Associated Press - October 2007
WASHINGTON - Sales of new homes posted an unexpected gain in September although the improvement came after sales had fallen to the slowest pace in more than a decade.
The Commerce Department reported Thursday that sales of new homes rose by 4.8 percent last month to a seasonally adjusted annual rate of 770,000 units. That level of activity was still 23.3 percent below a year ago, indicating that housing remains in a steep downturn.
Analysts had been expecting sales would fall by 2.5 percent last month from an August sales pace that had originally been reported as 795,000 homes. However, that figure was revised sharply lower in the new report to show a sales rate of just 735,000 in August, the slowest sales pace in 11 years.
Meanwhile, orders for big-ticket manufactured goods dropped an unexpected 1.7 percent last month following an even bigger 5.3 percent plunge in August. The first back-to-back declines in factory orders in more than a year raised new worries about how much harm would be inflicted on the economy from a severe housing slump and credit crunch.
In a third report, the Labor Department said that the number of newly laid off workers filing claims for unemployment benefits fell by 8,000 last week to 331,000.
The report on home sales showed that the median new home price in September - the point where half the homes sold for more and half for less - rose to $238,000, up 2.5 percent from August, which had seen prices fall to the lowest level in nearly a year.
The rebound in home sales was led by a 37.7 percent surge in the West. Sales were also up 0.5 percent in the South. But sales of new homes fell by 19.5 percent in the Midwest and 6.6 percent in the Northeast.
The September drop in orders for durable goods reflected weakness in such areas as autos, fabricated metals, computers and electronics products, and electrical appliances.
That decline followed several other reports showing economic weakness, including continued steep slides in sales of existing homes and reports from banks and investment houses that they were having to take big write-offs due to losses in such areas as mortgage-backed securities.
Losses that began in investments on subprime mortgages, where deliquency rates are soaring, had caused a severe credit crunch in August as the market for many kinds of investments nearly dried up.
The concern is that if the economic disruptions become serious enough, they could drag down overall economic growth, which has already slowed under the impact of the steep downturn in housing.
Many analysts, however, believe the economy will still be able to avoid an outright recession because the Federal Reserve, which cut a key interest rate for the first time in four years, will keep cutting rates to stimulate economic growth. The Fed meets again next week.
In a new report released Thursday, the congressional Joint Economic Committee estimated that 2 million subprime mortgages could go into foreclosure over the next 18 months as initially low introductory rates reset at much higher levels. The JEC report said that states will lose $917 million in property tax revenue as housing values are depressed by the wave of foreclosures.
"State by state, the economic costs from the subprime debacle are shockingly high," Sen. Charles Schumer, chairman of the JEC said in a statement. "From New York to California, we are headed for billions in lost wealth, property values and tax revenues."
Schumer called on the Bush administration to more more aggressively to help families find ways to avoid going into default on their home loans.
The report on durable goods showed that orders for transportation equipment fell by 6.3 percent last month after an even bigger 12.3 percent fall in August.
Demand for commercial aircraft did rebound, rising by 18.2 percent in September after a 40.2 percent plunge in August as demand picked up at aircraft-maker Boeing Co.
But orders for autos fell by 2.9 percent after an even bigger 8.2 percent drop in August, reflecting the continuing troubles for domestic automakers struggling with foreign competition and consumers' shift away from gas-guzzling vehicles.
Orders for military aircraft were also down a sharp 37.3 percent in September after having surged in August.
Excluding transportation, orders for durable goods would have risen by 0.3 percent following a 1.8 percent drop in orders outside of transportation in August.
Thursday, October 25, 2007
Monday, October 22, 2007
Most Livable Metro-Area Suburbs
Forbes - October 2007
With homes in the nation's cities becoming increasingly unaffordable, today the move to the suburbs is often as much about saving some cash as it is about settling beyond the white picket fence.
There are prominent suburbs most everyone knows--these include Greenwich, Conn., Rancho Santa Fe, Calif., or Alpine, N.J. -- where entree is dependent on the size of one's wallet.
And there are suburbs that welcome those whose bank accounts don't end in seven figures.
We set out to find them using a model from NeighborhoodScout.com, a statistical database that gathers figures from the U.S. Census, the National Center for Education Statistics, the Office of Federal Housing Enterprise Oversight, the FBI and the U.S. Justice Department at the granular neighborhood level. Every suburb within short range of the 15 largest metros was evaluated based on factors ranging from the quality of schools and the size and price of houses to the safety of the neighborhood and the education level of neighbors. Those that performed the best on all five metrics landed on our list of the three best-value suburbs for each city.
What Is A Suburb?
Each city's demographic, zoning and geographic factors make defining a suburb difficult.
Take sprawled areas like Los Angeles or Phoenix. There, property values go down in proportion to proximity to the city center. As brokers say, regarding loans, "you can drive until you qualify." For this reason, and to get a better sense of value rather than plain cost, a suburb was defined for the purposes of this story as any Census-designated area 25 miles or less from the principal city.
Once these areas were identified, they were assessed on a neighborhood level, since cities and their surrounding metros are designed differently. In New Jersey, for example, you'll find townships that contain smaller boroughs of a few thousand residents. In Chicago, most suburbs are independent towns, including South Holland, and Homewood, which made our list. Many Texas suburbs are slices of unincorporated areas. And suburbs in Miami and Phoenix, such as Hialeah, Fla., and Glendale, Ariz., respectively, house hundreds of thousands of people. Besides, we tend to understand where we live based on the region, the neighbors and the school, not Census designations..
Take the city of Healeah, immediately outside Miami. It has a population of 225,000 people. That's more than 35 states' capitals. To simply say "move to Hialeah" doesn't make sense. Which of the city's 16 public elementary schools will you send your kids to, and where in town (it's four square miles smaller than Manhattan) will you live? Answer: Palm Springs North. Buy a median-priced home here, and chances are you'll send your kids to good schools, live next to well-educated neighbors and experience low crime.
Supplementary Stats
The research also measured the education level of neighbors, by examining what percentage of the community -- of those over 25 -- had college degrees. Though this isn't a flawless value measure, demographers say that facilities, public works, schools and arts and cultural institutions are often better in more-educated enclaves.
Homeownership was another demographic trend measured. Neighborhoods with a higher share of owner-occupied, detached, single-family residences were favored over areas where the reverse is the norm. The more people that own, the thinking goes, the more committed they are to the neighborhood and the more stable the community.
Areas with larger houses and more bedrooms were ranked ahead of those that, for the same price, offered smaller homes with, say, only a couple of bedrooms. After all, value matters. In Plainfield, N.J., the median home sale price is $385,733. For that you can get a Greenwich, Conn., apartment. The differences: five bedrooms versus one bedroom; eight rooms versus two; 2,100 square feet versus 600; a lawn instead of a lobby.
The quality of local schools may be one of the most important factors weighed by families moving to the suburbs. An area with strong public schools is a prized commodity. Ask any real estate broker, and you'll hear that areas with superior public schools are more likely to maintain home values and are quicker to sell.
Though not a perfect measure of the schooling Junior will receive, education rankings were determined by looking at class size, favoring small over large; graduation rates; and per-pupil spending. NeighborhoodScout sorted school districts in relation to others in the state, instead of one national objective standard. California public schools simply aren't as good as Iowa ones, but if you're living in the San Diego or San Francisco area, all you care about are the schools in the surrounding districts and how they stack up against one another.
The final measure was safety. It doesn't matter how cheap properties are, or how big a house you can buy, if you can't let your kids out of the house for fear of them being snatched. The crime index for each city comes from the FBI and the U.S. Justice Department's crime index score for violent and property crime and is measured as a rate per 1,000 of the population.
Feeling safe and being able to raise a family is what makes a house a home, and a specific suburb a place to be.
With homes in the nation's cities becoming increasingly unaffordable, today the move to the suburbs is often as much about saving some cash as it is about settling beyond the white picket fence.
There are prominent suburbs most everyone knows--these include Greenwich, Conn., Rancho Santa Fe, Calif., or Alpine, N.J. -- where entree is dependent on the size of one's wallet.
And there are suburbs that welcome those whose bank accounts don't end in seven figures.
We set out to find them using a model from NeighborhoodScout.com, a statistical database that gathers figures from the U.S. Census, the National Center for Education Statistics, the Office of Federal Housing Enterprise Oversight, the FBI and the U.S. Justice Department at the granular neighborhood level. Every suburb within short range of the 15 largest metros was evaluated based on factors ranging from the quality of schools and the size and price of houses to the safety of the neighborhood and the education level of neighbors. Those that performed the best on all five metrics landed on our list of the three best-value suburbs for each city.
