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Worst may be over for metro Phoenix housing

[Source: Catherine Reagor, Arizona Republic] — Valley homeowners have watched their property values plummet with a sense of shock and horror during the past year.  But the gut-wrenching drop could be over as early signs of the market finally hitting bottom have appeared in some areas.  On Sunday, The Arizona Republic’s latest Valley Home Values report will show prices dropped in every Phoenix-area ZIP code during the first eight months of 2009.  A closer look at the numbers, though, reveals newer communities on the outer edges of metropolitan Phoenix are seeing smaller declines in home prices this year compared with 2008.

Those areas, including neighborhoods in Buckeye, Gilbert, Queen Creek, and Surprise, were the first to experience the housing market’s collapse.  Those former housing hot spots could be the first to recover.

Older areas closer to downtown Phoenix, including many central Phoenix neighborhoods, suffered the biggest home-price hits this year.  Most of these areas were the last parts of the Valley to see housing values tank, but they could bounce back more quickly because many of the neighborhoods are popular with people who want to live closer in.  [Note: Read the full article at Worst may be over for metro Phoenix housing.]

Moody’s lowers ratings outlook on City of Phoenix to negative

Phoenix City Hall

[Source: Wall Street Journal] — Moody’s Ratings Service lowered its ratings outlook on the city of Phoenix, Arizona, to negative, citing ongoing revenue declines and expected tax-base losses in the city, which will weaken its credit profile.  Arizona’s largest city, and the fifth most populous in the U.S., is in the midst of a severe recession that began with the housing crisis and now includes most other sectors of the economy.

Unemployment has been less of a burden in the city, reaching 8.7% in July, compared with 9.5% for the state and 9.7% for the nation.  But a weak job market combined with the potential for more foreclosures means many consumers in the area will severely limit their discretionary purchases well into 2010, Moody’s said.

The ratings agency said that, despite the city’s efforts to maintain fiscal stability during the recession, the outlook cut reflects Moody’s expectation that finances will remain under pressure for the foreseeable future, given those broader economic concerns and uncertainty about the region’s next economic expansion.  Moody’s has Phoenix at Aa1, which is one notch under Aaa.  The outlook change affects about $2.4 billion of debt.

Earlier this month, Moody’s lowered its ratings outlook on Arizona’s Aa3 issuer rating, which is three notches under Aaa, to negative.  The ratings agency cited similar concerns about revenue underperformance.  Despite those concerns, once the housing market levels off, Moody’s said Tuesday, Phoenix will resume its above-average long-term growth due to its high-skill office jobs and high-tech manufacturing sector.  The city continues to develop a number of revitalization efforts, including a convention-center expansion, light-rail construction, and development of a downtown campus for Arizona State University.  Moody’s said those efforts and ongoing population increases should help the city recover at a faster rate.  [Note: Read the full article at Moody’s lowers ratings outlook on City of Phoenix to negative.]

City of Phoenix’s development services department cut by 81

[Source: Scott Wong, Arizona Republic] — Phoenix eliminated 923 positions in the latest round of general-fund budget cuts.  But City Manager Frank Fairbanks wrote the City Council last week that those reductions didn’t include 81 additional jobs that were cut from the Development Services Department.  The department, which enforces building codes and issues permits for residential and commercial property, operates under a cost-recovery model.  That means DSD relies on customer fees rather than public tax dollars. 

The need for the cuts is evident after reviewing the sharp drop in demand for permits.  During the construction boom, the city averaged about 1,500 single-family housing permits per month.  Phoenix granted builders just 35 in February, though demand has picked up slightly in recent months.  Only three people were laid off from DSD in the latest round; the other cuts were achieved by eliminating vacant positions or moving employees to other jobs in the city. 

The July reductions bring to 374 the number of positions that have been axed from the department since 2007, when it had a high of 578 employees, said spokesman Michael Hammett.  But less manpower doesn’t mean a decrease in service levels, Hammett assured.  “When someone comes in, we want to make sure we can serve them in a timely manner,” he said.  “That’s revenue, and that’s key.”  [Note: Read the full blog entry at City of Phoenix’s development services department cut by 81]

Americans undergoing lifestyle preference shift

[Source: Bill Cunniff, Chicago Sun Times] — Americans are undergoing a fundamental shift in where they want to live, work and play, says Christopher Leinberger of the Brookings Institute think-tank.  “This is not just a normal cyclical downturn,” he said.  “We’ve structurally overbuilt retail, office and housing, and we’ve done so in the wrong places.”

