Metro Valley Real Estate

Population Growth Number

2011-08-01T16:02:00.000-07:00

ASU report: Foreclosures still impacting sales

2010-02-15T09:55:00.001-08:00

Thursday, February 11, 2010

Phoenix Business Journal - by Mike Sunnucks

Close to half of the existing home sales in the Phoenix metro area last month were foreclosed properties exhibiting continued struggles in the housing market, according to an Arizona University report released Thursday.

The report also said that two out of three home sales in the Valley in January were either foreclosures or re-sales of foreclosed homes.

“Even in response to hiatus and mortgage modification programs, foreclosure activity did not slow,” said Arizona State University economist Jay Butler. “It takes some time to finish recording transactions, though, so some slowing might still be evident in the next few months.”

ASU’s W.P. Carey School of Business reported Thursday there were 3,500 single-family foreclosures in January with a total of 7,725 total home sales. There were 495 condo foreclosures during January with 1,150 total condo sales last month.

There were 1,085 foreclosures of single-family homes in Phoenix last month; 140 in Scottsdale and 335 in Mesa.

Median single-family home prices in the Phoenix area dropped from $140,000 in December to $136,500 in January. The median price was $136,000 in January 2008.

Principal Cuts May Prevent Foreclosures

2010-01-08T13:42:00.001-08:00

At least 7 million borrowers will lose their homes this year and next unless there is a broad increase in property values or lenders become much more willing to cut the principal on mortgage loans, an analyst with Amherst Securities Group told the U.S. House Financial Services Committee last month.

That testimony has motivated Federal Deposit Insurance Corp. Chair Sheila Blair to consider incentives for lenders to cut principal on $45 billion in mortgages her agency has acquired from seized banks.

“We’re looking now at whether we should provide some further loss-sharing for principal write downs,” says Bair. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs.”

While principal reductions are rare, some banks are doing them. In the third quarter of 2009, about 21,000 home loans were modified by reducing the principal, according to Mortgage Metrics, a government publication.

Mark Zandi, the chief economist for Moody’s Economy.com, suggests that banks receive a federal match of $1 for every $2 in principal reductions they offer to home owners.

“You’re not going to wipe out all the borrowers’ negative equity,” he says. “This just gives them enough hope to get them committed again.”

Source: Bloomberg, John Gittelsohn and Prashant Gopal (01/07/2010)

Loan Modifications Hit Credit Scores

2009-12-30T14:45:00.001-08:00

Applying for a mortgage modification and being in a months-long trial period can devastate a home owner’s credit score.

Under the government plan, troubled borrowers can have their mortgage payments reduced to 31 percent of their pre-tax income. They are first put in a trial modification for several months to test whether they can meet the requirements of the new mortgage.

Borrowers who were previously current on their mortgages will see their FICO scores fall about 100 points while they are in the trial period, according to the Treasury Department. Borrowers who were previously late or missed payments will see their scores fall more, the government says.

The longer a borrower is in the trial period, the greater the impact on their credit scores, Once the modification is approved, the borrowers’ mortgage credit status will be listed as current and that should improve their scores, the Mortgage Bankers Association explains.

Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive, borrowers report.

Source: CNNMoney.com, Tami Luhby (12/28/2009)

Animated Unemplyment Map

2009-11-16T19:58:00.001-08:00

I thought this map was amazing to see. Click the link to see.

http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html

3 signs of the next real estate collapse

2009-11-02T10:47:00.001-08:00

The latest bubble is about to burst, but this time it's in the commercial market. Here's how to see it coming.

By Katie Benner, writer-reporter

October 22, 2009: 10:16 AM ET

NEW YORK (Fortune) -- When the FDIC closed Chicago's Corus Bank last month, it may have signaled the beginning of the next shock to the banking system: commercial real estate defaults.

Corus, whose balance sheet was larded with bad construction loans, is just one of many banks that have a slew of this debt on their books. Refinancing the $2 trillion in commercial mortgages will be tough, as property values decline. And in this new age of cautious lending, few banks are willing to refinance loans.

"There is a lack of new debt," says Michael Haas, a real estate attorney at Jones Day. "There is a hesitancy to extend credit when there is a real possibility that the real estate may be worth less than it was a few years ago."

Now, in a situation eerily similar to the subprime crisis, the result is likely to be a wave of foreclosures and loan defaults that could, in turn, trigger a collapse in the market of the structured bonds backed by commercial real estate and construction debt. But when, and how bad will it be? Here are three indicators to watch.

1. Special Servicers

Firms such as LNR Property, CW Capital, and Centerline are tasked with unraveling the most troubled loans in a last ditch attempt to keep them from default. An uptick in business at these companies means more borrowers under duress.

Between April and August of this year, the value of commercial loans in special servicing doubled to about $50 billion, according to Trepp, a firm that tracks the commercial real estate market.

2. Big Projects

When rents and property values fall, apartment complexes, malls, hotels, and major projects financed during the bubble become more likely to default on their debt.

Fitch Ratings has identified several stressed loans that have been sliced and diced into billions of dollars in commercial mortgage-backed securities, including Tishman Speyer's $3 billion loan for its Stuyvesant Town-Peter Cooper apartment complex in Manhattan and a $4.1 billion loan secured by Extended Stay's hotels.

3. Regional Banks

Watch to see how banks such as Fidelity Southern and United Community Banks -- identified in a SunTrust Robinson Humphrey report as having a high proportion of noncurrent construction loans -- hold up over the next few months. Community banks were especially aggressive in originating commercial real estate loans, but they could still manage to avoid big problems.

"Medium and small banks have a lot of exposure to local building projects," says Chris Whalen, a bank analyst and co-founder of Institutional Risk Analytics. "They're forbearing or getting involved in their customers' business rather than taking losses. They're hoping they can hold out until values come back."

Housing sale prices keep rising

2009-11-02T10:39:00.001-08:00

by J. Craig Anderson - Oct. 21, 2009 12:00 AM
The Arizona Republic

The Valley housing market has settled into a pattern of mild price recovery, with the median sale price rising by a few thousand dollars in recent months, according to the latest Arizona State University report on same-home sales.

But the report's author warned area residents not to interpret his findings as proof that home prices have stabilized.

Professor Karl Guntermann, who published the most recent ASU Repeat Sales Index report on Tuesday, said there are signs that home foreclosures in 2010 could jolt the housing market out of its current state of relative calm.

"The worst appears to be past, but the large number of foreclosures likely to hit the market through 2010 makes it difficult to predict the direction of house prices with any certainty," said Guntermann, of ASU's W.P. Carey School of Business.

The ASU index continued to show a steady decrease in the gap between home-sale prices in 2009 and prices a year earlier.

In July, the most recent month covered by the index, home prices were down about 28 percent compared with July 2008, and the median sale price was $125,000.

The index showed steady improvement from June, when the year-over-year decline was 31 percent, and the median sale price was $122,000.

The same-home sales index, which compares prices of homes that have been sold multiple times since 1989, shows an uninterrupted run of year-over-year price decline that has lasted a record 29 months.

However, Guntermann said 2010 is likely to see that losing streak reach its end. With the year-over-year gap closing by 2 to 3 percentage points each month, it's likely the index will cross over into positive territory by the end of next year, he said.

Commercial Real Estate Debt Jumps Amid Soaring Delinquencies

2009-11-02T10:23:00.001-08:00

By Sarah Mulholland

Oct. 19 (Bloomberg) -- Yields on bonds backed by hotel, shopping-center and skyscraper loans narrowed relative to benchmarks as U.S. programs help drive demand even as late payments soar on the underlying commercial real estate debt, according to Barclays Capital.

The gap, or spread, on top-ranked commercial-mortgage backed securities tightened 0.15 percentage point relative to benchmark swap rates to 6.25 percentage points for the week ended Oct. 15, Barclays data show. That compares with 10.15 percentage points in March, according to Barclays.

Demand for the bonds swelled as rising stocks buoyed investor sentiment and government programs helped further prop up prices of the debt. Rising delinquencies on commercial mortgages provide a “counterpoint to the rally,” Barclays analysts led by Aaron Bryson in New York wrote in an Oct. 16 report.

“The rally in cash CMBS continued,” Bryson wrote. “Better-than-expected earnings reports and strong economic data led to broad-based credit tightening and a further reduction of risk premia.”

Top-rated commercial mortgage-backed debt is trading at a price of about 84.70 cents on the dollar, up from 55.91 cents in mid-March, according to Merrill Lynch & Co. indexes.

Still, “the CMBS delinquency rate is on pace for a large jump,” Bryson wrote.

Commercial mortgages bundled and sold as bonds that are at least 30 days behind on payments rose 30 basis points to 5.42 percent for October, according to Barclays. About 36 percent of the loans hadn’t yet been reported for this month as of the report date. A basis point is 0.01 percentage point.

TALF Fading

The fourth round of the Federal Reserve’s Term Asset-Backed Securities Loan Facility, or TALF, is scheduled for Oct. 21. The Fed began lending against so-called legacy commercial mortgage- backed securities, or those sold before Jan. 1, in July as part of its effort to stimulate lending.

The Fed added newly issued commercial-mortgage backed bonds to TALF in June. No new bonds have been sold through the program.

The impact of TALF has “started to fade” as investors anticipate the start of buying under the U.S. Public Private Investment Partnership, a separate government program that also seeks to attract investors by boosting returns with taxpayer loans, according to Bank of America Corp. analysts.

“Legacy CMBS TALF is still in effect but demand does not seem strong enough, by itself to drive this sector significantly tighter,” the Bank of America analysts led by Roger Lehman in New York said in an Oct. 16 report.

Plunging Values

Unlike the TALF, the PPIP isn’t limited to securities carrying top-ratings and will finance the purchase of a broader swath of securities, including bonds that have had ratings cuts.

Spreads on some lower-ranked bonds have tightened on “at least the perception of PPIP buying,” according to the Bank of America analysts.

TALF loan requests to purchase legacy bonds will likely increase to around $2 billion for October, compared with $1.4 billion last month, according to Barclays. While the fourth round may be stronger than last month’s “disappointing” results, it will fall short of August’s $2.3 billion high, the Bank of America analysts wrote.

The government has made reviving the $700 billion commercial-mortgage bond market a priority as plunging property values and a pullback in lending threaten to derail an economic recovery. U.S. commercial real estate prices are down 40.6 percent from the October 2007 peaks, according to Moody’s Investors Service.

Recession-Proof Places for Working Retirees

2009-10-23T09:09:00.001-07:00

Retirees who must return to work because their nest eggs have taken a major hit should consider places where it’s easiest to get a good job.

Forbes magazine analyzed cities to identify those where there is a strong job outlook—as well as plenty of sunny days. It also considered how pricey the housing market is and how high health costs are.

Here are its 10-best recession-proof cities to live in retirement:

Atlanta
Dallas
Tampa, Fla.
Houston
St. Louis
Austin, Texas
Las Vegas
Phoenix
Kansas City, Mo.
San Antonio

Source: Forbes, Zack O’Malley Greenburg (10/15/2009)

Foreclosures: Down But Still Elevated

2009-10-23T09:06:00.001-07:00

Mortgage foreclosure filings declined in September for the second-straight month, but September was still the third-highest monthly total behind July and August since real estate data firm RealtyTrac began keeping count in January 2005.

September filings were down 4 percent from August, according to a report released Thursday, but they were up 29 percent compared to August 2008. Third-quarter filings were 5 percent higher than the second quarter.

One in every 136 U.S. housing units received a foreclosure filing during the third quarter. "Bank repossessions, or REOs, jumped 21 percent from the second quarter to the third quarter, corresponding to jumps in defaults and scheduled auctions in the previous two quarters," James J. Saccacio, CEO of RealtyTrac, said in a statement.

Nevada’s foreclosure rate led the nation, followed by Arizona, California, Florida, Idaho, Utah, Georgia, Michigan, Colorado, and Illinois.

Unemployed homeowners are driving the increase.

Source: Reuters News, Julie Haviv (10/15/2009)

Economists Predict Housing Recovery

2009-10-23T07:57:00.001-07:00

Economic forecasters predict that 2010 will be the first year since 2005 for housing to contribute to the growth of the U.S. economy, according to a survey released by the National Association for Business Economics.

Home prices are expected to rise 2 percent next year, but forecasters don’t believe the increase in prices will discourage homebuyers.

More than 80 percent of economists surveyed by the NABE think the recession is over and recovery has begun, but they expect the expansion to be slow because unemployment persists.

Source: Associated Press, Mae Anderson (10/12/2009)

BoA Struggles With Loan Modifications

2009-10-23T07:56:00.001-07:00

Bank of America could collect about $6 billion if it meets the deadline set by the federal government to help struggling borrowers for the Making Home Affordable program.

But the Treasury Department released a report last week that showed that only 11 percent, about 95,000, of Bank of America’s delinquent borrowers who are potentially eligible for the program have been given a loan modification. That puts Bank of America at the bottom of the list of major banks involved in the program.

"We're sure working hard," said Ken Scheller, senior vice president for home retention at Bank of America, when asked about his company's low success rate. "We don't want to be down there."

There appear to be multiple problems, not the least of which is that many of the employees handling the modifications are completely new to the business. Angry investors complicate the issue, with 15 percent of them demanding that the bank get their approval for every single case.

Source: Washington Post, Renae Merle (10/12/2009)

'Foreclosure aid' firms to pay fines

2009-10-23T07:55:00.001-07:00

Oct. 14, 2009 12:00 AM

The Arizona Attorney General's Office has reached settlements with two Valley "foreclosure help" firms it filed complaints against this year as part of the national "Operation Loan Lies" crackdown on mortgage fraud.

Richard Winer, principal of the firm Taken Care of Investments, has agreed to pay fines totaling $691,000, half of which goes to consumers who lost money to the firm, according to a Maricopa Superior Court consent judgment.

In March, the Attorney General's Office filed a complaint alleging Winer and his businesses defrauded 270 Arizona homeowners in danger of foreclosure by promising to obtain the deed to their home and then lease it back to them. Instead, homes were sold to investors who usually evicted homeowners. Winer is consenting to pay the fine without admitting guilt.

Glendale-based Hope for Homeowners Now and its principals, Matthew Castaneda and Michael Winding, have been ordered to pay almost $580,000 in fines, according to a default judgment filed in Superior Court. In July, the Attorney General's Office filed a complaint against Hope for Homeowners Now alleging the company solicited an upfront fee of $3,195 from homeowners by discouraging them to work with non-profits that provide loan-modification help for free.

Home Buyer's Fair on Saturday

The Arizona Mortgage Lenders Association is teaming with some government housing agencies to hold the Home Buyer's Fair 2009 on Saturday. The free event offers help with the $8,000 tax credit for first-time buyers, buying a home with no money down, credit repair, qualifying for a mortgage and buying a foreclosure home.

The Mortgage Lenders Association is working with the Phoenix office of the Department of Housing and Urban Development, Consumer Credit Counseling and housing agencies to put on the event, which starts at 10 a.m. at the Glendale Renaissance Hotel. Details: azmortgagelenders.com.

Executives shuffle at brokerages

Some shuffling at the Valley's residential brokerages. Dominic Scappaticci has left Russ Lyon Sotheby's Phoenix office to be president of Phoenix-based Realty Executives. John Foltz, Realty's former president, will become president emeritus. Russ Lyon Sotheby has named Glenn Niere chief executive and Deems Dickinson president. Phoenix-based Russ Lyon merged with Equitable Real Estate last year.

Commercial real estate to drive U.S. bank failures

2009-10-23T07:51:00.001-07:00

Mon Oct 12, 2009 5:32pm EDT

By Elinor Comlay - Analysis

NEW YORK (Reuters) - The next big headache for banks is likely to be commercial real estate and analysts expect big losses and another wave of bank failures to result.

Banks held about $1.7 trillion in commercial real estate loans at the end of September, according to Federal Reserve data, or about 15 percent of their total assets. But to the extent these loans weaken, small banks are likely to be hit the hardest because larger banks are better diversified.

The banks that analysts say could risk big losses include Salt Lake City's Zions Bancorp (ZION.O), Columbus, Georgia- based Synovus Financial Corp (SNV.N) and Dallas-based Comerica Inc (CMA.N).

But it is not just earnings that are at stake -- bank failures could surge in the coming quarters.

"The serenity of the quiet closure of two to three banks per week is soon going to come to an end," said George Ball, chairman of Sanders Morris Harris Group, an investment bank and investment adviser, in Houston.

Banking regulator the Federal Deposit Insurance Corporation had 416 banks on its watch list of problem banks at the end of the second quarter and veteran analyst Dick Bove at Rochdale Securities expects another few hundred will fail in the next few quarters.

The FDIC closed Chicago-based Corus Bank on September 11, following losses on commercial real estate and condominium developments in Arizona, California, Florida and Nevada.

At Warren Bank in Michigan -- closed on October 2 by the FDIC -- almost 40 percent of its $395 million in total loans were in commercial real estate.

"Real estate lending has long been the specialty of Warren Bank," the company still claims on its website.

Analysts are worried banks such as Corus and Warren Bank may be just the first of a coming wave of bank failures due to commercial mortgages.

Banks have been slow to recognize losses from commercial mortgages to forestall posting big losses, preferring to alter loan terms in the hope an improving economy will keep the loans from heading south, a phenomenon widely known as "extend and pretend."

"It takes a long time for an actively rented commercial real estate space to get to a point where a bank can't be flexible in terms of conditions and has to start writing it down," said Tom Mitchell, analyst at Miller Tabak & Co.

Banks may set aside larger amounts of money to cover losses in the fourth quarter, when banks consult with auditors over their results, Mitchell said.

When commercial real estate makes up a large portion of a bank's balance sheet, the bank is at risk of being forced to set aside much more money for losses.

At Zions, commercial real estate accounted for almost 35 percent of its $41.6 billion in loans at the end of the second quarter, while Synovus had almost 28 percent of its $28 billion loan portfolio in commercial real estate. Comerica's commercial real estate loans made up about 22 percent of its loan portfolio.

But while regulators stepped in to prop up large banks suffering from residential mortgage losses, they are not expected to help out small regional banks suffering commercial real estate losses since these are not seen as a threat to the wider financial system.

"The system will survive but with more cuts and bruises. We're going to see quite a lot of consolidation," said Marshall Front, chairman of Front Barnett Associates in Chicago.

"It's not pretty and there's not a lot of relief out there for these banks."

(Reporting by Elinor Comlay; editing by Andre Grenon)

Experts: Plummeting prices have rendered condos nearly worthless

2009-10-12T09:33:00.001-07:00

Experts say changes to FHA-backed loans could force some unfinished buildings into foreclosure

by J. Craig Anderson - Oct. 9, 2009 03:02 PM

The Arizona Republic

New federal loan-guarantee rules imposed to fend off future government losses from plummeting condominium prices have rendered condos utterly worthless, Valley real-estate experts said.

The Federal Housing Administration rules, which took effect Oct. 1, prohibit any new FHA-backed loans on condo units in projects that include more than 25 percent commercial space.

In addition, no single investor - including the developer - may own more than 10 percent of the units in a particular project. That particular restriction alone creates a catch-22 from which condo builders most likely cannot escape, said mortgage originator Jill Hoogendyk of Wallick & Volk in Glendale.

Another rule that has sellers and brokers scratching their heads prohibits FHA loans in condo developments that aren't "primarily residential," which could be taken to mean the FHA won't guarantee loans in future mixed-use projects.

"I'm predicting that what we'll see is whole condominium complexes sitting empty," Hoogendyk said.

The new rules are a reaction to substantial losses on federally insured condominium mortgages in the past year, government officials have said. In Maricopa County, condominium foreclosures have outpaced condo-unit sales by nearly two to one since Jan. 1, according to real-estate analyst Zach Bowers of Ion Data in Mesa. According to Bowers, lenders foreclosed on about 8,200 condo units between Jan. 1 and Sept. 30, compared with about 4,900 units sold during the same period.

"It's been pretty much consistent throughout the year that no one's buying condos," Bowers said. "The whole market seems to have stagnated."

The new restrictions won't directly affect high-end, luxury condos that sell for more than the Federal Housing Administration's roughly $350,000 lending limit, but Hoogendyk said FHA loans are by far the most commonly used loan among condo buyers. Without that option, buyers would have to obtain conventional loans, which are more expensive and difficult to qualify for, or they would have to pay cash.

Hoogendyk said the FHA rules amount to a death sentence for the Phoenix-area condo market, which had only been kept on life support by the continued availability of FHA loans.

Creating a special restriction that only applies to one type of housing is discriminatory, local critics said, and it punishes existing condominium owners by making their properties nearly impossible to sell.

"They'll lose everything," Hoogendyk said, "And quite honestly, they'll move just because they're afraid to live there."