What Is A Suburb?
Each city's demographic, zoning and geographic factors make defining a suburb difficult.
Take sprawled areas like Los Angeles or Phoenix. There, property values go down in proportion to proximity to the city center. As brokers say, regarding loans, "you can drive until you qualify." For this reason, and to get a better sense of value rather than plain cost, a suburb was defined for the purposes of this story as any Census-designated area 25 miles or less from the principal city.
Once these areas were identified, they were assessed on a neighborhood level, since cities and their surrounding metros are designed differently. In New Jersey, for example, you'll find townships that contain smaller boroughs of a few thousand residents. In Chicago, most suburbs are independent towns, including South Holland, and Homewood, which made our list. Many Texas suburbs are slices of unincorporated areas. And suburbs in Miami and Phoenix, such as Hialeah, Fla., and Glendale, Ariz., respectively, house hundreds of thousands of people. Besides, we tend to understand where we live based on the region, the neighbors and the school, not Census designations..
Take the city of Healeah, immediately outside Miami. It has a population of 225,000 people. That's more than 35 states' capitals. To simply say "move to Hialeah" doesn't make sense. Which of the city's 16 public elementary schools will you send your kids to, and where in town (it's four square miles smaller than Manhattan) will you live? Answer: Palm Springs North. Buy a median-priced home here, and chances are you'll send your kids to good schools, live next to well-educated neighbors and experience low crime.
Supplementary Stats
The research also measured the education level of neighbors, by examining what percentage of the community -- of those over 25 -- had college degrees. Though this isn't a flawless value measure, demographers say that facilities, public works, schools and arts and cultural institutions are often better in more-educated enclaves.
Homeownership was another demographic trend measured. Neighborhoods with a higher share of owner-occupied, detached, single-family residences were favored over areas where the reverse is the norm. The more people that own, the thinking goes, the more committed they are to the neighborhood and the more stable the community.
Areas with larger houses and more bedrooms were ranked ahead of those that, for the same price, offered smaller homes with, say, only a couple of bedrooms. After all, value matters. In Plainfield, N.J., the median home sale price is $385,733. For that you can get a Greenwich, Conn., apartment. The differences: five bedrooms versus one bedroom; eight rooms versus two; 2,100 square feet versus 600; a lawn instead of a lobby.
The quality of local schools may be one of the most important factors weighed by families moving to the suburbs. An area with strong public schools is a prized commodity. Ask any real estate broker, and you'll hear that areas with superior public schools are more likely to maintain home values and are quicker to sell.
Though not a perfect measure of the schooling Junior will receive, education rankings were determined by looking at class size, favoring small over large; graduation rates; and per-pupil spending. NeighborhoodScout sorted school districts in relation to others in the state, instead of one national objective standard. California public schools simply aren't as good as Iowa ones, but if you're living in the San Diego or San Francisco area, all you care about are the schools in the surrounding districts and how they stack up against one another.
The final measure was safety. It doesn't matter how cheap properties are, or how big a house you can buy, if you can't let your kids out of the house for fear of them being snatched. The crime index for each city comes from the FBI and the U.S. Justice Department's crime index score for violent and property crime and is measured as a rate per 1,000 of the population.
Feeling safe and being able to raise a family is what makes a house a home, and a specific suburb a place to be.
Sunday, October 21, 2007
Many Valley homeowners pressured or tricked into bad loans, experts say
The Arizona Republic - October 2007
Elizabeth and Jose Torres were happy with their small Phoenix home.
Even when a loan officer approached the couple in 2005 about buying a bigger home for a good price, they weren't interested, Elizabeth said.
Eventually, though, the "persuasive" loan officer sold them on the four-bedroom Queen Creek home, she said.
The house had a motivated seller. The couple would get $20,000 back on the sale. And they could quickly refinance at a lower interest rate to bring down the $2,000-plus monthly mortgage payments - all things the Torreses said their loan officer promised.
But after signing the loan documents, the couple quickly wanted out of the deal. They couldn't get copies of the papers or answers about why the figures didn't match what had been promised and why some lines on the document were blank, Elizabeth said. But it was too late.
Now, the couple is at risk of losing their home because they can't afford the mortgage payments and can't refinance because of a prepayment penalty they said they were never told existed.
The Torreses are among thousands of Valley homeowners facing foreclosure because of bad loans with high and often hidden fees, prepayment penalties and rapidly rising interest rates. Some homeowners got into those loans knowing the risks. But others, experts say, were pressured or even tricked into a loan they couldn't afford.
Loose lending guidelines, little regulation of the mortgage industry, higher home prices, too many risky subprime loans and in some cases greed and fraud have led to a slew of bad loans and to the rising foreclosure problem in the Valley.
The problem is more widespread than just people who bought homes with bad loans during the past few years. Many Valley homeowners refinanced, opting for the riskier loans with often deceptively low initial payments so they could cash in on their home's equity.
"It's very sad. A lot of people were preyed on and didn't understand what kind of loan they were getting into," said Margie O'Campo de Castillo of Arizona Dream Realty. "There was some greed involved, but many buyers were made promises and were lied to."
The number of people losing their homes in metropolitan Phoenix is at its highest point since the real-estate recession of 1990, primarily a result of subprime loans. Rates on those adjustable loans that thousands of homeowners took out during the housing boom are climbing. Many can't make the higher payments or refinance into a better loan. Defaults on subprime loans nationally are causing an implosion among lenders that isn't over.
Arizona is second only to Nevada for subprime loans, and the mortgage industry is bleeding billions of dollars from losses on those types of loans. Interest rates on the biggest block of subprime adjustable-rate mortgages are set to climb by the end of the year, prompting market watchers to predict the largest jump in foreclosures to happen in early 2008.
"The subprime mess is already bad, and it's going to get much worse," said Arizona Attorney General Terry Goddard, who is part of a group of state attorneys general who have joined forces to form a national task force to probe problems or fallout from subprime loans.
The Torreses sent a letter to the attorney general asking for an investigation into their loan. Arizona regulators and prosecutors are being deluged with complaints about bad loans. Neither comment on pending investigations.
The catalyst
Loose lending guidelines and speculators fueled the housing boom in 2004 and 2005.
Home prices across metropolitan Phoenix shot up 50 percent because of speculator-driven bidding wars. With little regulation in Arizona's mortgage industry, loan officers flocked to the state offering more creative, and often riskier, financing to any buyer who couldn't otherwise afford the rising home prices.
That gave the housing market a boost but also opened the door for many bad loans. Loan officers were enticed to put more borrowers in subprime mortgages because lenders paid higher fees on those. People were able to obtain mortgages without documenting their incomes. Sometimes borrowers lied, and sometimes loan officers lied.
Since lenders offered higher fees to brokers on the loans with the highest interest rates, some mortgage people put borrowers in subprime loans when they would have qualified for loans with lower interest rates.
Home buyers, as well as refinancing homeowners, opted for those riskier loans with teaser rates and deceptively low initial payments. Prepayment penalties often weren't mentioned.
"Many people could have qualified for loans with better rates and without the shocking prepayment penalties," said Jay Butler, director of realty studies at Arizona State University's Morrison School. "Some people got railroaded, and some bought into the whole boom."
Stuck
The day after the Torreses signed their loan documents, Elizabeth called her loan officer to try to stop the deal. Several days later he called her back and asked that she meet him at the title agency to get her check and final documents, she said. She waited, but he never showed. Eventually, someone from the title agency came out and gave her a check for several thousand dollars less than the $20,000 she was promised.
Elizabeth began calling her loan officer that afternoon, but he never returned calls. The Torreses' loan officer couldn't be found. Recent calls to his former employer revealed he left the Scottsdale mortgage firm at least a year ago.
The couple couldn't afford their utilities and mortgage so they turned off their electricity and water, moved in with family and tried to keep making their loan payments for a while.
Many Valley homeowners struggling with rising interest payments and facing foreclosure have few options. They can't always refinance because of new tighter credit standards, prepayment penalties and drops in home values that have left them owing more than their house is worth. Home prices dropped in most Valley neighborhoods this year. In Queen Creek, home values fell 10 percent this year.
