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.

 

Reincarnated Trend Homes finds its way

by J. Craig Anderson - Oct. 10, 2008 12:00 AM
The Arizona Republic

This year has been a difficult one for Trend Homes, but in some ways the Chandler-based home builder has been fortunate.

It was on the brink of insolvency in January when private equity firm Najafi Cos. agreed to purchase the bulk of its assets through a Chapter 11 bankruptcy proceeding.

Now, the second incarnation of Trend Homes, or as company CEO Reed Porter calls it, "T2," is trying to pick up where its failed predecessor left off.

Porter spoke with The Arizona Republic recently about the company's recent troubles and where things stand today.

Question: How is the company's health now compared with a year ago?

Answer: First of all, it is a new company. The Najafi Cos. formed a new legal entity. They acquired assets of the old company through the bankruptcy, including homes, lots, computers and other equipment. They also purchased the names Trend Homes and Classic Communities and hired all the (50) old employees, too. But it is a brand-new company that doesn't have any of the old issues.

Q: What led Trend Homes to file for bankruptcy protection in January?

A: It was kind of what would be known as a prepackaged bankruptcy. The deal was heavily negotiated with the creditors. Najafi wanted to buy the company's assets, but those assets had decreased substantially because of the housing market. They were no longer worth as much as the debt. So the old Trend Homes sold almost all of its assets to Najafi through what's known as a 363 sale, which can only happen through Chapter 11 reorganization. It's a complex process that allowed Najafi to purchase assets and assume some of the debt. The old (company) is still in Chapter 11.

Q: What's the relationship like with Najafi, and what role does Trend's new owner play in day-to-day operations?

A: We now have new credit that allows the company a fresh start to go ahead and continue to do business, and we can offer homes at today's market price. We're no longer hanging around with a bunch of overpriced assets. Our new home prices are competitive with foreclosures and short sales, and we're ready to go. Trend's six communities completed construction on all the unfinished homes this summer. We're eager to get some new homes sold in those communities.

Q: Several weeks ago, the company was trying to reach an agreement with its former land bank, Taro Properties Arizona, to buy nearly 500 vacant lots inside the partially built Cooley Station North subdivision in Gilbert that were going into foreclosure. What was the outcome of those talks?

A: When Taro filed for bankruptcy (in August), that stayed the foreclosure. We're still trying to put a deal together to buy those lots, but there's no plan at all. Certainly we have an interest in continuing to build homes there. The new Trend Homes will continue to build homes in six of the old Trend's seven communities, but Cooley Station North is being treated differently because it has a different bank. For whatever reason, they didn't like the terms that the other bank liked.

Q: Even though you don't have any plans to continue building homes inside Cooley Station North, you are still the sole member of its homeowners association board of directors. Are you planning to step down from that position?

A: That's being worked out through the Taro bankruptcy. The new Trend Homes doesn't have any assets in Cooley Station North, but Taro owns 65 percent of the property. The last thing (Taro) wants is for the property to decrease in value. They've got $30 million worth of land that they're trying to protect. The management company is still operating, but everyone's doing all they can to cut costs and services during these difficult times. It's a challenge everywhere. Every single partially built community is having trouble with the HOA.

 

Housing Inventory Tightens in September

The number of homes for sale in the 28 markets tracked by online real estate company ZipRealty fell 1.6 percent in September.

Overall, the September inventory is down 7 percent from a year ago in the Zip Realty-tracked metro markets. Zip's accounting includes only homes listed in multiple-listing services and many foreclosed homes aren’t included in those databases.

Barclays Capital estimates there are 811,000 bank-owned homes in the U.S., up from 129,000 two years ago, and predicts that the total will rise 60 percent before peaking late next year.

Source: The Wall Street Journal, James R. Hagerty (10/09/2008)

Businesses hope a new era arrives with rumble of light rail

by Chad Graham - Oct. 9, 2008 12:00 AM
The Arizona Republic

Light rail is giving Central Avenue a chance to become Phoenix's premier boulevard.