Bowers said there are Phoenix-area condominium projects in which only a handful of buyers purchased individual units. The only viable use for such projects would be renting the unsold units as apartments, which many condo building owners already have been doing.

However, most have continued trying to sell units, hoping to eventually sell out as the real-estate market recovers. Because of the new rules, local and national experts seem to agree that owner-occupants in half-empty condo buildings are now practically doomed to foreclosure. Hoogendyk said the last thing Arizona's real-estate market needs is government decisions that hinder its recovery.

"They should be making it more attractive to buy condos, not less," she said.

Valley landlords face new reality

2009-10-12T09:30:00.001-07:00

by Catherine Reagor - Oct. 11, 2009 12:00 AM
The Arizona Republic

Renting out homes has long been a profitable enterprise for many Valley landlords.

The business model was simple: Buy a home. Rent the home for at least the monthly mortgage payment. And when you decide to sell the home, enjoy the Valley's reliable appreciation in home prices.

That model fell apart amid the housing-market crash. Landlords, like everyone else, saw home values plunge. Rents fell. Many landlords who bought when prices were high now struggle to charge tenants enough to cover their mortgage payments. And this year, as foreclosures mounted, homes were snapped up by investors and turned into inexpensive rentals.

Suddenly, the landlord business has changed. Competition for tenants is increasing as more homes become rentals. Apartment owners are lowering rents, offering free utilities or a month's free rent, eliminating security deposits and credit checks.

This is the third in a periodic Republic series on how different segments of the housing industry are reinventing themselves to work toward a recovery. The new reality for Valley landlords is still taking shape. Longtime landlords slammed by the housing crash find they have to settle for less income, take more risks on tenants' reliability and try to keep their properties out of foreclosure. New landlords see opportunity in the low housing prices.

There is no way to count the number of different types of landlords in the Valley. There are people who own a number of houses as their primary source of income. Other people buy one or two rentals to supplement their income and sell later for retirement or a college fund. Some landlords are local. Others are out-of-state investors. Some landlords manage their own properties. Others pay a fee and turn them over to property management firms.

What they all share now is a rapidly shifting landscape and no clear solution yet as to how to re-establish that simple business plan. And that may not be possible until the housing market in general stabilizes and the variables in making money through rentals also settle.

Those variables include how much to charge for rent to stay competitive, the costs of maintaining properties and the challenges in dealing with problem renters.

Competition

Among many things that have changed for landlords is the level of competition for reliable tenants.

Because of the economic downturn, more people are losing jobs and unable to always pay their rents. Record foreclosures and rising bankruptcies in the Valley also mean more renters with less-than- stellar credit records.

More foreclosures does mean more people who have lost homes turn to renting. But supply still exceeds demand as the number of new homes for rent and vacant apartments is still larger than the pool of tenants.

So landlords are lowering rents to attract tenants. At the same time, apartment owners are lowering rents, giving away flat-screen TVs, iPods, scooters or a month of free rent.

Rent rates used to be a function of covering mortgage payments for many landlords. More downward pressure on rents comes now from people who recently paid cash for inexpensive foreclosure homes and can ask for less in rents. With Valley home prices down 50 percent from 2007, longtime landlords are feeling the pinch.

Rents on Valley homes are now down 10 to 25 percent from last year, depending on the area, landlords say. The drop in rents means many longtime landlords can't cover their mortgages anymore.

David Gudmundsen is offering new tenants $50 off their rent for six months in his 20 Valley rentals.

"The rental market really got tough, probably because apartments are giving away the farm to get tenants," said Gudmundsen, a real-estate broker with S.J. Fowler/GMAC Real Estate. He purchased most of his rental properties during the past two years. Gudmundsen is a longtime Valley landlord who owned 80 rentals in metro Phoenix during the late 1990s but sold them before the market's downturn in 2007. Homes with rents below $1,500 a month are now the most popular in the Valley.

"Just look at Craigslist or other online sites that list rentals. There's a lot of Valley homes for rent priced below $1,500," said Mike Sargent, a former executive with a high-tech firm who became a Valley landlord after the dot-com crash. "That's what most people can afford now."

Sargent recently dropped the rent on a Chandler home with a pool to $1,195. In 2002, the rent was $1,795.

"Everyone is dropping their rents now," said Dean Wegner, a Valley mortgage broker and landlord, who is president of Arizona's Independent Rental Owners Council. "It's not only about getting tenants; it's about keeping those who can pay."

To keep a tenant, Wegner recently dropped the rent $100 on a north Phoenix home with a swimming pool to $850.

In the Valley's current housing market, rental homes can sit empty for months. Cutting rents means lost income for landlords but perhaps less than losing several months of rent in a row.

"My business partner and I pay close attention to our renters, and we have been lucky," said Phoenix City Councilman Tom Simplot, who owns five central Phoenix homes. "We lowered rents 20 percent this year because we want to keep our tenants."

One place tenants can go if they choose to leave is sometimes to a nicer house down the street that was lost in foreclosure, purchased and turned into a rental for monthly payments well below recent mortgage payments. This is especially common in the newer neighborhoods that have been hard hit by foreclosures.

There's no exact figure on how many Valley homes have been turned into rentals, because some buyers don't disclose their intentions on property records.

As many as half of the 50,000 foreclosure homes to be sold by lenders in 2009 have been purchased by investors, according to property records and market watchers. Many investors are renting out the houses until home prices climb again and they can sell for a profit.

It's a renters market now, and most landlords must drop prices to fill their homes, even if they lose money on the deals.

Maintenance

Another variable in the cost of doing business for a landlord is property maintenance and fixing damages caused by tenants.

Before the housing and economic crash, rental rates were rising with home prices. As rents drop, longtime landlords lose money on rents and lose the extra cash to maintain homes.

Landlords used to be able to charge tenants deposits equaling one or two months of rent, as well as non-returnable cleaning and maintenance deposits. But since the crash, many renters don't have the extra cash for big deposits. And landlords have less leverage to ask.

The competition for tenants forces some landlords to drop required security deposits, which, combined with declining rents, makes it harder to cover regular wear and tear on a home or those unexpected expensive repairs. In some cases, landlords are even skipping credit and criminal background checks, which can lead to problem tenants.

"Landlords are lowering the bar on screening tenants and taking deposits," said Margie O'Campo De Castillo, a Valley real-estate agent and landlord with two rental homes. "Homes are being wrecked, and landlords stuck with big cleanup fees. It's hard to make money on rentals now."

A friend of De Castillo has a Phoenix rental home that was recently vandalized by tenants. The friend will lose several months rent and spend thousands of dollars on repairs.

Michael Rhone lives in California and is a partner in seven Valley rental homes. He received a call from a Valley police department a few months ago about a possible meth lab in one of his rentals. "I had to fly in and deal with that. There wasn't a meth lab, but tenants were involved in other illegal activities"

Rhone said the house is "trashed" and he's thinking about letting it go into foreclosure instead of spending the money to fix it up because he's already losing so much money and can't sell for a profit now.

Just as some homeowners caught in foreclosure strip or vandalize their homes, the same thing can happen with tenants. According to Valley landlords, more renters are wrecking or stealing appliances and fixtures because they're being evicted for not paying rent or because the home fell into foreclosure and they have to leave.

Sargent, who is co-owner of the property-management firm HomeLovers, said in today's rental market, a landlord should have enough money to cover half a year of mortgage payments in case they can't collect rents, have to fix homes or pay legal fees for evictions.

Despite the competitive pressures upon landlords, Sargent warns landlords to still be prudent. "Don't forgo deposits just to attract a renter," he said. "Renters must have some skin in the game now."

Collecting rents

Before the economic downturn, fewer Valley residents were struggling to pay their bills. Now more renters, like homeowners, are falling behind on their bills each month.

So landlords sometimes have to find ways to keep a steady flow of payments coming in.

"I know not everyone has perfect credit and everyone makes mistakes, so I won't do background checks," said Elaine Balderas, who owns four south Phoenix rental homes. She drives by her properties every Sunday to check on them and usually collects rent on one of those trips.

"I can't charge ridiculous deposits," Balderas said. "But I want to see a recent pay stub, and I want them to look me in the eye and tell me they will pay."

Julie Bieganski has had rental homes in the Valley for the past decade. She recently rented out a former foreclosure home in north Phoenix for $850 a month.

"You could get $900 a month in that area," she said. "But the tenants are great, and their employer cuts me a direct check for the rent and it goes in my account as a direct deposit. This way I don't have to chase around for the rent."

When tenants stop paying rent, landlords have to decide whether to evict them and potentially go months without income or try to work out a deal hoping they'll catch up on their monthly payments.

One of O'Campo de Castillo's longtime renters recently lost his job and was going to move out.

"I told him, 'Wait, we all are struggling now. Stay put. You need a home. Let's give this a month or two,' " she said. "He is now paying his full rent again. It's much better to lose some money for a few months than have the home empty or look for another good tenant in this market."

More landlords are now faced with evicting tenants for not paying. It can be a costly legal process involving hiring a lawyer, filing court documents and paying to store anything they leave behind.

Rhone said three of his renters are behind on their payments. He is in the process of evicting one and is considering going through the legal process to have that tenant's wages garnished to pay back rent.

When Gudmundsen had to evict a woman from one of his rental homes, she left almost all of her belongings. Under Arizona law, Gudmundsen had to give her more than a month's notice to collect her belongings.

He had to pay to have them stored and pay for a public notice announcing they would be sold if she didn't collect them.

To save money, Balderas skips formal eviction processes with her tenants, because she doesn't have them sign leases.

Instead, Balderas has tenants sign an agreement stating when rent is due, and if they don't pay, they have a month to vacate. To evict, she pays $37 to take them to small-claims court.

Earlier this year, she had to evict a tenant who hadn't paid rent for a few months because she lost her job. "It wasn't fun, and she (the tenant) tried to beat me up," Balderas said. "But she's out, and I found a better renter."

Opportunities

Despite the downward pressure on Valley rents, the housing market's downturn is enticing more people to become landlords or to expand their portfolio of rentals.

Landlords who can afford to buy Valley homes now, maintain them and hold on to them for several years are setting themselves up for the market's recovery.

"Investors need to have a strategy if they want to buy rental homes now," said Beth Jo Zeitzer, president of R.O.I. Properties. Balderas is looking for more rentals to buy but only in south Phoenix. She looks only at brick- or block-built homes that her husband can fix up.

Landlords are also seeking out people for whom renting is a good option.

"When I talk to renters who have recently lost a home to foreclosure, I usually find their mortgage was twice what I am asking in rent," Gudmundsen said. "Unfortunately, a lot of folks are losing their homes to foreclosure. Those people need places to rent."

Worst may be over for housing in the Valley

2009-10-12T09:22:00.001-07:00

Signs of recovery starting to surface on the outskirts

by Catherine Reagor - Oct. 10, 2009 12:00 AM
The Arizona Republic

Valley homeowners have watched their property values plummet with a sense of shock and horror during the past year. But the gut-wrenching drop could be over as early signs of the market finally hitting bottom have appeared in some areas.

On Sunday, The Arizona Republic's latest Valley Home Values report will show prices dropped in every Phoenix-area ZIP code during the first eight months of 2009. A closer look at the numbers, though, reveals newer communities on the outer edges of metropolitan Phoenix are seeing smaller declines in home prices this year compared with 2008.

Those areas, including neighborhoods in Buckeye, Gilbert, Queen Creek and Surprise, were the first to experience the housing market's collapse. Those former housing hot spots could be the first to recover. Older areas closer to downtown Phoenix, including many central Phoenix neighborhoods, suffered the biggest home-price hits this year.

Most of these areas were the last parts of the Valley to see housing values tank, but they could bounce back more quickly because many of the neighborhoods are popular with people who want to live closer in.

Positive signs

And there are signs the Valley's housing market has begun to inch toward a recovery.

Foreclosures have dropped during the past two months. Home sales are well ahead of last year's pace. Home prices are slowly ticking up.

"Valley home prices hit bottom in April," said Mike Orr, who publishes the "Cromford Report," a daily analysis of metropolitan Phoenix's home-sales data. "Foreclosures have peaked. The market is struggling to establish a clear direction."

Orr said the Valley's affordable-housing markets, especially those farther out, are seeing gains in home prices now.

But prices continue to fall in the most expensive neighborhoods.

The latest figures on foreclosure rates, home sales and home prices may be early indicators the housing market is starting to come back.

Foreclosures

Valley foreclosures fell 29 percent in September from the record 5,300 reached in July. Pre-foreclosures were also down last month, but there were still 7,857 homes that lenders started to foreclose on.

This is the key gauge of the health of metro Phoenix's housing market.

As long as lenders continue to foreclose on Valley homes and resell them for half of what they sold for a few years ago, home prices will fall.

Check out the foreclosure-resale chart in Sunday's Valley Home Values package to see how many foreclosure homes sold in your neighborhood this year.

Home sales

In June, Valley home sales buoyed by foreclosure-home resales rivaled monthly records set during the boom years. Although sales have slowed a little in the past few months, 85,000 homes have sold across metro Phoenix so far this year. That's 50 percent ahead of last year's pace.

There's a positive indicator in the slight drop in recent home sales. Fewer of the sales are foreclosure homes.

Earlier this year, foreclosures homes accounted for almost 70 percent of all Valley home sales. Slightly less than half of the home sales in September were foreclosure homes.

Home prices

The median price of a Valley home has ticked up to $135,000 after falling to a 10-year low of about $120,000 six months ago.

The current median is half of what the record median high price for the market was in 2006, but it is heading in the right direction. Valley home prices started falling in mid-2007 but didn't plummet until late in the year when lenders placed thousands of foreclosure homes on the market all at once and began accepting low-ball offers.

The supply of foreclosure homes for sale in the Valley has also fallen, another good sign for the market. There currently are about 4,500 foreclosure homes listed for sale, compared with more than 20,000 in February.

The federal government's plan to push more lenders to restructure the mortgages of borrowers facing foreclosure could help ensure foreclosures don't soar again.

A full recovery isn't imminent, but the latest signs suggest the Valley's housing market is beginning to pull out of its nose dive.

Banks Making Short Sales Tougher

2009-10-12T08:33:00.001-07:00

Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

"It drives me up a wall," says Robert G. Hertzog of Summit Home Consultants in Phoenix. "[The bank is] holding my client hostage."

Source: BusinessWeek, Christopher Palmeri (10/09/2009)

Office Vacancy Rates Still Soaring

2009-10-12T08:12:00.001-07:00

The U.S. office vacancy rate rose another 0.5 percent in the third quarter, reaching 16.5 percent, a five-year high, according to research firm Reis Inc.

Effective rent fell 2.2 percent from the second quarter to $22.91 per square foot and was down 8.5 percent compared to the third quarter of 2008.

Effective rents fell in 68 out of 79 markets in the third quarter. Markets such as San Diego, Seattle, Boston, San Jose, Orange County, and San Francisco all had double-digit year-over-year effective rent declines. The vacancy rate for New York, the largest U.S. office market, rose 0.6 percentage points to 11.4 percent with effective rent falling to $47.16 per square foot, down 4.4 percent.

Further declines are likely nationwide, said Victor Calanog, Reis director of research.

"At some point they will need to lower asking rents significantly in order to bring prospective tenants in the door, even before talks about concessions are initiated," Calanog said. "We have yet to observe clear, systematic evidence that the office market is bottoming out and has begun to recover."

Source: Reuters News, Ilaina Jonas (10/07/2009)

A Historic Time to Buy

2009-10-12T08:10:00.001-07:00

Young people just starting to invest and buying their first homes are potentially the winners in this recession.

First-time homebuyers, most between the ages of 25 and 45, accounted for about 45 percent of home sales from January through July 2009, according to the National Association of REALTORS®

"This is a historic time," says George Jaramillo, a 35-year-old business analyst in Atlanta, who recently bought three homes, two of them foreclosures. "It's a great opportunity to make some great gains in the future."

A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.

"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."

Source: The Associated Press, Chip Cutter (10/05/2009)

No improvement seen for retail real estate

2009-10-05T11:08:00.001-07:00

David Woodfill, Tribune

October 1, 2009 - 5:02PM

Store closings will continue to outpace openings and rents will persist in a downward spiral, driving some shopping centers into foreclosure as the Valley's job market continues to shrink.

That's the grim assessment of the Valley's retail sector from Marcus & Millichap Real Estate Investment Services. The firm's third-quarter Retail Research Market Update said woes in the Valley's retail real estate sector will persist for the remainder of 2009.

Although job losses slowed in the second quarter, those losses will still continue, prompting consumers to hold firmly onto their wallets. The Valley has shed jobs at twice the national rate since the economy went south, according to the report.

"We're seeing everybody in the economic chain around retail properties just being hammered by all these different occurrences," said Sanford Burstyn, a Marcus and Millichap retail broker.

Researchers at the firm forecast that the overall job market will shrink 5.8 percent this year, or by 104,000 workers. Last year, the job market shrank by 111,200 jobs.

Those losses and the persistent woes in the residential real estate market will drive rents down 7.3 percent from last to $15.84 per square foot.

The report went on to say that although the amount of newly constructed retail space in 2009 is expected to fall from 7.2 million square feet in 2008 to 2.9 million square feet in 2009, vacancies will keep creeping up as landlords struggle to replace closing stores. It said the threat of more Bashas' closures "could impact valuations considerably among neighborhood centers anchored by Bashas' and Food City stores." Bashas' recently entered Chapter 11 bankruptcy.

According to the report, the Mesa, Chandler and Gilbert submarket has the highest vacancy rate in the Valley at 12.6 percent. That will only increase as nearly 1.2 million square feet of space under construction starts to come online.

Retailers are struggling to make current rent payments due to rising unemployment and an ongoing retrenchment in retail sales. Sales dropped about 12 percent in the last year.

Because of a glut of space and less demand, rents are coming down and owners aren't able to make mortgage payments, Burstyn said.

"If they're not able to renegotiate those with the lenders or come up with more money ... then those deals are going to get foreclosed on and get recycled out into the market," he said.

Burstyn said this scenario has been playing out across the Valley for about a year now.

"It's really unprecedented, and it's continuing because we're seeing tenants who came back and renegotiated leases and are coming back a second time," he said.

"It's not like the tenants are trying to hurt the landlords," he added. "They're just reacting to the lack of consumer spending that's impacted from job loss and credit restraints."

Burstyn said foreclosures will hit two categories of owners, those who bought at the top of the market or put maximum debt on the properties.

Bob Kammrath, a Phoenix real estate expert, said he expects that about half of those owners who financed shopping centers over the last five years or so will lose their properties to foreclosure.

That includes those who took out loans to acquire existing shopping centers.

"And the reason of course will be because values are falling and the loan was based on a ratio of probably an appraised value at that time," he said, adding that it isn't surprising to find properties going for 50 cents on the dollar.

Retail vacancy rates

1. Mesa/Chandler/Gilbert, 12.6 percent

2. Northwest Phoenix/Glendale, 11.3 percent

3. Central Phoenix/Northeast Phoenix/South Scottsdale, 10.6 percent

4. Tempe/South Phoenix, 10.1 percent

5. North Scottsdale/Paradise Valley, 10.1 percent

6. West Phoenix/ Southwest Valley, 10 percent

Source: Marcus & Millichap

Recession Rising Like Phoenix With Area Delinquencies Surging

2009-10-05T11:06:00.001-07:00

By Brian Louis

Oct. 1 (Bloomberg) –

Drive up to the Peaks Corporate Park in north Scottsdale, Arizona, and the only person you’ll encounter at the luxury office complex is a security guard.

The development was planned to offer executive suites with views of the McDowell mountains, neighbors such as General Electric Co. and a location just minutes away from Jack Nicklaus’s Desert Mountain golf courses. Plans to lure tenants haven’t materialized and today the complex in this city next to Phoenix is empty, the entrance blocked by a traffic barricade.

Delinquencies in the Phoenix area on loans backed by office, industrial, retail and apartment properties have risen more than five-fold since March, according to data compiled by Bloomberg. The Phoenix region has the second-worst U.S. delinquency rate, behind Detroit’s 10 percent. In Phoenix, the economic recovery looks a lot like a recession.

“A commercial recovery in markets that are heavily dependent on construction will be slow, which means the overall recovery will lag the nation as a whole,” said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia. “These are more volatile markets and getting back to normal could take years.”

Phoenix and other southern and western cities such as Atlanta, Houston and Dallas grew because they offered an affordable lifestyle to middle-class Americans, said Edward Glaeser, an economics professor at Harvard University in Cambridge, Massachusetts. That growth has slowed.

Slowing Growth

The Phoenix area’s population is forecast to increase 1.6 percent in 2009 from 2008 and 1.8 percent in 2010, according to a forecast by Scottsdale, Arizona-based real estate and economic consulting firm Elliott D. Pollack & Co. That’s the slowest growth since at least 1990. Employment may fall 6 percent in 2009 and another 1 percent in 2010, according to the firm.