Most struggling homeowners can't sell in time or get enough for their home to pay what they owe because the record 55,000 homes for sale in metro Phoenix have made competition stiff.
Even before the Torreses fell behind on their mortgage, they contacted their lender. But Elizabeth said they wouldn't work with her until she stopped making payments. Not all lenders are quick to help, said Brett Barry of Realty Executives. "Everyone says 'call your lender first,' but lenders are being extremely tough right now," said Barry, who is trying to help a couple in north Phoenix on a short sale, a negotiated sale with a lender for less than is owed on the property but what it will sell for now. "Lenders are playing a game of chicken with many struggling borrowers."
Lack of regulation
The Torreses knew their loan officer and trusted him. He was a client of Elizabeth's and regularly saw her at work, she said. She assumed he was licensed like real-estate agents are in Arizona. He wasn't.
Arizona is one of a dozen states that don't license mortgage originators or loan officers, the people in charge of helping consumers make what is often their biggest purchase.
The state's mortgage industry is fragmented and not regulated by one group, which makes it more difficult for struggling homeowners looking for help. As many as 18,000 unlicensed people are taking mortgage applications, negotiating rates and getting loan commissions statewide. Only the official "broker" for a firm must be licensed. "We want to regulate anyone who is soliciting loans and getting commissions," said Felecia Rotellini, superintendent of the state Department of Financial Institutions. "Most of the mortgage problems we hear about come from unlicensed originators, and it's not only hard to stop them, it's hard to find them as they jump from firm to firm."
A bill to license loan officers operating in Arizona is expected to be introduced at the Legislature. There have been a few legislative efforts over the years, but each has failed because not everyone thinks more regulation is needed.
"I have been in the mortgage business for over 15 years, and never have I seen the amount of unscrupulousness as I have in the last five years," said Frank Sobampo, a broker with Century One Mortgage. "I have been asked to help some people refinance after they have been scammed by loan officers who put them in terrible programs and even created false documentation to make the deal go through."
A law went into effect in September that makes mortgage fraud, which often is associated with bad loans and false documentation, a felony.
Finding help
The Torreses put their home on the market in June. They also have filed complaints with regulators. They are working with the Phoenix non-profit Chicanos Por La Causa to get help on a short sale.
The couple won't get any money out of the deal but will avoid having a foreclosure mark on their credit record. Loan documents filed with the Pinal County Recorder's Office show the Torreses' loans have high interest rates and fees.
This year the Department of Financial Institutions has cracked down on several Valley firms for illegal lending practices that include hidden fees and misrepresentations on loan documents. The state agency has several more investigations under way.
Often struggling homeowners don't know where to go for help. They may have worked with a mortgage broker or originator, but their loan was financed by another firm. Their mortgages could be sold to another group after that, and a different group could be servicing their loan. Anthony Sanders, professor of finance and real estate at ASU, said borrowers should be careful working with servicers to avoid a foreclosure. He said they can charge excessive fees to both a lender and borrower and delay the foreclosure and still a homeowner can lose his or her home.
Many of the country's biggest lenders say they are working with more homeowners to modify loans so they can avoid foreclosure. A national program for the Federal Housing Administration to refinance adjustable-rate loans to fixed-rate loans was recently launched. Housing advocate groups are calling for moratoriums on subprime foreclosures until the loans can be checked for fraud or other wrongdoing and possibly restructured to keep homeowners in their homes and paying their mortgage. Last week, three of the nation's biggest banks announced a plan to create an investment conduit to help prevent problems in mortgage-backed securities from hurting other parts of the credit market.
Seeing metro Phoenix's growing foreclosure problem, the Federal Reserve held a meeting here last June with lenders and housing groups to discuss how to help struggling homeowners. The task force has met once since then.
The Valley's housing non-profits are being deluged with calls from homeowners asking for help, and they don't have the funding or staff to tackle the problem.
"We are getting three to five referrals a day about people facing foreclosures," said Joann Hauger, executive director of Community Housing Resources of Arizona. "There aren't any programs to help them, and many are upside down in their loan and can't sell or refinance."
Foreclosure fallout
The Torreses are worried they won't be able to buy another home soon because of what the foreclosure will do to their credit. But the foreclosure problem is much bigger than a black mark on a homeowner's credit record. Home values in entire neighborhoods drop with just one foreclosure, and foreclosures aren't limited to affordable or even new fringe areas.
"People with subprime mortgages live in all Valley neighborhoods," said Steve Walsh of Scottsdale-based Scout Mortgage. "I tell people to watch their own block because there's no one subprime village in the Valley. Foreclosures will affect everyone."
That said, many new suburbs on the Valley's fringes that went up in 2004-05 have high percentages of investors and homeowners with subprime mortgages facing foreclosure.
In Atlanta and other areas of the country with strong economies and rising foreclosures, like Phoenix, neighborhoods with too many foreclosures and abandoned homes are trapping other homeowners who are trying to sell. Blight is setting in as lenders don't keep up the homes they take back.
Inspectors across the Valley are finding abandoned homes with green pools and yards full of trash.
"People with good loans who need to sell are getting hurt too because of foreclosures in their neighborhood," said O'Campo of Arizona Dream Realty. "This is going to hurt everyone."
Elizabeth and Jose Torres were happy with their small Phoenix home.
Even when a loan officer approached the couple in 2005 about buying a bigger home for a good price, they weren't interested, Elizabeth said.
Eventually, though, the "persuasive" loan officer sold them on the four-bedroom Queen Creek home, she said.
The house had a motivated seller. The couple would get $20,000 back on the sale. And they could quickly refinance at a lower interest rate to bring down the $2,000-plus monthly mortgage payments - all things the Torreses said their loan officer promised.
But after signing the loan documents, the couple quickly wanted out of the deal. They couldn't get copies of the papers or answers about why the figures didn't match what had been promised and why some lines on the document were blank, Elizabeth said. But it was too late.
Now, the couple is at risk of losing their home because they can't afford the mortgage payments and can't refinance because of a prepayment penalty they said they were never told existed.
The Torreses are among thousands of Valley homeowners facing foreclosure because of bad loans with high and often hidden fees, prepayment penalties and rapidly rising interest rates. Some homeowners got into those loans knowing the risks. But others, experts say, were pressured or even tricked into a loan they couldn't afford.
Loose lending guidelines, little regulation of the mortgage industry, higher home prices, too many risky subprime loans and in some cases greed and fraud have led to a slew of bad loans and to the rising foreclosure problem in the Valley.
The problem is more widespread than just people who bought homes with bad loans during the past few years. Many Valley homeowners refinanced, opting for the riskier loans with often deceptively low initial payments so they could cash in on their home's equity.
"It's very sad. A lot of people were preyed on and didn't understand what kind of loan they were getting into," said Margie O'Campo de Castillo of Arizona Dream Realty. "There was some greed involved, but many buyers were made promises and were lied to."
The number of people losing their homes in metropolitan Phoenix is at its highest point since the real-estate recession of 1990, primarily a result of subprime loans. Rates on those adjustable loans that thousands of homeowners took out during the housing boom are climbing. Many can't make the higher payments or refinance into a better loan. Defaults on subprime loans nationally are causing an implosion among lenders that isn't over.
Arizona is second only to Nevada for subprime loans, and the mortgage industry is bleeding billions of dollars from losses on those types of loans. Interest rates on the biggest block of subprime adjustable-rate mortgages are set to climb by the end of the year, prompting market watchers to predict the largest jump in foreclosures to happen in early 2008.
"The subprime mess is already bad, and it's going to get much worse," said Arizona Attorney General Terry Goddard, who is part of a group of state attorneys general who have joined forces to form a national task force to probe problems or fallout from subprime loans.
The Torreses sent a letter to the attorney general asking for an investigation into their loan. Arizona regulators and prosecutors are being deluged with complaints about bad loans. Neither comment on pending investigations.
The catalyst
Loose lending guidelines and speculators fueled the housing boom in 2004 and 2005.
Home prices across metropolitan Phoenix shot up 50 percent because of speculator-driven bidding wars. With little regulation in Arizona's mortgage industry, loan officers flocked to the state offering more creative, and often riskier, financing to any buyer who couldn't otherwise afford the rising home prices.
That gave the housing market a boost but also opened the door for many bad loans. Loan officers were enticed to put more borrowers in subprime mortgages because lenders paid higher fees on those. People were able to obtain mortgages without documenting their incomes. Sometimes borrowers lied, and sometimes loan officers lied.
