time when some of the 1,276 affected county properties were rentals, abandoned or in foreclosure, he said.

Hurley said his group is grateful for the cooperation from Chandler and the prospects of getting a formal agreement in a few months.

"This isn't anything like what happened in Gilbert; we have a very positive relationship with the city," he said. Gilbert county island residents and the town battled for three years before setting a fire district tax rate in July.

Under the interim Chandler agreement, the city responded to county island fires and billed property owners. Charges varied depending on the time, personnel and equipment required. If the owners don't pay, Maricopa County reimburses the city and may file liens on properties for collection, Carlson said. The city has sent $70,000 in unpaid fire service bills to the county so far, he said.

 

FHA lowers limits on loans

by Catherine Reagor - Nov. 19, 2008 12:00 AM
The Arizona Republic

There will be a new FHA loan limit for Maricopa County next year, and it's lower.

So if you were planning to buy a Valley home, now would be a great time to do it.

Starting in January, the maximum for the government-backed Federal Housing Administration loans in Maricopa County will be $271,050. Currently, the FHA limit in the Valley is $346,250.

The U.S. Department of Housing and Urban Development quietly announced the changes to FHA loans last week.

Last year, HUD raised its loan limits to try to help struggling homeowners who owed more than their house was worth and couldn't refinance anywhere else. The move also was designed to encourage more lenders and borrowers to use FHA loans in the tight credit market.

The FHA dropped its limit in Maricopa because it considers the Valley a "low-cost" area for housing. Metropolitan Phoenix's median existing-home price is now $175,000, according to the realty studies department at Arizona State University Polytechnic. That compares with $267,000 at the peak of the market in early 2006.

The FHA loan limit will fall to $271,050 in every Arizona county except Coconino, where it will be $333,500 because of Flagstaff's higher home prices.

Pricey home areas such as San Francisco will have a loan limit of $625,500, which is below the $729,750 that it was raised to last year.

Before Congress

ASU business Professor Anthony Sanders testified to Congress late last week about the Troubled Asset Relief Program. Unlike U.S. Treasury Secretary Henry Paulson, Sanders believes loan modifications for struggling homeowners are the best way to get the economy out of a free fall.

"While U.S. Treasury Secretary Henry Paulson has announced that TARP will not be used to purchase troubled loans from banks, it is still of tantamount importance to stabilize the housing and mortgage markets, and loan modification is one of the best tools available to the Treasury, even if they decide in the short run not to deploy it," said Sanders, who is also a former director and head of asset-backed and mortgage-backed securities research for Deutsche Bank in New York.

Jail for mortgage broker

Rick Thomas McCullough has been sentenced to 3 1/2 years in jail for running a residential mortgage scam in the Valley.

Arizona Attorney General Terry Goddard said the scam defrauded four senior citizens out of more than $400,000.

McCullough, 36, of Phoenix, was also ordered to pay $343,811 in restitution.

McCullough was the president of mortgage firm CactusCash. Earlier this year, regulator Arizona Department of Financial Institutions revoked his broker's license and barred him from the state's mortgage industry. Department of Financial Institutions Superintendent Felecia Rotellini said this case came out of a complaint to the state's Mortgage Fraud Task Force.

 

Orbital Sciences in Chandler set for expansion

November 18, 2008 - 6:59PM

Ed Taylor, Tribune

At a time when many businesses are cutting back, Orbital Sciences Corp. will break ground Thursday on an 82,000-square-foot expansion of its rocket development and production campus in south Chandler.

The expansion, whose price tag was not revealed Tuesday, will provide office and engineering space for about 300 Orbital employees.

Providence, R.I.-based Gilbane Development Corp. will construct and own the building, and Orbital will rent the space under a long-term lease.

The building will be the first phase of a three-building complex that Gilbane will build for Orbital atPrice and Dobson roads. The timing of the later phases will depend on business conditions, said Orbital spokesman Barry Beneski.

Orbital, based in Dulles, Va., already houses nearly 1,500 employees and contractors at an existing 350,000-square-foot complex across Price Road from the expansion site.

Orbital has signed an 11-year lease with the W.P. Carey real estate company to continue occupying that building.

"We have made a strong commitment to Chandler," Beneski said.

When the three buildings are completed, the project will create 232,000 square feet of floor space for nearly 1,000 additional employees.

The Orbital expansion is part of a new mixed-use development by Gilbane called the Waters at Ocotillo.

That 74-acre project will include residential condos, retail stores and restaurants in addition to commercial space.

Although the national economy is slowing, Orbital is expanding because its business is government oriented, Beneski said.

"We have long-term contracts with the (federal) government for products and services that will be needed by the country irrespective of macroeconomic conditions," he said.

The company makes rocket components in Chandler for the Pentagon's missile defense system, which Beneski said will continue to be needed because of dangerous world conditions.

Also Orbital is developing a new and larger launch vehicle called the Taurus II, which will be able to propel 10,000 pounds of supplies to the international space station. That project will create additional work in Chandler, Beneski said.

Slumping economy leads to big box blues

November 15, 2008 - 11:48PM

David Woodfill, Tribune

Shoe Pavilion — 6 stores.

Mervyn’s — 11 stores.

Linens-N-Things — 12 stores.

Circuit City — 13 stores.

Taken together, 42 large retail stores, commonly called “big-box” stores, are closing and dropping 1.8 million square feet of real estate onto the Valley market in the next few months. The stores leave large holes in many of the East Valley’s busy malls that will be especially hard to fill in these economic times.

“I don’t think I’ve ever seen where we’ve had this many retailers at one time, within this short of a period, go bye-bye,” said Rick Murphy, senior vice president at the brokerage firm CB Richard Ellis.

During past downturns, big boxes sometimes sat empty for months, hurting small retailers in centers that often drew less traffic and more decay. Some experts say the list of closed retailers will almost assuredly grow this time with sales plunging at record rates going into the all-important holiday shopping season and the phrase “consumer confidence” sounding more like an oxymoron.

“I think it’s really going to be a stinking Christmas for a lot of retailers,” said Bob Kammrath, a Phoenix real estate consultant.

OUTER FRINGES WILL BE HURT MOST

In third quarter this year, the Valley’s retail vacancy rate was 9.9 million square feet, or nearly 7 percent of the market, according to CB Richard Ellis. Kammrath, based on his own research, puts the vacancy rate at about 11 percent.

Jay McIntosh, a consultant and president of Consumer Foresight, is among those who say the worst is likely yet to come for the Valley.

A slow holiday season means more retailers will have to close stores if they want to see next Christmas, he said.

“It’s going to be essential,” he said. “This is a year when retailers are going to be trying to survive.”

Kammrath said certain retail developments will bear the heaviest burden, including those on the outer fringes of the Valley like Queen Creek and Buckeye, he said.

“I think you’ll just see wholesale closures out in those areas,” he said.

He pointed to the area around Rittenhouse and Ellsworth roads in Queen Creek where developers, who expected population and home construction would continue soaring, tried to get ahead of the market by building retail centers.