The avenue's 3-mile stretch from just south of McDowell Road to Camelback Road is a jumble of disconnected identities. High-rise office towers back up to historic neighborhoods. A world-renowned art museum sits across the street from a CVS pharmacy.

It is the address for the Heard Museum and Phoenix Public Library's main branch, two of the most architecturally significant buildings in the Valley. Yet there are acres of empty lots, as well, many in decades-old holding patterns as past excitement and blueprints faded.

"The light rail provides that avenue to put together the final pieces," said Phoenix City Councilman Tom Simplot, who represents part of the Central Avenue corridor and is chairman of Metro light rail's board of directors. "We will have a live, work, play environment."

Promising future

Although it still might be a decade away, a more vibrant Central Avenue could mean more residents living and working in the area. It could mean well-heeled professionals and First Friday artists shopping at boutique stores and frequenting independent coffeehouses and unique restaurants.

Central Avenue could become the place where suburbanites grab a drink or dinner and then take light rail to a sporting event or concert downtown. It could become a destination street like Mill Avenue in Tempe.

"(It) could be a very walkable, shoppable street as far down as you want to go," said Brad Plumley, co-owner of Haus Modern Living. "There's a lot of empty space."

His business, which sells items from $4.50 luggage tags to $15,000 Italian sofas, moved this summer from Biltmore Fashion Park to near a Central Avenue light-rail stop.

"Ideally, Central would be more cosmopolitan with more locally owned businesses opening up and selling their products," he said, adding that he would like to see the area be known as the antidote to the big-box chain stores common elsewhere in the Valley.

Economic pain

Until the late 1980s, Central Avenue was a center for corporate headquarters and ritzy living, but the artery dimmed after the recession of the early 1990s.

The street's image began to re-emerge in recent years with the development of luxury condominiums - with everything from sleek and modern designs to stately Victorian row houses.

With light rail coming, the avenue readied for its largest building boom in more than a quarter-century, but the real-estate bubble burst before much of the construction began. Developers again abandoned or delayed projects.

It may take a decade after light rail opens to spur such wide-scale development again, Simplot said.

"Until we get a track record of sustainable ridership, I don't think we're going to see the developers finding the financing to be able to build in the short term," he said. "We know that there is a lot of excitement from the development community about the potential and possibilities. Once the financing comes back into Arizona, we know . . . there will be building that will be going on: more apartments, more condos, retail, commercial, office space."

Luxury living delayed

David Pourbaba, CEO and founder of 4D Development & Investment in Los Angeles, still hopes his luxury-condominium project will be built.

Cielo Phoenix, a 36-story building of 500 condominiums with units initially priced from $300,000 to $2 million, has been delayed until at least next year. It was to have been the new home to Arizona Cardinals quarterback Matt Leinart.

"Right now, the market is just not there," Pourbaba said. "The capital market is going to get worse through the end of the year, but we expect it to get better in the second quarter of 2009."

Still, he has faith that light rail will draw new residents to the area after the economy recovers and that they will want a nice place to live.

"At the end of the day, Phoenix is too big of an area, and the driving just makes people tired," he said. "I think there will be some conservation, people will want to be closer, and the only way to do that will be to go vertical."

Hip and cool already

What might Central Avenue look like in 10 years? Some signs of urban hip are already in place, and others are on the way.

One corner to watch is Central Avenue and Camelback Road, which already has boutiques like Frances Vintage and Halo Precision Piercing.

Postino Winecafe, an eatery in the Arcadia neighborhood, will open a second location, Postino Central, at the former home of Katz's Deli on Central Avenue. It is set to open by January. Highly anticipated restaurants Cyclo and St. Francis Place are set to open nearby.

At the corner of the two major streets, a residential and hotel project has started moving through the city-planning process. Light rail will go behind the property diagonally, making it one of the easiest places to get to.

Construction woes

Down the street, near Steele Indian School Park, there is Lux Coffee, a hip hangout with minimal decor and works by local artists. The coffee bar remained busy through the construction that devastated other businesses, but it is ready for that messy chapter to be finished.