Since lenders offered higher fees to brokers on the loans with the highest interest rates, some mortgage people put borrowers in subprime loans when they would have qualified for loans with lower interest rates.
Home buyers, as well as refinancing homeowners, opted for those riskier loans with teaser rates and deceptively low initial payments. Prepayment penalties often weren't mentioned.
"Many people could have qualified for loans with better rates and without the shocking prepayment penalties," said Jay Butler, director of realty studies at Arizona State University's Morrison School. "Some people got railroaded, and some bought into the whole boom."
Stuck
The day after the Torreses signed their loan documents, Elizabeth called her loan officer to try to stop the deal. Several days later he called her back and asked that she meet him at the title agency to get her check and final documents, she said. She waited, but he never showed. Eventually, someone from the title agency came out and gave her a check for several thousand dollars less than the $20,000 she was promised.
Elizabeth began calling her loan officer that afternoon, but he never returned calls. The Torreses' loan officer couldn't be found. Recent calls to his former employer revealed he left the Scottsdale mortgage firm at least a year ago.
The couple couldn't afford their utilities and mortgage so they turned off their electricity and water, moved in with family and tried to keep making their loan payments for a while.
Many Valley homeowners struggling with rising interest payments and facing foreclosure have few options. They can't always refinance because of new tighter credit standards, prepayment penalties and drops in home values that have left them owing more than their house is worth. Home prices dropped in most Valley neighborhoods this year. In Queen Creek, home values fell 10 percent this year.
Most struggling homeowners can't sell in time or get enough for their home to pay what they owe because the record 55,000 homes for sale in metro Phoenix have made competition stiff.
Even before the Torreses fell behind on their mortgage, they contacted their lender. But Elizabeth said they wouldn't work with her until she stopped making payments. Not all lenders are quick to help, said Brett Barry of Realty Executives. "Everyone says 'call your lender first,' but lenders are being extremely tough right now," said Barry, who is trying to help a couple in north Phoenix on a short sale, a negotiated sale with a lender for less than is owed on the property but what it will sell for now. "Lenders are playing a game of chicken with many struggling borrowers."
Lack of regulation
The Torreses knew their loan officer and trusted him. He was a client of Elizabeth's and regularly saw her at work, she said. She assumed he was licensed like real-estate agents are in Arizona. He wasn't.
Arizona is one of a dozen states that don't license mortgage originators or loan officers, the people in charge of helping consumers make what is often their biggest purchase.
The state's mortgage industry is fragmented and not regulated by one group, which makes it more difficult for struggling homeowners looking for help. As many as 18,000 unlicensed people are taking mortgage applications, negotiating rates and getting loan commissions statewide. Only the official "broker" for a firm must be licensed. "We want to regulate anyone who is soliciting loans and getting commissions," said Felecia Rotellini, superintendent of the state Department of Financial Institutions. "Most of the mortgage problems we hear about come from unlicensed originators, and it's not only hard to stop them, it's hard to find them as they jump from firm to firm."
A bill to license loan officers operating in Arizona is expected to be introduced at the Legislature. There have been a few legislative efforts over the years, but each has failed because not everyone thinks more regulation is needed.
"I have been in the mortgage business for over 15 years, and never have I seen the amount of unscrupulousness as I have in the last five years," said Frank Sobampo, a broker with Century One Mortgage. "I have been asked to help some people refinance after they have been scammed by loan officers who put them in terrible programs and even created false documentation to make the deal go through."
A law went into effect in September that makes mortgage fraud, which often is associated with bad loans and false documentation, a felony.
Finding help
The Torreses put their home on the market in June. They also have filed complaints with regulators. They are working with the Phoenix non-profit Chicanos Por La Causa to get help on a short sale.
The couple won't get any money out of the deal but will avoid having a foreclosure mark on their credit record. Loan documents filed with the Pinal County Recorder's Office show the Torreses' loans have high interest rates and fees.
This year the Department of Financial Institutions has cracked down on several Valley firms for illegal lending practices that include hidden fees and misrepresentations on loan documents. The state agency has several more investigations under way.
Often struggling homeowners don't know where to go for help. They may have worked with a mortgage broker or originator, but their loan was financed by another firm. Their mortgages could be sold to another group after that, and a different group could be servicing their loan. Anthony Sanders, professor of finance and real estate at ASU, said borrowers should be careful working with servicers to avoid a foreclosure. He said they can charge excessive fees to both a lender and borrower and delay the foreclosure and still a homeowner can lose his or her home.
Many of the country's biggest lenders say they are working with more homeowners to modify loans so they can avoid foreclosure. A national program for the Federal Housing Administration to refinance adjustable-rate loans to fixed-rate loans was recently launched. Housing advocate groups are calling for moratoriums on subprime foreclosures until the loans can be checked for fraud or other wrongdoing and possibly restructured to keep homeowners in their homes and paying their mortgage. Last week, three of the nation's biggest banks announced a plan to create an investment conduit to help prevent problems in mortgage-backed securities from hurting other parts of the credit market.
Seeing metro Phoenix's growing foreclosure problem, the Federal Reserve held a meeting here last June with lenders and housing groups to discuss how to help struggling homeowners. The task force has met once since then.
The Valley's housing non-profits are being deluged with calls from homeowners asking for help, and they don't have the funding or staff to tackle the problem.
"We are getting three to five referrals a day about people facing foreclosures," said Joann Hauger, executive director of Community Housing Resources of Arizona. "There aren't any programs to help them, and many are upside down in their loan and can't sell or refinance."
Foreclosure fallout
The Torreses are worried they won't be able to buy another home soon because of what the foreclosure will do to their credit. But the foreclosure problem is much bigger than a black mark on a homeowner's credit record. Home values in entire neighborhoods drop with just one foreclosure, and foreclosures aren't limited to affordable or even new fringe areas.
"People with subprime mortgages live in all Valley neighborhoods," said Steve Walsh of Scottsdale-based Scout Mortgage. "I tell people to watch their own block because there's no one subprime village in the Valley. Foreclosures will affect everyone."
That said, many new suburbs on the Valley's fringes that went up in 2004-05 have high percentages of investors and homeowners with subprime mortgages facing foreclosure.
In Atlanta and other areas of the country with strong economies and rising foreclosures, like Phoenix, neighborhoods with too many foreclosures and abandoned homes are trapping other homeowners who are trying to sell. Blight is setting in as lenders don't keep up the homes they take back.
Inspectors across the Valley are finding abandoned homes with green pools and yards full of trash.
"People with good loans who need to sell are getting hurt too because of foreclosures in their neighborhood," said O'Campo of Arizona Dream Realty. "This is going to hurt everyone."
Friday, October 19, 2007
Increase in foreclosures taking toll on renters
Tribune - October 2007
The rising number of foreclosures in the Valley isn't just hurting property owners - it's also pinching hundreds of renters who are being forced out when the properties go back to the bank. Ken Volk, president and founder of Arizona Tenants Advocates in Tempe, said he's getting dozens of calls from renters asking if it's illegal for landlords to break a lease because of foreclosure.
No exact number of displaced tenants were available, but Volk estimated it might be thousands of people across the Valley.
Carlos Lopez, a south Scottsdale resident who lives near 64th Street and McDowell Road, is one of those. He said his landlord is forcing him and others to move out of their fourplex by Oct. 31 because of foreclosure.
"I don't think it's fair for us," Lopez said. "They should give us more time to move out.
"Not just two weeks."
Four families, including a pregnant woman and several children, said they were told they have to leave the fourplex in the 3100 block of 67th Place.
The fourplex has been turned over to R.O.I. Properties, which is the company behind the evictions.
A woman who answered the phone there Wednesday refused to comment or be interviewed.
Lopez said besides the cost of moving, he's now hesitant to sign a new lease because of the high number of foreclosures.
"I'm nervous because maybe they're going to do the same thing," he said.
Terry Feinberg, president of the Arizona Multihousing Association, said lenders work to get renters out of a foreclosed home because it's easier and cheaper to sell the property than serve as landlords.
"The goal of a bank is to turn it as quickly as possible," Feinberg said. "While they may lose a couple of months rent, they are getting a quicker sell if there aren't tenants living on the property."
Volk said renters can be forced out if the property owner financed the property prior to the lease agreement. But, he said, if the home was refinanced after a lease agreement was signed, renters could have a case because the lease would take precedence.
If renters find themselves facing eviction due to foreclosure, Volk recommends calling the current owner to make a deal.