“There’s three power centers right at that intersection,” he said, referring to Queen Creek Marketplace, Cornerstone at Queen Creek and Shoppes at Indigo Trail. “You would think you were in the middle of some giant metropolis, and you’re in the middle of nowhere.”

Other projects that could take hard hits are those like Scottsdale Pavilions at Indian Bend and Pima roads in Scottsdale, Kammrath said.

The 1.1 million-square-foot shopping center, which is in the midst of a multimillion-dollar makeover, will lose a Circuit City and a Mervyn’s, leaving huge holes. A Best Buy has already left the mall and moved north.

The Pavilions’ owner, Marty De Rito of Phoenix-based De Rito Partners, said he has mixed feelings over the loss.

“Sometimes vacancy can be a plus given the fact that it allows us to redevelop a piece of property with less restrictions,” he said. “It’s yin and yang. It’s a negative because it increases vacancy and affects cash flow. It’s a positive (because) it does help to a certain point in my redevelopment plans.”

REPEAT OF THE PAST?

Some fear the Valley’s real estate market could eventually surpass the industry turmoil of the late 1980s and early 1990s, which was caused by easy credit that fueled overbuilding and was exacerbated by an economic downturn.

In 1992, retail vacant space accounted for 15 percent, or 8.1 million square feet, of the market, according to CB Richard Ellis.

Rents sank, developers and investors lost money and centers went into decline.

“Oh, I think it will be worse,” Kammrath said. “Let me put it this way — it depends who you believe on the economy. Most of what I hear is there’s no end in sight. We’re talking years here, and if that occurs it will be much worse than it was in the early ’90s.”

Others are far more optimistic, including Michael Pollack, an East Valley shopping center magnate with holdings across the Valley.

“In the 1980s, that was not a recession in real estate no matter what anybody says,” he said. “I started business in 1973. I was right on the front lines and I can tell you that the 1980s was a depression with a 'D.’ The ’80s were catastrophic. They were the worst I’ve ever seen in 36 years and I don’t see that happening here. I think we still have a lot of good retailers that are still in the marketplace, and I think that we’re going to have others.”

Thomas Woods, an executive vice president of retail properties at Colliers International, said one key difference between today’s real estate market and the market 20 years ago is that today’s isn’t as saturated with shopping centers. Rather than building huge projects on speculation, developers went forward only when they had enough commitments from retailers to fill store space, he said.

Woods added the Valley is a highly coveted area for retailers, so it should bounce back quickly when the market returns.

“We’re still in Phoenix,” he said. “To me, it’s a little bit like having beachfront property,” he said.

Bill Whiteside, vice president of property management for the Valley’s largest mall owner, Westcor, downplayed any threat related to more store closures.

He said Westcor will lose a few Mervyn’s and Circuit City stores.

“It’s really just new opportunity for us,” he said.

Whiteside pointed to Scottsdale Fashion Square, Fiesta Mall and Paradise Valley Mall, which all lost major anchor tenants after Macy’s acquired Robinsons-May.

Scottsdale Fashion Square replaced the Robinsons-May store with a Barneys, which is set to open in fall 2009, as well as 150,000 square feet of other retail space.

Paradise Valley Mall signed a lease with Costco and Fiesta Mall is constructing a Dick’s Sporting Goods store and Best Buy in the space left empty after Macy’s took over the old Robinsons-May store. Those retailers are expected to open in spring 2009.

This economic downturn and the wreckage it leaves in its wake will be no different, he said, downplaying all the doom and gloom.

“Each time there is this 'oh my gosh, what are we going to do’ attitude,” Whiteside said. “But there’s always a different way.”

 

Input sought on $40 million rehab project

by Sadie Jo Smokey - Nov. 14, 2008 12:00 AM
The Arizona Republic

Phoenix residents on the brink of losing their home won't be rescued with the nearly $40 million Uncle Sam gave the city to deal with the foreclosure crisis.

The federal government awarded Phoenix the money in September based on the high number of foreclosed homes, subprime mortgages and mortgage delinquencies in the city. But the grant is meant to spur neighborhood stability, not bail out homeowners.

The city plans to use the money over five years to buy vacant single-family homes to rehab and sell, with incentives, as an owner-occupied home. A quarter of the money is dedicated to buying and rehabbing multifamily homes for low-income rentals.

"This isn't a prevention program," Deputy City Manager Ed Zuercher said.

"It's an after-the-fact program. We hope at least 800 families see benefit from the program."

Citizens have a chance to have a say over how the city plans to spend the money. The Neighborhood Stabilization Program's deadline for comments is Nov. 26.

 

Industry unveils new mortgage-relief plan

Only a fraction of borrowers will qualify for new loan terms

by Renae Merle - Nov. 12, 2008 12:00 AM
Washington Post

WASHINGTON - As losses from bad loans continue to mount despite more than a year of government and industry focus, some of the giants of the mortgage industry, including Fannie Mae and Freddie Mac, on Tuesday unveiled another stepped-up effort to keep delinquent borrowers out of foreclosure.

Government and lender efforts to stem foreclosures have been stymied by the sheer size of the problem. This program attempts to address that by using a simplified process for determining whether someone is eligible for a new loan. Instead of the standard, cumbersome, loan-modification process, which can include reviewing a borrower's credit report and tax returns, the new plan focuses on the borrower's income and how much he or she can afford to pay. It also creates a formula for determining what a homeowner can afford, eliminating some guesswork.

Government officials said they expect the effort, dubbed the Streamlined Modification Program, to be able to help "hundreds of thousands" of homeowners.

But the new program is also an acknowledgment that the industry's efforts to keep people in their homes have not kept up with growing foreclosure rates.

"We are experiencing a necessary housing correction, and the sooner we work through it, the sooner housing can again contribute to our economic growth," Neel Kashkari, interim assistant Treasury secretary for financial stability, said at a news conference.

The program, set to begin Dec. 15, applies only to mortgages owned or guaranteed by Fannie Mae and Freddie Mac, which are involved with more than 50 percent of residential loans. But major lenders - including Bank of America, Wells Fargo and Citigroup - have agreed to apply the formula to loans they administer for Fannie Mae and Freddie Mac and are expected to extend it to their own loans, industry officials said.

"This is a big step forward that will make it easier to modify loans for the most at-risk homeowners so they will be able to avoid foreclosure and stay in their homes," said Faith Schwartz, head of Hope Now, an alliance of lenders that has spearheaded the industry's foreclosure response and will be advocating the new standards.

A borrower who is 90 days delinquent will be eligible for a new loan with a payment that does not exceed 38 percent of his gross monthly income.

To qualify, the homeowner must provide proof that he has suffered a hardship, such as losing a job, that made it impossible to keep up with payments. The terms of the borrower's loan then could be extended from 30 years to 40 years, and if that is not enough, the interest rate could be reduced to as low as 3 percent to make the payments more affordable. The homeowner could be subject to an interest-rate increase after a set time, depending on how low his new interest rate is. If those options don't reduce payments enough, part of the principal owed on the loan could be deferred until the end of the loan term.