“Gen Xers and Millennials want a lifestyle closer to ‘Friends’ and ‘Seinfeld’ that is walkable and urban, than to Tony Soprano, low density and suburban,” he said. “It’s not that nobody wants Tony Soprano. About 50 percent of Americans actually do want that configuration.  But if we’ve built 80 percent of our housing that way, that’s the definition of oversupply. The other 50 percent of Americans want walkable urban arrangements and yet that’s just 20 percent of the housing stock. That’s called pent-up demand. So the market is just responding.”

So in practical terms, how do towns get on the right side of this multi-decade imbalance between supply and demand? “You need to get the right infrastructure in,” Leinberger said. “Doing so is a three-step process:

  • First, getting a transit connection that can anchor a walkable urban core.  
  • Second is putting in overlay zoning districts around the train stations that will allow for much greater density and mixed use development.  We’re talking about a hundred, two hundred, three hundred acres.  
  • Third, getting in place an entity to manage the thing, which generally takes the form of a non-profit business improvement district.” he said.  

“These things are very complex, but we know how to do it now.  We didn’t 50 years ago, but we do now.”

Arizona Republic issues “report card” on Phoenix mayor

[Source: Scott Wong, Arizona Republic] — A year after Phoenix Mayor Phil Gordon gave his 2008 State of the City address, [the Republic takes] a look at how well he followed through on his policies and goals:

What he said in ’08: “Phoenix is a city on the rise.  And because we are a city on the rise, we face our challenges — our opportunities — from a stronger position than most other big cities can.”  The reality: The housing crisis and broader economic recession dealt Phoenix’s budget a fierce blow.  But Phoenix literally is a city on the rise. Several projects have helped fill the downtown skyline, including the expanded convention center, Sheraton hotel, and future CityScape project.

What he said in ’08: “We need more investments, more partnerships, more international flights.  Last year I hinted at a new non-stop flight to Europe… We’re nearly there and we’ll have it before we meet again.” The reality: Well, we met again, and Lufthansa, the referenced airline, abandoned its plan for a non-stop flight across the pond due to the economy.  “We’re just grateful the airline is still in business,” the mayor’s spokesman said.

What he said in ’08: “We’re proud of our innovative solar projects… But let Phoenix now become the global center for sustainable energy.”  The reality: The city and state have lagged behind other regions when it comes to attracting solar and other renewable-energy firms, but Gordon has laid out a bold plan to make Phoenix the greenest city in the country.  Stay tuned.

What he said in ’08: “Before this year is over, 20 miles of light rail will be operating.  And that train will leave the station on budget and on time — on Dec. 27.”  The reality: Metro light rail launched its $1.4 billion starter line by its Dec. 27 target.  Ridership has exceeded expectations but fare hikes are imminent given the budget crunch faced by Phoenix and other cities.

[Note: To read the full article and online comments, click here.]

Phoenix among modern day ghost towns of abandoned real estate

Abandoned House, Baseline Ave by richard.leaf.[Source: Jason Lankow,] — Arizona ranks 48th in New Job Creation.  Developers spread to the west to Phoenix and as far out as Buckeye and foreclosures are currently at a record high, which has resulted in plummeting housing prices.  This is a hard pill to swallow for many recent first-time buyers, who are witnessing a sharp increase in their monthly mortgage payments, against the background of a house with a drastically decreasing value.

Of the 6,150 houses sold in the Phoenix metropolitan area in September 2008, an astounding 78% of these were vacant when sold. There are currently 55,000 homes for sale in Phoenix, of which 40% have been abandoned and are presently vacant.  Most of these are currently bank-owned properties and are being sold at liquidated prices.  According to area investor and resident, Donna Butera, this massive departure and house abandonment in Phoenix has had other implications in the community.

Understandably, home owners are deciding to walk from their mortgages if the home they just agreed to buy for $350,000 is now only worth $270,000. As a result of the frustration, homeowners are removing everything they can from the homes before they abandon them, selling appliances, cupboards and virtually everything else, including the kitchen sink.  As a result, it is not unusual to drive down a street in what was once a nicer suburban neighborhood in Phoenix and now see a majority of windowless abandoned homes.  [Note: To read the full article, click here.]

WSJ says housing push for Hispanics spawns wave of foreclosures; Phoenix ranked 9th

[Source: Susan Schmidt and Maurice Tamman, Wall Street Journal] — California Rep. Joe Baca has long pushed legislation he said would “open the doors to the American Dream” for first-time home buyers in his largely Hispanic district.  For many of them, those doors have slammed shut, quickly and painfully.  Mortgage lenders flooded Mr. Baca’s San Bernardino, Calif., district with loans that often didn’t require down payments, solid credit ratings or documentation of employment.  Now, many of the Hispanics who became homeowners find themselves mired in the national housing mess.  Nearly 9,200 families in his district have lost their homes to foreclosure.