"Say 'Listen, you can have the property sitting empty, uncared for, abandoned essentially or you can continue to take the rent from me,'" Volk said.
If that isn't an option, Volk advises demanding the deposit back in writing and make sure it's delivered by certified mail.
Desert Schools Federal Credit Union spokesman Jason Myers said that the home loan provider feels bad for renters evicted due to a foreclosure, some of whom are now looking to buy their own homes in order to gain control of their own living situations and financial futures.
"We see it as a classic Catch-22," Myers said. "It's an industry-wide problem and we're trying to coach people through it."
Myers said the credit union encourages prospective home buyers and renters to carefully research the owners of a property before entering into any type of agreement.
The rising number of foreclosures in the Valley isn't just hurting property owners - it's also pinching hundreds of renters who are being forced out when the properties go back to the bank. Ken Volk, president and founder of Arizona Tenants Advocates in Tempe, said he's getting dozens of calls from renters asking if it's illegal for landlords to break a lease because of foreclosure.
No exact number of displaced tenants were available, but Volk estimated it might be thousands of people across the Valley.
Carlos Lopez, a south Scottsdale resident who lives near 64th Street and McDowell Road, is one of those. He said his landlord is forcing him and others to move out of their fourplex by Oct. 31 because of foreclosure.
"I don't think it's fair for us," Lopez said. "They should give us more time to move out.
"Not just two weeks."
Four families, including a pregnant woman and several children, said they were told they have to leave the fourplex in the 3100 block of 67th Place.
The fourplex has been turned over to R.O.I. Properties, which is the company behind the evictions.
A woman who answered the phone there Wednesday refused to comment or be interviewed.
Lopez said besides the cost of moving, he's now hesitant to sign a new lease because of the high number of foreclosures.
"I'm nervous because maybe they're going to do the same thing," he said.
Terry Feinberg, president of the Arizona Multihousing Association, said lenders work to get renters out of a foreclosed home because it's easier and cheaper to sell the property than serve as landlords.
"The goal of a bank is to turn it as quickly as possible," Feinberg said. "While they may lose a couple of months rent, they are getting a quicker sell if there aren't tenants living on the property."
Volk said renters can be forced out if the property owner financed the property prior to the lease agreement. But, he said, if the home was refinanced after a lease agreement was signed, renters could have a case because the lease would take precedence.
If renters find themselves facing eviction due to foreclosure, Volk recommends calling the current owner to make a deal.
"Say 'Listen, you can have the property sitting empty, uncared for, abandoned essentially or you can continue to take the rent from me,'" Volk said.
If that isn't an option, Volk advises demanding the deposit back in writing and make sure it's delivered by certified mail.
Desert Schools Federal Credit Union spokesman Jason Myers said that the home loan provider feels bad for renters evicted due to a foreclosure, some of whom are now looking to buy their own homes in order to gain control of their own living situations and financial futures.
"We see it as a classic Catch-22," Myers said. "It's an industry-wide problem and we're trying to coach people through it."
Myers said the credit union encourages prospective home buyers and renters to carefully research the owners of a property before entering into any type of agreement.
Valley resale market enters holiday slowdown
Staff Reports - October 2007
The 3,050 recorded sales in September 2007 heralds in the local resale housing market's traditional period of doldrums, due primarily to the holidays and the desire not to move children during a school year.
The doldrums should begin to let-up in early 2008, with improvement in recorded sales becoming more evident in March, according to real estate experts for Arizona State University.
The activity of September followed August 2007 at 4,240 sales and was below last year's 4,875 transactions. The month of September brought the year-to-date total to 40,800 sales, which is well below the 52,390 for 2006 year to date and 88,750 sales for 2005 year to date.
"Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines," said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness. "This could be especially true in the move-up market."
Butler by-the-numbers In a statement from Realty Studies, Butler reported that:
The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable. However, continuing concerns in the nonconforming mortgage market (mortgages above $417,000) have begun to adversely impact the move-up market. Last year, 39 percent of the resale homes sold for more than $300,000, while it was 35 percent for September 2007.
Foreclosures and new homes are providing a competitive alternative to the resale home in many areas of the market.
New home builders have been aggressively pursuing buyers through incentives such as specially priced up-grades, free pools and gift cards.
"Because of these tactics, the 2007 resale housing market is showing signs of increasing weaknesses that could drive it below the expectations of even a few months ago," said Butler.
Much like the ever-increasing sales activity of the last few years, the rapid improvement in prices has disappeared. The median home price in September was $250,000 in comparison to $255,000 for August and last year's $256,900. The most evident impact of lower prices is improved affordability. Although mortgage interest rates increased slightly from last year's 5.9 percent to 6.0 percent, the lower median price allowed the monthly payment to decrease from last year's $1,325 to $1,275.
Changing stories around the Valley Changes in median prices can vary tremendously throughout the valley.
For the West Valley the median price has fallen from $240,000 in September 2006 to $216,930. On the other hand, homes in the North Mesa area have gone from last year's $233,000 to $226,000. While some areas have declining prices, other areas are increasing or remaining fairly stable, especially the mature neighborhoods that are close to freeways, retail and schools. Since the Greater Phoenix area is so large, the median price can range significantly from $647,000 ($680,000 in August) in North Scottsdale to $185,000 ($189,000 in August) in the Maryvale area of the city of Phoenix.
Although townhouse/condominium units have retained some popularity with seasonal visitors, investors and people seeking affordable housing, this housing sector has continually fallen from the 1,350 sales in March to 685 sales, while there were 930 sales for a year ago. Much like the single-family market, the median home price decreased from $182,500 in August to $170,000 in September ($173,500 for September 2006).
The median square footage for a single-family home recorded sold in September 2007 was 1,745 square feet, which is larger than the 1,620 square feet for a year ago. The larger size further demonstrates the role of the move-up sector in the local housing market. In the townhouse/condominium sector, the median square footage was 1,075 square feet, which is smaller than the 1,090 square feet reported a year ago.
City-by-city snapshot
• In contrast to September 2006, recorded sales in the city of Phoenix decreased from 1,605 sales to 880 sales, while the median sales price decreased to $211,930 from $223,000 for a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $185,000 in the Maryvale area to $300,000 ($314,750 in August) in the Union Hills area. The townhouse/condominium sector decreased from 335 to 240 sales, with the median price decreasing from $152,000 to $150,000.
• The Scottsdale resale home market declined from 340 to 246 recorded sales, with the median sales price decreasing from last year's $580,000 to $535,000. The median resale home price is $647,000 ($680,000 in August) in North Scottsdale and $283,250 ($305,000 in August) in South Scottsdale. The townhouse/condominium sector in Scottsdale decreased from 170 to 145 sales, while the median sales price increased from $252,250 to $255,000.
• The Mesa resale housing market declined from 555 to 360 sales, with the median price falling from $240,000 to $227,000 ($237,000 in August). The townhouse/condominium sector also decreased from 135 to 90 sales, while the median home price decreased from $155,000 to $149,900.
• In Glendale, the recorded resale number dropped from 400 to 220 sales, and the median sales price decreased from $247,810 to $235,000 ($240,750 in August). The townhouse/condominium sector decreased from 45 to 40 sales, while the median sales price increased from $139,000 to $140,250.
• For the city of Peoria, the resale market declined from 190 to 110 sales, with the median price moving from $265,000 to $251,045 ($257,500 in August). The townhouse/condominium sector decreased from 20 to 15 sales, and the median price went from $169,500 to $161,950.
• In comparison to a year ago, the Sun City resale market declined from 75 to 65 sales, while the median sales price decreased to $176,940 from $206,500. Resale activity in Sun City West increased from 30 to 35 sales, but the median sales price decreased from $215,000 to $201,900. The townhouse/condominium market in Sun City declined from 50 to 25 recorded sales, while the median home price decreased from $132,000 to $118,450. In Sun City West, activity remained at 10 sales and the median sales price decreased from $165,000 to $150,000.
• The resale market in Gilbert decreased from 265 to 220 sales and the median sales price decreased from $318,500 to $276,000 ($300,000 in August). The townhouse/condominium market remained at 10 sales as the median sales price decreased from $215,000 to $211,250.
For the city of Chandler, the resale market fell from 315 to 205 recorded sales, while the median sales price experienced a small drop from $292,500 a year ago to $292,200 ($282,800 in August). The townhouse/condominium market declined from 40 to 30 sales and the median sales price declined from $176,000 to $163,700.