Jeff and Tara Fischer bought the coffeehouse in October 2005. Light-rail construction began in early 2006.

Jeff remembers the time the restaurant's water was cut off and it couldn't serve coffee. Construction limited patrons' access into the parking lot.

"The construction was out of our control, so we focused on things that we could control," he said. "We shifted away from being predicated on volume and more predicated on having a really quality experience for everyone that came in."

They tried to provide the best individualized service possible, in part by memorizing customers' names and usual orders.

When Jeff Fischer looks at Central Avenue now, he still sees a lot of the empty lots left by the mortgage fallout.

"I hope the light rail fills in some of those voids," Jeff said.

 

Treasury Rushes To Set Up Rescue Program

The Treasury Department plans to hire five to 10 asset management firms that will set up a process to buy up to $700 billion of distressed mortgages and mortgage-related assets from financial firms.

One firm will be selected by Friday to provide custodial services such as tracking cash and assets. The asset management firms will be named next week.

Federal Reserve Chairman Ben Bernanke has said the government won't pay "fire sale" prices for the distressed assets, which would be less likely to achieve the bailout plan's objective of bolstering the financial sector.

Only companies with $100 billion in bonds and other fixed-income assets under management are eligible to apply to be asset managers, the department said, though future contracts will be opened to small businesses. Among those expected to bid are: Legg Mason Inc., Blackrock Inc. and bond manager Pacific Investment Management Co., or PIMCO.

Some anaylsts are concerned that the short timetable will result in the government overpaying for services. "We can't criticize them for rushing when we're telling them it's an emergency," said Steven Schooner, a law professor at George Washington University, but "there's no question when you rush, the contracts tend to be less well-drafted ... and lead to less disciplined cost control."

Source: The Associated Press, Christopher S. Rugaber (10/07/08)

Pending Home Sales Up Sharply

Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, according to the NATIONAL ASSOCIATION OF
REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, jumped 7.4 percent to 93.4 from an upwardly revised reading of 87.0 in July, and is 8.8 percent higher than August 2007 when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4.

Improved Affordability

Lawrence Yun, NAR chief economist, says home buyers were responding to improved affordability. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island, and the Washington, D.C., region,” he says.

“The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It’s unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we’re hopeful most of the increase will translate into closed existing-home sales", adds Yun.

The PHSI in the West surged 18.4 percent to 109.5 in August and remains 37.8 percent above a year ago. In the Northeast the index jumped 8.4 percent to 79.8 and is 2.0 percent higher than August 2007. The index in the Midwest rose 3.6 percent to 84.5 in August and is 6.6 percent above a year ago. In the South, the index increased 2.3 percent to 96.0 but is 2.1 percent below August 2007.

Yun notes the unusual timing of contract activity in August. “Home buyers in July were hampered by overly stringent lending criteria in the months before the government takeover of Fannie and Freddie,” he said. “August shows some unleashing of pent-up demand before the credit crisis accelerated in September.”

He cautioned that the sampling size for pending home sales is smaller than the track on existing-home sales, so there is more volatility in the forward-looking series. “We need to see just how much of this gain holds up,” Yun adds.

NAR President Richard F. Gaylord says despite all the turmoil in world financial markets, home mortgages are available. “The recently enacted economic stimulus package should help housing by gradually freeing the flow of credit," he says.

Yun now expects growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in latter part of 2009 as the housing market begins a steady improvement.

Existing-home sales projected to rise next year

Looking at middle-ground assumptions, existing-home sales are forecast at 5.04 million this year and 5.41 million in 2009. Following national declines of 5 to 8 percent in 2008, home prices are projected to increase 2 to 3 percent next year.

New-home sales should total around 503,000 this year and 471,000 in 2009. Housing starts, including multifamily units, are likely to fall 28.2 percent to 973,000 units this year, and come in around 843,000 in 2009 as builders continue to clear the accumulation in inventory.

The 30-year fixed-rate mortgage will probably average 6.1 percent in the fourth quarter and rise gradually to 6.6 percent by the end of 2009. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007.

