House Passes Bill to Protect Borrowers

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

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

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

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:

1. Orlando
2. Miami
3. Jacksonville, Fla.
4. Tampa
5. Los Angeles
6. Phoenix
7. Las Vegas
8. Oakland, Calif.
9. San Diego
10. New York

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

Measuring the housing market

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

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

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:

1. Irvine, Calif.
2. Raleigh, N.C.
3. Bellevue, Wash.
4. Portland, Ore.
5. Sunnyvale, Calif.
6. Redmond, Wash.
7. Austin, Texas
8. Chandler, Ariz.
9. Rochester, N.Y.
10. Plano, Texas

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

Valley median home price hits 8-year low

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

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

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

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

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

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

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

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.