Under-$200,000 market gives home sales a push

The Arizona Republic - February 2008

The real-estate slump has an upside for first-time home buyers looking to spend $200,000 or less.

As median-home prices continue dropping, the supply of homes for sale in the much-coveted low-end market is swelling.

Consider Marshall and Wendy Kauffman,who recently picked up the keys to their first home: a 1,150-square-foot three-bedroom, two-bath house in a nice Gilbert neighborhood. They paid $185,000.

The Kauffmans, who are both 29 and have three children, are among home buyers fighting over a growing inventory of homes in the Valley's sub-$200,000 market. The subprime debacle, foreclosures and "short sales" in which a buyer offers less than what is owed the bank, continue to drive Valley real-estate prices down. That, in turn, makes more homes than ever affordable for first-time home buyers and investors.

But those who want to get the deals face:

• Competition from investors.

• Bidding wars on "short-sale" homes with multiple offers.

• Waiting games for lenders to respond to "short-sale" offers.

"We saw a house that we liked, but it needed a lot of work," Wendy Kauffman said. "It had eight offers on it. It was a short sale, and there was a bidding war on it."

The Kauffmans found their dream home relatively quickly by limiting how far out they were willing to look. They also disregarded short-sale and foreclosure homes.

Wendy Kauffman described their house hunt as "a wonderful experience."
"But the key was having people on your side, from Audrey to our mortgage broker," she said.

The other key was not having to sell another home first. The couple have been renting a 1,460-square-foot, three-bedroom, two-bath home in Ahwatukee.

Homes that sold for less than $200,000 grew to 34 percent of the market in January, up from 16 percent of the market in January 2007, according to Jay Butler, director of Realty Studies at the Morrison School of Management and Agribusiness at Arizona State University's Polytechnic campus.

Butler's data doesn't break down where the less-expensive homes are selling or how many of the buyers are investors.

Real-estate agents and brokers said they see a growing number of homes listed for sale for $200,000.

"I'm working with a handful of buyers under $200,000, and I'm not having trouble finding them properties," said April Starr, a broker for All Starr Property in Phoenix. "It's the lenders who are making these people jump through hoops and then jump through them again."

Of the 46,148 single-family homes listed for sale in Maricopa County as of Thursday, about one-quarter of them are priced at $200,000 or less, Starr said.

Linda Booker, a real-estate agent with Realty Executives' Arrowhead branch, said the under-$200,000 market is a sweet spot for first-time buyers and investors.

"There's a decline in property values, and it's what's affordable for people to purchase," she said.

Several real-estate agents said many of the buyers in this market are investors.

Also, Dave Green of Century 21 Arizona Foothills said many of the homes listed for $200,000 or less tend to be in far-flung areas of the Valley, such as Queen Creek or Maricopa. Those closer to metro Phoenix often rise above the $200,000 mark.

Bradley Crutchfield, an assistant technician at the Gila River Indian Casino and a part-time ASU student, said he paid $243,900 for his first house, a foreclosure near Clemente Ranch in Chandler.

"It was in the (price) range of what I was looking for, but it was my top end and I was only willing to pay that if I could be closer," Crutchfield, 23, said.

"I've been looking for about two years now when the market was really high, and I had the urge to buy. Then the market went down, and I seriously wanted to buy."

Crutchfield and his real-estate agent, Sonia Carver of Keller Williams Realty East Valley, said they also found themselves competing with investors.

"The sub-$200,000 market is superhot," Carver said.
Shawn and Charlene McNeely, who live in Mesa, jumped into the low-end market to generate retirement income. They have bought three homes, ranging in price from $200,000 to $220,000, with the help of real-estate agent Marie Nowicki of Re/Max Elite in the past six months. Two of the homes are in Gilbert, and one is in Chandler.

One of the Gilbert homes was owned by a 65-year-old woman whose 95-year-old mother has Alzheimer's disease and lives with her. The women were about to lose their home because they couldn't keep up with their mortgage payments, which ballooned to $3,000 a month on an adjustable-rate loan.

The McNeelys said they now rent the home back to the women for $1,200 a month.

"She was very happy because for months, she was in fear of losing her home and being displaced," Shawn McNeely said. "Unfortunately, somebody's misfortune becomes somebody else's opportunity."