The new program also retains many of the practices that have frustrated other efforts to modify troubled loans.

For example, it excludes borrowers who are current on their mortgages but face an interest-rate increase that will make payments unaffordable. It also does not provide any new mechanism for reaching homeowners, who in about half of foreclosures have not talked to their lenders.

By requiring the homeowner to be 90 days delinquent, the program fails to anticipate problems, said John Taylor, president and chief executive of the National Community Reinvestment Coalition, an activist group.

"Why not 60 days? Why not 30 days? In fact, why not say that, based on their income and this type of loan, we know this family is going to be underwater in six months or sooner (and act before it falls behind)?" he said. The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, is also still trying to persuade investor groups to adopt the program.

 

Conditions bleak for home sellers

Edward Gately, Tribune 11/11/2008

Sellers have lost money on nearly half of homes sold across the Valley in the past year, and nearly a third of homeowners owe more on their mortgages than their homes are worth, according to Zillow.com's third-quarter real estate market report.

Nationally, one-third of homes sold lost money as home values fell 9.7 percent year-over-year to a median of $202,966, according to the online real estate service. In the Phoenix-Mesa-Scottsdale area, home values fell 19.4 percent year-over-year to a median of $195,947.

Pinal County was hit worse, with values falling 25 percent.

"Phoenix isn't doing too good," said Katie Curnutte, Zillow.com spokeswoman. "In the past 12 months, 37.9 percent of all (home sales) have been foreclosures, and that's compared to 18.6 percent for the nation. Foreclosures tend to drive down even values of homes that aren't being touched by foreclosures directly. Things like abandoned houses tend to have an effect on the neighborhood surrounding them."

Valley home sellers lost money on 49 percent of the houses sold in the past year. And more than 30 percent of all homeowners in the Phoenix-Mesa-Scottsdale area have negative equity, meaning they now owe more on their mortgages than their homes are worth, according to Zillow.com. For buyers who purchased at the peak of the market in 2006, 77 percent now have negative equity.

"Negative equity is a precursor to foreclosure," Curnutte said. "That said, not everyone who has negative equity is going to even notice it. There are going to be a lot of people who are in negative equity, but their jobs are stable, they're paying their mortgage on time, they're not having trouble meeting those commitments, and those people will come out on the other side of this fine."

However, negative equity means fewer options for those right on the edge financially, she said.

"The reason there are so many upside-down (homeowners) in the Phoenix area is home values have declined more rapidly than in most of the markets in the nation," Curnutte said. "From 2000 to 2004, appreciation was steady at about 6 percent and then in 2004 it just shoots up, it's almost a cliff. In any market where that happened, we're seeing a pretty steep decline on the other side as well."

Gayle Henderson, a certified distressed property expert with RE/MAX Excalibur in Scottsdale, said homeowners should do all they can to avoid foreclosure, and that short sales are a better alternative. In a short sale, the homeowner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds to the lender usually in full satisfaction of the debt.

Magazine rates Gilbert as best place in Ariz. for kids

by Marjon Rostami - Nov. 11, 2008 06:10 PM
The Arizona Republic

A riparian preserve, skate park, affordability and school performance landed Gilbert as the best place in Arizona to raise kids, according to Business Week magazine.

The roundup, conducted with OnBoard Informatics, a New York-based provider of real estate analysis, set the criterion at towns with at least 50,000 residents and a median family income from $40,000 to $100,000.

School performance and safety were most heavily weighted, according to the magazine.

Councilman Don Skousen, who has lived in Gilbert since 1971 when Gilbert Public Schools had only three schools, said he raised four children in the town.

"It's a good place and has been for years," Skousen said. "Survey after survey we've found that most people moved here because of the schools and the open areas."

Runners-up included Phoenix and Scottsdale.

 

Putting real estate crisis in perspective

November 6, 2008 - 11:06PM

Ed Taylor, Tribune

Even though Arizona’s real estate recession feels painful today, it’s no worse than previous downturns. And the state will probably pull out of this one in the same ways it has done in the past, said Bill Gosnell, a Phoenix-based real estate investor, at a presentation Thursday night at the East Valley Partnership’s annual Economic Forum.

Gosnell said the greater affordability of housing and a general reduction in living expenses caused by the slowing economy should eventually attract new businesses and people to the Valley, causing its growth-based economy to perk up again. But a national economic recovery is a prerequisite to a local turnaround, he said.

Gosnell quoted from a famous article in Barron’s financial magazine during a previous downturn in the early 1990s that predicted a dire future for the region. But that was followed by unprecedented booms during the 1990s and the middle of this decade. “We are a boom-and-bust city,” Gosnell said in an interview before his presentation. “We always get bigger, then contract, then get bigger again.”

Gosnell thinks the election of Barack Obama to the presidency will cause a freeze-up in economic activity until businesses get a feel for the new chief executive’s economic policies. He said that occurs whenever the administration changes in Washington, and it could last for most of next year.

Business executives “won’t make decisions until they see what will happen,” he said. But market forces will eventually cause the real estate markets to strengthen both nationally and locally, and the Valley could be one of the top beneficiaries, he said.

“We have business cycles on steroids,” he said. “We go to extremes in both directions.”

That means once the Arizona economy does turn around, it will happen fast, he predicted.

“We are one of the top five overbuilt residential markets, which means we are becoming incredibly affordable again,” he said. “We are also substantially overbuilt in office and industrial, and we are reaching similar vacancy rates as in the late 1980s.

“What brought us back in the 1990s was the cost of living came down because of housing, and the cost of doing business came down because of the vacancies.”

The same trends could help the Valley recover from its current malaise, he said. “I don’t want to sound overly optimistic. … It’s unfortunate for people who lost their houses. But the bottom line is that it is creating opportunities for others to buy these houses.”

And Gosnell has joined a private equity group called Quantum Capital, which is buying distressed real estate.

 

Maricopa County predicts $58 million shortfall

Next year's forecast: Things will be twice as bad

by Yvonne Wingett - Nov. 7, 2008 12:00 AM
The Arizona Republic

Maricopa County's gloomy economic picture worsened Thursday when economists released figures showing a $58 million shortfall this year, and almost double that for the next fiscal year.

The cause: declining revenues working in tandem with the national economic downturn.

Officials will try to balance the budget by cutting spending in most departments, dipping into emergency and contingency funds, reducing or eliminating pay raises, scaling back capital improvement projects, and probably laying off employees. Already this year, the county has eliminated staff and cut several dozen vacant positions in the Planning and Development Department because of the slower real-estate market.

"We have to downsize county government and sustain it at a lower service level for the foreseeable future, for several years," said Deputy County Manager Sandi Wilson, who oversees the county's estimated $2.2 billion budget. "The economy is not going to bounce back. We've been told it's going to be a four- to five-year recovery. We need to become more effective and efficient with less money."

 

As borrowers stumble, bankruptcies soar in state

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

Arizona's bankruptcy filings surged to a new yearly high in October, with observers seeing no relief in sight.

