Why the Foreclosure Crisis is Hard to Fix

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

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

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

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

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

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

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

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

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

Valley home price drop leads nation, index says

October 28, 2008 - 1:05PM

Tony Natale, Tribune

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Associated Press contributed to this report.

 

Local builder goes out of business

Construction lender cut credit for Brown Family

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

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

 

Falling home prices erasing what many Valley owners gained

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

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

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

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

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

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

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

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

Foreclosure wild card

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

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

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

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

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

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

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

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

Investors return

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

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

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

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

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

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

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

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

Hitting bottom

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

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

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

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

 

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

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

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

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

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

More remain on the market.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Valley existing home sales leap 70%

October 24, 2008 - 6:09PM

Edward Gately, Tribune

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Home values stay ahead of 2004 levels

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Master plan for Gateway nears OK

by Gary Nelson - Oct. 23, 2008 11:01 AM
The Arizona Republic

After nearly two years and much hand-wringing, a master plan to govern Mesa's Gateway area is all but ready.

There'll be one more public meeting to gather input, a few more official discussions, and then Mesa will have a plan to propel the area around Phoenix-Mesa Gateway Airport into a hoped-for future as a 21st century "aerotropolis" with worldwide appeal.

The first steps in that direction already have been taken with last month's announcement that two glitzy resorts and a big convention center will be built east of the airport.

But the plan discussed Thursday by the council in a joint meeting with the Planning and Zoning Board covers far more than that.

It divides the airport and surrounding areas into four zones, all of which will employ the same kind of newfangled "form-based" zoning that will characterize the Mesa Proving Grounds project being developed by DMB Associates.

That means more emphasis on the size and form of buildings than on their specific uses.

"We're not necessarily excluding any use from any place," Planning Director John Wesley said.

And it means, according to the latest version of the plan unveiled Thursday, that some kinds of housing could be built northwest of the airport's runways, in what's called the "Inner Loop District."

Whether to allow housing there has long been an issue as the council has stressed protecting the airport as the region's top economic generator, and Councilman Scott Somers asked Thursday why the city was even considering the idea again.

Wesley said no housing - and no other uses, for that matter - will be allowed automatically.

"Developers must show how their projects are consistent with the goals" of protecting the airport and generating more than 100,000 high-quality jobs in the area, Wesley said.

Wesley also said developers who submit site plans that might have been acceptable under old zoning regimes probably will be encouraged to rework them to create more pedestrian-friendly, environmentally sustainable projects.

Mayor Scott Smith said the Gateway plan is revolutionary for Mesa.

"We no longer can look at each property as a stand-alone," Smith said. Projects must integrate with one another.

"It's a change," Smith said. "It's a big change. And I can see that being very challenging" as the city and developers feel their way through a new way of doing business.

Key dates

Mesa's Gateway area strategic plan, nearly two years in the making, is nearing final approval. Here's what's on tap:

• Public meeting to review and discuss the plan, 6-7:30 p.m. Wednesday, Fire Station 217, 10434 E. Baseline Road.

• Design Review Board vote, Nov. 5.

• Planning and Zoning Board vote, Nov. 20.

• Final City Council vote, Dec. 1.

 

Data: Foreclosures pull down values

by Catherine Reagor - Oct. 23, 2008 12:00 AM
The Arizona Republic

Here's a new way to help better track home prices in Valley neighborhoods: foreclosure resales.

For the first time, homeowners can see exactly how foreclosures are affecting their home values.

New data tracks the prices of homes taken back by lenders through foreclosure and then resold. It then compares that median price of the foreclosure resales to the median price of regular resales in a ZIP code.

With that, homeowners can look at the overall median price for home sales in their neighborhood and see how much foreclosures are pulling down overall values.

"This is the indicator to watch now," said Tom Ruff, analyst with real-estate data-research firm Information Market, which began tracking foreclosure resales a few months ago. "Everyone knows foreclosures can drag down home prices in an area. It's surprising to see how low lenders are selling some homes for in the Valley now."

In summer 2007, when Valley foreclosures had just started to climb, the foreclosure-resale number wasn't that important an indicator of where the housing market was headed. But now that foreclosures are at record levels and haven't yet peaked, what happens to those houses is key for neighborhoods.

In a normal housing market, most homes to go into foreclosure are sold at trustee-sale auctions. Since last fall, about 98 percent of all homes to go into foreclosure have instead been taken back by the lender. What lenders resell foreclosure homes for now is driving home values, particularly in neighborhoods where a higher percentage of existing-home sales are foreclosure resales.

Foreclosure resales make up at least one-fourth of all sales in a many Valley neighborhoods now. In a few areas, the rate of foreclosure resale is much higher. In the El Mirage ZIP code 85335, there were more foreclosure resales than regular resales. The overall median home price in the area is $135,000. The foreclosure resale is $133,750. In most other Valley neighborhoods, the overall median price is $20,000 to $40,000 higher than the foreclosure resale.

"These foreclosure homes need to sell for the Valley's housing market to recover," said Brett Barry, a Phoenix real-estate agent with Realty Executives. "It's a good thing they are selling, but it's not going to make you happy if you are a homeowner in a neighborhood with a lot of these properties."