• The resale market in Tempe decreased from 130 to 90 sales, with the median sales price decreasing from $283,950 to $269,000 ($270,000 in August). The townhouse/condominium sector decreased from 50 to 30 sales and the median sales price decreased from $182,250 to $175,000.
• The highest median sales price was in Paradise Valley at $2,100,000 with a median square foot house of 4,050 square feet.
West Valley In the West Valley, the following communities represent 10 percent of the resale market.
• Avondale fell from 120 to 70 sales, with the median price moving down from $247,000 to $220,000 ($223,275 in August).
• El Mirage decreased from 75 to 40 sales, and the median home price went from $209,500 to $179,900 ($185,000 in August).
• Goodyear went from 80 to 70 sales, while the median price decreased from $273,000 to $256,500 ($272,000 in August).
• Surprise decreased from 190 sales to 125 sales, with a slight drop in the median price from $239,000 to $237,450 ($232,500 in August).
The 3,050 recorded sales in September 2007 heralds in the local resale housing market's traditional period of doldrums, due primarily to the holidays and the desire not to move children during a school year.
The doldrums should begin to let-up in early 2008, with improvement in recorded sales becoming more evident in March, according to real estate experts for Arizona State University.
The activity of September followed August 2007 at 4,240 sales and was below last year's 4,875 transactions. The month of September brought the year-to-date total to 40,800 sales, which is well below the 52,390 for 2006 year to date and 88,750 sales for 2005 year to date.
"Even in an uninspiring market, there are potential buyers that cannot get the needed financing due to tighter mortgage underwriting guidelines," said Jay Q. Butler, director of Realty Studies in the Morrison School of Management and Agribusiness. "This could be especially true in the move-up market."
Butler by-the-numbers In a statement from Realty Studies, Butler reported that:
The combination of large inventories and low interest rates have enabled people to purchase more expensive homes, which is one reason the county median price has remained fairly stable. However, continuing concerns in the nonconforming mortgage market (mortgages above $417,000) have begun to adversely impact the move-up market. Last year, 39 percent of the resale homes sold for more than $300,000, while it was 35 percent for September 2007.
Foreclosures and new homes are providing a competitive alternative to the resale home in many areas of the market.
New home builders have been aggressively pursuing buyers through incentives such as specially priced up-grades, free pools and gift cards.
"Because of these tactics, the 2007 resale housing market is showing signs of increasing weaknesses that could drive it below the expectations of even a few months ago," said Butler.
Much like the ever-increasing sales activity of the last few years, the rapid improvement in prices has disappeared. The median home price in September was $250,000 in comparison to $255,000 for August and last year's $256,900. The most evident impact of lower prices is improved affordability. Although mortgage interest rates increased slightly from last year's 5.9 percent to 6.0 percent, the lower median price allowed the monthly payment to decrease from last year's $1,325 to $1,275.
Changing stories around the Valley Changes in median prices can vary tremendously throughout the valley.
For the West Valley the median price has fallen from $240,000 in September 2006 to $216,930. On the other hand, homes in the North Mesa area have gone from last year's $233,000 to $226,000. While some areas have declining prices, other areas are increasing or remaining fairly stable, especially the mature neighborhoods that are close to freeways, retail and schools. Since the Greater Phoenix area is so large, the median price can range significantly from $647,000 ($680,000 in August) in North Scottsdale to $185,000 ($189,000 in August) in the Maryvale area of the city of Phoenix.
Although townhouse/condominium units have retained some popularity with seasonal visitors, investors and people seeking affordable housing, this housing sector has continually fallen from the 1,350 sales in March to 685 sales, while there were 930 sales for a year ago. Much like the single-family market, the median home price decreased from $182,500 in August to $170,000 in September ($173,500 for September 2006).
The median square footage for a single-family home recorded sold in September 2007 was 1,745 square feet, which is larger than the 1,620 square feet for a year ago. The larger size further demonstrates the role of the move-up sector in the local housing market. In the townhouse/condominium sector, the median square footage was 1,075 square feet, which is smaller than the 1,090 square feet reported a year ago.
City-by-city snapshot
• In contrast to September 2006, recorded sales in the city of Phoenix decreased from 1,605 sales to 880 sales, while the median sales price decreased to $211,930 from $223,000 for a year ago. Since Phoenix is a geographically large city, the median prices can range significantly such as $185,000 in the Maryvale area to $300,000 ($314,750 in August) in the Union Hills area. The townhouse/condominium sector decreased from 335 to 240 sales, with the median price decreasing from $152,000 to $150,000.
• The Scottsdale resale home market declined from 340 to 246 recorded sales, with the median sales price decreasing from last year's $580,000 to $535,000. The median resale home price is $647,000 ($680,000 in August) in North Scottsdale and $283,250 ($305,000 in August) in South Scottsdale. The townhouse/condominium sector in Scottsdale decreased from 170 to 145 sales, while the median sales price increased from $252,250 to $255,000.
• The Mesa resale housing market declined from 555 to 360 sales, with the median price falling from $240,000 to $227,000 ($237,000 in August). The townhouse/condominium sector also decreased from 135 to 90 sales, while the median home price decreased from $155,000 to $149,900.
• In Glendale, the recorded resale number dropped from 400 to 220 sales, and the median sales price decreased from $247,810 to $235,000 ($240,750 in August). The townhouse/condominium sector decreased from 45 to 40 sales, while the median sales price increased from $139,000 to $140,250.
• For the city of Peoria, the resale market declined from 190 to 110 sales, with the median price moving from $265,000 to $251,045 ($257,500 in August). The townhouse/condominium sector decreased from 20 to 15 sales, and the median price went from $169,500 to $161,950.
• In comparison to a year ago, the Sun City resale market declined from 75 to 65 sales, while the median sales price decreased to $176,940 from $206,500. Resale activity in Sun City West increased from 30 to 35 sales, but the median sales price decreased from $215,000 to $201,900. The townhouse/condominium market in Sun City declined from 50 to 25 recorded sales, while the median home price decreased from $132,000 to $118,450. In Sun City West, activity remained at 10 sales and the median sales price decreased from $165,000 to $150,000.
• The resale market in Gilbert decreased from 265 to 220 sales and the median sales price decreased from $318,500 to $276,000 ($300,000 in August). The townhouse/condominium market remained at 10 sales as the median sales price decreased from $215,000 to $211,250.
For the city of Chandler, the resale market fell from 315 to 205 recorded sales, while the median sales price experienced a small drop from $292,500 a year ago to $292,200 ($282,800 in August). The townhouse/condominium market declined from 40 to 30 sales and the median sales price declined from $176,000 to $163,700.
• The resale market in Tempe decreased from 130 to 90 sales, with the median sales price decreasing from $283,950 to $269,000 ($270,000 in August). The townhouse/condominium sector decreased from 50 to 30 sales and the median sales price decreased from $182,250 to $175,000.
• The highest median sales price was in Paradise Valley at $2,100,000 with a median square foot house of 4,050 square feet.
West Valley In the West Valley, the following communities represent 10 percent of the resale market.
• Avondale fell from 120 to 70 sales, with the median price moving down from $247,000 to $220,000 ($223,275 in August).
• El Mirage decreased from 75 to 40 sales, and the median home price went from $209,500 to $179,900 ($185,000 in August).
• Goodyear went from 80 to 70 sales, while the median price decreased from $273,000 to $256,500 ($272,000 in August).
• Surprise decreased from 190 sales to 125 sales, with a slight drop in the median price from $239,000 to $237,450 ($232,500 in August).
Thursday, October 18, 2007
East Valley builders on shaky ground
Tribune - October 2007
For years, neighbors of a once vacant property in the San Tan area have warned prospective buyers about land fissures that lurk below.
But foundations were recently poured and three homes are now rising from the ground on the patch of land located between Hunt Highway and Sun Dance Drive - an area neighbors and a state geologist says is known to have fissures.Fissures are subsidence cracks caused by groundwater harvesting and are exposed during heavy rains. The science of fissures isn't well-developed, but geologists are learning more all the time, Arizona Geological Survey geologist Todd Shipman said.
Shipman, the manager for a project to map every fissure in the state, confirmed three, and possibly more, fissures on the subdivided property in the San Tans.
Though there are fissures all over the Chandler Heights and San Tan area, Shipman he's never heard of a home being damaged by one, and an engineering consultant for the homes being built maintains there are no fissures on the property where the homes are being built.