Consumers and businesses initiated 1,552 filings in the Valley and 2,119 statewide last month. Both were easily the highest totals so far in 2008.

Nationally, bankruptcy filings so far this year have surpassed the full year's tally from 2007.

"We've been busier than I ever remember, and I've been doing these since the 1980s," said Joe Volin, a Tempe bankruptcy attorney. "I've never seen anything like it."

Chapter 7 cases account for more than 80 percent of the total, both in the Valley and across Arizona, according to the U.S. Bankruptcy Court in Phoenix. They allow filers a fresh financial start after the court uses non-exempt assets to pay creditors. Chapter 13 cases account for most of the rest. They involve court-supervised, debt-repayment plans designed for filers with regular income.

Chapter 7 filings rose 127 percent in the Valley and 105 percent statewide in October compared with a year earlier, while the Chapter 13 figures were up 53 percent and 40 percent, respectively.

Even though they didn't rise as much, the Chapter 13 increases are more worrisome, said Mike Sullivan, director of education at Phoenix debt-counseling firm Take Charge America. That's because Chapter 13 is less attractive to filers; it results in a debt-repayment plan rather than a broad dismissal of debt.

"It shows those people must be desperate," Sullivan said.

Although job losses, divorces and medical bills remain leading catalysts for bankruptcy, financial troubles are snaring other types of individuals, too.

Volin said he is seeing more real-estate investors fall into a hole, particularly those with adjustable-rate mortgages that they haven't been able to refinance to better rates because their rental properties continue to lose value.

"They've been left with a mortgage payment that's so much higher than their rental income," he said.

Nationally, bankruptcy filings in October topped the 100,000 mark for the first time since the bankruptcy laws were changed in October 2005 to make the process more restrictive to filers. The U.S. total of 106,266 filings was up 20 percent from September, the American Bankruptcy Institute reported, citing data from the National Bankruptcy Research Center.

So far in 2008, the 880,076 filings nationally exceed the total of 822,590 for all of 2007.

"October's sharp spike in new consumer bankruptcies confirms the severe financial stress on household budgets caused by high debts, flat incomes and declining home values," said Samuel J. Gerdano, the ABI's executive director.

Sullivan wonders whether the tougher bankruptcy-reform legislation of 2005 might have given lenders a false sense of security.

"The credit-card companies took that as a license to make credit easier because they thought they wouldn't have to worry about losses, since people couldn't file as easily," he said. "But the numbers are going up, which means things are worse than they thought."

 

Federal government launches new mortgage aid effort

Nov. 11, 2008 02:05 PM
Associated Press

WASHINGTON — The government and the mortgage industry are launching the most sweeping effort yet to help troubled homeowners by speeding up the process for renegotiating hundreds of thousands of delinquent loans held by Fannie Mae and Freddie Mac.

The Federal Housing Finance Agency, which seized control of the two mortgage finance companies in September, announced the plan Tuesday along with other government and industry officials, including Hope Now, an alliance of mortgage companies organized by the Bush administration last year.

“Foreclosures hurt families, their neighbors, whole communities and the overall housing market,” said James Lockhart, the housing finance agency's director. “We need to stop this downward spiral.”

The plan could have tremendous importance because Fannie Mae and Freddie Mac own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding. Still, government officials did not have an estimate of how many people would qualify for the new program.

Officials hope the new approach, which goes into effect Dec. 15., will become a model for loan servicing companies, which collect mortgage companies and distribute them to investors. These companies have been roundly criticized for being slow to respond to a surge in defaults.

To qualify, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth. Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.

Borrowers would get help in several ways: The interest rate would be reduced so that borrowers would not pay more than 38 percent of their income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.

While lenders have beefed up their efforts to aid borrowers over the past year, their earlier efforts have not kept up with the worst housing recession in decades.

More than 4 million American homeowners, or 9 percent of borrowers with a mortgage were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.

Indeed, Tuesday's announcement comes too late for Troy Courtney, a 44-year-old San Francisco police officer.

He moved out of his home in Mill Valley, Calif., at the start of this month — taking his children, three dogs and one cat with him — after failing at several to attempts to get a loan modification or a short sale — where the lender agrees to receive less than the loan is worth.

Courtney worked overtime and tapped into his retirement account to try to catch up with two loans on his home. But in the end he couldn't convince Countrywide Financial, which managed the loan for Wells Fargo, to modify the loan.

“I feel like I missed the boat,” he said of the new efforts to help more homeowners. “I'm just mad at the whole system.”

One reason the problem has been so tough to solve for borrowers like Courtney is that the vast majority of troubled loans were packaged into complicated investments that have proven extremely difficult to unwind.

Deutsche Bank estimates more than 80 percent of the $1.8 trillion in outstanding troubled loans have been packaged and sold in slices to investors around the world.

The remaining 20 percent are “whole loans,” which are easier to modify because they have only one owner.

Nevertheless, Tuesday's announcement coupled with recent and more aggressive strategies from the major retail banks are important steps to fix the housing crisis. After more than a year of slow and weak initiatives, there appears to be a serious effort to get at the heart of the credit crisis: falling U.S. home prices and record foreclosures.

Citigroup announced late Monday it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. The New York-based banking giant also said it is also working to expand the program to include mortgages for which the bank collects payments but does not own.

Additionally, over the next six months, Citi plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.

Citi plans to devote a team of 600 salespeople to assist the targeted borrowers by adjusting their rates, reducing principal or increasing the term of the loan.

Late last month, JPMorgan Chase & Co expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 customers. The New York-based bank has already modified about $40 billion in mortgages, helping 250,000 customers since early 2007.

Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.

 

BofA agrees to halt 2,000 foreclosures across Valley

by Catherine Reagor - Nov. 1, 2008 12:00 AM
The Arizona Republic

A large number of Phoenix-area homeowners facing foreclosure have received a reprieve.

Bank of America, which last summer bought the nation's largest subprime lender, Countrywide, has suspended foreclosure notices pending against nearly 2,000 homes across the Valley in the past week in an effort to help homeowners hold on to their property. And relief for even more homeowners is expected to follow.

The move, which will lead to cuts in people's mortgage payments, is part of the bank's recent settlement agreement with the office of Arizona Attorney General Terry Goddard and could help stem the growing number of foreclosures that has crippled the local housing market.

Last month, BofA agreed to modify loans for struggling borrowers if attorneys general from Arizona, Texas, Ohio, Iowa and Washington halted legal action against Countrywide. That action is based on the lender's "alleged use of deceptive practices" in its mortgage-lending business, according to Goddard.

The deal requires BofA to place a temporary hold on foreclosures on loans made up until the end of 2007 and work with buyers to make their mortgage payments more affordable so they have the option of staying in their homes.

Rick Simon, spokesman for BofA, said the bank will contact homeowners when its home-retention program is ready at the beginning of December.

About 13,000 mortgage holders in Arizona are eligible for loan modifications under the agreement, according to an estimate from the Arizona Attorney General's Office.