The real estate crisis has brought economic growth to an end. Arizona had the highest unemployment rate since 1983 in July at 9.2 percent, according to the U.S. Bureau of Labor Statistics. The rate fell to 9.1 percent in August. Single- family building permits in metropolitan Phoenix may fall to 5,973 this year, down 81 percent from 2007, according to a consensus forecast of real estate and consulting firms and universities compiled by Arizona State University’s W.P. Carey School of Business.

“The economy in Phoenix is in tatters right now,” said Matthew Anderson, a partner at Foresight Analytics LLC in Oakland, California. “It’s now really hit the skids.”

The decline demonstrates that it may take even longer for states with slower growth to emerge from the recession.

Rising Unemployment

In August, 19 states had higher unemployment rates than Arizona’s, U.S. Bureau of Labor Statistics show.

Worse, more real estate is at risk of defaulting throughout the U.S. Investors in commercial mortgage-backed securities are holding assets with a delinquent unpaid balance of $28.9 billion, up more than five fold since June 2008, according to a report issued by the Congressional Oversight Panel. Under a worst-case scenario, the panel estimates that commercial real estate and construction loan losses through 2010 may total $81.1 billion at 701 banks with assets of $600 million to $80 billion.

“The problems in commercial real estate are just getting started and they will dampen what is already going to be a weak economic recovery,” said Jim Rounds, senior vice president and senior economist at Elliott D. Pollack. “In Arizona, the recession is probably going to last to the middle of the next calendar year.”

Growth Fallout

Wachter, who has been studying housing markets for more than two decades, predicts that Phoenix won’t see a recovery until at least 2012.

The city of Phoenix is suffering the fallout from growth that boosted its population from 983,403 in 1990 to 1.6 million in 2008, according to the Census Bureau. Single-family building permits in Maricopa County, which includes Phoenix, rose more than five-fold from 1975 to the peak earlier this decade.

Delinquencies for loans backed by office, industrial, retail and apartment properties that were bundled into securities in Phoenix increased five-fold since March, according to data compiled by Bloomberg.

The Phoenix office vacancy rate probably exceeds 30 percent, including space that’s leased yet vacant because the tenants have pulled out, Rounds said.

More offices are becoming available. Los Angeles-based commercial broker CB Richard Ellis Group Inc. said in a second quarter report 2.2 million square feet will be ready for occupancy this year and in early 2010.

Late Payments Rise

As tenants abandon space, landlords are struggling to meet their obligations. Commercial properties with mortgage payments 60 days late or more rose to 8.5 percent as of August in the Phoenix, up from 1.6 percent in March, data compiled by Bloomberg show.

“The commercial markets are the second shoe to drop,” said Marshall Vest, the director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management in Tucson. Vest has lived in Tucson since 1970 and worked at the business school studying and forecasting the Arizona economy for 30 years.

For the last three decades, Arizona’s population growth has exceeded most of the nation’s. From 1970 to 2007, the state’s population more than tripled to 6.3 million. Its population growth ranked second or third in the U.S. from 1970 through 2008, according to Pollack data.

Onetime Growth Engine

The state was also an engine for job growth. Arizona was fourth in the U.S. in employment growth from 2000 to 2008 and second from 1990 to 2000. Arizona’s gross state product, a measure of overall economic activity, jumped to $249 billion last year from $30.3 billion in 1980.

Residential construction soared from 1980 to 2005, the peak of the new-home market boom in the state. Single-family building permits rose from 22,919 in 1980 to 87,415 in 2005, according to data on Texas A&M University’s Real Estate Center Web site.

The fallout can be seen throughout the Phoenix. Completed and empty office buildings and retail developments dot the desert landscape of the region, the 12th-largest metro region in the U.S. Vacant retail shops are hard to ignore.

‘Going Under’

“It’s kind of going under locally,” said Chris Dellrie, who was working at Axis Sports, a sporting goods and clothing store, one of at least two businesses open in a Gilbert shopping center that’s mostly empty.

The slump forced Opus West Corp., one of the region’s biggest real estate developers, to file for Chapter 11 bankruptcy this year, listing debts of $1.46 billion and $1.28 billion in assets, according to bankruptcy records. Opus West is part of the Opus Group, a real estate developer based in Minneapolis.

“It’s really nothing out of the ordinary,” said Craig Henig, senior managing director at CB Richard Ellis in Phoenix. “They believed like everyone that the market would expand.”

At 24th at Camelback II, an 11-story, 300,000-square-foot office building going up in Phoenix near the Arizona Biltmore Country Club, developer Hines hasn’t preleased any of the space. The building will be finished in the first quarter of 2010, said Kim Jagger, a spokeswoman for the Houston-based real estate company. Jagger said there are at least half a dozen potential tenants.

‘Horrible Economy’

People who’ve moved to Phoenix and adjacent suburbs have found life difficult as the economy has slumped.

Ambre Mauro moved to Gilbert, a suburb of Phoenix, in March after struggling in Oregon.

“The economy was horrible there,” said Mauro, 25, who graduated from Brigham Young University-Hawaii with a degree in exercise sports science. “Eventually I decided to come here.”

Things aren’t much better in Arizona. Mauro now holds two jobs. She’s a personal trainer and front desk clerk at a local gym and a waitress at a Japanese restaurant, where she makes about $10 an hour, including tips.

“I have a four-year degree and I never expected to be a waitress,” Mauro said.

About 25 miles northeast of downtown Phoenix, the Peaks Corporate Park stands as a reminder of just how optimistic developers were about the region’s growth prospects.

Prestigious Neighbors

The office complex was built in one of the most prestigious and wealthy parts of the state, where the median price for a new home was $920,000 in the second quarter.

A Web site for the development boasts that it’s near several resort hotels including the Boulders, a Waldorf Astoria property, and “neighbors such as General Electric, Pacesetter, DHL, Taser, USF Bestways, Toll Brothers, Pulte Homes.” Dale Dowers, a principal with the developer, didn’t return calls or e-mails for comment.

With no tenants, the development’s courtyard is barren but for a sculpture featuring wildlife.

More Than Half of Modified Loans Back in Default

2009-10-05T10:58:00.001-07:00

More than 50 percent of home owners whose loans were modified in the first six months of 2008 had fallen behind on their payments a year later, the federal Office of the Comptroller of the Currency and the Office of Thrift Supervision said Wednesday.

The situation could have been worse. One-third of borrowers whose monthly payments were reduced by 20 percent or more had fallen behind again with a year. But more than 60 percent of borrowers whose payments were left unchanged or increased fell behind.

The report covers 34 million loans, representing 60 percent of first mortgages on residences. More than 11 percent of all borrowers covered by the report had missed at least one payment in the first six months of 2009.

Source: The Associated Press, Alan Zibel (09/30/2009)

Guess Who's Ditching Their Mortgages

2009-10-05T10:54:00.001-07:00

A study of 24 million credit files by national credit bureau Experian and consulting company Oliver Wyman has shown that home owners with high credit scores are 50 percent more likely to deliberately walk away from a mortgage than lower-scoring borrowers.

The industry calls these “strategic defaults” and their numbers grew to 588,000 in 2008, double the total in 2007, and well beyond most earlier estimates.

The study determined:

Strategic defaulters tend to go straight from paying their mortgages dependably to not paying at all.
Strategic defaulters are heavily concentrated in negative-equity markets like California and Florida.
Two-thirds of strategic defaulters have only one mortgage.
Most likely to default are home owners with large balances and the highest credit ratings.

Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters "are clearly sophisticated” and look on the decision to default as a business strategy. "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," Tantia says of defaulters.

Source: Washington Post Writers Group, Kenneth R. Harney (09/27/2009)

Consumer Confidence Is Down

2009-10-05T10:52:00.001-07:00

Consumer confidence as measured by the Conference Board’s Consumer Confidence Survey declined to 53.1 in September, down from 54.5 in August.

The Conference Board, a private research group, said shoppers’ intentions to buy big-ticket items like homes, cars, and major appliances dipped because shoppers simply don’t have money to spend.

The index hit a historic low of 25.3 in February, rose from March through May, and then declined as joblessness paralyzed consumers. Readings above 90 means the economy is solid. Above 100 signals strong growth.

Source: The Associated Press, Anne D’Innocenzio (09/29/2009)

Signaling Confidence, Fed Holds Rates Steady

2009-10-05T10:36:00.001-07:00

In an announcement that should bolster the housing industry, the Federal Reserve said Wednesday that it intended to keep key lending rates near zero "for an extended period" and continue to buy mortgage-backed securities and debt through March 2010.

That’s the second time the Fed has decided to stretch out its program to encourage spending and stimulate the economy.

Economists predict that the Fed will keep the key lending rate near zero into the first quarter of next year. Holding that rate low means that consumer loans, including mortgages, home-equity loans, and credit-card rates, remain at the lowest point in decades.

Greg McBride, senior financial analyst at Bankrate.com, warned that these low rates will eventually head higher and said home owners interested in refinancing should realize that "it could be a different story 12 months from now," with much higher rates for 30-year fixed-rate mortgages.

Source: The Associated Press, Jeannine Aversa (09/23/2009)

Thank You,

Russell Gould

REALTOR®

StoneCrest Properties, LLC

(480) 215-4555 Direct

(480) 899-4262 Office

(480) 452-0264 E-Fax

NAR: Existing-Home Sales Fall

2009-10-05T10:35:00.001-07:00

Existing-home sales in August gave back some of their strong gain in July but remain above year-ago levels, according to the National Association of REALTORS®.

Existing-home sales—including single-family, townhomes, condominiums and co-ops—declined 2.7 percent to a seasonally adjusted annual rate of 5.10 million units in August from a pace of 5.24 million in July, but remain 3.4 percent above the 4.93 million-unit level in August 2008. In the previous four months, sales had risen a total of 15.2 percent.

Lawrence Yun, NAR chief economist, says the tax credit is working. “Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus. The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions,” he says. “Some of the give-back in closed sales appears to result from rising numbers of contracts entering the system, with some fallouts and a backlog contributing to a longer closing process, but the decline demonstrates we can’t take a housing rebound for granted.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.19 percent in August from 5.22 percent in July; the rate was 6.48 percent in August 2008.

First-Time Buyer Tax Credit

An NAR practitioner survey shows first-time buyers purchased 30 percent of homes in August, and that distressed homes accounted for 31 percent of transactions; both were unchanged from July.

“The recent trend shows broad improvement in most of the country, but with an expected rise in foreclosures over the next 12 months we need to maintain a healthy level of ready buyers to absorb the inventory. An extension of the tax credit is critical to preserve incentives for financially qualified buyers to enter the market,” Yun says.

He adds that many buyers have been on the sidelines during the past few years, waiting for signs of stabilization. “Now that the market is showing some momentum, we have an opportunity to achieve a more rapid and broader stabilization in home prices. Extending and expanding the tax credit also would help to keep other families from becoming upside down in their mortgages or risk foreclosure,” Yun says.

NAR President Charles McMillan says time is running very short for the existing tax credit. “Because it’s generally taking 60 days to close on a home after a contract is offered, buyers have little time to act to complete a purchase by the November 30 deadline,” he says.

Inventory Falls

Total housing inventory at the end of August fell 10.8 percent to 3.62 million existing homes available for sale, which represents an 8.5-month supply at the current sales pace, down from a 9.3-month supply in July. Unsold inventory totals are 16.4 percent lower than a year ago.

The national median existing-home pricefor all housing types was $177,700 in August, down 12.5 percent from August 2008. Distressed properties continue to downwardly distort the median price because they generally sell for 15 to 20 percent less than traditional homes.

Single-family home sales fell 2.8 percent to a seasonally adjusted annual rate of 4.48 million in August from a level of 4.61 million in July, but are 2.5 percent higher than the 4.37 million-unit pace in August 2008. The median existing single-family home price was $177,500 in August, down 12.1 percent from a year ago.

Existing condominium and co-op sales slipped 1.6 percent to a seasonally adjusted annual rate of 620,000 units in August from a spike of 630,000 in July, but are 10.1 percent higher than the 563,000-unit level a year ago. The median existing condo price was $179,300 in August, which is 15.7 percent below August 2008.

Northeast: Regionally, existing-home sales in the Northeast declined 2.2 percent to an annual pace of 910,000 in August, but are 5.8 percent above August 2008. The median price in the Northeast was $241,100, which is 10.5 percent below a year ago.

Midwest: Existing-home sales in the Midwest fell 6.6 percent in August to a level of 1.14 million but are unchanged from a year ago. The median price in the Midwest was $149,900, down 10.4 percent from August 2008.

South: In the South, existing-home sales were down 3.1 percent to an annual pace of 1.89 million in August but are 1.6 percent above August 2008. The median price in the South was $157,400, which is 11.0 percent below a year ago.

West: Existing-home sales in the West declined 2.7 percent to an annual rate of 1.16 million in August but are 7.4 percent higher than a year ago. The median price in the West was $220,500, down 12.2 percent from August 2008.

—NAR

Seven New Rules for the First-Time Home Buyer

2009-09-29T07:48:00.001-07:00

New York Times, Your Money

By RON LIEBER

Published: September 11, 2009

Too many people bought too much house for too many years.

Yes, the financial system almost collapsed because mortgage bankers and brokers told lies about loan terms and loosened standards in dangerous ways, and investment bankers packaged those loans into bonds that were far more toxic than ratings agencies predicted.

But the roots of the mortgage contagion lie with all of us and our desire to own just a bit more house.

So as the one-year anniversary arrives of our near financial collapse, it’s a good time to blow up a long-standing but underexamined maxim of real estate — that you should always stretch financially when buying your first home.

No one is quite sure who came up with this idea, though suspicions rest on real estate agents or kindly parents with the best of intentions who never expected that real estate prices could fall. Whatever its origin, the economists and financial planners I spoke with this week are almost unanimous in their rejection of it.

Here’s how they dismantled the old saw — and a list of seven suggestions they offered up in its place.

START WITH THE BASICS Let’s begin with some other standards, tried and true advice that served banks and borrowers well for years, until they forgot all about them in the race to write more loans and buy bigger houses. Put 20 percent down, so you have less of a chance of owing more than your home is worth if prices fall again. Get a fixed-rate mortgage, so the biggest part of your monthly housing bill remains stable.

If you’re determined to be truly conservative, don’t spend more than about 35 percent of your pretax income on mortgage, property tax and home insurance payments. Bank of America, which adheres to the guidelines that Fannie Mae and Freddie Mac set, will let your total debt (including student and other loans) hit 45 percent of your pretax income, but no more.

That said, if you end up with an adjustable-rate loan, banks may not be concerned with whether you’ll be able to afford the maximum possible payment when the interest rate adjusts in five or seven years. But you should be worried about it.

CONSIDER YOUR INCOME The best case for stretching for a first house is that first-time home buyers in their 20s and 30s will probably see their incomes grow more quickly than older people buying their second or third home.

Harvey S. Rosen, a Princeton economics professor, finds in a forthcoming Journal of Finance article that he co-wrote with two Federal Reserve Bank economists, Kristopher Gerardi and Paul S. Willen, that the size of a house that someone buys tends to be a good indicator of what their income will be later. “People can, on average, make reasonably good predictions of their future incomes and act on them in sensible ways by buying bigger houses,” Mr. Rosen said.

Indeed, much of the mess in the mortgage market has been because of people borrowing money with loans that they didn’t understand — or betting that housing prices would continue to rise enough that they would be able to refinance their loans before the payments rose. Income overconfidence may have had something to do with it (and high unemployment worsened the problems), but it’s probably not the primary cause.

BOW TO UNKNOWNS This research is all well and good as long as you continue to work. But if you’re buying your first home before you have children, you may feel quite differently about work once you become a parent. And if you do, you may not want a mortgage boxing you in to going back to the office three months after the baby is born.

Bobbie D. Munroe, a financial planner with Fraser Financial in Atlanta, encourages younger clients in this situation to model out their budget, including any proposed mortgage, three ways — with both spouses working full time, one working part time and one staying at home for a few years. She also suggests imagining or even practicing living on one income, to see if it’s truly realistic.

“What people should do is ultimately their own decision,” she said. “But they should do it with eyes wide open.”

Even people who don’t want to have children need to consider this. Besides the obvious possibility of sustained unemployment, what about the need to escape a dying industry or an early midlife crisis that necessitates career change to stave off depression? Even government employees and medical residents who believe that their incomes are set for life ought to consider this possibility.

MAP OUT EXPENSES It stands to reason that anyone tempted to stretch for a house will be inclined to play down the expense of maintaining it. These costs are anything but ancillary, though.

For many years, Dennis G. Stearns, a financial planner in Greensboro, N.C., has been alarmed enough by clients’ unrealistic expectations that he’s maintained a home cost spreadsheet that he shares with clients shopping for houses. He also updates it periodically with aggregate, real-world data based on their subsequent experiences.

Mr. Stearns estimates that owners of a newer home that do some work for themselves but contract major work out to others will pay 3.6 percent of the original purchase price annually for maintenance and 4.5 percent if it’s an older home. So if you own a $400,000 home, your costs will probably hit the five figures each year — and may rise with inflation. These expenses will be another 20 percent or so higher if you live in a severe weather area. He does note, however, that the tax benefits of home ownership can offset half or more of these costs in some areas of the country.

BUY BEST (OR CHEAPEST) All of these caveats have given rise to some unusual strategies. Michael Kalscheur, a financial planner with Castle Wealth Advisors in Indianapolis, suggests buying the dream house you covet (if you can afford it) or an inexpensive starter house but not anything in the middle.

“If people have their heart set on something, inevitably, if they can’t afford what they really want, they buy the next best thing,” he said. “That’s absolutely the worst thing you can do. Not only do you not get what you want, but it sucks you dry.”

Why? Well, if you buy that entry-level home instead of the silver-medal home, you can save a lot more money each month after making the house payment (as long as you’re disciplined) than you would if you were paying a big mortgage toward that next best house. And all of your other housing costs will be lower, too. Then, several years later, you’re in a much better position to buy what you actually want.

STRETCH THE HOUSE Better yet, keep in mind that you don’t ever have to move from that first home — and incur all of the transaction costs associated with selling and buying and moving again.

J. Michael Collins, an assistant professor in the department of consumer science at University of Wisconsin’s School of Human Ecology in Madison, suggests paying less for a home that you can upgrade periodically when your income is stable and your savings or available credit make it possible.

In other words, stretching out your tenure in a home (and the physical boundaries of the home itself) may make more sense than stretching for each successive mortgage in a series of two or more houses.

THE EIGHT-HOUR RULE One rule about all of these rules is that it’s unlikely that every one will apply to every circumstance. Individuals and their income streams are too varied, and real estate markets are themselves unique.

When all else fails, however, you can always fall back on the eight-hour test. Whatever the size of your mortgage, you have to be able to sleep soundly at night. So if an impending loan has you stretching for the Ambien, it’s a pretty good sign that the loan is a bit of a stretch as well.

D.C. Dances Around Tax Credit Extension

2009-09-21T10:02:00.001-07:00

Washington is being forced to take a hard look at the expiring $8,000 first-time homebuyer tax credit.

Nearly a dozen bills have been proposed to extend the credit past the Nov. 30 deadline, but the top decision makers are just beginning to weigh in.

On Thursday, Senate Majority Leader Harry Reid endorsed a six-month extension. Treasury Secretary Timothy Geithner said Thursday that he hasn’t made a decision yet. And the White House economic team says it will make a recommendation to President Barack Obama by the end of Friday.

Extending the credit is a tough sell in some corners because so far the credit has cost an estimated $15 billion, twice what was projected last February.

Source: The Associated Press, Adrian Sainz (09/17/2009)

Credit Market Makes Economists Nervous

2009-09-21T10:00:00.001-07:00

Interest rates are low and home prices are down, but banks continue to be stingy with loans.

At the height of the housing boom, seven out of 10 mortgages were approved. At the end of 2008, only five out of 10 got the green light. During the boom years, homebuyers could qualify for the cheapest rates with a credit score of 660. Today, they need 740 or better.

"Banks are going to be in a defensive posture for several years. Most borrowers can't meet their criteria," says Christopher Whalen, managing director at research firm Institutional Risk Analytics.

Consumers cut back borrowing by $21.6 billion from June to July, the biggest drop since the Federal Reserve began keeping records in 1943. That made some analysts nervous.

The reduction in borrowing could slow the economic recovery, says David Olson, president of Access Mortgage Research & Consulting.

"If they cut back, it would be catastrophic," Olson says. "We could have a second downturn."

Source: The Associated Press, Stevenson Jacobs (09/17/2009)

Congress Gets Report on Cutting MID

2009-09-17T09:14:00.001-07:00

The Congressional Budget Office has prepared a report that suggests ways for Congress to raise revenues. One key suggestion is that Congress cut deductions for home owner mortgage interest from the present $1.1 million cap to $500,000, phasing in the reduction by $100,000 annually starting in 2013.