He said for buyers who are patient and will work with lenders, there are great deals in foreclosure resales.

Gloria Giroux recently bought a foreclosure-resale home from Deutsche Trust Bank. She paid $560,000 for a 3,400-square-foot Carefree home on a half-acre lot that had sold for $815,000 in 2005. "The pool was green. It needed work, and it was frustrating waiting for answers on my offers from the bank," Giroux said. "But I got it, and the house behind me is almost identical and sold for $839,000 in April of this year."

 

Signs of a record fall

Valley's home values recorded an average 24 percent one-year decline in July. Although the skid shows signs of slowing, real-e

by J. Craig Anderson - Oct. 21, 2008 12:00 AM
The Arizona Republic

The Valley's housing market plummeted past another milestone in July, tying a record 17 consecutive months of declining home values.

The mark was set in the early 1990s after the savings-and-loan industry implosion.

The latest Arizona State University Repeat Sales Index, released Monday, reported an average one-year decline in home values of 24 percent from July 2007 to July 2008.

Preliminary data for August and September shows the trend continuing, according to the report, which would make it the region's longest downturn ever recorded.

The Repeat Sales Index compares sale prices of homes that have sold more than once, measuring the rate at which they increase or decrease from a year earlier.

The latest report shows the ongoing decline in home values continued to accelerate in July, though the rate of acceleration has slowed over the past few months.

ASU real-estate Professor Karl Guntermann said the Valley has not seen such a prolonged period of home price decreases since its last major real-estate recession more than 15 years ago.

During the previous downturn, he added, prices fell at a far slower rate.

Southwest Valley homes fared the worst during the 12-month period ending in June, with a 35.8 percent drop in value. Same-home sale prices in the northeast Valley diminished the least, at 14 percent.

Homes values declined by 25.6 percent in Phoenix, 28.4 percent in the northwest Valley and 23.7 percent in the southeast Valley.

The overall, year-over-year rate of decline was 1 percent more in July than in June, which means home prices fell just a bit more than they did the previous month. By comparison, June prices fell 3 percent faster than in May.

The rate of decline appears close to leveling off, Guntermann said, but prices are likely to remain on a downward slope for some time.

"It probably will take months for the index to move up to zero, which would mean that house prices have stopped declining from one year ago," he said.

Guntermann said he expects to see year-over-year declines of 26 percent in August and 27 percent in September.

"The decline may not level off until the RSI (the Repeat Sales Index) is down close to 30 percent from the prior year," he said.

 

Buckeye could gain 17,000 jobs

by Eric Graf - Oct. 17, 2008 11:18 AM
The Arizona Republic

A newly proposed industrial development in southwest Buckeye could bring more than 17,000 jobs to the town, officials said.

The Buckeye Logistics Transportation Center would stretch out over 11,000 acres near Arizona 85 and Old Highway 80, along the Union Pacific Railroad corridor. A rail switching yard would be a major component of the center, making it a hub of industrial activity.

"It's going to make a significant impact on the town," said Lori Gary, director of Buckeye's Economic Development Department. "It will guarantee huge gains in employment and the tax base."

The focus of the project is rail-served distribution, said Eddie Gutzman, manager of Nevada-based Benessere Land Holdings LLC, the developer behind the project.

"The current economy is creating demand for rail-served industrial sites as fuel costs rise," Gutzman said. "Rail freight is much cheaper than trucking freight."

The area, a collection of 14 parcels, was initially slated to be a housing development. But the real estate market has weakened and the town has shifted its focus to drawing employers. About 40,000 live in Buckeye, up from roughly 6,000 in 2000.

"We've had very rapid housing growth and employment has not grown at the same rapid rate," Gary said. "One of our goals is to bring in companies to provide jobs so people can live here and work here, too. There is an ample workforce to tap into."

If the projections are correct, the job offerings will be diverse, Gutzman said.

"It is anticipated that many distribution companies will locate in the project . . . so the jobs will include all levels, from dock workers to haulers, account managers to executives in every sector, including industrial and housing," he said.

Despite the challenges in today's depressed economic climate, Gary said both the developer and the town are moving ahead with the planning stages. They want to ensure they will be "ready to start marketing the industrial park when the market picks up," she said.

Gary noted the striking number of jobs the Buckeye Logistics Transportation Center could create is only an estimate and could change as the project moves forward. Most jobs would be at or above the state's median income of $17 an hour, according to Cheryl Covert, management assistant for the Economic Development Department.

The town is not covering any of the center's costs, nor did it provide incentives to the developer, Covert said. The town is only responsible for infrastructure needs, she said.

The Town Council is expected to review the project Tuesday.

 

Mervyns will shut down remaining stores

by Russ Wiles - Oct. 18, 2008 12:00 AM
The Arizona Republic

Retailer Mervyns LLC said it will close its remaining stores and wind down its business by selling off inventory at discounts as the holiday season approaches.

The action affects the 16 Mervyns stores in Arizona that were not among the four being shut in an initial round of closings that started in August.