The unemployment rate is projected to average 6.4 percent in the fourth quarter and then average 6.6 percent in 2009. Inflation, as measured by the Consumer Price Index, is estimated at 4.0 percent for 2008 and 2.0 percent next year. Inflation-adjusted disposable personal income is forecast to grow 1.7 percent this year and 1.0 percent in 2009.

— NAR

Good news in market gone bad

Oct. 8, 2008 12:00 AM

Foreclosures and pre-foreclosures were up across metropolitan Phoenix in September. It's the expected bad news in the midst of the financial- and housing-market meltdowns.

But home sales were up across the Valley last month, an unexpected piece of good news.

According to Realtor Mike Orr's analysis of Arizona Multiple Listing Service data, 6,136 homes were sold in September, the highest monthly level since August 2006.

Orr said the higher sales volume is due to more homes being resold after lenders foreclose on them and an expected rush by some first-timers to buy before down-payment-assistance programs go away.

There are more foreclosure homes for buyers to choose from. In September, foreclosures, or trustee sales, in Maricopa County hit a new high of 4,378, according to the Information Market. That's a 10 percent increase in one month.

Pre-foreclosures, or notices of trustee sales, also hit a new high. Last month, lenders moved to foreclose on 7,447 Valley homes.

Tom Ruff, a real-estate analyst with Information Market, said currently about two out of every three pre-foreclosures end up in foreclosure. More than 95 percent of all foreclosures go back to the lender.

Valley homes foreclosed on and resold by banks accounted for as much as 50 percent of all resales in September.

Buyers are finding bargains in the foreclosure-resale market, which continues to pull down the area's overall median home price. Information Market tracked a median price of $175,000 for the Valley's resale market in September. The median price for foreclosure resales was about $150,000.

Some real-estate analysts say the housing market was the first economic sector to fall and will be the first to recover. It's nothing new in Arizona for real estate to lead the economy into a recession - and to lead it out.

Orr said the upswing in home sales continued during the first week of October.

 

Countrywide loans to be modified

13,000 mortgage holders in Ariz. eligible for program

by J. Craig Anderson - Oct. 7, 2008 12:00 AM
The Arizona Republic

Thousands of former Countrywide Financial customers on the brink of foreclosure will be eligible for lower mortgage payments in the coming months, thanks to a settlement agreement.

Borrowers with subprime and other adjustable-rate loans will be eligible for significant loan modifications beginning in December, Arizona Attorney General Terry Goddard's office said Monday.

The deal requires Bank of America to modify the loans of struggling borrowers to make their monthly payments more affordable, and it places a temporary hold on any bank action to take their homes.

About 13,000 Arizona mortgage holders are eligible for loan modifications under the agreement, said Susan Segal, Goddard's public-advocacy division chief.

The modifications would be based on what each borrower can afford, Segal said, and most borrowers would end up with fixed-rate loans. Some also would get a reduction in the loan's principal, she said.

In cases where foreclosure already has occurred or cannot be prevented, Segal said the borrowers would be eligible for relocation assistance from Bank of America.

A group of five state attorneys general and Bank of America, Countrywide's new corporate parent, signed the agreement Friday.

In exchange, the group of attorneys general representing Arizona, Texas, Ohio, Iowa and Washington state, agreed not to pursue any legal action against the former Countrywide based on its "alleged use of deceptive practices in their mortgage-lending business."

"There is no admission of guilt," Segal said about the agreement.

Still, it could take weeks or months for every eligible borrower to get a loan modification, she said.

Countrywide is supposed to launch the program Dec. 1 but has said it will need about 60 days to prepare.

Segal said the bank has committed to a staff of 3,200 loss-mitigation specialists to provide service to all of the affected customers nationwide.

Six other states, including California, have worked out their own loan-modification deals with Countrywide, formerly the nation's No. 1 subprime lender and overall largest mortgage lender, in exchange for dropping consumer-protection lawsuits.

Segal said similar deals with other subprime and "alternative" mortgage lenders should be forthcoming.