Over a 10-year period, the change would increase revenue by an estimated $41 billion.

Alternatively, the CBO proposed replacing mortgage interest deductions with a flat tax credit that is 15 percent of mortgage interest paid. This would potentially increase revenue by nearly $390 billion from 2013 to 2019.

It also proposed eliminating deductions for all state and local taxes, including property taxes, which would cost taxpayers $862 billion by 2019.

What are the odds these ideas will fly? In the past, the mortgage deduction has been sacred. These days, some analysts say it may be vulnerable.

Source: Washington Post Writers Group, Kenneth R. Harney (08/30/2009)

Mortgage Applications Slide

2009-09-17T09:09:00.001-07:00

Mortgage application volume declined 2.2 percent last week on a seasonally adjusted basis after rising for four straight weeks, according to the Mortgage Bankers Association.

On an unadjusted basis, the index decreased 3.1 percent compared with the previous week, but it was up 22.7 percent compared with the same week a year ago.

Both refinances and purchases were down slightly from the previous week. The only application segment to rise was government-backed loans, which rose 0.5 percent.

Mortgage interest rates actually decreased for the week:

30-year fixed-rate mortgages decreased to 5.15 percent from 5.24 percent;
15-year fixed-rate mortgages decreased to 4.57 percent from 4.58 percent;
1-year ARMs decreased to 6.71 percent from 6.74 percent.

Source: Mortgage Bankers Association (09/02/2009)

Pending Home Sales on a Record Roll

2009-09-17T09:08:00.001-07:00

Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in July, increased 3.2 percent to 97.6 from a reading of 94.6 in June. It is 12 percent higher than July 2008 when it was 87.1. The index is at the highest level since June 2007, when it was 100.7.

Affordability at Record High

Lawrence Yun, NAR chief economist, says the housing market momentum has clearly turned for the better.

“The recovery is broad-based across many parts of the country. Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit,” he says.

“Other buyers are taking advantage of low home values before prices turn higher," Yun says. "Nationally, the typical mortgage payment now takes less than 25 percent of a middle-income family’s monthly income to buy a median priced home, with payment percentages so far in 2009 being the lowest on record dating back to 1970. As long as home buyers stay within their budget, mortgage payments will be very manageable."

First-Time Buyers

NAR estimates that about 1.8 to 2 million first-time buyers will take advantage of the $8,000 tax credit this year, with approximately 350,000 additional sales that would not have taken place without the credit. Buyers have little time to act because they must complete the transaction by Nov. 30 to qualify for the credit. Unless extended, contracts signed but not completed by that date will not be eligible – it is taking approximately two months to complete home sales in the current market.

By Region

Northeast: The Pending Home Sales Index declined 3 percent to 78.8 in July but is 4.7 percent higher than July 2008.
Midwest: The index slipped 2 percent to 88.1 but is 8.1 percent above a year ago.
South: Pending home sales activity rose 3.1 percent to an index of 103.8 in July and is 12 percent above July 2008.
West: The index jumped 12.1 percent to 112.5 and is 20 percent above a year ago.

"Keep the Momentum Going"

NAR President Charles McMillan says Congress needs to keep the momentum going.

“Even with a good recovery taking place, the market is not yet back to normal. With a gradual absorption of inventory, we are on the cusp of a general stabilization in home prices,” he says. “To ensure that housing has a broad stimulus to the overall economy and stays on sound footing, we’re encouraging Congress to extend the tax credit into 2010, and to expand it to all buyers of primary residences. The faster we stabilize home prices, the fewer families will face foreclosure and the quicker credit can be extended to other sectors of the economy.”

NAR’s Housing Affordability Index stood at 158.5 in July, below the peak set in April but is still 36 percentage points higher than a year ago. The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates, and family income.

Yun expects existing-home sales to rise through the fourth quarter.

“Unless the tax credit is extended, no one should be surprised to see home sales drop in the first quarter of next year,” he says. “However, the fundamentals of the housing market and the economy are trending up, and we expect home sales to generally pick up in the second quarter of 2010. The buyer psychology may be shifting from, ‘Why buy now when I can purchase later?’ to ‘I don’t want to miss out on a recovery.’”

Source: NAR

Commercial Mortgage Defaults Jump for U.S. Banks

2009-09-17T09:06:00.001-07:00

Bloomberg

By Hui-yong Yu

Last Updated: August 31, 2009 16:04 EDT

Aug. 31 (Bloomberg) -- The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter from a year earlier amid falling rents and occupancies for malls, office buildings and warehouses.

Loans that were 90 days or more past due climbed to 2.88 percent of outstanding balances in the second quarter, from 1.18 percent a year earlier, according to New York-based property research firm Real Estate Econometrics LLC. Defaults increased from 2.25 percent in the first quarter.

“A delinquency may have resolved itself two years ago,” said Real Estate Econometrics President and Chief Economist Sam Chandan. “Today, even one missed payment may be more indicative of an underlying problem, so banks have to be very proactive in addressing the issue.”

Banks held $1.087 trillion of commercial property loans in the quarter, up from $1.077 trillion in the previous three months. That’s almost 15 percent of all loans and leases held by banks, Real Estate Econometrics said. Defaults are rising both for lenders who hold commercial mortgages and for bondholders in the $700 billion U.S. market for securities backed by commercial mortgages.

The CMBS market accounts for about 22 percent of the nation’s $3.4 trillion in commercial real estate debt, according to the Real Estate Roundtable. Defaults and late payments on loans bundled into CMBS could surpass 7 percent by the end of this year, research firm Reis Inc. said on July 30.

Falling Behind

Banks are beginning to recognize that more past due commercial property loans are unlikely to be paid in full. Commercial mortgages labeled as “non-accrual” more than doubled in the second quarter from a year earlier, to $27.76 billion, according to Real Estate Econometrics. The figure reflected a 31 percent increase from the previous three months.

Commercial defaults will rise to 4.1 percent by year’s end, a rate last seen in 1993, according to Chandan’s forecast. Overdue commercial property loans reached 4.6 percent in 1992 during the savings and loan crisis, when the U.S. created the Resolution Trust Corp. to sell off real estate and non- performing mortgages held by insolvent lenders.

This year’s first-quarter default rate was the highest since 1994, Real Econometrics said.

The credit crisis and recession mean lower occupancies and rents for apartment buildings, offices, shopping malls, warehouses and hotels.

Apartment Defaults

U.S. apartment vacancies may rise to 7.8 percent by the end of this year and break the record 8 percent in 2010 as unemployment worsens and the supply of new apartments increases, according to New York-based Reis.

The default rate on bank-held mortgages for apartment buildings climbed to 3.13 percent in the second quarter from 1.20 percent a year earlier, according to Real Estate Econometrics.

A loan is delinquent when it’s 30 to 89 days past due and in default when 90 or more days late.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

Option ARMs Put Recovery at Risk

2009-09-03T13:58:00.001-07:00

Option ARMs, which accounted for $750 billion in mortgages issued between 2004 and 2007, according to Inside Mortgage Finance, are at serious risk with at least 50 percent already in default.

Resets on option ARMS have doubled the payments for many holders.

“Everyone’s been focused on subprime, but we’re more concerned about this,” says Todd Jadlos, managing director of LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”

Lenders have stopped offering option ARMS, but there are about 600,000 held by borrowers, three-quarters of whom are paying interest only. When the cap is reached – for most after they have held the loan for five years – they’ll face drastic increases.

Barclays Capital estimates that banks will lose $112 billion on option ARMs. Some banks are aggressively refinancing these loans, Barclays says.

Source: The New York Times, John Leland (08/26/2009)

First-Time Buyer Tax Credit Extension Possible

2009-09-01T09:12:00.001-07:00

Bills to extend the maximum $8,000 tax credit for first-time home buyers, which expires Nov. 30, are pending in both the U.S. House and the Senate.

Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.

Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, "It's something we can get done."

Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing aren’t as good, observers say.

Source: Washington Post Writers Group, Kenneth R. Harney (08/22/2009)

Delinquencies Climb

2009-09-01T09:11:00.001-07:00

Summary of Mortgage Bankers Press Release 8/20/2009 from Carolyn Kemp - http://www.mbaa.org/NewsandMedia/PressCenter/70050.htm

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 64 basis points from 8.22 percent in the first quarter of 2009 to 8.86 percent this quarter.

Not good news when looking for signs of a recovery.

Banks Plan to Keep Lending Tight

2009-09-01T09:01:00.001-07:00

Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.

About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.

Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.

“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.

Source: Bloomberg, Craig Torres (08/17/2009)

Buyers Rush to Beat Tax Credit Deadline

2009-09-01T09:00:00.001-07:00

Real estate professionals report that first-time home buyers are flooding the sale market, pressed to finalize a deal before the federal government's $8,000 tax credit offer expires on Nov. 30.

Because mortgage approvals, residential inspections, and other steps in the buying process typically take about two months, buyers hoping to take advantage of the incentive will need to have a contract by the end of September.

The new flurry of activity now as house-hunters try to meet the deadline is triggering bidding wars and energizing the property market, which historically is slow at the end of summer. As a result, more homes are getting their full asking price.

Source: Chicago Tribune, Kathleen Lynn (08/14/09)

Foreclosures rise 7 percent in July from June

2009-08-17T09:23:00.001-07:00

By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Ap Real Estate Writer – Thu Aug 13, 1:50 pm ET

WASHINGTON – The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage.

Foreclosure filings were up 32 percent from the same month last year, RealtyTrac Inc. said Thursday. More than 360,000 households, or one in every 355 homes, received a foreclosure-related notice, such as a notice of default or trustee's sale. That's the highest monthly level since the foreclosure-listing firm began publishing the data more than four years ago.

Banks repossessed more than 87,000 homes in July, up from about 79,000 homes a month earlier.

Nevada had the nation's highest foreclosure rate for the 31st-straight month, followed by California, Arizona, Florida and Utah. Rounding out the top 10 were Idaho, Georgia, Illinois, Colorado and Oregon. Among cities, Las Vegas had the highest rate, followed by the California cities of Stockton and Modesto.

While there have been numerous recent signs that the ailing U.S. housing market is finally stabilizing after three years of plunging prices, foreclosures remain a big concern. Foreclosures are typically sold at a deep discount, hurting neighbors' home values.

The mortgage industry has been slow to adapt to the surge in foreclosures. Many lenders have needed government prodding to get up to speed with the Obama administration's plan to stem foreclosures.

The Treasury Department said last week that banks have extended only 400,000 offers to 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000, or 9 percent, those borrowers have enrolled in three-month trials in which their monthly payments are reduced.

"The volume of loans that are in distress simply overwhelms" those efforts, said Rick Sharga, RealtyTrac's senior vice president for marketing.

Vacancies Still Strain Commercial Properties

2009-08-13T12:53:00.001-07:00

Commercial real estate is feeling the pain as retailers cut back on rental space in light of unemployment and a weak economy.

Just this week, Maguire Properties Inc., which owns office buildings in Southern California, walked away from seven of its properties because it couldn’t pay the mortgages and may abandon others, according to rating agency Realpoint.

"The bottom line: defaults are exploding," said Richard Parkus, an analyst with Deutsche Bank. "It's terrible. It's going to be worse than in the early '90s."

Source: The Associated Press, Alex Veiga (08/12/2009)

Foreclosures Still Up in Sun Belt, Midwest

2009-08-13T12:51:00.001-07:00

Foreclosure filings in July, including default notices, scheduled auctions, and bank repossessions, were up 7 percent compared to June and increased 32 percent from July 2008, according to RealtyTrac.

One in every 355 U.S. housing units received a foreclosure filing in July, the third time in five months that foreclosures have reached a new high in the four years that RealTrac has been keeping records.

"Despite continued efforts by the federal government and state governments to patch together a safety net for distressed homeowners, we're seeing significant growth in both the initial notices of default and in the bank repossessions," said James J. Saccacio, CEO of RealtyTrac.

For the thirty-first consecutive month, Nevada had the nation’s highest state foreclosure rate with one in every 56 housing units receiving a filing in July. California was second with initial defaults spiking 15 percent compared to June. Other states that make up the 10 highest were: Arizona, Florida, Utah, Idaho, Georgia, Illinois, Colorado, and Oregon.

The 10 states with the highest actual foreclosures were California, Arizona, Nevada, Florida, Illinois, Texas, Georgia, Ohio, Michigan, and New Jersey.

Source: RealtyTrac (08/13/2009)

Economists Pronounce the Recession Over

2009-08-12T16:18:00.001-07:00

The majority of economists surveyed by the Wall Street Journal say the recession is over and Federal Reserve Chair Ben Bernanke deserves another term.

Of the 47 economists the newspaper surveyed, 27 said the recession has ended and 11 predict another trough this month or next. The rest refused to commit. But they were nearly unanimous is saying that Bernanke should be rehired.

Gross domestic product is expected to grow 2.4 percent in the third quarter at a seasonally adjusted annual rate. Economists were also heartened by a better-than-expected jobless report in July.

Source: The Wall Street Journal, Phil Izzo (08/12/2009)

Fed Will Keep Key Rates Low

2009-08-12T16:17:00.001-07:00

When the Federal Reserve ends its meeting on Wednesday afternoon, it is almost certain to leave the key rate at or near zero and pledge to hold it there.

That makes it likely mortgages will stay historically low and rates on home-equity and other consumer loans will hug 3 percent.

But it is unclear whether the Fed will continue some programs that have kept mortgages and other consumer debt even lower than the market might expect. One such program involves buying U.S. Treasurys. The Fed is set to buy $300 billion worth of Treasury bonds by the fall. It has bought $235 billion already this year.

"I think they'll let it expire. It seems the mood turned against Treasury purchases in the last couple of months, and there's been some skepticism whether it has worked in bringing rates down," says Michael Feroli, an economist at JPMorgan Economics.

Source: The Associated Press, Jeannine Aversa (08/11/2009)

Commercial foreclosures rocket

2009-08-12T14:39:00.001-07:00

Valley is 'at the tip of the iceberg' for notices, expert says

by J. Craig Anderson - Aug. 5, 2009 12:00 AM
The Arizona Republic

More than 2,000 commercial properties in Maricopa County have received 90-day foreclosure notices since Jan. 1, representing $6.3 billion in real-estate loans on which the borrowers have failed to make payments.

That number is staggering when placed in contrast with the average commercial foreclosure rate over the past decade, which has been practically zero.

The problem, sparked by property-value declines and a paucity of refinancing options, has produced a steady flow of distressed commercial properties onto the market, with a heavy emphasis on small and midsize office and retail centers.

Industrial and warehouse properties also have suffered tremendously, due in large part to disappearing jobs. More than 1 million square feet of previously occupied industrial and warehouse space was vacated in the second quarter.

Commercial-real-estate broker Bret Isbel has been tracking actual foreclosure sales in Maricopa County, which can take several months to occur following the issuance of a foreclosure or trustee's sale notice.

The number of notices issued has been holding steady at between 300 and 400 a month since January, but actual foreclosures vary more widely, because it can take months - potentially even years - for a property in default to be repossessed by the lender or sold to a third party.

In Arizona, a lender can foreclose in either of two ways: It can take the borrower to court via foreclosure, or it can bypass the court system and call for a trustee's sale, which is quicker and less expensive but requires the lender to waive certain legal rights.

Isbel said there's no indication that the pace of commercial foreclosures is about to taper off. If anything, it's still building momentum.

"We're at the tip of the iceberg, there's no doubt," said Isbel, of Scottsdale-based GPE Commercial Advisors. "It's just a question of how big it is underneath."

The inescapable problem for many commercial developers is that they've had to maintain the same construction loan payments while lowering rents because of dwindling demand for leased commercial space.

While the federal government has created programs to help homeowners in danger of foreclosure negotiate lower mortgage payments, no such program exists for commercial-property owners, and none is expected.

By and large, commercial-mortgage lenders are not modifying commercial-real-estate loans, even as commercial-lease rates have plummeted as much as 75 percent in some areas.

Isbel said county records show more than 50 commercial foreclosure sales in June, the most recent full month available, with a total mortgage value of about $54 million. Geographically, they're all over the map, including the East Valley, West Valley, Scottsdale and downtown Phoenix.

Declining rent income isn't the problem for all area commercial centers, real-estate data analyst Zach Bowers said.

Owner-occupied projects including "commercial condos," where individual office or retail spaces were sold to small-business owners, are going back to the lenders, said Bowers, of Ion Data in Mesa.

Not unlike their residential counterparts, commercial condos were overbuilt and now represent a disproportionately high percentage of commercial foreclosures, the analysts agreed.

They include medical and dental offices that opened, much like retailers did, in high-growth areas on the fringes now hit hard by residential foreclosures.

"We've been seeing dental properties popping up every week (in county foreclosure records)," Bowers said.

Commercial broker Marc Bonilla, who specializes in selling medical-office properties, said they can still be attractive investments to buyers paying today's lower prices, but that it depends largely on the tenants.

Bonilla, of Colliers International in Scottsdale, recently negotiated the $12.1 million sale of a 40,000-square-foot medical-office project in Peoria.

Arrowhead Professional Park, 16222 N. 59th Ave., in Glendale, was not a foreclosed property, Bonilla noted. The owner, Phoenix-based Arrowhead Health Office Properties, sold it to real-estate investment firm Jomike Realty Co., based in New York.

While Jomike technically bought the building, he said, the true investment was in future lease revenue from its occupants.

"Number 1, it was fully leased," he said, "and Number 2, it has tenants that have been successful in this market for a long time."

Residential Real Estate Market Update

2009-08-08T10:01:00.000-07:00

It has been awhile since I have done an update to the market and where we are heading. Below are some of the graphs that I watch and monitor to advise my clients. If you have any questions feel free to shoot me an e-mail or comment on the blog with your opinions.

Recently in the news has been talk about there being an upswing in new construction and that is a sign of the market turning around. In this graph you can see the number of building permits in Maricopa county and there is the beginning of an upswing, but the market is still far from normal. The market should have about 3000 permits per month and we are just under 1000.

This graph shows the number of foreclosure notices and sales in Maricopa County. We should be around 2000 notices per month, but we are four times that rate. There is no obvious trend that shows a sign of slowing down. The moratorium from the beginning of the year has yielded record sales for this summer. I anticipate that there will be record number of bank owned properties coming on the market in August.

This is a graph of the available homes for sale in the MLS database. 2009 is the strong red line. As you can see we are on a heavy trend of shrinking inventory. The market would have a normal inventory of 30,000 to 35,000 units and we should be there at the current rate by the end of October.

This graphs shows the number of offers accepted per week in a year. The current volume of offers is in the range as was seen in 2004 and 2005. That is incredibly high.

Likewise this graph shows the number of closings per month. It shows closings are in the same range as in 2004 and 2005.
In conclusion the market activity is accelerating and I am seeing in the most competitive price ranges that it is hard to land a contract without having to bid up the price with multiple offers. The window for the "good deals" for investors is closing and the "easy deal" is gone. Depending on how the market adsorbs the coming foreclosures can determine if we are out of the downward cycle by the end of the year.

More Home Owners Underwater as Prices Fall

2009-08-07T20:02:00.001-07:00

A report from Equifax and Moody's Economy.com shows that falling prices have left 24 percent of owner-occupied, single-family home owners with mortgage debt greater than the values of the residences.

At the end of this year's second quarter, more than 16 million Americans were in this predicament, an increase from 10 million a year earlier.

Almost 5 percent of owner-occupied dwellings are saddled with mortgage debt worth 150 percent of the property value. Nevada, where 40 percent of owner-occupied homes are "upside-down," is the hardest-hit state, followed by Arizona and California.

Source: Wall Street Journal, Nick Timiraos (08/05/09)

Feds Scold BoA, Wells Fargo on Loan Modifications

2009-08-07T20:01:00.001-07:00

The Treasury Department on Tuesday announced that only 9 percent of eligible home owners had been helped by the federal program to modify home loans and prevent foreclosure.

It scolded banking giants Bank of America and Wells Fargo, both of which received federal bailout money, pointing out that these banks have been among the least willing to assist troubled borrowers.

Bank of American modified 4 percent of eligible loans, and Wells Fargo modified 6 percent.

Big banks that did better included JPMorgan Chase & Co., which modified 20 percent of eligible loans, and Citigroup Inc., which modified 15 percent.

The bank with the best results was Saxon Mortgage Services Inc., which helped about 25 percent of its eligible borrowers.

Source: The Associated Press, Alan Zibel (08/04/2009)

Construction Spending Rises, Defies Forecasts

2009-08-07T19:59:00.001-07:00

Analysts predicted a 0.5 percent drop in construction spending in June, but they were wrong.