SE Valley resale numbers continue downward slide

The Arizona Republic - February 2008
Southeast Valley homeowners struggled to unload their homes in January, making it difficult for them to buy other homes and creating a circular problem in the real estate market, a researcher said Tuesday.

There were 3,350 homes sold Valleywide in January, down from 4,520 in January 2007, said Jay Butler, director of Realty Studies in the Morrison School of Management and Agribusiness at Arizona State University Polytechnic.

The median - or middle range price of a resale home - was $230,000 for the Valley compared with $260,000 for the same month last year. That represents the lowest median price in more than two years. In April 2005, the median home price was $221,000, and that was up from $194,000 in January 2005.

Bright spots in the January housing market included east Mesa, which saw median value rise to $248,130 in January from $238,500 for the same month a year ago.

Also, while fewer homes are being sold and for less money, the homes that are being sold are getting larger. The median size for a single-family re-sale home rose to 1,800 square feet this January from 1,700 square feet in January 2007.

The larger size illustrates that buyers are taking advantage of lower prices to upsize their homes, Butler said.

The median size for a townhouse and condominium also increased, to 1,120 square feet from 1,110 square feet a year ago.

Aside from in east Mesa, the prices of homes across the Southeast Valley continued to fall, as did the number of homes sold.

• Median prices overall in Mesa fell to $209,880 in January from $235,000 a year ago. The number of resale homes sold fell to 355 from 475 in January 2007.

• In Chandler, the number of resale homes sold dropped to 215 from 330 a year ago. The median sales price fell to $256,750 from $305,000 for the same month a year ago.

• In Tempe, the median price fell to $253,545 from $282,950 a year ago. The number of homes that sold fell to 65 from 100 a year ago.

• In Gilbert, the number of homes sold fell to 220 from 280 a year ago. The median price fell to $283,775 from $319,000.

• In Ahwatukee, the price fell from $360,000 to $315,000, while the number of resold homes recorded fell to 75 from 80.

The latest resale numbers back up data released by another ASU researcher on Friday.

Home prices in several Valley cities are falling at rates not seen since 1990, wiping out equity and making it difficult for those trying to refinance.

Valleywide, prices on repeat home sales fell 4.6 percent overall from October 2006 through October 2007. That compares with a decline of 3.8 percent from September 2006 to September 2007.

Unlike Butler's index, which measures median home prices, the Arizona State University-Repeat Sales Index compares the sale price of a house against itself rather than homes of varying size and quality, said Karl. L. Guntermann, real-estate professor at W. P. Carey School of Business.

Every city and region dropped into the negative category in terms of rates of change in house prices.

The southeast region, which stretches from Tempe through Mesa, Gilbert and Chandler to Apache Junction, Higley, Queen Creek and Sun Lakes, fell 8 percent from October 2006 to October 2007.

Phoenix and the northeast Valley region of Carefree, Cave Creek, Fountain Hills, Paradise Valley and Scottsdale both fell about 1 percent. Prices dropped 11.1 percent in the southwest region, which includes Avondale, Buckeye, Goodyear and Litchfield Park; and 9 percent in the northwest, which includes El Mirage, Glendale, Peoria, Sun City, Sun City West, Surprise and Youngtown.

The Valleywide 4.6 percent decline is the biggest drop in housing prices over a 12-month period since the last real estate recession when in

February 1989 to February 1990 home prices dropped 5.01 percent.

Guntermann said he cannot predict when the decline will stop or when housing prices will regain their former strength.

"It's not just a matter of too many houses on the market," he said. "It gets into the sub-prime-mortgage problem, affordability, foreclosures, and that has a big impact on people's ability to refinance if their house prices go down 6 to 8 percent. They may not have any equity, and that may create cascading problems."

Pinal home sales show improvement at end 0f '07

Tribune - February 2008

Pinal County home sales showed some improvement in the final months of 2007, though sales remained down overall for the year.

A total of 1,145 existing homes were sold in the fourth quarter - an 83 percent spike from the previous three months and a nearly 60 percent gain over a year ago, a report by Arizona State University's Realty Studies department shows.

A steep decline in home prices in the past year has made houses in the region more affordable and attractive to investors, according to the study.

"Although affordability has improved, higher gasoline prices, more congested highways and limited employment opportunities continue to strongly hamper any potential recovery of the housing market in Pinal County," Realty Studies director Jay Butler said.