The modifications are supposed to be made based on how much a homeowner can afford to pay each month.

As part of the changes, adjustable- and negative-amortization loans can be swapped out for fixed-rate mortgages.

Streamlined process

"There will be a streamlined process to look at the loans and meet affordability targets for the borrowers," Simon said. "The borrower has to decide if they are interested."

In early October, the number of pending foreclosures Valley-wide hit a new high of 29,000, according to Information Market, a real-estate research firm that, while conducting its daily analysis of property records, discovered that Countrywide foreclosures had been pulled.

Pending foreclosures are now down by at least 2,000 because of Bank of America's action, and more foreclosures in the Valley are likely to be temporarily halted this month.

"Now, we are asking other big mortgage firms to take on the same obligations to work with struggling borrowers as (BofA)," Goddard said.

"We have asked them to do it voluntarily without us filing a lawsuit, but investigations do continue into fraud and the possible inducement (of homeowners) into some of these mortgages by firms."

Money from the national housing-bailout plan passed last summer will be available in Arizona to help more struggling homeowners next year.

Until then, other big lenders are expected to step up efforts to help borrowers facing foreclosure.

On Friday, JPMorgan Chase announced that it would modify up to $110 million in mortgages nationwide. It expects to assist 400,000 families who need help making their home-loan payments.

"It's a far better solution to have companies working with buyers than foreclosures," Goddard said.

"This is important in getting us out of this mortgage meltdown and getting property values to firm up."

 

Commercial property

 

Published: November 5 2008 02:00 | Last updated: November 5 2008 02:00

Certain "markets" - the word is from the Latin mercari , to trade - are not living up to their name. Determining if the US commercial property market is bad, worse or simply terrible is hampered by the virtual absence of deals since September. With only top-notch property drawing interest for much of this year - forced sales by stricken investor Harry Macklowe, for example, account for nearly a third of business district office sales to date - transactional values were already skewed, masking the maelstrom in bricks and mortar.

Beyond frozen credit, there remains a yawning gulf between would-be buyers and reluctant sellers. Capitalisation rates - a property's operating income divided by its value - have yet to rise sufficiently to tempt buyers asked to stump up more equity and pay vast spreads even on senior debt. Those relying on price appreciation and a quick sale have departed. With tenancy demand set to weaken, buyers can no longer rely on surging rents to help make the sums add up.

Average cap rates dipped below 6 per cent last year but have risen to about 6.5 per cent on the basis of observed deals. But rates now are probably closer to 7.5 per cent, estimates Green Street Advisors, given poor income growth. There is more pain to come. Cap rates still compare unfavourably with yields on mid-rated corporate bonds, at about 9 per cent. That these have historically been closely linked suggests that cap rates may rise further (that is, prices may have considerably further to fall).

For now, the absence of deals removes one reality check for sellers yet to absorb the market's shift. Credit constraints will keep buyers on the sidelines. The danger of prices overshooting on the downside may increase as boom-time financing comes due next year. Closing the gap between buyers and seller could then result in a head-on collision.

Copyright The Financial Times Limited 2008  (http://www.ft.com/cms/s/1/455e122e-aadd-11dd-897c-000077b07658.html)

 

6 Key Facts About the First-Time Buyer Tax Credit

The $7,500 home ownership tax credit that the federal government created earlier this year as part of the Housing and Economic Recovery Act (H.R. 3221)

 1. Buyers have until July 2009 to make a purchase that qualifies. 

The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if you wait to buy in the first half of 2009 you can take the credit on your 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

 2. Buyers don't really have to be "first-timers."

The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years. And the NATIONAL ASSOCIATION OF REALTORS® has asked Congress to expand the credit to all buyers, not just those who haven't owned a primary residence in recent years.

 3. Even if buyers exceed the income limit, they can benefit from the credit. 

The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Sounds like a great deal. But what if your clients make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.

 4. Think of it as an interest-free loan.  

The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. NAR is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan. 

 5.  You don't have to be authorized before making a home purchase. 

There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on their IRS Form 1040 tax return and/or any form that the IRS might devise. 

 6. New-home construction qualifies. 

For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home.  However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.   

 REFERENCE:

• NATIONAL ASSOCIATION OF REALTORS®' Tax Credit Chart Printout  (PDF)
• NAR Frequently Asked Questions Printout (PDF)
• IRS Web Site: Tax Credit Guidelines
• National Association of Home Builders: Frequently Asked Questions

 

 

Fed Drops Key Rate to 1 Percent

The Federal Reserve trimmed a half point off the key federal funds interest rate Wednesday, dropping it to 1 percent.

In a statement, the Fed acknowledged that the economy has few bright spots. “The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures,” the central bank said.

It left open the possibility of further cuts, saying it would “act as needed” to stabilize prices and encourage growth.

Unemployment has risen to 6.1 percent from 5 percent in January as a result of the loss of 700,000 jobs. Analysts say this news is particularly alarming since job losses usually come early in a recession.

Source: The New York Times, Edmund L. Andrews (10/29/08)

Real Estate Markets Most Likely To Rebound

Forbes: Dorothy Pomerantz 10.29.08,

If you're a homeowner seeing property values plummet, look to the commercial real estate market for solace. It might tell you which areas will recover fastest--and which will likely remain weak.

The Urban Land Institute recently asked 700 real estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, Realtors and Real Estate Investment Trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.

The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars, and don't have a glut of condos or office space.

In Depth: Best And Worst Places For Real Estate Investors

These traits landed Seattle the No. 1 spot on the list. No city scored above a 6.15 on a scale of one to nine (one being an abysmal place to invest and nine being excellent).

Seattle is "a diversified market, has a good base of business and is becoming a 24-hour city," says Stephen Blank, senior resident fellow, finance, of the Urban Land Institute. "It's going to be in a good position to come back."

Although the city is suffering from the loss of Washington Mutual (nyse: WM - news - people ) and the downsizing of Starbucks (nasdaq: SBUX - news - people ), Boeing (nyse: BA - news - people ) and Microsoft (nasdaq: MSFT - news - people ) are still relatively strong. Apartment vacancies are low and there aren't too many new buildings going up, meaning the market won't be oversupplied. The same is true in the retail space.

San Francisco comes in second with a 6.12. The City by the Bay learned from the tech crash of 2001 not to overbuild. There is a reasonable supply of office and apartment space, which should limit vacancies. San Francisco's port is also expected to help the city during the downturn as Americans continue to rely on Asian imports.

Washington, D.C., New York and Los Angeles round out the top five.

Of course, there's no guarantee that an improved commercial market will lead to an improved home market. However, investors have a better chance of seeing home prices rise in fundamentally strong markets like Seattle than in struggling cities like Detroit.

It landed at the bottom of the list, scoring a 2.24. Detroit has been reliant on the car industry, which is rapidly shrinking. Other businesses are unlikely to fill the void in the next few years, which means the city will be hit hard by further economic struggles.

New Orleans also lands near the bottom with a score of 3.33. The city has been losing businesses to Houston, Dallas and Atlanta since Hurricane Katrina hit in 2005.