On a recent trip to the site, Shipman used a global positioning device interwoven with a geographic information system to map the fissures. He said his work was also looked at several visibly open cracks and defining locations using previous maps and aerial photographs.
"Everybody that works in that area knows about these fissures," Shipman said. "If they don't believe my mapping, they can look at earlier mapping."
Tom Lang, who has lived on property adjacent to the under-construction homes for 28 years, said he has watched the fissures come and go with rain and has marked them by tying twine to bushes adjacent to the subsidence cracks. A few years ago, Lang also placed an iconic whitewashed tractor tire with a sign on his property warning "buyer beware" of the adjacent property's fissures.
Lang said his main concern is for the people who plan to build homes - they need to investigate the possibility of fissures, he said.
"I don't mind the houses going up, but what's it going to be like when we get a real heavy rain and something falls in these cracks," Lang said.
According to the Pinal County Assessor's Web site there are several property owners with lots on the 40 acres - lot sizes ranging from 12.5 acres to 1.25 acres.
Shipman said he was asked by Pinal County about possible fissures on the property in March when someone wanted to develop there. He said he told county officials that there were fissures on the property.
"There are definitely people out there who have been doing this longer than me, but I can take you out there and show you the fissures," Shipman said.
He said fissures on the property are difficult to track through historical aerial photographs because a gravel quarry used to be located there and neighbors say developers backfilled fissures there in the past.
"I think the real problem is if they build these buildings here and then our disclosure maps come out, they're stuck with having to disclose the fact that there are earth fissures," Shipman said. "There is an earth fissure right on the edge of where they graded. There is another earth fissure out there (in an undeveloped portion of the property) that is totally covered over."
There is nothing to prevent people from building near fissures.
According to Pinal County records, three building permits have been approved on the property. Calls to two of the three owners listed on the permits were not returned. The third could not be found. More land in the area is listed for sale and calls to the real estate agency went unreturned.
"It's folly to think that if you have a fissure and it stops right here at the surface, that there isn't anything below it that just hasn't made its way to the surface," Shipman said. "It's difficult for us to get a good handle on where they are, but there's no doubt there are fissures there."
Shipman said the worst damage caused by fissures was this summer, when a horse fell into an open fissure and died after monsoon rains.
"It's not a matter of stopping all building. It's a matter of making sure people know what they're getting into and building in a manner that is making the house strong enough for the situation," he said. "We can only hope that they're trying to be responsible."
Martin DeMarse, an engineering consultant for the three homes being built on the property, said they were responsible and a study was conducted showing no fissures on the site.
"They hired one of the most well-known geologists for fissures to make sure there are no fissures on the property," DeMarse said. "The property owners did the proper due diligence to verify that there are no fissures on that property."
DeMarse said he could not remember the name of the geologist.
But Shipman said the state's next fissure map, due before the end of the year, will show fissures on the property, and the real problem will come when the homes are being resold.
"You invest so much into something and then if it's got an earth fissure on it, it's not a matter that it's a real problem, it's what people perceive as a problem," he said. "If they feel they don't want to invest because of that risk, the value goes down."
Sunday, October 14, 2007
Some homes hold steady while Valley housing overall slows down
The Arizona Republic - October 2007
Home values in several established Valley neighborhoods have held steady this year despite the housing market's slowdown. But many areas, particularly far-flung communities, have seen prices tumble.
Median home prices have dropped in more than half of all metropolitan Phoenix's ZIP codes, according to a Republic analysis of new- and used-home sales from the data-research firm Information Market. Hardest hit were newer Valley fringe communities from Pinal County to Peoria and even some closer in, where home builders reduced prices.
Several of the newer suburbs farther out such as Queen Creek, Surprise and Avondale posted double-digit drops in median home prices. Central Valley ZIP codes in west Phoenix and Glendale with more-affordable homes and established neighborhoods fared better, largely a result of little room for new building and shorter commutes.
The drop in prices is painful for sellers and homeowners banking on equity, but real-estate analysts say the Valley's housing market is due for a correction because prices were artificially inflated by speculators during the boom of 2004-05.
Impacting the housing market significantly are foreclosures, which are expected to keep climbing as adjustable-rate mortgage payments rise, speculators walk away from properties and people who need to sell can't. For some potential buyers, mortgages have become tougher to get and more expensive as the credit market tightens from the fallout from bad loans.
So far this year, Valley home sales are 20 percent behind last year's pace, and 2006's pace was 30 percent off the speculator-driven boom pace of 2005. Housing experts expect prices to keep falling in many Valley areas for at least the next several months and potentially much longer for areas struggling the most.
"If the numbers continue to decrease month after month, it puts the rebound farther and farther away," said Jim Sexton, president of brokerage John Hall & Associates.
The median price of a new home has fallen from $285,000 at the tail end of the boom to $255,000, according to the Phoenix Housing Market Letter. A few Valley areas such as north Scottsdale and far east Mesa posted increases in new home prices due to luxury subdivisions that continued to sell this year, albeit at a much slower pace than the previous few years.
One figure that isn't declining is listings, which need to fall for prices and sales to climb.
Kathy and Dennis Rowedder are trying to sell their north Phoenix home in the 85050 ZIP code. The couple recently closed on a new house in Peoria and got a $30,000 concession on it because they haven't yet sold their existing home.
So far, the couple have lowered their price $40,000 to $360,000.
"I thought when we listed it at the beginning of August it was priced really well. I buried a statue of St. Joseph in our front yard for luck," Kathy Rowedder said. "But after we lowered our price, I went out and dug it up, cleaned it off and brought it back in the house."
Overall home prices in 85050 have fallen almost 24 percent this year , the biggest drop of any Valley neighborhood. But several new, less expensive homes recently went up in the area, which pulled down the overall price. The median new-home price in 85050 dropped 60 percent this year to $298,271.
"The bad time to buy a home was two years ago; now sellers are motivated, and there are plenty of houses to choose from," said Steve Walsh, president of Scottsdale-based Scout Mortgage. "Buyers just need to be careful and not get into loans they don't understand that could cost them a lot more in a few years."
The drop in home prices is bad news for homeowners who bought at the peak and are now finding their homes are worth less than what they paid. Market watchers say those people should price to sell now if they have to because prices are likely to continue to drop.
"We are going to have to go through this pain to get back to a healthy market," Barry said. "Sellers tell me their bottom line on a sales price, and I tell them to forget it because we haven't seen the bottom of the market yet."
Saturday, October 13, 2007
Many sellers slash prices to sell homes
The Arizona Republic - October 2007
A Chandler man slashed his price by $60,000 to sell his home so he and his wife could move to Ahwatukee.
An east Mesa women accepted about $25,000 less than her original asking price even after installing carpet, remodeling a bathroom, upgrading the swimming pool and adding a $7,000 hot tub and a $2,000 shed.
Their tactics weren't extraordinary in the ongoing housing downturn, where prices are falling by double-digit percentages in some cases.In nearly every ZIP code in the Southeast Valley, median home prices fell on a percentage basis over the past year, according to Information Market.
The biggest percentage drop was 19.4 percent in the 85297 ZIP code in Gilbert. Another Gilbert ZIP, 85296, saw a 15.2 percent drop. Its remaining two ZIP codes saw smaller declines.
But there were some bright spots, too. Four areas in Mesa saw a percentage increase ranging from 0.8 percent to a whopping 21 percent. The 21 percent jump occurred in 85207, which includes Las Sendas and other tony east Mesa developments.
Still, in Mesa, nine of its 13 ZIP codes posted a decline in the percentage change for the overall median price.
Susan Estes, an east Mesa resident, was among those in 85208 who saw her home value fall.
The median home price fell by 8.1 percent over the past year in her area, making it hard for Estes and her husband to sell their 1,589-square-foot, four-bedroom, two-bath home near Southern Avenue and Signal Butte Road.
"I figured it would take four months," she said.
Estes and her husband put their home on the market in December, took it off for one day in June and put it back on the next day.
It was expected to close Friday, 270 days after it went on the market.
She originally asked $255,000 for it, dropped the price to $240,000 and sold it for $229,500.
The deal came after Estes sunk $7,000 into a hot tub, $2,000 into a shed and thousands more into remodeling a bathroom, putting in new carpet, painting the garage, draining the pool, adding a heater to it, upgrading its pump and installing a new home water heater.
"And we're making $5,000 off the sale," she said.