The U.S. Commerce Department said Monday that construction spending rose by a seasonally adjusted 0.3 percent annually in June. That’s positive news, despite the fact that overall spending was still down 10.2 percent compared to a year ago.

The increase was driven by federal government spending, which rose 1.9 percent. This offset a 0.5 percent decline in commercial, nonresidential building, including shrinkage in retail and offices.

Source: The Associated Press, Christopher S. Rugaber (08/03/2009)

Entrepreneur Identifies 10 Do-Business Cities

2009-08-07T19:50:00.001-07:00

Entrepreneurmagazine has identified 10 major cities that it says encourage business start-ups.

The magazine chose cities that provide government incentives, have affordable commercial rents, have public officials who are open to new ideas, and have a population that's growing.

Amy Cosper, editor in chief of the publication, says she thinks Entrepreneur’s research will help other businesses that are searching for a location to start a new business or expand an existing one.

The most entrepreneurial cities identified in the July issue are:

Las Vegas
Portland, Ore.
Orlando
San Diego, Calif.
Phoenix, AZ
Chapel Hill, N.C.
Atlanta
Madison, Wisc.
Youngstown, Ohio
Austin, Texas

Source: Entrepreneur (07/29/2009)

Office Vacancies and Rents Are Still Slumping

2009-08-07T19:47:00.001-07:00

Office vacancies rose 1 percent nationwide in the second quarter of the year to 15.45 percent, according to Colliers International, a real estate services firm.

The vacancy increase from 14.48 percent in the first quarter cuts across all kinds of property, Colliers said, although prime office space in downtown markets had the lowest increase in vacancy rates.

Rental rates also declined across the board. Since year-end 2008, downtown Class A weighted rents have fallen an average of 10.5 percent.

“Firms have little appetite for expansion and instead remain focused on reducing costs and watching their bottom lines," said Ross Moore, director of economic research for Colliers. "We expect further increases in office vacancy and falling rents for the balance of 2009."

Source: Colliers International (07/28/2009)

Treasury Pushes Bankers on Loan Modifications

2009-08-07T19:46:00.001-07:00

During daylong meetings Tuesday, the Treasury Department pressured executives from 25 mortgage companies to promise to work harder to modify more mortgages for troubled borrowers.

The officials agreed orally on a new goal of 500,000 loan modifications by Nov. 1.

The meeting stemmed from concern that the program to modify mortgages will fall far short of the original goal of 3 to 4 million modified loans. As of this week, only 200,000 borrowers were enrolled in three-month trial loan modifications.

"Today's meeting was an opportunity to identify ways to accelerate the program and bring relief faster," Treasury Secretary Timothy Geithner said in a statement.

Bankers who attended the meeting complained that the original announcement of the program led the public to believe that modifications could be accomplished immediately.

"It was very difficult as an industry as a whole to try to live up to those expectations," said Dan Frahm, a Bank of America spokesman.

Source: The Associated Press, Alan Zibel and Daniel Wagner (07/28/2009)

Economists Optimistic That Market Is Upward Bound

2009-08-07T19:43:00.001-07:00

Economic recovery is still a few months away, say economists surveyed by USA Today, but two-thirds of them think existing-home sales have bottomed out.

Both housing and automotive markets “have the potential to generate some quite large percentage increases,” says Bill Cheney, chief economist at MFC Global Investment.

Overall, economists say unemployment won’t peak until the first half of next year and credit markets will remain tight.

"I think (the recovery) is going to be anemic," says Allen Sinai, chief economist at Decision Economics. "I don't think consumers have the wherewithal to buy a lot of cars and a lot of houses."

Source: USA Today, Paul Davidson; Barbara Hansen (07/27/2009)

NAR: Existing-Home Sales Rise Again

2009-08-07T19:40:00.001-07:00

Existing-home sales rose for the third consecutive month with inventory easing and home prices declining less sharply in June, according to the National Association of REALTORS®.

Existing-home sales — including single-family, townhomes, condominiums, and co-ops — increased 3.6 percent to a seasonally adjusted annual rate of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2 percent lower than the 4.90 million-unit level in June 2008.

Lawrence Yun, NAR chief economist, is hopeful about the gain.

“The increase in existing-home sales occurred in all major regions of the country,” he says. “We expect a gradual uptrend in sales to continue due to tax-credit incentives and historically high affordability conditions. Despite the rise in closed transactions, many REALTORS® are reporting lost sales as a result of new appraisal standards that went into effect May 1 of this year.”

HVCC Issues

A June survey of NAR members shows 37 percent experienced at least one lost sale as a result of the new Home Valuation Code of Conduct, with seven out of 10 reporting an increased use of out-of-area appraisers. Seventy percent of NAR appraiser members said consumers were paying higher fees, while 85 percent report a perceived reduction in appraisal quality.

“Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations, and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales,” Yun says. “In many cases, normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition – this is causing real harm to both buyers and sellers.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.42 percent in June from 4.86 percent in May; the rate was 6.32 percent in June 2008. Mortgage interest rates have trended lower in recent weeks.

Inventory Declines

Total housing inventory at the end of June fell 0.7 percent to 3.82 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, down from a 9.8-month supply in May. Raw inventory totals are 14.9 percent below a year ago.

“This is another hopeful sign — if we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” Yun says.

An NAR practitioner survey in June showed first-time buyers accounted for 29 percent of transactions, unchanged from May, and that the number of buyers looking at homes is up nearly 12 percentage points from June 2008.

NAR President Charles McMillan notes that there are very good opportunities. “Despite some of the challenges, the housing market continues to demonstrate signs of recovery,” he says. “The temporary first-time buyer tax credit is clearly helping people make a decision and is contributing to the overall stimulus impact, but since it’s taking longer to close transactions, many would-be beneficiaries may not be able to take advantage of the credit before the Dec. 1 expiration date."

The national median existing-home price for all housing types was $181,800 in June, which is 15.4 percent below June 2008. Distressed properties, which accounted for 31 percent of sales in June, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes.

Single-family home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.32 million in June from a level of 4.22 million in May, and are 0.2 percent higher than the 4.31 million-unit pace a year ago. The median existing single-family home price was $181,600 in June, which is 15.0 percent below June 2008.

Existing condominium and co-op sales jumped 14.0 percent to a seasonally adjusted annual rate of 570,000 units in June from 500,000 in May, but are 3.1 percent below the 588,000-unit level in June 2008. The median existing condo price was $183,300 in June, down 18.9 percent from a year ago.

By Region

Northeast: Regionally, existing-home sales in the Northeast rose 2.5 percent to an annual pace of 820,000 in June, but are 4.7 percent below a year ago. The median price in the Northeast was $249,400, down 5.9 percent from June 2008.
Midwest: Existing-home sales in the Midwest increased 0.9 percent in June to a level of 1.10 million but are 1.8 percent lower than June 2008. The median price in the Midwest was $157,000, which is 9.1 percent below a year ago.
South: In the South, existing-home sales rose 4.0 percent to an annual pace of 1.81 million in June but are 3.7 percent below a year ago. The median price in the South was $163,200, down 11.9 percent from June 2008.
West: Existing-home sales in the West improved by 6.4 percent to an annual rate of 1.16 million in June, and are 11.5 percent higher than June 2008. The median price in the West was $214,800, which is 24.9 percent below a year ago.

Source: NAR

Investors Drive Foreclosure Prices Up

2009-08-07T19:35:00.001-07:00

Home shoppers in parts of the country with lots of foreclosures are finding it increasingly difficult to buy. Investors are bidding up prices thousands above the original asking price.

Federal legislation slowing the number of foreclosures is adding to the problem by reducing the number of homes on the market. For instance, in Las Vegas, one of the areas where the bidding problem is greatest, home inventories are down 10 percent since March, according to the Las Vegas Association of REALTORS®.

When a bidding war erupts, the problem is particularly difficult for traditional buyers because investors are usually cash purchasers. They can bid up a property without concern whether the appraisal will prevent them from getting a loan.

Experts say the problem is not unlike the situation at the height of the housing bubble.

"This market is about as abnormal as the hypermarket that we came out of a few years ago," says Jay Butler, director of the Realty Studies program at Arizona State University.

Source: The Associated Press, Jonathan J. Cooper (07/20/2009)

Investors return to Valley, flood rental-house market

2009-07-02T10:47:00.001-07:00

Bank-owned homes sell fast; are there enough tenants?

by J. Craig Anderson - Jun. 18, 2009 12:00 AM

Arizona Business Gazette .

Real-estate investors have returned to the Valley in a big way, prompting concerns that the housing market is becoming too speculative to sustain the recent buyer activity.

The lure of once-in-a-lifetime deals on bank-owned homes is driving investor purchases, which experts say account for 50 to 70 percent of recent home-buying transactions. Still, it's the ability to generate revenue by renting the homes to tenants - in some cases, previous owners - that makes the properties such attractive investments.

The Phoenix-area housing market has been flooded with homes for rent in recent months, raising concerns about whether there will be enough tenants to keep the Valley's estimated 130,000-and-growing rental properties out of financial jeopardy.

Even some longtime supporters of the home-investment market say they've noticed a disturbing return of the can't-lose mentality that got so many house-flippers into trouble a few years ago.

"Investors are starting to look at the market from a speculative standpoint," said Alan Langston, who runs the Arizona Real Estate Investors Association. "We could end up with an oversaturated rental market."

Although the demand for rental homes is still strong, Langston said, speculators seeking big returns could be in for an unpleasant surprise, especially if they don't treat rental-home ownership as a business that requires time, effort and cash reserves.

Dealing with tenants also requires legal knowledge, he added. "You need to have a good lease, and you need to know how to enforce it," he said.

Langston has created a second organization, the Arizona Rental Property Owners and Landlords Association, to provide resources such as proper lease agreements, market data and legal advice in exchange for an annual fee of $129.

Rental-home owners who lack a full understanding of the financial risks and recommended precautions could find the homes they purchased from lenders right back on the market, which would be bad for investors, tenants and the area's economic recovery.

Home foreclosures have created an atypically high demand for rental properties, but that demand is not unlimited, and rental investments are not immune to financial risks such as tenants losing their jobs or continued decline in rental rates as supply increases. The glut of single-family homes for rent, overbuilding of apartments and failed condominium projects have created a difficult and highly competitive market for rental-property owners.

Many apartment managers have responded by boosting incentives such as lower rents, waived or reduced fees and complimentary services.

Still, Langston and others see real-estate investment as a positive. The competition that's causing frustration for other buyers is keeping prices from falling further, they said. Starter-home buyers alone would not create enough demand to absorb the supply of bank-owned homes coming on to the market each month, they said.

Investors have fixed up many dilapidated or trashed homes and prevented the Valley from having neighborhoods littered with abandoned properties.

However, he said, there is a big difference between an investor and a speculator.

"Investors follow solid investment practices. They add value to the transaction," Langston said. "Speculators are looking for a very quick turnaround and a very large return."

House Passes Bill to Protect Borrowers

2009-05-16T08:13:00.001-07:00

A bill passed by the U.S. House of Representatives on May 7 requires mortgage lenders to take borrowers' repayment ability into account. It also makes it possible for borrowers to take legal action against entities that pool mortgages and sell them as securities on the secondary market.

The bill also will force lenders to retain a 5 percent interest in mortgages other than standard 30-year fixed and adjustable-rate loans. However, adjustable-rate mortgages that carry prepayment penalties or fees greater than 2 percent do not qualify for the exemption.

Source: Washington Post, Dina ElBoghdady (05/08/09)

Real Estate: Home refinancing program a huge maze

2009-05-16T08:11:00.001-07:00

Submitted by SHNS on Thu, 05/07/2009 - 15:19.

By MARCIE GEFFNER, bankrate.com

The federal government's Home Affordable Refinance program is designed to help homeowners refinance their mortgages -- even if they owe slightly more than the current value of their homes.

For some borrowers, the program could be a boon. But many layers of rules may resemble one of those maddeningly complex contests that offer prizes to people who complete a maze of special offers.

The program is complicated because the federal government has a top-level set of rules; Fannie Mae and Freddie Mac have their own separate sets of rules and lenders, loan servicers and mortgage insurers generally have their own rules as well.

Borrowers may well wonder where to begin. Here's our guide to help you navigate through this labyrinth of rules:

The federal government's Home Affordable Refinance program is intended to help creditworthy homeowners whose homes have decreased in value refinance their mortgages to obtain lower interest rates or payments, lock in a fixed interest rate or eliminate onerous loan terms to improve their long-term stability as homeowners.

The program applies only to loans that are owned or guaranteed by Fannie Mae or Freddie Mac, the two secondary-market mortgage corporations that currently are operated under federal government conservator ships.

The borrower must be an owner-occupant of a detached house, condominium, duplex, triplex or four-unit residential property.

The borrower must not have made a loan payment more than 30 days late in the last 12 months or missed a payment if the loan was originated fewer than 12 months ago.

The new first mortgage cannot exceed 105 percent of the current market value of the property.

The borrower may be allowed to finance closing costs or obtain small amounts of cash.

The interest rate on the new mortgage will be a market rate.

The borrower must have sufficient income to afford the new mortgage payments.

The borrower's existing loan balances will not be reduced.

Nearly a dozen lenders have signed formal agreements to participate in this program. A list of these lenders has been posted on the Making Home Affordable Web site.

This program will end June 10, 2010.

Fannie Mae's Home Affordable Refinance program is intended to help borrowers refinance to reduce their monthly principal-and-interest payment or switch from a risky loan product such as a short-term, adjustable-rate mortgage, or ARM, or from an interest-only mortgage to a fixed-rate mortgage.

To qualify, the borrower must have an existing mortgage that is owned or guaranteed by Fannie Mae. To find out whether Fannie Mae owns or guarantees your loan call (800) 732-6643.

Borrowers can apply through any lender that has been approved by Fannie Mae. However, some borrowers may find that they need to refinance through their original lender or loan service.

The new loan may be a fixed-rate mortgage or an ARM with an initial fixed-rate period of at least five years. The payback period may be as long as 40 years.

So-called "jumbo-conforming" or high-balance loans that meet loan-limit requirements may be eligible.

Vacation/second-home and investment properties may be eligible.

The borrower may be able to finance closing costs or take out cash of up to 2 percent of the mortgage amount or $2,000, whichever is less.

The borrower must have sufficient income to afford the new loan payments. A verbal verification of employment is required.

No minimum credit score is required. However, borrowers whose credit is impaired may be offered a higher interest rate.

An appraisal may be required.

Freddie Mac's Home Affordable Refinance program, known as the Relief Refinance Mortgage, may be used to reduce the borrower's interest rate, shorten the loan repayment period or replace an adjustable-rate mortgage, interest-only mortgage or balloon/reset mortgage with a fixed-rate loan.

To qualify, the borrower must have an existing mortgage that is owned or guaranteed by Freddie Mac. To find out whether Freddie Mac owns or guarantees your loan, call (800) 373-3343.

Borrowers should contact their original lender or loan servicer to apply for this program.

The new mortgage can be a 15, 20 or 30-year, fixed-rate loan or an adjustable-rate mortgage with an initial term of five, seven or 10 years.

The property may be a vacation/second home or an investment property, with some restrictions.

The existing loan, new loan or both may be a so-called "super-conforming" loan limit within the applicable loan limit for the area.

The borrower may be able to finance transaction costs of up to $2,500.

Borrowers whose monthly payment increases 20 percent or more must provide income and employment documentation and have an acceptable credit score and debt-to-income ratio to demonstrate they can afford the new higher payment.

Mortgage rates inched higher this week.

The average 30-year fixed-rate rose 4 basis points, to 5.27 percent. A basis point is one-hundredth of a percentage point.

This week's average 15-year fixed-rate -- a popular option for refinancing -- increased by 5 basis points, to 4.78 percent.

The average jumbo 30-year fixed climbed 3 basis points, to 6.68 percent.

Adjustable-rate mortgages were split this week. The one-year adjustable-rate mortgage slid 12 basis points, to 5 percent. The popular 5/1 ARM edged up 2 basis point, to 5.07 percent.

(Distributed by Scripps Howard News Service. Reach Marcie Geffner at editors(at)bankrate.com)

Housing data stir optimism for Valley

2009-04-30T10:30:00.001-07:00

by Catherine Reagor - Apr. 22, 2009 12:00 AM
The Arizona Republic

In March, there were 200 more new-homes sales across the Valley than the month before. That may not sound like much, but it's significant in the current slowdown.

Last month, 912 new homes sold across metropolitan Phoenix, a 28 percent increase from February, according to RL Brown's latest "Phoenix Housing Market Letter."

Even better for the market is that many of the recently sold new homes were built last year or the year before, either speculatively or for buyers who pulled out of deals. Depleting the inventory of built-but-unsold homes will help the area market rebound.

Home building slowed nearly to a halt last fall and hasn't picked up, another trend that will help lower the Valley's inventory of new homes. There were 390 single-family permits issued Valley-wide last month, compared with 1,278 in March 2008, according to the "Housing Market Letter."

Foreclosures must continue to slow to help the market recover. Now, builders must compete against lenders reselling nearly new foreclosed-on homes for bargain prices in many subdivisions.

"The metro Phoenix new-housing market is showing the signs of stabilization and even improvement," Brown said.

Could Valley home prices have already hit bottom? Real-estate analyst Mike Orr, who publishes the "Cromford Report," thinks so.

He tracks the daily square-foot price for Valley home sales by analyzing Arizona Regional Multiple Listing Service and Information Market data. The lowest he has recorded since he began tracking the market a few years ago was $82.20 on April 6. The price per square foot has been inching up since then. It reached $83.18 this week.

"The trend is now sideways to very slightly upwards, rather than very strongly downwards, which it has been for a very long time," he said.

He said there is always the chance Valley home prices could dip again, but both pending and active listings are showing prices have climbed in the past two weeks. Pending and active listings are key indicators of future home sales and prices.

"It seems more likely to me that sentiment will improve and prices will strengthen further," Orr said.

Cities Where Home Prices Could Fall More

2009-04-30T09:31:00.000-07:00

With incomes falling and loans remaining hard to get, the best bargains are probably yet to come in some of the nation’s largest housing markets, predicts Forbes magazine.

To figure out which housing markets still haven’t hit bottom, Forbes calculated the spending power, unemployment, credit availability and housing stock over the last 27 years in the country’s 50 largest metropolitan statistical areas.

The projections determined how much each area’s home prices would have to change to bring that housing market into historical balance. Analysts said the employment rate is the great unknown. The more employment falls, the more likely home prices will follow.

Here are the 10 cities where Forbes believes prices are likely to continue to fall the most:

Orlando
Miami
Jacksonville, Fla.
Tampa
Los Angeles
Phoenix
Las Vegas
Oakland, Calif.
San Diego
New York

Source: Forbes, Matt Woolsey (04/17/2009)

Measuring the housing market

2009-02-27T08:15:00.001-08:00

Housing data remain mostly bleak as Valley awaits mortgage-relief details

by Catherine Reagor - Feb. 25, 2009 12:00 AM
The Arizona Republic

Most key indicators used to track the Valley's housing market are still going the wrong way, but there is one measure of the market that has begun to defy the downturn.

Pending listings, which are home sales in negotiation or under contract, are up 90 percent in the Valley.

Real-estate agent Michael Orr, who tracks Arizona Regional Multiple Listing Service data, said there are currently about 9,600 pending sales in the system. If all of those pending sales - or even most of them - turn into actual closings, March and April could be good months for the Valley's housing market.

Here are the Valley's other latest housing data:

• New-home sales, or closings, fell 47 percent in January from December 2008, reports RL Brown's Phoenix Housing Market Letter.

• Home building hasn't picked up after slowing dramatically last fall. There were 301 single-family permits issued across metropolitan Phoenix in January, according to the Housing Market Letter.

• Metro Phoenix posted a 34 percent decline in home prices during the last three months of 2008, according to the Standard and Poor's/Case-Shiller U.S. National Home Price Index released Tuesday. Las Vegas and San Francisco were right behind the Valley, with drops of more than 31 percent.

Nationally, home prices plunged more than 18 percent during the quarter from the prior-year period, the largest drop in the index's 21-year history.

Help is on the way

Federal help is on the way for the housing market.

There's the new $8,000 credit for first-time home buyers, which should spur sales; next month, $121 million in Neighborhood Stabilization Program funds will be coming to Arizona to help areas hardest hit by foreclosures; and final details for the plan to aid both people facing foreclosure and those who can't refinance because of falling home prices will be unveiled March 4.

The economic-stimulus package should help about 70,000 Arizonans keep their jobs or find a new ones, which means more people will be able to buy homes or keep paying their mortgages.

If you have questions about the new federal housing plan and whom it will help, go to azcentral.com/realestate and click on "Leave a question for Catherine Reagor."

Housing director departs

Fred Karnas resigned as director of Arizona's Housing Department last week, and he's already in Washington, D.C., for his new job. Karnas is a now senior adviser at the U.S. Department of Housing and Urban Development.