For years, immigrants to the U.S. have viewed buying a home as the ultimate benchmark of success.  Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the U.S. Census Bureau.  Over that same period, homeownership nationally grew by 8%.  In 2005 alone, mortgages to Hispanics jumped by 29%, with expensive nonprime mortgages soaring 169%, according to the Federal Financial Institutions Examination Council.  An examination of that borrowing spree by The Wall Street Journal reveals that it wasn’t simply the mortgage market at work.  It was fueled by a campaign by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders, and brokers, who all were pushing to increase homeownership among Latinos.  [Note: To read the full article, click here.  To see how different Congressional districts break down in terms of prime and nonprime home loans, click here.]

Foreclosure-riddled metro Phoenix to get $121M in federal aid

[Source: Catherine Reagor, Arizona Republic] — Metropolitan Phoenix’s ailing housing market is getting a boost from the federal government.  Early next year, Arizona will receive $121 million to combat the state’s growing foreclosure problem.  Most of the money must be spent to buy and fix up foreclosure homes and then help people purchase them. Homes in the Valley communities hardest hit by the downturn will be targeted.  Those areas include neighborhoods in Phoenix, Mesa, Avondale, Tolleson, and Surprise.  The money, distributed by the U.S. Department of Housing and Urban Affairs, comes from the nation’s Housing and Economic Recovery Act, which Congress passed in July.

The funds are earmarked for “stabilizing” the neighborhoods hurt by too many foreclosures.  The federal money will go toward the purchase of thousands of Valley foreclosure homes, which means more work for real-estate agents, appraisers, title agents and lenders.  Many people who have struggled to get financing or down-payment money to buy a house will get help.  The funds also will mean more jobs for contractors hired to fix up foreclosure homes. Homeowners in neighborhoods hurt by too many foreclosures should see their home values stabilize and even increase as the money is spent on houses nearby.

A record 35,000 homes have been foreclosed on Valley-wide so far this year.  Many neighborhoods, particularly on the Valley’s fringes, are dotted with homes left vacant and vandalized because of foreclosures.  “This money will a go a long ways to helping a lot of people and communities,” said Fred Karnas, director of the Arizona Housing Department, which will get more than $38 million of the federal money.  Only Phoenix, which has been allotted $39 million, will get more of Arizona’s share.  Several other communities will receive money, as well.  [Note: To read the full article, click here.]

Airline woes pinch Arizona, Phoenix tourism

[Source: Dawn Gilbertson, Arizona Republic] — Airline flight cuts and higher airfares this fall will bring fewer visitors to Arizona, delivering a punishing one-two punch to the state’s limping economy.  In Phoenix, more than 1 of 10 flights are gone from a year ago.  Nearly 70 daily departures have disappeared from Sky Harbor International Airport’s schedule, the equivalent of losing service from almost every major airline except US Airways and Southwest.

Fewer seats for sale means airlines can charge more.  Tickets for Phoenix flights departing in October are up an average 28 percent from a year ago, according to  Flights to Boston and Chicago are each up 50 percent.  In a tourism hotbed where the majority of visitors arrive by plane, fewer flights and higher fares mean fewer customers for hotels, restaurants, spas, and golf courses.  At risk: A substantial slice of $19 billion in annual visitor spending in Arizona.  This comes after months of reduced numbers in hotel occupancy and airport traffic as people struggle with a plunging stock market, the housing meltdown and other economic woes.  “We know we’re in for a period of some rough times,” said Steve Moore, chief executive officer of the Greater Phoenix Convention and Visitors Bureau.  [Note: To read the full article, click here.]

Arizona mortgage failures fuel crisis

[Source: Christie Smythe, Arizona Daily Star] — The financial risks taken by Arizona home buyers and lenders in the housing run-up came home to roost in last week’s financial crisis.  As Tucson, Phoenix, and Pinal County struggle with excesses of home inventory and painful drops in values, big financial companies that helped inflate the bubble are suffering, even up to venerable Wall Street institutions such as Lehman Brothers and Merrill Lynch.  “It was a vicious cycle of greed,” said University of Arizona finance professor Christopher Lamoureux, referencing home buyers, lenders, and Wall Street investors, and others who contributed to the situation. [Note: To read the full article, click here.  Click on the graphic to view it full-size.]