Until recently, Mervyns operated 20 stores in Arizona, the second-highest store total next to 128 in California.

The chain precounted 175 stores and 20,000 associates in seven Western states.

The company, based in Hayward, Calif., referred callers to a press release in which management cited the tough economy. Retail sales fell 1.2 percent in September, the weakest showing in more than three years. California's economy has been very soft.

"We are disappointed with this outcome but the company's declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action," said John Goodman, Mervyns' chief executive officer.

Mervyns plans to pursue the liquidation under the Chapter 11 bankruptcy code, which typically allows companies to retain more control over the selling of assets. The company said it intends to retain an outside professional services firm to assist in the liquidation sales of inventory.

Founded in 1949, Mervyns filed for bankruptcy protection in July, squeezed as it was between deep-discount competitors and upper-end department stores.

Mervyns was bought by private investors from Target Corp. in a $1.2 billion leveraged deal in 2004. Mervyns later sued the investors, including Cerberus Capital Management and Sun Capital Management, claiming they forced it into the Chapter 11 filing by stripping away its real estate, then charging high rent.

The announcement represents yet another blow to the nation's malls, which are grappling with increasing vacancy rates in a deteriorating economic environment.

On Tuesday, specialty retailer Linens n Things, which filed for bankruptcy protection in May, announced it will begin liquidation sales at its stores as early as this week.

 

Unemployment rate in Ariz. rose to 5.9% in September

by Betty Beard - Oct. 17, 2008 12:00 AM
The Arizona Republic

Arizona's unemployment rate, which has been rising faster than the national rate, climbed in September to 5.9 percent, just under the national rate of 6.1 percent.

In the past year, the state's unemployment rate has risen 55 percent, while the national rate rose 30 percent.

"Arizona has been hit harder more than other states by the housing downturn," said Frank Curtis, director of data systems at the Arizona Department of Commerce.

The number of total non-farm jobs, though, rose by 7,900 from August to September because of seasonal back-to-school hires.

It was the second consecutive month of job-total increases, but the total was 2.2 percent less than a year earlier.

Construction, which lost an additional 4,000 jobs in September, had its 13th consecutive month of losses.

Retail jobs fell 3.8 percent compared with a year earlier, a foreboding sign for the upcoming holiday season.

 

Arizona's indicators a mixed bag

by Betty Beard - Oct. 12, 2008 12:00 AM
The Arizona Republic

Initial claims for unemployment insurance in Arizona jumped 41.5 percent in August compared with the same month a year earlier as slower job growth continues to take its toll.

Retail sales fell again in August compared with 2007, but the dip was not as bad as in July, according to this month's Republic Arizona Economic Snapshot.

Other indicators offered a mix of good and bad news.

• The number of homes sold rose again in August compared with a year earlier, offering hope that the housing market may have bottomed. Although the Arizona Regional Multiple Listing Service's numbers don't show September totals yet, one Realtor said last week that 6,136 homes were sold in September, the highest in about two years.

But the median price has fallen back to a level not seen since late 2004, ARMLS says. The housing bubble that started in 2005 may have completely burst, wiping out millions of dollars of equity but also making homes more affordable.

• The total number of non-farm jobs increased slightly in August because of seasonal back-to-school hires, but the Arizona Department of Commerce expects the state to lose almost 2 percent of its jobs this year and next.

• Auto-sales receipts tumbled 30 percent from August 2007 but recorded a slight increase from July.

• Gasoline prices fell for the third straight month in September. The number of gallons of gasoline sold also has been falling and is at the lowest point in at least four years, hurting the state's Highway User Revenue Fund, which pays for roadway construction and maintenance. Motorists pay 18 cents for every gallon of gas they buy to the fund.

Doug Nintzel, a spokesman for the Arizona Department of Transportation, said people are driving less and using more fuel-efficient vehicles.

 

Will work for down payment

Builder gets creative after loss of seller-funded assistance

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

One local home builder is trying to paint itself out of a corner by handing out smocks, rollers and brushes to prospective buyers.

When builders found out in late July that the government was going to ban seller-funded down-payment assistance on Federal Housing Administration loans, they began a mad scramble to come up with another way to offer no-down-payment or low-down-payment mortgages.

After poring over FHA guidelines in search of a loophole, this is what Chandler-based Trend Homes came up with: paint equity.

FHA rules allow a home's seller to contribute up to 2 percent of the buyer's required 3.5 percent down payment as compensation for work performed by the buyer on the home.

Thus was born the Trend Homes Work Equity Program.

It's a simple concept: Spend three to five shifts painting the interior and/or exterior of your future home, and the home builder will reduce your down payment to as little as 1.5 percent of the sale price.

It's actually an interesting idea that might appease a few critics of seller-funded assistance, under which home builders were merely gifting down payments to buyers through a non-profit organization. The practice accounted for as much as 90 percent of new-home sales in recent months.

Unlike that program, which was banned effective Oct. 1, paint equity doesn't cover the entire down payment, and it requires home buyers to sweat a little for the money.

It can't be used to sell inventory homes, also known as spec homes, because they've already been built and painted.