Karnas' parting comment: "All state agencies have to deal with Arizona's budget shortfall, but the Department of Housing is looking at a cut that's disproportionate. Look forward: If the Housing Trust Fund is devastated, there won't be the help for the homeless and the first-time home buyers (that) there has been in Arizona for the past several years."

The Arizona Housing Trust Fund is facing a $29 million cut from its 2009 budget of $33 million.

Fed: Economy likely to shrink through '09

2009-02-26T20:19:00.001-08:00

by Jeannine Aversa - Feb. 19, 2009 12:00 AM
Associated Press

WASHINGTON - The Federal Reserve warned Wednesday that the nation's crippled economy is even worse than thought and predicted it would deteriorate throughout 2009, with no sign that the housing market will stabilize.

The Fed's bleak estimates indicated that unemployment could climb as high as 8.8 percent this year and that the economy would contract for a full calendar year for the first time since 1991.

The central bank's latest projections came hours after a separate report showed that new home construction and applications for future projects both fell to record lows last month.

Still, some economists saw a silver lining in the otherwise dismal housing report: Scaled-back building should reduce the number of unsold homes and contribute to an eventual housing recovery.

The Fed's latest forecast says the unemployment rate will climb to between 8.5 and 8.8 percent this year. The old prediction, issued in mid-November, estimated that the jobless rate would rise to between 7.1 and 7.6 percent.

Many private economists believe the current 7.6 percent jobless rate - the highest in more than 16 years - will hit at least 9 percent by early next year even with the $787 billion stimulus package.

The Fed also believes the economy will contract this year between 0.5 and 1.3 percent. The old forecast said the economy could shrink by 0.2 percent or expand by 1.1 percent.

The last time the economy registered a contraction for a full year was in 1991, by 0.2 percent. If the Fed's new predictions prove correct, it would mark the weakest showing since a 1.9 percent drop in 1982, when the country had suffered through a severe recession.

The grim outlook represents the growing toll of the worst housing, credit and financial crises since the 1930s. All of those negative forces have plunged the nation into a recession, now in its second year.

"Given the strength of the forces currently weighing on the economy," Fed officials "generally expected that the recovery would be unusually gradual and prolonged," according to documents on the Fed's updated economic outlook.

In another sign of the troubled economy, production at the nation's factories, mines and utilities fell 1.8 percent last month, more than economists expected. That figure, the third monthly drop in a row, was dragged down by a 23 percent drop in production at auto plants and their suppliers.

Meanwhile, construction of new homes and apartments plummeted 16.8 percent in January from the previous month, the Commerce Department said, falling to a seasonally adjusted annual rate of 466,000 units, a record low. Analysts expected a pace of 530,000 housing units.

Building permits, a measure of future activity, also sank to a record low pace of 521,000 units in January, a 4.8 percent drop from the prior month.

The Fed also reported Wednesday that production at the nation's factories, mines and utilities fell 1.8 percent last month. Many economists expected a 1.5 percent decline.

Great to Live for Less

2009-02-19T16:17:00.001-08:00

Forbes magazines has compiled a list of cities where $500,000 will still buy an exceedingly comfortable lifestyle.

To choose these 10 locations, Forbes examined the cost of the typical four-bedroom, two-bathroom, and 2,200-square-foot home. They also factored in the amount of patent and venture capital activity, average commute, and an average cost of living below $100,000.

The top cities were:

Irvine, Calif.
Raleigh, N.C.
Bellevue, Wash.
Portland, Ore.
Sunnyvale, Calif.
Redmond, Wash.
Austin, Texas
Chandler, Ariz.
Rochester, N.Y.
Plano, Texas

Source: Forbes, Matt Woolsey (02/12/2009)

Valley median home price hits 8-year low

2009-02-19T16:11:00.001-08:00

by J. Craig Anderson - Feb. 18, 2009 12:00 AM
The Arizona Republic

It's official: Phoenix-area home pricing has overcorrected for the housing bubble.

Preliminary same-home resale data from Arizona State University show the Valley's median home price fell to $130,000 in January, equivalent to the median price in January 2001.

That was three years before home prices began their meteoric climb, fueled by a frenzy of building, lax lending and overreaching buyers.

While the numbers probably will not shock those who have tracked recent developments in the housing market, they underscore the severity of the Phoenix area's real-estate crisis, which prompted President Barack Obama's visit to Mesa today to outline his $50 billion plan for reducing home foreclosures.

The ASU Repeat Sales Index, measured monthly by W.P. Carey School of Business real-estate professor Karl Guntermann, shows the Phoenix-area median home price fell to $150,000 in November, the same as in October 2003, just before the price run-up began.

Rather than hitting solid ground, the median price continued to slide in December and January, early ASU housing data show.

The Repeat Sales Index tracks repeat sales of the same homes over a period of years, considered the most accurate way to measure changes in the market value of housing.

Data from November 2007 to November 2008 show a record year-over-year price decline of 32 percent. That number probably increased to 33 percent in December and 34 percent in January, Guntermann's preliminary research shows.

"It will probably be months before the index levels off, which would be the first step in ending the home-prices decline," he said.

As median home prices plummet, affordability is skyrocketing, Guntermann said.

He also measures what's known as the Affordability Index, which tracks the relationship between median home price and median income.

An index of 100 means that a household earning the median income can afford a house selling for the median price at prevailing interest rates. An index of 125 means a median-wage earner can afford a home that's 25 percent above the median home price.

The Phoenix area's Affordability Index has gone from a low of 74 in 2006 to well above 100 in most Valley cities, Guntermann said.

The most-affordable city in which to purchase a home in the fourth quarter was Phoenix, he said, which led the Valley with an index of 152.

The least-affordable city measured was Tempe, which had an index of 87.

Scottsdale and Paradise Valley were not measured.

Housing Bill

2009-02-16T10:23:00.001-08:00

I have had quite a few questions about what the stimulus bill meant for valley real estate. I have been holding off on posting anything until the bill was passed due to the fact that a lot of the debate was over real estate credits and limits. Below is a excerpt from the National association of Realtors that I think best Summarizes what was passed. Feel free to e-mail or call me with any questions.

So here's what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES's thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

In addition, we preserved what we have - which some tend to forget is always on the table when these negotiations start up again - mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

We did make a run at the $15,000 credit -- and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of 'what we are willing to give up to get a $15,000 tax credit' and kept the debate again, on how much it should be. It's pretty hard to complain when they give you what you ask for and you lose something you never had.

While we study the Treasury specifics on their major role in providing the rest of the housing solution -- there is much more to come and we are working diligently with the Administration to help 'unclog the pipeline' and get capital flowing into housing again.

Foreclosures continue upward climb in Valley

2009-02-16T09:59:00.001-08:00

The 'good' news: Plummeting median price sparks 49% sales jump

by J. Craig Anderson - Feb. 13, 2009 12:00 AM
The Arizona Republic

Phoenix-area home foreclosures were on the rise again in January after a holiday break from bank repossessions, according to the latest home-resale figures from Arizona State University.

It's a troubling start to a year in which many experts believe foreclosure activity will reach its peak, as equity continues to dissolve and another wave of foolish-in-retrospect mortgage loan products reset to higher monthly payments.

The upside in January was a 49 percent increase in detached, single-family home resale activity from a year earlier, according to the report from Realty Studies at the Morrison School of Management and Agribusiness at ASU Polytechnic.

Still, resales were down 17 percent from December 2008.

The foreclosures driving up sales in recent months have created opportunities for many buyers, but they also have forced residents out of their homes and chipped away at property values across the Valley, said Jay Butler, Realty Studies director.

Deep anxiety about the country's economic future leaves little chance of a housing-market recovery this year, he added.

"The local housing market will continue to be vexed well into the next year by eroding consumer confidence, brought on by a weak economy, possible job losses and tighter mortgage underwriting guidelines," Butler said in his report.

Michael Brauneis, a financial loss-mitigation expert and consultant to the mortgage industry, agreed that things are likely to get worse before they get better.

Brauneis said his biggest concern is the high number of interest-only "Option ARM" and stated-income "liar" loans scheduled to reset to higher monthly payments in the coming year.

Such loans can be difficult to modify, because in many cases the borrower's income simply isn't high enough to afford payments that include both interest and principal, he said.

"Foreclosure rates are definitely still on the way up," said Brauneis, director of Protiviti, a subsidiary of Robert Half International.

"It's going to get ugly."

In January, the median sale price for single-family detached homes in Maricopa County was $136,000, ASU reported.

That's a 44 percent drop from the median of $243,000 the previous January.

Home prices fell 7 percent from December's median resale price of $146,000, according to ASU.

In the past two months, a high volume of sales in Phoenix at disproportionately low prices has pulled down the median home price Valleywide.

In December, 1,360 Phoenix homes were sold at a median price of $90,000.

In January, the number of sales decreased to 1,190, while the median price fell to $74,500, ASU reported.

The Phoenix median price was January's lowest in the Valley, surpassing perennially last El Mirage, which had a median home price of $76,125.

As usual, other areas fared considerably better, Butler said.

Chandler's median price was $230,000 in January, down roughly 18 percent from $280,000 a year earlier.

The median price in Tempe experienced a reduction of 14 percent, from $255,000 to $219,000.

Housing Inventories Fall in 29 Major Markets

2009-02-16T09:41:00.001-08:00

The inventory of existing homes for sale in 29 major markets covered by ZipRealty declined an average of 2.5 percent in January 2009, compared to December 2008 and down 13 percent compared to January 2008.

This is a good sign, especially when considering that typically inventories rise in January after the holidays. In the last 25 years, the average increase in inventory in January has been 8.7 percent, according to Ivy Zelman, CEO of research firm Zelman & Associates.

Housing-market analysis Altos Research reached similar conclusions, saying that the listings in its 10-city composite index declined 3.3 percent in January compared to December 2008.

This data doesn’t include New York City, where appraisal firm Miller Samuel Inc. reports that inventories were at the highest level in the last decade, up 6 percent from December and 36 percent from January 2008.

Source: The Wall Street Journal, James Hagerty (02/10/2009)

Lack of Credit Threatens Commercial Sector

2009-02-16T09:38:00.001-08:00

A severe lack of credit threatens commercial real estate and poses significant risks for the whole economy, according to a NATIONAL ASSOCIATION OF REALTORS® work group.

The Commercial Economic Stimulus Work Group has developed a plan to address high-priority issues like lack of credit to avoid further losses in the commercial real estate markets and identify strategies as part of the national economic recovery plan.

“Most lenders have withdrawn from the market and there is no secondary market for commercial mortgages,” says NAR President Charles McMillan. “If lenders cannot meet the growing demand for credit to refinance performing commercial real estate loans which are due to mature soon, a wave of defaults could worsen the current credit crisis. Policymakers must act swiftly to enact measures to restore credit capacity.”

Commercial real estate plays a vital role in the national economy. Income-producing commercial property is valued at approximately $5 trillion. The commercial sector provides more than 9 million jobs and generates millions of dollars in federal, regional, and local tax revenue. Local governments, in particular, depend on this revenue for roughly 70 cents out of every dollar in local government budgets. Tax revenues from commercial real estate provide vital public services including education, road construction, law enforcement and emergency planning and response.

“Commercial real estate creates the framework for much of what happens in our economy,” says Robert Toothaker, chairman of the REALTORS® Commercial Alliance, which organized the work group. “A major collapse in this area would be felt throughout the economy.”

Addressing the crisis in commercial real estate markets will require a multifaceted approach. Stabilizing the mortgage-backed securities market is one component essential to a successful recovery plan, because of the importance of the mortgage and housing markets to economic recovery.

Toothaker says many property owners are concerned that during 2009 and 2010 they will be unable to refinance existing loans, including land and residential development projects, and that lenders may consider loans on performing properties in default because of problems determining the fair market value of those properties.

“Accounting rules should be made more flexible. The U.S. Treasury and Federal Reserve also should exercise their authority to implement and expand the Term Asset-Backed Securities Loan Facility,” he says, adding that the TALF should be encouraged to purchase commercial mortgage-backed securities and conventional commercial real estate loans to help stabilize the market.

The work group also recommended tax policies to strengthen the commercial market. “Any changes that would make investment in commercial property less attractive would reduce property values in an already fragile marketplace. Capital gains rules that apply to appreciated property, like-kind exchanges and carried interests must be kept at the existing 15 percent, and passive loss rules should be suspended,” Toothaker says.

Finally, a comprehensive program for recovery must stimulate and support investment in commercial real estate. For example, the federal government should free up spending for capital improvements to the nation’s infrastructure, including transportation, roads, and energy grids.
“We must avoid policies that artificially raise the cost of construction and operation of commercial real estate properties. And the commercial real estate sector needs to invest in energy efficiency and environmentally friendly initiatives through tax and other incentives,” Toothaker says.

Source: NAR

Fannie Loosens Refinancing Rules

2009-02-16T09:34:00.001-08:00

Fannie Mae plans to eliminate some credit-score requirements, scale back income-documentation standards, and waive the need for appraisals in some cases, starting on April 4.

The mortgage finance company believes the changes will allow more home owners to refinance into new home loans at near-record low interest rates.

Analysts say the relaxed rules for loans that Fannie Mae owns or guarantees are unlikely to have a significant impact on mortgage-bond investors and mortgage insurers.

Source: The Washington Post, Jody Shenn (02/06/09)

ON to close Valley plant; 350 workers to lose jobs

2009-02-06T19:35:00.001-08:00

by Andrew Johnson - Feb. 5, 2009 12:00 AM
The Arizona Republic

ON Semiconductor Corp.'s manufacturing presence in metro Phoenix will be nil by next year, when the chipmaker will close its remaining Valley fabrication plant.

The semiconductor manufacturer on Wednesday said that it will close the facility, which makes filters, diodes, rectifiers and transistors for electronic devices, by the end of the first quarter of 2010. Its other fabrication plant in Phoenix closed last year.

The announced closure eliminates 350 manufacturing jobs in metro Phoenix. Production will be moved to ON's plant in Malaysia.

ON currently employs about 1,100 workers in the Phoenix area, including the workers affected by the announcement.

The company also operates an engineering and design center in Chandler. That facility and ON's corporate headquarters in Phoenix are not affected.

In an earnings conference call with analysts on Wednesday, Keith Jackson, president and chief executive officer, said that the plant closure would result in a cash charge of $8 million to $10 million but eventually will result in annual savings of $36 million.

For the fourth quarter that ended Dec. 31, ON reported a net loss of $519.6 million, or $1.27 per diluted share, compared with a profit of $61.1 million, or 20 cents per diluted share, in the same period a year ago.

The Phoenix plant, which has been in operation since the 1960s and makes chips on six-inch wafers, is located at ON's corporate headquarters, 5005 E. McDowell Road.

ON is one of several semiconductor manufacturers to close plants and reduce headcount amid plummeting chip sales, as the recession hampers demand for consumer electronics, mobile phones, automobiles, home appliances and other products that contain the chips.

Annual semiconductor sales fell in 2008 for the first time in seven years. Industry analysts expect sales to continue declining this year.

ON's fourth-quarter sales actually increased 19.8 percent year-over-year, to $488.7 million. However, they decreased 16 percent from the third quarter.

"The end of 2008 and the beginning of 2009 have been a challenging time for the semiconductor industry . . . and we are expecting further declines in the first quarter 2009," Jackson said. "We are uncertain as to the depth or duration of the current recession."

ON's shares closed up 22 cents, or 5.4 percent, to $4.27 Wednesday.

The sluggish environment is prompting manufacturers to shutter aging facilities in favor of newer U.S. plants and fabrication plants overseas where labor and other manufacturing costs are lower.

Last month, ON said it planned to lay off 1,500 workers across the company during the year, cut merit increases and require employees to take a two-week unpaid furlough.

ON also said it was accelerating three previously announced plant closures this year - two in Slovakia and one in Idaho - and close a fourth plant. The fourth plant turned out to be the Phoenix facility.

The closures are partly the result of two acquisitions ON made in 2008, spokeswoman Anne Spitza said.

After the four plant closures, ON will have 10 fabs around the world. The company currently has about 14,500 employees worldwide.

Several other semiconductor manufacturers with Arizona operations have announced layoffs, salary cuts and furloughs in recent weeks, including Intel Corp., Texas Instruments Inc., Freescale Semiconductor Inc., Microchip Technology Inc. and STMicroelectronics.

Market analysts and trade groups are hopeful President Barack Obama's proposed stimulus plan of $900 billion, which includes several billions of dollars for infrastructure projects, could give the semiconductor industry a much-needed boost.

Commercial property values post big quarterly decline

2009-02-06T19:33:00.001-08:00

Reuters

Wed Feb 4, 2009 9:02am EST

By Ilaina Jonas

NEW YORK (Reuters) - U.S. commercial property prices by institutional investors posted their greatest quarterly fall in 22 years, according to an index developed by the Massachusetts Institute of Technology Center for Real Estate.

The transaction-based index, which MIT developed in 1984, fell 10.6 percent in the fourth quarter, surpassing the record fall of 9 percent seen in the fourth quarter 1987.

The index tracks the prices that institutions such as pension funds pay or receive when buying or selling commercial properties like shopping malls, apartment complexes and office towers.

"It now seems likely that this down market will be at least as severe as that of the early 1990s for commercial property," Professor David Geltner, director of research at the Center for Real Estate, said in a statement.

The index fell a record 15 percent in 2008, and easily surpassed the 9 percent decline seen in 1991 and the 10 percent drop in 1992.

That period marked one of the most severe recessions in commercial real estate recession and was the result of the savings and loan debacle and U.S. tax code changes in 1986.

The current downturn in commercial property is the result of the credit crisis, which has cut off debt financing for sales. The U.S. recession has also dealt a blow to commercial real estate returns, as business tenants cut staff and office needs, cut hotel demand, or close stores.

The index declined a total of 27 percent from 1987 through 1992, with most of the decline occurring in 1991 and 1992.

The index's performance means that prices in institutional commercial property deals that closed during the fourth quarter for properties such as office buildings, warehouses and apartment complexes are now 22 percent below their peak values attained in the second quarter of 2007. The index has fallen in five of the past six quarters, but the recent drop is by far the steepest.

The MIT Center for Real Estate also compiles indexes that gauge movements on the demand side and the supply side of the market that it tracks.

The demand-side index, which tracks prices potential buyers are willing to pay, has fallen for the past six quarters, and is down 23 percent for the year and 31 percent since its mid-2007 peak.

Pending home sales climb 6.3 percent

2009-02-06T19:31:00.001-08:00

by Alan Zibel - Feb. 4, 2009 12:00 AM
Associated Press

WASHINGTON - An index that tracks signed contracts to purchase existing homes rebounded in December, as buyers snapped up properties at deep discounts, especially in the South and Midwest.

It was the second positive sign in the past two weeks for the troubled U.S. housing market, and may indicate that a bottom is forming.

Analysts, however, caution that prices are likely to keep falling through 2009, and say the outlook for home sales is uncertain, especially as layoffs mount and banks' lending standards remain tight.

The National Association of Realtors said Tuesday its seasonally adjusted index of pending sales for previously owned homes for December rose 6.3 percent to 87.7 from an upwardly revised November reading of 82.5, which was lowest month on record. That's better than the 82.3 reading economists expected, according to a survey by Thomson Reuters.

The reading also was up 2.1 percent from December 2007.

Power Road corridor packing wallop

2009-02-06T19:30:00.001-08:00

by William Hermann - Feb. 4, 2009 08:44 AM
The Arizona Republic

Just as Phoenix developed a "Power Corridor" on East Camelback Road and Tempe is developing a commercial and residential power center along Mill Avenue, East Valley officials see a corridor of educational, healthcare and commercial development blossoming along, appropriately enough, Power Road.

In a Valley area that only a few years ago was considered the hinterlands - it's 22 miles from downtown Phoenix - developers and city officials see a 15 miles-long swath of elegant homes, modern health facilities, a large airport, upscale retail malls and excellent schools, colleges and universities bringing an economic bonanza to Mesa, Gilbert, Chandler and Queen Creek.

Mesa's Mayor Scott Smith, in a recent press briefing, said many of the components of an educational power center along Power Road already are in place. He said while Mesa has "great educational assets throughout the city," Power Road is becoming an educational focal point.

"When you start up around the McDowell-McKellips area you have the (Mesa Community College) Red Mountain campus, and as you continue southward you go past Mesa Public Schools with their Academy for Advanced Studies and Red Mountain High School and that whole cluster.

"Moving south, right off of Power and Baseline you have the A.T. Still (medical school) campus. And then you get into Gateway where you have, of course, Polytechnic, Chandler-Gilbert (Community College), the University of North Dakota has a presence there, and EVIT (East Valley Institute of Technology) is ready to build a branch campus there. That entire area we call the Power Road Knowledge Corridor."