What's happening to housing in your area? Weigh in. Post your thoughts in the Reader Comments section below.

The other cities at the bottom of the list-- Columbus, Ohio, Milwaukee, Wis., and Cleveland--suffer from dying industries and lack of tourist appeal.

Recent attempts to turn downtown Milwaukee into a thriving 24-hour city haven't been enough to protect it from the coming downturn. Increasingly picky investors are expected to favor higher-quality port cities over Midwest towns.

And while Columbus has the potential to become a major shipping hub for goods traveling cross-country, that revitalization may have to wait for a stronger economy and a government focused on improving the nation's roads.

For now, prospects are dim.

 

New Demands Make Mortgages Harder to Get

Even home buyers with good credit are having trouble getting mortgages with terms they find attractive.

Lenders are demanding much higher down payments, often about 20 percent, and sometimes even higher. Jumbo home loans, ranging from $417,000 up to $750,000, depending on the local market, are particularly hard to find because private banks are no longer investing in them.

Properties, as well as buyers, are facing extra scrutiny. Some lenders now require a second appraisal to reassure them of a property’s true value, slowing the buying process and increasing closing costs by hundreds of dollars.

Plus, the wave of consolidation among financial institutes has led to confusion and further delays over mortgage processing.

Source: USA Today, Stephanie Armour (10/28/2008)

Why the Foreclosure Crisis is Hard to Fix

The government has thrown billions at the foreclosure crisis, but as Sheila Bair, head of the Federal Deposit Insurance Corp., told the Senate last week, “There has been some progress, but it’s not enough.”

Until the sweeping foreclosure problem is resolved, mortgage system woes will persist.

Here are five reasons why the foreclosure crisis has proven difficult to fix:

1. Falling home prices: More than 23 percent of home owners with a mortgage owe more on their loans than their homes are worth. Lenders won’t give new loans to people with negative equity and that leads to owners walking away, causing the lender to foreclose.

2. Too many investors: More than 30 percent of properties in the foreclosure process are owned by someone who doesn’t live in the property, according to RealtyTrac Inc. Programs that help home owners in trouble are not designed to aid investors.

3. Complex investments: Nearly all mortgages in the last decade have been packaged into securities and sold. Investors in these securities are hesitant to agree to loan modifications because it will mean a significant loss. U.S. Rep. Barney Frank, D-Mass., has accused hedge fund investors of blocking loan modifications. In a letter summoning hedge fund investors to a hearing, he wrote: "For the hedge fund industry, which has flourished for much of the past decade, to take steps so actively in opposition to what is currently in the national economic interest is deeply troubling.”

4. Job losses: Unemployment is the main reason people can’t pay their mortgages. As the unemployment rate has risen above 6 percent, the percentage of mortgage delinquencies caused by job loss has risen to 45 percent.

5. Small modifications don’t work: One third of all subprime loans modified in the third quarter of 2007 were delinquent again within 10 months, according to a Credit Suisse report.

Source: The Associated Press, Alan Zibel (10/27/08)

Valley home price drop leads nation, index says

October 28, 2008 - 1:05PM

Tony Natale, Tribune

Homes in the Valley suffered the greatest drop in prices during the past year among 20 major cities, according to the Standard & Poor’s Case Shiller Home Price index released Tuesday.

Prices in the metro area plummeted 30.7 percent from August 2007 to the same month this year, while the sale of homes in Las Vegas plunged 30.6 percent and Miami sale prices sank 28.1 percent, the index reported.

While they also had price drops, the cities that held up the best according to the survey were Dallas, which saw a decrease of 2.7 percent, Charlotte, N.C., down 2.8 percent and Boston, 4.7 percent.

No city showed a price gain during the 12 months, according to the index, a study that is closely watched by the real estate industry, particularly investors. The index compares the sale prices of the same homes each year to determine price trends.

Besides a 20-city study, the index also compares and lists home sale prices for a 10-city market. Prices in the 20-city index have dropped more than 20 percent since peaking in July, 2006. The 10-city index has fallen nearly 22 percent since its peak in June, 2006.

For the fifth straight month, no city in the 20-city index saw annual price gains in August.

“I’m not surprised by any of the data,” said Malcolm MacEwen, president and chief operating officer for Coldwell Banker Residential Brokerage in Arizona.

“We’re falling down the other side of the cliff,” he said, referring to the steady rise in residential selling prices that began in 1995 and reached its peak in 2005, then began to fall when one of every four homes in Maricopa County were sold by homeowners to investors.

MacEwen added: “Metropolitan Phoenix between 1995 and 2005 was one of the fastest growing areas of appreciation of selling prices in the country. Real estate is a cyclical thing. It’s up, then down.”

Jay Butler, director of the Arizona Real Estate Center at Arizona State University, said he wasn’t surprised by the report, either.

“It (index) confirms what we already know,” said Butler. “The drop in selling prices is being driven by the growing number of foreclosures, and the economy.”

Overall, the 20-city index recorded a record year-over-year decline of 16.6 percent with a 1 percent fall in August, the largest drop since the index’s started in 2000.

In August, San Francisco saw the biggest price declines, down 3.5 percent, the Valley dropped 2.9 percent and Las Vegas, down 2.4 percent. Only two cities showed gains in August, Cleveland’s prices rose 1.1 percent and Boston inched up 0.1 percent.

“The downturn in residential real estate prices continued, with very few bright spots in the data,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s.

The Associated Press contributed to this report.

 

Local builder goes out of business

Construction lender cut credit for Brown Family

by J. Craig Anderson - Oct. 28, 2008 12:00 AM
The Arizona Republic

Tempe-based home builder Brown Family Communities closed its doors Friday after more than three decades in the business.
Company founder Dave Brown said he was forced to cease operation and lay off all 60 employees because the company's construction lender, which he didn't want to name, was unwilling to extend additional credit to build new homes or finish homes under construction.
Brown said that means customers currently in the process of buying a Brown Family home would not be allowed to close the deal.
Instead, the bank will keep those homes as collateral. Brown said that he would refund every customer's deposit.
The builder's problems escalated early this year when the bank reappraised Brown's land assets at a lower value and ordered the company to pay back a portion of money it had loaned, he said.
Brown said he had been trying to negotiate a compromise for months, and in the meantime the bank began keeping all of the proceeds from every home sale, cutting off Brown's ability to generate revenue.
"They sucked every nickel out of the company," he said. "I went through the company's money and my own money."
Valley real-estate analyst RL Brown, publisher of the Phoenix Housing Market Letter, said he was surprised by the way Dave Brown's (no relation) lender handled the credit issue.
"I think that particular bank's technique was pretty short-sighted," he said. "This is a company that, at least on the surface, one would think was as solid as any builder in town."
Brown Family Communities, founded in 1975, was not among the home builders on the Arizona Department of Real Estate's list of "builders in financial trouble."
It had no property in foreclosure and was not the target of any liens for unpaid construction work, although Dave Brown acknowledged that some of his subcontractors might not get paid for recent work.
Tom Osselaer, executive vice president of Suburban Mortgage in Phoenix, said he had 13 clients in the process of buying Brown Family homes. He hoped Brown would follow through on his promise to refund their earnest money so they could begin looking for other homes.
Osselaer said lending institutions are in such a state of panic that heavy-handed tactics like seizing all sale proceeds are becoming more common.
"Banks, when they get afraid, they just stop," he said.