Overall last year, 3,580 existing Pinal County homes were sold, a 7.3 percent drop from 2006. The median sales price in the fourth quarter was $174,000, down from $191,500 a year ago.

Initiative looks to ban tax on sale of homes in state

Capitol Media Services - February 2008

Hoping to bury the idea forever, the Arizona Association of Realtors wants to bar the state from ever taxing the sale of homes. An initiative drive launched this week would put a provision in the state constitution to make it illegal "to impose any tax, fee, stamp requirement or other assessment, direct or indirect" on the sale, transfer or purchase of real property. Backers have until July 3 to gather the 230,047 valid signatures necessary to put the measure on the November ballot.

Tom Farley, lobbyist for the Realtors, acknowledged that the late start will require the use of paid petition circulators. But he declined to say how much the group intends to spend to qualify for the ballot, saying only that the group already has the cash.

Arizona does not impose any sort of real estate transfer tax. But Farley pointed out that the concept comes up from time to time as governors, lawmakers and others look for ways to revamp Arizona's tax structure.
It came up as an idea in Fiscal 2000, a panel put together to study meeting the state's financial needs and how best to fund them. Among the ideas of the 1990 report was broadening the list that is subject to state sales taxes beyond the purchase of goods.

Most of the recommendations never took effect.

The Citizens Finance Review Committee, formed more than a decade later by Gov. Janet Napolitano, also looked at a real estate transfer tax among other methods of raising more money, or at least reducing the volatility of Arizona tax revenues. But Napolitano ignored the major tax law changes her panel proposed.

And this year, Rep. Rick Murphy, R-Glendale, is proposing to scrap the state income tax in favor of a broad-based sales tax. That would include not just services, which generally are exempt, but also a levy on the sale of land and homes.

Farley said home and land sales should not be lumped into other financial transactions that now are exempt from the sales tax.

"You already have a property tax," he said, based on the value of the building and land. That levy is adjusted based on the annual change in value.

Home-rental evictions up - Driving the trend: Hard times, landlords in foreclosure

The Arizona Republic - February 2008

Maricopa County constables are evicting more renters of single-family homes as they struggle to pay rent in the faltering economy or as foreclosures strike their landlords.

The tenants cut across all demographics and properties, from luxury homes in north Scottsdale to affordable homes in the suburbs.

Some tenants are blindsided by the evictions, unaware the home fell into foreclosure even as they have continued to pay rent to homeowners. Other tenants have failed to pay rent and have already boxed their belongings, waiting for a constable to bang on the front door.

Things began to turn a year ago for Constable Joe Arredondo. Back then, he would serve about 10 evictions each month to tenants of houses. These days, it's more like 35 to 50.

"In the past, apartments have been our bread and butter, but it's changing," said Arredondo, who works in the University Lakes Precinct, which mostly includes Tempe. "I'm seeing more families who tend to rent homes rather than apartments. They're finding it difficult to meet the rent increases that have been put on them by some of the homeowners."

In many foreclosures, the residents of the home are not the owners. Among Arizona prime-loan defaults, 26 percent of the homes were not owner-occupied, according to the Mortgage Bankers Association. Among subprime-loan defaults, 18 percent were not owner-occupied. Arizona is second to Nevada for the rate of rental-home defaults.

Bad decisions

Even before the mortgage crisis, house evictions had been rising because more and more people who lived in rental homes could not pay their rent. Constable Dan Ryan works in the McDowell Mountain
Precinct, which includes Scottsdale and parts of north Phoenix. These days, he estimates he is issuing 15 to 18 house evictions each month, up from about five last year.

"You'll see people that have been there a year or two or three, and their luck changed," Ryan said. "On the other hand, you get someone that's made a bad decision with a renter, and they got suckered. All of a sudden, somebody's not paying."

That's what happened to homeowners Carmen Nuñez and her husband, Raymond Ordoñez. Almost four years ago, they bought a nice home in a nice neighborhood near 35th and Northern avenues in Phoenix. They kept the house as an investment property when they later moved to Laveen and in August rented it to a young, unmarried couple.

The tenants stopped paying the $1,200 rent in December, instead dodging Nuñez's phone calls and giving lots of excuses.