Roc Arnett, President of the East Valley Partnership, says that one day, Power Road will be the center of the East Valley.

And he says it's already way more than an educational corridor.

"Look at what is already there as far as healthcare---Banner Baywood (hospital) the Banner Heart complex and the A.T. Still dental school," he said. "Then there's a lot of retail: Superstition Springs Mall, Mesa Pavilions, and the malls all around them thriving. Phoenix/Mesa Gateway Airport is a big success and the airport of the future; the Gaylord Resort is going to light up that area; and between Elliot and Warner, land on both sides of the street are being planned for millions of square feet of office space.

"It's truly a power . . . make that the Power Corridor, and it's going to be quite an amazing place."

It is not, of course, by accident that development is sprouting along Power Road. Ten years ago, city officials saw that with Arizona State's University's commitment to developing the Polytechnic campus at Williams Field and Power roads into a major institution, and with the transformation of the old Williams Air Force Base into the Valley's second major airport, significant development would be anchored by the big campus and increasingly busy airport.

Mesa Economic Development project manager Scott Rigby said the obvious assets of the corridor have made it so, "we don't have to steer people there: people have latched onto what . . . has evolved as a key corridor for development and it's obvious that's the place to be."

Rigby says Valley freeway construction has been instrumental in the creation of the Power Corridor.

"Power Road connects to the (Loop) 202 Red Mountain Freeway in the north, the (U.S.) 60 Freeway in the center and the 202 Santan Freeway in the south," he said. "Few roads in the Valley have that much freeway interaction. And Power Road traverses Mesa, Gilbert, Chandler and Queen Creek . . . and is one of three exits points for Queen Creek. So Power Road will only get more prominent as that whole area grows."

Rigby and Arnett both say that a key to the development of the Power Corridor is the amount of vacant land that still exists along both sides. Both say the Morrison family's farm holdings that straddle Power Road between Warner and Elliot roads is a prime area.

"That Morrison family land is perfect for housing, commercial and industrial development . . . and a lot of it," Rigby said. "Employers see that area in the inner loop between the 60 and 202 freeways, see the open space, see the excellent educational facilities, see the airport and consider it the perfect location."

Veteran Valley zoning attorney, developer and academic Grady Gammage agrees that the Power Road Corridor is an area of immense promise. But he notes that the Phoenix- Mesa Gateway Airport, "is a wonderful magnet, but it's also a barrier."

"The relationship between Power Road and Polytechnic and all things on both sides of Gateway Airport is not yet fully figured out," he said "Any airport is a barrier. You can't drive where there are runways, and those are very long runways. The airport is huge-it's the size of Sky Harbor--and the runways are on a diagonal. It's a major barrier and big things are planned on both sides."

Nevertheless, Gammage said, the pluses of the airport outweigh the navigational barrier it represents. Combined with the freeways that bring traffic to and from Power Road, the airport represents a powerful engine of economic development.

Arnett sees the airport as the centerpiece of east Valley development-and much of tied to Power Road:

"One day the center of the East Valley will be the Power Corridor, to the north and south," Arnett said. "And the epicenter of the East Valley will be the Gateway Airport. And it's not so far in the future.

"In fact, it's happening right now."

Expert: Valley's economy will be either bad or terrible in 2009

2009-02-04T09:28:00.001-08:00

Dismal economic outlook for '09 at Westmarc meeting

by Carrie Watters - Jan. 28, 2009 12:15 PM
The Arizona Republic

Anyone who headed to Westmarc's annual economic forecast breakfast Wednesday morning hoping for a pep talk likely walked away disappointed, or downright depressed.

Valley economist Elliott Pollack told the crowd of business, education and municipal leaders who gathered at the Glendale Civic Center that 2009 will likely be termed a bad year or even a terrible one.

"Those are the options," Pollack said.

The gist of the problem, he said, is that in the first six years of this decade, 10 years' worth of housing was built. The last four years will be spent eating that excess until some equilibrium is reached.

Add in the national economic slowdown and credit crunch and it's a rough ride.

The Valley has 20,000 to 40,000 excess homes to absorb, which could take a while - Pollack estimated that last year, only about 3,000 were absorbed.

"Until we work off that oversupply, we've got nowhere to go. It's that simple," Pollack said.

In a Valley so dependent on growth to fuel its economy, building permits are down 90 percent from the peak. Realtors struggle, construction crews feel the slowdown and furniture showrooms are pinched.

"All of this stuff ripples through the economy," Pollack said.

The Valley now ranks 28th out of 32 major employment markets in the country, areas with 1 million or more jobs.

"Cleveland is doing better than we are," he said.

Pollack said recovery would be slow but that 2009 will be better than last year and that the area, in the long term, will rebound.

But for now, it's time to buck up.

"No one will be spared," he said. "You can't have an economy like this and get away with it."

Here's a look at some of the bleak economic indicators:

84.2 percent of the Valley's economy has declined. The 15.8 percent continuing to grow is in education and health care.

A dwindling number of people are moving to the area. If anything, Pollack said, a 1.8 percent growth prediction for 2009 may be too high.

Power company APS is showing the slowest growth in new hook-ups in 50 years, with the biggest slowdown in Surprise and Avondale.

Nationally, a third of homes sold in the past 12 months were sold at a loss. Of those, 19 percent were foreclosed homes. Of homes purchased in the past five years, 41.8 percent have negative equity.

Valley home prices are down 32.5 percent, and they're not done dropping. One of the few benefits is increased affordability. In 2006, Pollack estimated 22.8 percent of Valley families could afford a median priced home. In 2008, that jumped to 72 percent.

Last year, 603,112 square feet of office space were absorbed, but 3.4 million square feet were built and opened. An additional 3.1 million square feet are under construction. Pollack predicted nothing more would be built for another two or three years.

Retail sales declined 10 percent in 2008 and are expected to drop another 4 percent his year. Pollack predicted that should climb 5 percent in 2010.

A Commercial Bright Spot: Doctors Are Calling

2009-02-04T09:25:00.003-08:00

Medical offices are a bright light in an otherwise less-than-sparkling commercial real estate market.

“There certainly are investors who want this type of property in their portfolio,” said Dan Fasulo, a managing director at Real Capital Analytics. “It’s kind of a recession-proof bet, if you will.”

One advantage that buyers and sellers of medical office buildings have is access to credit. Doctors are viewed as desirable tenants because they are unlikely to move. Plus, demand for office space is growing. The number of health care jobs is up 2.66 percent compared to a year ago.

“There is still real leverage out there, and there is still the ability to get these deals done, versus a standard office building or shopping center,” said Neil R. Shapiro, chairman of the health care finance group at the law firm of Herrick Feinstein in Manhattan.

Source: The New York Times, Alison Gregor (01/27/2009)

Fed Announces Plan to Reduce Foreclosures

2009-02-04T09:25:00.001-08:00

The Federal Reserve will take aggressive action to renegotiate mortgages that are likely to enter foreclosure, Fed Chair Ben Bernanke said in a letter to Congress Tuesday.

Under the program, which only affects mortgages owned by the Fed, the central bank will be able to reduce what a home owner owes on a mortgage, lower the interest rate, lengthen the term on the loan, or take other steps that might persuade home owners to keep paying. Borrowers will deal directly with their mortgage servicer.

The Fed says that the mortgages most likely to be affected are those with loan balances that are more than 125 percent of estimated value of the property.

"It's a step beyond what FDIC is doing with its own portfolio," said mortgage expert Alan White, an assistant professor at Valparaiso University School of Law. "Principal write-downs are still the critical issue" in keeping borrowers in their homes.

Source: Washington Post, Neil Irwin and Renae Merle (01/28/2009)

As recession hit, real estate sank

2009-02-04T09:23:00.001-08:00

Jan. 28, 2009 12:00 AM

It's over . . . 2008 was a year that won't be soon forgotten," is the headline on longtime real-estate analyst's RL Brown's latest Phoenix Housing Market Letter.

The report, which many market watchers follow closely, has the year-end tallies for new-home sales and building. But Brown's latest edition, sent out Tuesday, also has some interesting predictions and observations.

First, the numbers.

The final tally for Valley home building in 2008 was 12,582 single-family permits, down 60 percent from 2007's pace of 31,172 permits.

December permits didn't drop from November's surprisingly low level of 295, but they didn't rebound much, either. There were 365 single-family permits issued from Pinal County to Peoria last month.

Last year, there were 20,547 new-home closings, or sales, down 46 percent from 38,308 in 2007.

The median price of a new Phoenix-area home fell to $214,397 in December, compared with $242,000 in December 2007. But the median price was up from $206,000 in November.

D.R. Horton was the top home builder in the Valley last year with 3,607 sales. It has held the top spot for the past few years. Pulte Homes was second.

Now for some observations from Brown.

"Fortunes were lost, and one source reports 110 home builders closed their doors or undertook reorganizations," Brown said.

"Many of them were Phoenix companies," he said.

He said subcontractors were especially hard hit.

"One story made the rounds of a builder who notified the sub that they weren't going to pay him for work already done, and then called to demand warranty work" on the same project, Brown said.

And finally, home prices.

"It seems like yesterday that a Realtor called us to dispute our suggestion that the resale median might fall to $150,000," he said.

"It now appears reasonable to assume the resale median could fall into the $125,000 range before mitigation of the foreclosure impact is felt," he said.

"Housing speculators will lose a lot of money."

Brown's forecast is for approximately 70,000 new- and existing-home sales this year, similar to 2008's level.

He sees the market growing to 105,000 home sales by 2013.

Ailing Fulton Homes files for bankruptcy

2009-02-04T09:22:00.000-08:00

Builder is one of Arizona's largest

by J. Craig Anderson - Jan. 28, 2009 12:00 AM
The Arizona Republic

A home-building company founded by one of the Valley's most generous philanthropists sought legal protection from creditors Tuesday by filing for Chapter 11 bankruptcy reorganization.

Tempe-based Fulton Homes Corp. is one of the largest home builders based in Arizona, with 21 subdivisions selling homes in the Valley.

Like many builders, Fulton has struggled to keep up with its debt payments as banks demand additional capital so their loan values don't exceed the builders' declining property values, market analysts say.

Fulton Homes was founded 35 years ago by Chairman and Chief Executive Officer Ira Fulton, a prominent community figure and one of the state's best-known philanthropists.

The engineering college at Arizona State University bears Fulton's name, and its Mary Lou Fulton College of Education was named after his wife in May. The couple's Fulton Foundation has contributed more than $160 million to ASU.

Doug Fulton, Ira's son, is the company president.

Neither the Fultons nor company bankruptcy attorney Mark Roth returned calls seeking comment. Court documents show that Fulton Homes owes $100 million to $500 million to more than 100 individual creditors, including lead creditor Bank of America.

The company's estimated assets are listed as $100 million to $500 million, the documents show.

The company is scheduled to have its court-mandated meeting with creditors on March 3.

Companies filing for protection under Chapter 11 of the U.S. Bankruptcy Code typically remain in operation while the court reviews creditor claims and resolves debt issues.

Though it's likely Fulton Homes will continue as a company, bankruptcy creates new challenges in securing credit to build homes - and persuading consumers to buy them.

Future lenders undoubtedly will require Fulton to secure its credit with company assets and will charge higher interest rates, making it more difficult to do business in an environment that is already putting many builders out of business.

2008 was a dismal year for home builders everywhere. Companies such as Fulton that were heavily invested in the outer edges of urban sprawl - places like Queen Creek, Maricopa and Casa Grande - fared the worst.

Phoenix analyst Jim Belfiore of Belfiore Real Estate Consulting said home builders were expected to pull only 6,000 to 10,000 building permits in the coming year, a far cry from the 55,000 permits issued in 2005.

Fulton, like many Valley home builders, had a backlog of speculatively built homes from 2005 to '07. It has been aggressively trying to sell those homes and get contracts on new ones by lowering prices, market watchers say. But the builder had started few new homes recently.

Fulton took out 61 single-family permits to build new Valley homes last year, said RL Brown, a housing-market analyst.

The builder reported 428 closings or sales, so the numbers suggest that most of those sales came from Fulton's speculative inventory, built in past years.

How many more spec homes Fulton has on its books isn't clear. The builder pulled only two Valley building permits in December.

Brown said Fulton's financial situation is most likely a direct result of the housing market's problems and not a product of mismanagement.

"It's bloody out there," he said of the Valley's housing market.

The Arizona Department of Real Estate's most recent list of home builders in financial trouble includes 41 projects by a variety of builders that have filed for bankruptcy protection since the housing market hit a stucco wall in 2007.

Those bankruptcies include Trend Homes, KB Home, Americabuilt Communities and Engle Homes.

Bankruptcy erodes customer confidence, especially since many bankrupt builders stop honoring past customers' home warranties. Belfiore said Fulton customers' warranties could be voided by the court even if the builder wants to continue honoring them.

"Some of the control is not going to be in their hands anymore," he said. "Lenders have a say because they're the ones writing off part of the debt."

Brown said Fulton behaved like every other big builder in Arizona. It bought land during the boom and built houses based on speculation that demand for them would continue to grow.

But home sales and construction have continued to slow in the Valley, and land values have sagged.

Fulton Homes started operations in 1974 and grew to become one of the Valley's biggest private home builders.

In December, Doug Fulton told The Arizona Republic that the coming year would bring about "natural selection of the building industry."

Chandler's only landfill closer to becoming city park

2009-02-04T09:16:00.001-08:00

by Kerry Fehr-Snyder - Jan. 23, 2009 10:15 AM
The Arizona Republic

Chandler's first and only landfill is getting closer to becoming the Valley's first municipal park reclaimed from a city dump.

The Paseo Vista Recreation Area at the northwest corner of McQueen and Ocotillo roads is starting to look less like a giant mound of mud and more like a rolling park, at least from the top.

Chandler has added 300,000 cubic yards of dirt to the top of the landfill as a cap on the decommissioned landfill, which was closed in 2005 after 24 years.

"That was a major accomplishment to get that much dirt moved to the site," said Don Tolle, park planning superintendent.

The park required so much extra dirt that the city had to close McQueen Road from Queen Creek to Appleby roads for a month late last year.

Workers added two feet of dirt to the towering, 40-foot-high mound, which locals jokingly call Mount Chandler or Mud Mountain.

"There needs to be a buffer between the landfill and the recreation amenities," Tolle said. "We don't want it (the landfill) settling to allow the trash that's in the landfill to come through."

The contractor is adding decomposed granite on the dirt and installing wire mesh baskets to control erosion. After that, they will lay a concrete border to the outside of the walking paths and build concrete roadways and parking lots at its summit.

"It's starting to take shape," Tolle said.

Seeing that from the road is virtually impossible as the site is ringed by a barbed-wire fence and much of the work is occurring on the top of the park.

Eventually, the contractor will create a dog park, a disc-golf course and an archery range.

The park is expected to be finished by August or September, Tolle said.

Converting closed landfills into city parks is common in other parts of the country, where open land is in short supply. Among the 250 old landfills that have been transformed from a dump to a park are Flushing Meadows in New York, home to the U.S. Open, and the site of an annual hot-air balloon festival in Albuquerque and an international kite festival in Berkeley, Calif.

The Paseo Vista Recreation Area sits on 2.2 million tons of compacted trash that will continue to decompose and shift imperceptibly, preventing workers from adding basketball courts or any other concrete surface on top.

Phoenix Leads nation for Increasing Sales

2009-02-04T09:00:00.000-08:00

Property values are down, but in some cities sales are up because motivated sellers are slashing prices and buyers are getting deals.

“There's a pretty active housing market, it's simply at a lower-priced inventory," says Michael Feder, chief executive of Radar Logic, a New York derivatives firm.

In San Diego, Calif., transactions are up 90 percent as buyers compete for available bargains.

"Unlike stocks, housing has intrinsic value," says Barry Ritholtz, chief market strategist of Ritholtz Research, a New York research firm. "Outside of Love Canal or Detroit, house prices do not go to zero."

Here are the cities where sales are up the most in the last three months:

Las Vegas
Sacramento, Calif.
San Diego, Calif.
Los Angeles
Detroit
Phoenix
San Francisco
Washington, D.C.
San Jose, Calif.
Atlanta

Source: Forbes, Matt Woolsey (01/12/2009)

10 Cities Boasting Mini Sales Booms

2009-01-21T09:43:00.001-08:00

Some cities that were hardest hit by the real downturn are experiencing mini sales booms.

Las Vegas real estate properties are down 28 percent in price, but sales of homes are up 15 percent.

Motivated buyers accounted for 64 percent of Las Vegas sales in October, says Radar Logic, a derivatives firm. That’s the highest rate in the country.

"There's a pretty active housing market, it's simply at a lower-priced inventory," says Michael Feder, chief executive of Radar Logic. "And there are now bidding wars taking place over homes in foreclosure."

Phoenix and San Diego are reporting similar experiences.

"We're clearing out the bad news," says Kiva Patten, a director at Merrill Lynch specializing in housing derivatives.

"By the end of 2010 – that's where we're calling the bottom in the forward market. You're going to get a small price appreciation in 2011," says Patten. "It's not like the turn is 10 percent per year, it'll be something like 3 percent or 4 percent."

Here are the cities where experts say it makes the most sense to buy now.

Las Vegas
Sacramento, Calif.
San Diego, Calif.
Los Angeles
Detroit
Phoenix
San Francisco
Washington, D.C.
San Jose
Atlanta

Source: Forbes, Matt Woolsey (01/12/09)

More foreclosures predicted for 2009

2009-01-21T09:39:00.001-08:00

by Catherine Reagor - Jan. 15, 2009 01:00 PM
The Arizona Republic

Foreclosures in metropolitan Phoenix will continue to climb in 2009, says prominent Wall Street housing analyst Ivy Zelman, a factor that will continue to hold back any recovery of the Valley's housing market and overall economy. Zelman said lenders need to find more ways to help struggling homeowners find lasting solutions.

Zelman's assessment was one of several predictions from national economists and real estate analysts at Urban Land Institute Arizona's Real Estate Trends Conference today at the Phoenix Convention Center.

This annual conference has become a must-attend event for people involved in Arizona real estate because of the expert speakers and their honest, even startling projections. Last year, there was stunned silence when analysts predicted home prices would fall 30 to 35 percent off their 2006 peak and any recovery was years away. So far home prices are more than 40 percent off the peak.

Two other national experts predict Valley home prices may not begin to rise again until 2012. They said prices will continue to drop this year and in 2010, and either level off or climb slightly in 2011. That's because metropolitan Phoenix's economy was hit harder than most cities because of its dependence on housing, construction and financial services, three industries at the center of the current economic downturn.

“Those industries are the three ground zeros for problems the American economy is having right now,” said New York-based economist Arthur Margon of Rosen Consulting.

“Foreclosures are the bugaboo for Phoenix's housing market,” said Tim Sullivan, a housing analyst with Sullivan Group Real Estate Advisors of San Diego. “Home prices are a neighborhood by neighborhood indicator. Prices can depend on how many foreclosures are in a neighborhood.”

This year's conference has drawn more than 1,000 real estate executives, analysts, government officials and consultants.

Foreclosures remain the pressing issue for metropolitan Phoenix's housing market recovery. All agree home prices won't stabilize until foreclosure rates fall for several months in a row. Lower priced foreclosure sales depress home values overall. Valley foreclosures topped 40,000 in 2008, a new record.

Housing resales in Valley were up in 2008

2009-01-21T09:31:00.001-08:00

Rocketing foreclosures dragged down prices

by J. Craig Anderson - Jan. 15, 2009 12:00 AM
The Arizona Republic

Valley home-resale transactions increased slightly in 2008 from the previous year, but foreclosure activity more than quadrupled, dragging the median resale price down 23 percent, the latest Arizona State University report shows.

Resales totaled 46,745 in 2008, up nearly 2 percent from 46,035 the previous year, according to a report issued Wednesday by ASU's realty studies in the Morrison School of Management and Agribusiness.

The median resale price for detached single-family homes fell 23 percent from 2007 to 2008 without including foreclosed-on home prices. The decline was 27 percent with foreclosures factored into the total.

The median resale price for condominiums and town homes decreased by 11 percent in 2008, without including foreclosures, and by 15 percent with foreclosures included.

Foreclosure activity on detached, single-family homes, also known as trustee sales, increased 310 percent, from 8,535 in 2007 to 34,955 the following year, according to ASU.

Realty-studies Director Jay Butler predicted the housing slump will continue well into 2010 with "eroding consumer confidence, possibly additional job losses and tighter mortgage-underwriting guidelines."

The market's best hope is that more homeowners will receive loan-modification agreements from their lenders in 2009 to help them prevent foreclosure, Butler said.

"Unfortunately, the extremely weak economy is leading to mounting job losses that could severely impact the ability of a troubled household to have the needed income to qualify for one of the possible programs," he said.