 

Falling home prices erasing what many Valley owners gained

by Catherine Reagor - Oct. 26, 2008 12:00 AM
The Arizona Republic

Home prices in many parts of metropolitan Phoenix have fallen so low, they have returned to levels from before the housing boom.

New data compiled for The Arizona Republic show median housing prices in most Valley ZIP codes have dropped to where they were in early 2005 or late 2004, signaling the housing market already has lost most of the gains from the boom when home prices shot up 50 percent.

For example, in the Glendale ZIP code 85305, the median price of a home fell from $385,000 at the peak in 2006 to $227,000 today, which is about what it was in 2004.

The overall median home price in the Valley has dropped around 30 percent from $267,000 to $180,000 in the same time period.

Climbing foreclosures, a glut of foreclosure homes being resold and fewer buyers able to get mortgages are all working to drive down home prices.

Yet despite the price drops, the Valley's housing market still hasn't hit bottom. Analysts say the market will likely overcorrect before it improves.

"Phoenix-area homes are more than halfway to where they are likely to fall," said Marshall Vest, an economist with the University of Arizona, who in early 2006 predicted housing prices would fall significantly even as they were continuing to climb then. "Many neighborhoods still have 10 to 20 percent home-price declines in their near future. A lot depends on how many homeowners can't pay their mortgages in an area."

Foreclosure wild card

As long as foreclosures continue to climb, home prices will fall.

More than 30,000 Valley homes have been foreclosed on so far this year. That compares to fewer than 1,500 foreclosures in 2006. Now, almost all of the homes are going back to the lenders, which are reselling them for bargain prices.

"It's clear foreclosures are putting a lot of pressure on home prices," said Tom Ruff, a real-estate analyst with the Information Market, which compiled housing-value data for The Republic.

The impact on prices is apparent. The Valley's overall median resale price without factoring in foreclosures is $215,000. The overall median resale price of a foreclosed home is $149,000. That foreclosure median pulls down the overall median resale price to $180,000. At the height of the housing boom in 2006, the median was $267,000.

Ruff said foreclosures could peak by the end of the year.

But that doesn't mean prices will have hit bottom because of the backlog of foreclosures that lenders still need to liquidate.

Foreclosure properties are dominating the Valley's housing market. In a few Valley neighborhoods, there are more foreclosure resales than regular resales.

Lower home prices are drawing more buyers, but they may not all be the types of buyers neighbors want.

Investors return

Many foreclosed homes are bought by investors who can pay cash, market watchers say. That means fewer homes are going to buyers who plan to live there and hang onto the house for a while. Owner-occupied homes ultimately help an area's recovery.

The Valley's housing market is seeing the flipside of the investor cycle now. In 2004, investors cashing in on loose lending guidelines, the Valley's growth and relatively affordable housing started the buying frenzy that led to the wild run-up in home prices. Many of those investors, who didn't sell before prices dropped, ended up walking away from the homes and starting the Valley's foreclosure problem.

Aimee Jackson has been trying to buy a foreclosure home in the West Valley for the past six months, but the pharmaceutical sales representative keeps getting beat out by investors.

"I am pre-approved for a loan, and that's not easy now," said Jackson, who has been making offers on newer homes in Surprise, Peoria and Buckeye. "But lenders all seem to be going for the cash offers from investors. It seems unfair."

Jackson is going to keep looking at foreclosure resales because she doesn't think prices are going to go up on those properties anytime soon. She also doesn't think regular homeowners are pricing their houses low enough to compete with foreclosure properties.

Bettina Franco, a real-estate agent with Phoenix's HomeSmart, said lenders are trying to resell so many foreclosures now that homeowners trying to sell have given up trying to compete with them.

There is concern among real-estate analysts that investors will again hurt the housing market.

"In some areas of the Valley, we are starting to see the bottom for prices," she said. "But we need to get rid of all the foreclosures first and watch what investors are doing."

Hitting bottom

No one knows for sure just where the bottom is for the Valley's home prices because the housing market is in uncharted territory. Never have home prices shot up 50 percent in a year as they did in 2005 or fallen 30 percent in a year as they have this year.

Housing analyst RL Brown, who publishes the Phoenix Housing Market Letter, believes that because of foreclosures, the median resale home price in the Valley could fall to $160,000. That is where it was in 2003.

During the Valley's real-estate recession in 1990, home prices fell only about 5 percent.

But those home prices didn't climb significantly for several years after that. Most people who bought homes during the peak in the mid-1980s didn't break even on the value of their homes until the mid-1990s.

 

El Mirage, other W. Valley areas lead housing-price dip

by Carrie Watters - Oct. 25, 2008 08:08 AM
The Arizona Republic

Several West Valley communities are among those seeing the biggest drops in home prices in Maricopa County, with El Mirage taking the biggest nosedive, according to The Arizona Republic's analysis of Valley home values.

The median price of new and resale homes in El Mirage dropped 32.5 percent when comparing the first eight months of 2008 to 2007.

The working-class Northwest Valley city is the only place in the county where foreclosed home sales exceeded traditional resales. Of 382 houses sold this year through mid-September, 53 percent were foreclosed homes.

More remain on the market.

Early Tuesday, Lesego Lidge raked up yard trimmings in front of her stucco home on Willow Avenue in El Mirage. Next door, overgrown bushes claimed the front of what used to be her neighbor's home. It has been sitting vacant nearly a year - a telltale "code enforcement" notice plastered to the window.

Across the street, a "bank-owned" sign looms in front of another house.

Lidge and her husband bought their home in 2005, at the height of the Valley's housing bubble.

She hopes the market stabilizes before her husband retires from the military in a year and they consider moving.

Lidge said she has no illusion that prices will rebound enough to make a profit on the sale of their home.

"I just don't want to be upside down," she said, returning to her raking.

The common denominator in falling values is the mix of bank-owned homes. It's never good for sellers when the for-sale signs on their homes are joined by foreclosure signs at their neighbors'.

"There have been many times that we had to drop the price to beat the bank," said Michael Martell, a Re/Max Integrity Realtor in Glendale and the Northwest Valley.

On the flip side, the foreclosures must be absorbed - and that presents some great prices for buyers.

In most Valley communities the overall median price on traditional resales is $20,000 to $40,000 higher than the foreclosure resale. In El Mirage, where foreclosure sales make up a big portion of the market, the overall median home price is $135,000. The foreclosure resale is $133,750.

Other areas seeing the largest mix of foreclosure sales include southern Surprise, Youngtown and Avondale.

In Surprise's 85379 ZIP code, 352 resales were foreclosures and 352 were traditional resales from January through mid-September. The median price of new and resale homes in this area dropped 25.5 percent in the past year.