"I'm spending money I don't have to pay the mortgage on that house, my house, to the courts for the eviction," said Nuñez, a real-estate agent. "It's affected me really badly, and it's just plain ridiculous."

On Wednesday, a team of constables descended on the home to evict the tenants, who weren't home. The house was trashed: Half-eaten hamburgers and moldy bowls filled with cereal and milk sat on a table. Christmas decorations, dirty clothes and toys were scattered through the living room. The carpets were stained, the place smelled like rotten food and dirty diapers.

The tenants rolled up as the owners changed the locks, and the constables carried out the eviction paperwork. The tenant, Bobby Green, jumped out of a car, screamed, cursed and started to get physical with one constable. Within seconds, Green was Tasered, down on the driveway and in handcuffs.

"It's supposed to be nice and easy," Constable Philip Hazlett said. "But you can see how difficult and confrontational it can be, especially when we're working with houses."

Serving evictions

In Maricopa County, constables are elected to do all kinds of duties, including serving subpoenas and orders of protection. They typically perform evictions, known as writs of restitution, that come out of Maricopa County Justice Courts, an average of 1,785 monthly in 2006.

Maricopa County sheriff's deputies typically perform evictions on foreclosed homes that are ordered by the county Superior Court, a much smaller figure and one that was not immediately available, a sheriff's representative said.

Evictions performed by county constables climbed 42 percent from 2002 to 2006, the most recent figures available, an Arizona Republic analysis shows.

In 2006, county constables served 21,414 eviction papers, up from 15,080 four years earlier. County officials do not have 2007 figures available but expect eviction rates to hold steady or rise modestly.

There are no solid statistics on how many renters have been evicted from houses. County officials do not track evictions by the type of dwelling.

However, many of the county's 23 constables, and many others with the Arizona Constables Association, have reported steady increases, said Hazlett, vice president of the statewide organization with a membership of 78.

Houses vs. apartments

On average, house evictions take an hour or more, compared with 10 minutes on an apartment. Constables have more space to deal with, and they often have to work with families, children and pets. Locks have to be changed, and arrangements must be made with homeowners to retrieve possessions.

Some constables end up working Saturdays to keep up with time spent working the longer house evictions, Hazlett said.

"We didn't realize how much of an impact it was going to have on us when the market turned," said Hazlett, who works in the North Valley Precinct. "It's come up at our meetings. A lot of us are dealing with it. It used to be a standard tract home would be where you'd do your eviction. Nowadays, I do ones on houses that sell for $750,000 in Anthem."

Home evictions have risen about 15 percent since January 2006 in parts of the East Valley, including Scottsdale and Tempe, constables said.

They are substantially higher, up to 45 percent, in parts of Phoenix, Ahwatukee, Chandler, the north Valley and the West Valley, constables said.

Trend Homes to be purchased by private-equity company

Arizona Republic - February 2008

Phoenix-based private-equity company Najafi Cos. said today it agreed to purchase Trend Homes of Gilbert and some of its affiliates for $65 million.

The announcement came a day after the parent of Engle Homes, another Arizona home builder, filed for bankruptcy protection in Florida.

Under the Najafi-Trend agreement, Trend also will file for bankruptcy protection.

Assuming the U.S. Bankruptcy Court agrees, the home builder would emerge from the reorganization 90 days later as a company that is "healthier, stronger, better-capitalized and better positioned for growth than Trend has been in its 30-year history," according to a news release.

Trend Homes moved to the Valley from Salt Lake City in 1989 and has been building more than 1,000 homes a year since 2002. Housing analyst RL Brown said it was one of the pioneers of cluster housing, the trend toward putting full-sized homes on small lots.

Najafi makes investments of up to $2 billion in size across a variety of industries. In 2002, it purchased Network Solutions, a clearinghouse for ".com" and ".net" names, and sold it in early 2007 for $800 million.
Brown said the Trend sale is not a surprise because the home building industry is in such a slump. He expects more consolidations.

"I think it's clear that for a number of builders, the change in the market has caught them with excess inventory of houses, excess inventory of land and excess organization," he said. "And that all leads to financial stress. I think we'll see continued consolidation in the industry, in the region and nationally."

He predicts some builders will quit and others will try to buy competitors to gain market share.

Brown expects only 22,000 to 24,000 permits to be issued for new homes in the Phoenix area this year, a one-third of those issued in 2005.