Foreclosure activity has skyrocketed as home equity has evaporated and many homeowners' monthly mortgage payments have reset to higher interest rates.

Butler noted that price declines and trustee-sale activity varied considerably throughout the Valley in 2008.

El Mirage in the West Valley suffered the sharpest decline in home-resale prices, with the median falling 38 percent to $120,000 from $195,000.

Homes in Sun City West retained the greatest percentage of their resale value from 2007 to 2008, with the median price decreasing 11 percent.

The age-restricted West Valley community also had the fewest foreclosures by far, with only 35 trustee sales for the entire year, up from 15 foreclosures in 2007.

Study Predicts Riskiest Markets for Price Drops

2009-01-21T09:28:00.000-08:00

Home prices are likely to fall still more, according to a new study by mortgage insurer PMI Group Inc.

The study predicts that home prices will be lower than they are now in 97 percent of 381 metro areas by the third quarter of 2010.

The riskiest markets for falling home prices are California’s Inland Empire; the greater Miami, Fla., area; Lake Havasu City-Kingman, Ariz.; and the Cape Coral-Fort Myers, Fla., areas.

The cities with the lowest risk of further declines include the Dallas-Fort Worth area, greater Houston and Pittsburgh.

Home prices showed signs of recovery in the third quarter of 2008, but with rising unemployment rates, home prices fell further in the fourth quarter, says PMI chief economist David Berson.

Source: The Wall Street Journal, Ruth Simon (01/13/09)

Program to expedite short-sale process of homes

2009-01-21T08:21:00.001-08:00

by Catherine Reagor - Jan. 14, 2009 12:00 AM
The Arizona Republic

Struggling Valley homeowners could get some relief through a new pilot program from Fannie Mae. The initiative won't help people keep their homes, but it could help them avoid foreclosure.

Mortgage giant Fannie Mae is testing a program to pre-approve short sales in Phoenix and Orlando, two of the areas hardest hit by foreclosures. The goal is to expedite the often difficult short-sale process by Fannie Mae agreeing on a sales price for a home on the brink of foreclosure and the loss it will take before a deal is even done.

Short sales allow homeowners, who can no longer afford their payments, to sell their house for less than they owe the lender to avoid foreclosure. The deal must be pre-approved by the lender, and usually the remaining debt owed on the home is forgiven.

Foreclosures in the Valley have soared during the past year even as many real-estate agents and homeowners tried to negotiate short sales. The problem has been that short sales take too long and often don't go through because an agreement over price can't be reached with lenders in time.

The Arizona Regional Multiple Listing Service is working with Fannie Mae to launch the expedited short-sale program.

Brett Barry, a Valley real-estate agent with Realty Executives, is concerned about Fannie Mae's reputation for overpricing homes. He said it will help to have a pre-approved price on houses in the program, but if the price is much higher than values in the area, it won't help the house sell before foreclosure.

Fannie Mae's short-sale program focuses on homes listed to sell for less then the mortgage balance and that are being serviced by Countrywide Financial.

This is one more move to mitigate foreclosures. In December, foreclosures and pre-foreclosures dipped, according to Information Market. But analysts are concerned that the drop is due to a foreclosure moratorium by Fannie Mae and Freddie Mac during the holidays and that many of the loans will go back into foreclosure. If the program is successful, it will be expanded to other parts of the country.

CityScape update

During these tough economic times, developments able to get financing and move forward are to be lauded.

Downtown Phoenix's $900 million CityScape project is one example. The development has been downsized because of the recession, but that's so much better than being put on hold. Construction is under way on CityScape's first skyscraper. The high-rise, across from US Airways Center, already has several tenants. Most recently the law firm Ballard Spahr Andrews & Ingersoll signed to move into the project.

Construction of the CityScape's condominiums is on hold for now. Some leaders are disappointed, but it seems like a wise business move considering the many other downtown condo projects competing for buyers now.

If you know of any sizeable developments that construction has recently started on, please send me information.

Builder Outrage Delays RESPA Rule Change

2009-01-21T08:18:00.001-08:00

In response to a suit over the Real Estate Settlement Procedures Act (RESPA) by the National Association of Home Builders, Housing and Urban Development has delayed implementation of a controversial rule change for 90 days until April 16.

The new rule would have barred home builders from offering incentives to buyers when they agree to use builders’ affiliated mortgage and title companies. It was set to take effect Jan. 16.

NAHB argues that the new rule is arbitrary because it only applies to businesses operated by home builders. Affiliated businesses run by title insurers could still offer discounts.

Home builders say their incentives programs increase competition and offer consumers "a full range of options to explore the best possible deal to purchase a home."

William P. Killmer, vice president of NAHB's advocacy group, said in a court filing that the new rule would "greatly obstruct NAHB's members from stimulating consumer demand and moving excess supply."

Source: Inman News, Matt Carter (01/12/09)

Building boom continues for SE Valley medical facilities

2009-01-16T17:43:00.001-08:00

by Angelique Soenarie - Jan. 8, 2009 07:48 AM
The Arizona Republic

While most of the Valley is mired in a building slump, one industry appears to be bucking the trend.

Twenty five years ago, John Kressaty had only one choice for medical care in East Mesa. Now he has nearly a dozen.

Kressaty, who has had two open-heart surgeries, volunteers at Banner Heart Hospital, just a few miles from his home.

The specialty hospital, formerly Lutheran Heart Hospital, opened about eight years ago, pioneering a trend of hospitals opening or expanding along the U. S. 60 corridor, following the population boom as it moves east.

Since 1990, Mesa has seen 58 percent population increase, according to the U.S. Census, and healthcare is now the state's second largest employer.

"Hospitals tend to follow population and tend not to be built unless there is a place to support that," said John Rivers, chief executive officer of Arizona Hospital and Healthcare Association. The state's bed ratio is 1.9 beds per 1,000 population, which is actually lower than the national ratio of 2.7 beds, according to the American Hospital Association.

But the Southeast Valley is catching up.

In the last year, two community hospitals opened, and four specialty hospitals are on the drawing board. In addition, several existing hospitals are adding more beds and operating rooms.

"The demand for health services won't change because of the down economy," said John Harrington, chief executive officer at Banner Heart Hospital. He added that the two new hospitals in east Mesa, Mountain Vista Medical Center and Banner Gateway Medical Center, have helped meet more an increased demand for medical care.

"The need to construct was there," said Harrington, who recalls that in the mid 1980s, the Leisure World retirement community was the only major business in East Mesa.

Now, Mesa and Gilbert are benefitting from the number of jobs the healthcare industry is bringing. Banner Baywood Medical Center employs 997 Mesa residents and 323 Gilbert residents in its 2,113-member workforce.

That number doesn't include other jobs provided by community and specialized medical facilities in Mesa.

Banner Health is Mesa's second largest employer, with 9,100 jobs. That number will grow with the opening of the new Banner Children's Hospital in the fall.

For Kressaty, who moved his family from Wisconsin, quality medical care and education were at the top of his list in checking out places to live.

Little did he know, those preferences would pay off. He is now a volunteer at Banner Heart Hospital.

"I chose Banner Medical Center because it was highly rated. I always look for medical facilities to be close by," he said.

Office occupancies post major decline

2009-01-09T14:45:00.001-08:00

by J. Craig Anderson - Jan. 8, 2009 12:00 AM
The Arizona Republic

Valley businesses abandoned their offices in the final three months of 2008 at a rate that one large commercial real-estate brokerage said it has not seen in its nearly 30 years of tracking the statistic.

It's alarming evidence that supports accounts of plans on hold, continued layoffs and bankruptcies in a market that is accustomed to uninterrupted growth.

CB Richard Ellis released its fourth-quarter report Wednesday on the absorption rate for office, retail and industrial space, with all three sectors showing unusually poor results.

Office properties suffered the most, losing a net 548,334 square feet of occupied space in the last quarter of the year. That's 10 times the amount of negative absorption seen in the previous three quarters.

CB Richard Ellis broker Jerry Noble said nothing in the first three quarters of 2008 prepared him for the office-market freefall he saw in the final quarter.

"It was probably one of the worst quarters Phoenix has ever experienced," he said.

Office projects in the Phoenix metro area lost a total of 603,112 square feet of occupancy in 2008, making it the first year of negative absorption CB Richard Ellis has reported since it began tracking the market in 1981.

The vacancy rate increased by more than 5 percentage points to 19.1 percent, up from 13.9 percent a year earlier.

In the retail sector, vacancy increased to 7.5 percent from 6.2 percent at the end of 2007. The increase was caused by store closings, and commercial brokers say more of those are on the way after a dismal holiday shopping season.

Retail finished the year ahead by 3.4 million square feet in terms of absorption, but the fourth quarter saw a loss of 232,798 square feet, the report said.

Occupancy of industrial space increased by 629,838 square feet in 2008, according to the report. It was the first year since 1990 in which less than a million square feet of additional industrial space was occupied by businesses in a single year.

LDS temples boost property values

2009-01-09T13:16:00.001-08:00

Home values often rise near LDS sites

by Chelsea Schneider - Jan. 8, 2009 12:00 AM
The Arizona Republic

Homeowners near the proposed site of a Church of Jesus Christ of Latter-day Saints temple in Gilbert could see their property values increase, even in this depressed real-estate market.

As the focal point of the Mormon faith, a new temple tends to raise property values because church members like to live nearby. And for those outside the faith, temples have a reputation of being good neighbors and can anchor the long-term quality of an area.

The newest LDS temple in the U.S. opened in August in Twin Falls, Idaho. As has happened elsewhere, lots around the temple are now bringing higher prices than other places in the city.

Plans for the Gilbert temple were announced in April for a site on the corner of Pecos and Greenfield roads near Loop 202. Temples are also in the works for Phoenix and the Gila Valley in eastern Arizona. The site for the Phoenix temple will be announced soon.

Construction of three new temples reflects the growth of the LDS community in Arizona.

The new Gilbert temple is 13 miles south of the 81-year-old Mesa temple and is intended to serve the growing Mormon population in the southeast Valley, where about 100,000 Mormons live. The church recently built two Gilbert meetinghouses, where members gather on Sundays, and it expects to build more as Gilbert grows.

The Mormons hope to break ground for the Gilbert temple in about a year.

The new temple in Twin Falls provides a glimpse of what can happen in the surrounding neighborhoods.

Twin Falls' experience

When the site of the Twin Falls temple was announced, property values of houses across the street doubled overnight, Idaho developer Ken Edmunds said. This "temple effect" on a real-estate market is typical, Edmunds said.

Temples are considered houses of the Lord, and many of the Mormon faithful like to live in the shadows of their most sacred religious buildings.

Mormon temples also are relatively rare, so they attract people from wide areas. There are only 128 in the world. In recent years, the church's leadership has pushed for more temples to be built. Eight are under construction and 10 have been announced, including the three for Arizona. The state now has two temples, in Mesa and Snowflake.

A temple isn't a guarantee of desirable surroundings. The Mesa temple, the seventh-oldest still in operation, is surrounded by an area many say has deteriorated over time. The church and the city have worked on long-term rejuvenation plans.

But given the sprawling size of a temple's grounds, along with the quality of design and landscaping, many temples form a desirable and stable center for surrounding residential areas.

Twin Falls, with a population of more than 41,000, is about 20 percent Mormon and serves as the commercial hub for several bedroom communities surrounding the southeastern Idaho city. Before the temple was built, Twin Falls' previous claim to fame was being the site of Evel Knievel's unsuccessful 1974 motorcycle jump across the Snake River Canyon.

In Twin Falls, demand for homes near the temple was high as soon as the site was announced. There were even rumors that investors were knocking on doors around the site with offers to buy. Today, lots in a three-block radius of the temple are still priced higher than comparable land elsewhere in the city. Values range from $115,000 to $150,000 near the temple but drop by up to $40,000 in areas farther out, according to Terry McCurdy, spokesman for the church in Twin Falls.

Up to five families already have moved into Ensign Point, a custom-home neighborhood around the temple. Before the temple was built, Twin Falls-area Mormons traveled two hours to Boise for temple work.

Temples are different from meetinghouses, where church members gather on Sundays. Only members in good standing with the church can enter the temple. Sacred ordinances, such as marriages (called sealings) and proxy baptisms for the dead, are performed there.

Dick and JoAnn Irwin were among the first to move into the neighborhood across the street from the temple site 2 1/2 years ago. The Irwins, who are not Mormon, sold their farmhouse on the outskirts of Twin Falls because they were eager to move to an area that had a better setting than a typical suburban development.

"We couldn't ask for better neighbors," JoAnn said. "They did such a great job on the landscaping. It is beautiful and well taken care of."

The economic downtown has reduced demand lately, said Gayle Anderson, a Twin Falls real-estate agent. Still, she said, "in a market that's a little slower, I do feel (the temple) is a positive influence" and will still raise values once the market returns to normal.

In addition to raising home values, the temple has attracted three new major chain hotels in the area and plans for a fourth. About 160,000 people came to Twin Falls for a two-week public open house of the temple before it was dedicated. Now, 500 Mormons visit the temple every day, and weddings are held almost every weekend.

Spiritual attraction

Although some are drawn to the temple area for good home values, more may move close for spiritual reasons.

In the neighborhood near the Twin Falls temple, several couples said they didn't even consider property values. Instead, they wanted to live near a sacred space.

Dennis Brown and his wife, Valerie, live next to the temple in the Ensign Point development, the fulfillment of a dream that began four years ago when they heard the church would build a temple in Twin Falls.

"I couldn't believe it," Dennis said. "To me, it's such a blessing in my life. We wanted our kids and grandchildren when they came to visit to literally come to the temple."

The Browns' neighbors, Steve and Sally Victor, moved into their Ensign Point home in November. They never intended to sell their home in Twin Falls, but the draw of the temple was too strong.

"When I wake up in the morning and look out that window, I have the resolve and determination to live through the day and keep the covenants of being an honest and hardworking person," Steve said.

Brent and Marilyn Rasmussen live across the street from Ensign Point. They moved back to Idaho to be near the temple. Both grew up east of Twin Falls and lived in Portland, Ore., for 17 years. Brent, a retired FBI agent, says the temple serves as a visual reminder that he needs to keep his life in tune.

"(The temple) brings people closer together," Marilyn said. "Members of the church got really excited and drew closer together. It's the house of the Lord. It's a beautiful edifice and a symbol of good in the community."

Plans in Gilbert

Back in Gilbert, final plans for the temple still need town approval. The church hopes to begin construction in about a year. Temples can take up to two years to build.

The temple grounds will occupy about 10 acres. There have been talks about developing a custom-home neighborhood nearby.

If Gilbert mirrors Twin Falls, homeowners can expect gains even in a depressed housing market. The median home price for the area near the Gilbert temple site is now $255,000, down $20,000 from last year.

A few months ago, about 30 people filled a room in the Mormon meetinghouse near Pecos and Greenfield roads to learn about the Gilbert temple. Several neighbors from Whitewing at Higley Estates attended the meeting. They hoped the temple would keep houses occupied in the upscale Gilbert development, which borders the temple site.

Paul Gilbert, an attorney handling the temple project for the church, told the crowd he expects the temple to benefit property values, especially once construction begins.

"From our experiences, temples have definitely raised property values of surrounding residential areas," Gilbert said. "It's an extremely quiet use. You'll never hear noise emanating from the temple, and the church is very careful to use very generous setbacks from the street."

Kris Thompson, chairman of Gilbert's economic-advisory board, said that property values have at least stabilized around the temple site and that he expects to see more growth, especially after construction begins.

"There is an undercurrent or buzz taking place around the area the temple is set to be constructed," Thompson said. "Once we see ground break, property values will likely increase."

Federal Reserve Drives Rates Even Lower

2009-01-07T08:11:00.001-08:00

The Federal Reserve announced a plan last week to spend a half-trillion dollar buying up mortgage-backed securities.

As the new year dawns, the Fed's action has driven down interest rates on new mortgages and rates are expected to fall further.

The Fed said that it would start buying mortgage bonds early this month.

“The program stands to drive mortgage rates even lower, possibly to 4.5 percent," said Derek Chan and Nicholas Strand, strategists at Barclays Capital in a note.

"That's a huge deal for this mortgage market," said Kevin Cavin, a mortgage strategist with FTN Financial.

Source: The Wall Street Journal, Prabha Nataraian (01/02/2009)

Economy stalls Waveyard project, but developers optimistic

2009-01-06T16:25:00.001-08:00

by Gary Nelson - Jan. 4, 2009 12:00 AM
The Arizona Republic

Thirteen months ago, Mesa voters gave overwhelming approval to the idea of selling Riverview Golf Course and four nearby ball fields to a company that wants to build a water-sports paradise on the land.

In the aftermath of that election, the founders of Waveyard Development LLC said they would move quickly to build what they said would be Arizona's most popular man-made destination. They hoped to be turning dirt by this past summer and opening the mixed-use resort by early 2010.

Now, early 2010 is a little less than a year away. Instead of promising an opening day, it looms as the deadline for Waveyard to either close the deal or walk away from Mesa.

From the start, the project hinged on whether Waveyard founders Richard Mladick and Jerry Hug could prove to the city that they had hundreds of millions of dollars in solid financing. Until that happens, Mesa retains ownership of the land.

To no one's surprise, those loans haven't materialized amid the worst worldwide financial crisis since the Great Depression.

"We're talking about the worst credit cycle in the last 100 years," Hug told The Arizona Republic. "It's not like (other) things are getting done and Waveyard is not."

Although the Mesa project is stalled, Hug and Mladick said several things are working in their favor:

• Creditors who have kept them afloat for more than five years during the company's infancy are still supplying money, and the firm has not had to lay off staff.

• Negotiations and design work are under way to build Waveyards in Dubai and South Korea.

• Waveyard has been able to sell licensing agreements for amusement-park technology it has developed as it works on the Mesa project.

• Entertainment-oriented projects are more attractive to investors right now than traditional developments such as recession-stricken housing subdivisions and shopping malls.

• A down economic cycle might actually help the project in the long run.

"We're very fortunate that we're not opening our doors today," Mladick said. With commodity and labor costs falling, he said, "the cost to execute on our vision is coming down almost daily."

Earlier this year Mladick said the Mesa project could cost $750 million. That was up from the initial estimate of $250 million, partly because of soaring costs at that time and partly because some parts of the project had grown larger than originally planned.

Mladick said Waveyard could have been in big trouble had it started construction with financing from companies that imploded because of the subprime mortgage crisis. Instead, he said, "We'll let the markets settle and play out," and the company is working with several possible lenders to fund the Mesa project.

Mayor Scott Smith said he and City Manager Chris Brady are in regular contact with Waveyard and planned to meet with Hug and Mladick this week.

"We recognize that with the financial markets the way they are, things aren't going to change overnight," Smith said.

Meanwhile, he said, Waveyard still has time to pull things together before the agreement to buy Riverview expires on Jan. 11, 2010.

Mladick said Waveyard could ask for an extension of that deadline, but such a request would be accompanied by an enormous site plan and other paperwork showing the project was moving ahead.

He promised that despite the delay, Waveyard will get built.

"It's just a matter of timing, when the credit markets free up to provide us that opportunity," Mladick said.

IRS touts real estate tax breaks

2009-01-06T09:14:00.001-08:00

BY SHANNON BUGGS / Houston Chronicle

Published: January 3, 2009

Home is where the tax relief is. The Internal Revenue Service and the U.S. Department of Energy are touting the following real estate-related tax breaks Congress recently created or extended for individual taxpayers:

→Mortgage Forgiveness Debt Relief Act of 2007.

For taxpayers who lose their homes in foreclosure.

What: Allows homeowners to exclude from income any debt forgiven in a home foreclosure.

→First-time home-buyers' credit.

For first-time home buyers who purchase homes between April 9, 2008, and June 30, 2009.

What: The credit is 10 percent of the purchase price up to $7,500 for either single taxpayers or married couples filing jointly. The tax credit must be paid back in equal payments over 15 years. The IRS defines first-time home buyers as people who have not owned a home in the three years prior to a home purchase.

→Property tax deduction.

For taxpayers who pay real estate taxes but do not qualify to itemize other tax deductions.

What: Increase your standard deduction by as much as $500, or $1,000 if you are married and filing jointly, without having to itemize.

→Energy-saving home improvement credit.

For homeowners who purchase and install energy-efficient windows, insulation, doors, roofs and heating and cooling systems.

What: Save your receipts to file for a tax credit for the amount you spent on the improvements up to $500. However, to qualify, the improvements can't be "placed in service" before Jan. 1, 2009 or after Dec. 31, 2009.

→Residential renewable energy credit:

For homeowners who install solar electric systems, small wind systems or geothermal heat pumps.

What: A 30-percent credit for solar electric systems placed in service between Jan. 1, 2006, and Dec. 31, 2016.