Youngtown's 85363 ZIP Code saw 49 percent of its 51 resales involve foreclosed homes. The area's median price for new and resale homes dropped 25.9 percent in the past year.

In Avondale, 45 percent of 742 resales were foreclosures. In the past year the city saw a 22.8 percent drop in the median price of new and resale homes.

West Valley cities seeing fewer foreclosure sales were Sun City, where just 5 percent of 339 resales were foreclosed homes, and Sun City West, where only 2 percent of 485 resales involved foreclosed homes.

The Sun City communities still have seen decline in the median price of new and used homes, but it was in the 18 to 20 percent range.

Valley existing home sales leap 70%

October 24, 2008 - 6:09PM

Edward Gately, Tribune

Existing home sales in the Valley jumped a staggering 70 percent last month compared with September 2007, overshadowing a 5.5 percent increase in national home resales for the same period.

Home resales in Maricopa and Pinal counties rose to 5,749 units last month, up from 3,383 in September 2007, according to the latest Phoenix Housing Market Letter by analyst RL Brown. For most of the past year, existing home sales have been in the minus ranges from the same pace last year, off by as much as 46 percent last September.

"The bottom of the (Valley) resale market was sometime about a year ago," Brown said. "It went on for about six months, and we were down into the 3,000 (resales) level. So the fact that we're up is great news, but that's why the percentage is so high."

The National Association of Realtors reported that sales of existing homes nationally rose by 5.5 percent last month, the best showing since a 5.7 percent increase in July 2003 during the five-year housing boom.

"The West was up 34.4 percent," said Walter Malony, association spokesman. "A lot of the gains were in California, but also in Arizona and Nevada, and we're also seeing some pickup in Colorado. In areas like Phoenix ... where there was a lot of subprime mortgage exposure and then consequently big price corrections, that's where the buyers are responding."

The unprecedented home price surge meant the Valley had further to fall when the real estate bubble burst, prompting a flood of foreclosures and plummeting values, Brown said. These are prompting higher sales, he said.

The national improvement demonstrates that buyers who have been sitting on the sidelines want to get into the market to make a long-term investment, Malony said.

"Our survey data is showing that 80 percent of these purchases are owner-occupants and other data indicates that as many as half of the buyers are first-time buyers," he said.

Of the 5,749 Valley resales last month, 2,859 were bank-owned properties, Brown said. The median price of resales last month was $170,000, while the median price of bank-owned properties was $143,000.

Median resale prices last month fell 6.6 percent from August, 20 percent from a year ago.

"What it really comes down to is there is a demand in the price point of the foreclosed units, and that's what we're seeing demonstrated," Brown said. "It's proof that the buyers are out there and the buyers will come out of the woodwork when they see what they perceive to be appropriate values. If the buyers weren't coming out of the woodwork for the foreclosures, we would be in a much, much deeper world of hurt."

Yalda Alawi, a short-sale negotiator with WestUSA Realty Revelation in Chandler, said a turnaround is a year or two away.

"In the specific area I specialize in, I've actually seen a slowdown in buyer activity," she said. "It's slow in our end of it, especially because it takes so long."

Still, Alawi said that progress is being made toward recovery.

 

Home values stay ahead of 2004 levels

by Kerry Fehr-Snyder - Oct. 25, 2008 08:00 AM
The Arizona Republic

Foreclosed homes are shredding the paper gains made during the market's run-up in recent years, but Southeast Valley cities are still ahead of 2004 levels.

Median home values fell from 2005 to 2008, but they're still greater than four years ago, according to data from Information Market and analyzed by The Arizona Republic.

"The only people generally who have lost real value in their house are those who have bought in the last three to four years," said real-estate analyst RL Brown, who produces the Phoenix Housing Market Letter. "It's tragic when someone has to sell their home in this market."

Homeowners who bought at the market peak in 2005 and 2006 have seen values decline to record lows in many cases throughout the Valley. But those in the Southeast Valley have fared better, in part, because they aren't located in the farthest-flung areas.

The average median home values in Mesa, Chandler, Gilbert and Tempe through mid-September this year are still $42,000 to $68,000 greater than the average median home values in 2004.

But communities in outlying areas aren't holding onto their gains. They are the ones that boomed during the real-estate heyday and the "drive till you qualify" buyer mantra.

Banks have taken back many of those homes through foreclosure, while others have agreed to "short sales" in which buyers pay less than what is owed on a mortgage.

"Mostly what I'm doing are short sales, and I've got quite a few listings in Queen Creek," said Julie Bieganski, a real-estate agent with Century 21 Premier Realty. "Oh, man, that place is getting decimated."

Like many real-estate agents, Bieganski recommends homeowners sit tight and not try to sell their homes until the market recovers.

"If you don't need to, don't," she said.

The number of foreclosures and short sales are driving down median home values but so is the sheer number of homes for sale. The number of properties on the Arizona Regional Multiple Listing Service totaled more than 44,000 plus another 6,800 under contract or pending as of Tuesday.

In a so-called normal market, listings total 15,000 to 20,000 at any given time.

Bill Ryan, a broker with Re/Max Elite, said the majority of single-family homes being sold are foreclosures, also known as bank-owned properties, and short sales.

"Buyers know that there are opportunities on properties that have been written down as a loss," he said. "One foreclosure sale drives the market, and people have to take that into account."

Ryan sympathized with homeowners who lose their jobs, become ill or otherwise can't keep up with their mortgages. But he had harsh words for homeowners who walk away from their homes because they are "upside down" on their mortgages, meaning they owe more to the bank than they their homes currently are worth.

"It's unconscionable to walk away just because the market has gone down," he said. "It's not an excuse to go into default if you are capable of paying. A deal is a deal."

Homeowners who believe their credit won't be ruined by a foreclosure and in some cases, a short sale, are wrong, he added.

For the vast majority of homeowners, declining or rising home values are immaterial to their everyday lives.

"When you think about it, what you have really lost is this big fluff of paper," he said. "That's the outlook you have to have on it."

Most real-estate analysts say it's impossible to predict when the housing market will bottom out and when values will rise again. A lot, they say, has to do with the current economic slump.

But for first-time buyers, the home buying picture couldn't be brighter, said Jodi Erwin, a real-estate agent with Coldwell Banker Residential Brokerage in Tempe.

Erwin said she has several clients in the Southeast Valley who are first-time homebuyers who have pre-qualified for mortgages and are shopping for homes under $350,000.

"I'm working with a lot of buyers because everyone wants a deal right now," she said.

Banks anxious to unload bad mortgages have priced homes cheaply, Erwin said, adding that she has found more than 100 single-family homes throughout the Valley listed for $200,000 or less.

"Two years ago, you couldn't touch a condo for $200,000," she said.

But even with the prospects for first-time homebuyers, Erwin is candid about the complexity involved in trying to buy short sales and bank-owned properties.

"I tell my clients, 'Don't expect logic to prevail because it won't. It's out of our control,' " she said.