The Estes had bought a larger, 4,000-square-foot home near Baseline and Crismon roads in the 85209 ZIP code, which experienced a 5.8 percent drop in the median price.
That worked to the Estes' advantage because they got the home for $525,000, well below the $560,000 asking price.
Some real estate agents argue that home prices have been inflated for so long that a market correction is overdue.
For Gary Brown, selling his two-story home in Chandler was a chore that he and his wife were anxious to finish.
They put their 3,000-square-foot home near Ray and Rural roads on the market last Octoberfor $520,000 and sold it - twice.
The first deal fell through because it was contingent on the buyers selling their home, and that sale fell apart.
After nine months of agent showings and open houses, the Browns sold the home in July for $60,000 less than their original asking price.
Brown also blames his timing, adding, "We thought about selling six months earlier, and we should have acted on it."
Like others, Brown said he was able to save money, $10,000, when he bought another home in the original section of Ahwatukee. The home is in the 85044 ZIP code, which saw values fall 6 percent.
3 Mesa ZIP codes buck housing slump
The Arizona Republic - October 2007
The Southeast Valley's housing market continued its slump, but three Mesa areas bucked the trend.
The 85207 ZIP code was a standout for the entire Valley.
This Las Sendas area recorded a 21 percent rise in median home value. In a dollar amount, that put the median home at $375,000 compared with $310,000 for the same area a year ago.
Of the more than 100 ZIP codes in Maricopa County, three in Mesa saw a jump in the median home price over the past year.
The Mesa ZIP codes 85213 and 85215 posted slight gains while the rest of the Valley's home values fell. The median home value in 85213, in north central Mesa, rose by 2.8 percent. The 85215 ZIP code, which includes Red Mountain Ranch, rose by 0.8 percent.
Homes in the city's remaining 11 ZIP codes saw sharp declines. Among those, the city's farthest southeast ZIP code of 85212 fell by 8.4 percent to $300,000, compared with $327,550 a year ago.
Overall, Mesa's median home price was unchanged from a year ago.
The Southeast Valley's housing market continued its slump, but three Mesa areas bucked the trend.
The 85207 ZIP code was a standout for the entire Valley.
This Las Sendas area recorded a 21 percent rise in median home value. In a dollar amount, that put the median home at $375,000 compared with $310,000 for the same area a year ago.
Of the more than 100 ZIP codes in Maricopa County, three in Mesa saw a jump in the median home price over the past year.
The Mesa ZIP codes 85213 and 85215 posted slight gains while the rest of the Valley's home values fell. The median home value in 85213, in north central Mesa, rose by 2.8 percent. The 85215 ZIP code, which includes Red Mountain Ranch, rose by 0.8 percent.
Homes in the city's remaining 11 ZIP codes saw sharp declines. Among those, the city's farthest southeast ZIP code of 85212 fell by 8.4 percent to $300,000, compared with $327,550 a year ago.
Overall, Mesa's median home price was unchanged from a year ago.
Friday, October 12, 2007
East Valley builders put brakes on homes
Tribune - October 2007
Valley homebuilders are scaling back production, as they continue to battle an oversupply of new and existing houses on the market. GRAPHIC: New residential Valley building permits
Some 26,807 residential building permits were issued in the Valley in the first seven months of 2007, a 14 percent drop from the same period last year, according to real estate research firm Hanley Wood Market Intelligence.
Permits also fell 30 percent in 2006 from the year prior.
"The brakes are starting to happen, which is good news for everybody," said Greg Doyle, managing director of Hanley Wood's local office, meaning this will cut down on the massive oversupply of both new and existing homes in the market. Until then, the Valley won't see an upward swing in building permits again until that inventory is whittled away, experts say.
The drop in permits reflects a nationwide trend.
In August, residential building permits fell to a seasonally adjusted annual rate of 1.3 million units - 24.5 percent below the same month last year, according to the U.S. Department of Commerce.
Corporate homebuilders are watching their earnings drop and tightening their belts, Valley real estate analyst RL Brown said. They're no longer building speculative homes and are pushing back construction schedules, he said.
"There are scores of subdivisions that have little if any activity in them," said Brown, who takes plane rides over the Valley every two weeks to note movement in various developments.
The drastic rise in the number of existing homes for sale - now totaling more than 55,000 across the Valley - has hampered builders' efforts to rid themselves of the excess.
Builders have seen healthier sales rates but still suffer from high cancellation rates because potential buyers can't sell their existing homes, said John Fioramonti, senior managing director at Meyers Builder Advisors in Scottsdale.
Fioramonti said he's seen cancellation rates as high as 40 percent in some cases.
At Shea Homes, employees help potential buyers set realistic asking prices on their old homes, "which is a hard pill to swallow" for some people, said Ken Peterson, the builder's vice president of sales and marketing. That's because some homeowners owe more on their properties than they're worth.
Tightened lending standards stemming from the mortgage crisis also have made it more difficult for potential new home buyers to get financing, he said.
Peterson added that the Valley has many different sub-markets and some areas, such as parts of Gilbert and Chandler, are still seeing positive building activity.
Despite the overall slackened pace of production, Hanley Wood's Doyle said he had expected builders to slow down sooner.
Valleywide, the active new home inventory - including vacant lots, speculative homes and homes under construction but not sold - was 104,989 units in the second quarter of 2007, up from the 94,694 in the same period last year.
Another 360,165 housing units also have been proposed for future development, though a large chunk of those may never come to fruition, Doyle said.
In the long term, however, there isn't a better market for builders than the Valley with its population growth, employment opportunities and affordability, he said.
"This is one of three top targets in the country for builders and developers to make sure they're in for the long haul," he said.
Tuesday, October 2, 2007
The new rules of the credit crunch
Good-bye, easy money. Hello, credit squeeze. If you haven't tried to borrow since the subprime chaos began, you'll find your friendly money bazaar a much more cautious place.
The lenders that in 2005 threw funds at anyone with a pulse have begun to insist on proof that borrowers have a prayer of paying them back. Even if you have a high credit score and a flush bank account, you'll likely feel the difference. So you'd better get to know the new rules.
Mortgages
What's happening: Several species of exotic mortgages are headed for extinction, including the 2/28, the 3/27 and those requiring no proof of income, says Paul Haarman, vice president of Renaissance Mortgage Corp. But the effects of the mess have extended beyond subprime.
According to the Federal Reserve, about one in seven banks has toughened home lending standards even for borrowers with good credit. You'll find lenders stingier on appraisals, more persnickety on documentation and far less likely to finance 100 percent.
Also, at the high end, rates on the 30-year jumbo (over $417,000) jumped nearly a percentage point between June and September.
What to do: If you have an adjustable-rate mortgage, read your agreement to find out when your rate will reset, how high it will likely go and how high it could go.
If it's coming due and will end up above 7 percent, consider refinancing to a fixed rate. You'll need 10 percent equity and a credit score over 660.
Must buy?
Get the best fixed rate you can (rates on a 30-year fixed are currently a sliver above 5/1 ARMs).
Home-equity loans and lines of credit
What's happening: These are generally holding at about the prime rate, now 8.21 percent if your credit score is above 680 and you can prove income. But you can't tap 100 percent of equity anymore; you'll be lucky to get 80 percent.
What to do: Just because you can get a home-equity loan or HELOC doesn't mean you should. Home prices are falling nationwide, and you don't want to borrow against shrinking equity unless it's the cheapest way to finance a necessary purchase, such as college or medical care.
Credit cards
What's happening: Hurting from subprime exposure, banks are looking to increase revenue. Coincidence or not, credit-card terms are slightly higher. Intro offers have gone from 12 months at 0 percent to three months at 1.9 percent and up, says Curtis Arnold of CardRatings.com.
And issuers are increasingly triggering rate increases, he adds. Discover, for example, hiked its highest-risk customers from 17.99 percent to 18.99 percent.
What to do: Now more than ever, pay on time and check your bill to be sure your APR hasn't risen.
Auto loans
What's happening: Car loans have hovered for the past year around 7.4 percent, with highs of 25 percent for those with poor credit. So far these have been impervious to the crunch, says Chintan Talati of Edmunds.com.
What to do: You may be tempted, as in the past, to use a tax-deductible HELOC to buy a car, but think twice. Real estate is unstable, it's harder to get prime on a HELOC and paying it back requires discipline. If you can get a 7 percent to 8 percent auto loan, take it.
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