2
Contents 1 2011 1.1
7 April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Why the Housing Market is Three Times Worse Than You Think - Yahoo! Real Estate (2011-04-02 14:08) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Calculated Risk: CoreLogic: Shadow Inventory Declines Slightly (2011-04-02 14:45) . . . .
9
Forgiven mortgage debt not taxable (2011-04-03 12:54) . . . . . . . . . . . . . . . . . . . . .
10
Homebuilders pin hopes on retiring Baby Boomers (2011-04-03 13:00) . . . . . . . . . . . .
10
US economy outpaces rivals even as job growth lags (2011-04-03 13:39) . . . . . . . . . . .
16
Irish stress tests expected to lead to bank takeovers (2011-04-03 13:41) . . . . . . . . . . . .
17
Activist investors to companies: Show us the money - Times Union (2011-04-03 13:45) . . .
18
Scottsdale-based Taylor Morrison to be purchased by investors (2011-04-03 13:53) . . . . .
21
Foreign banks tapped secret Fed loans (2011-04-03 13:56) . . . . . . . . . . . . . . . . . . .
22
Unemployment rate declines to 8.8% (2011-04-03 13:57) . . . . . . . . . . . . . . . . . . . .
23
Nasdaq joins global competition for NYSE with bid (2011-04-03 14:14) . . . . . . . . . . . .
24
Scottsdale-area housing market may be flattening out (2011-04-03 14:18) . . . . . . . . . . .
25
Median price of homes in Phoenix rose by 21.1% in 2010 (2011-04-03 14:21) . . . . . . . . .
27
Empty houses taking toll on Valley (2011-04-03 14:42) . . . . . . . . . . . . . . . . . . . . .
28
Live-in homebuyers necessary for a sustained resurgence, analysts say (2011-04-03 14:53) . .
30
Despite signs of stability, Valley’s foreclosure-stressed market remains vulnerable (2011-04-03 14:55) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
Banks curtail rewards for debit-card use (2011-04-03 14:58) . . . . . . . . . . . . . . . . . .
34
Crowne Plaza San Marcos Golf Resort files for bankruptcy (2011-04-09 21:48) . . . . . . . .
35
High-end beach club planned for downtown Scottsdale (2011-04-09 22:05) . . . . . . . . . .
36
Banker’s hours (2011-04-09 22:11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
Meritage expands to North Carolina (2011-04-09 22:19) . . . . . . . . . . . . . . . . . . . .
39
Demand high for Tempe’s West 6th luxury apartments (2011-04-09 22:35) . . . . . . . . . .
40
Arizona hurt by stagnant, declining population (2011-04-10 15:56) . . . . . . . . . . . . . .
41
Foreclosure filings drop in the Valley (2011-04-16 16:01) . . . . . . . . . . . . . . . . . . . .
42 3
Default on HELOC may bring tax bill (2011-04-16 16:06) . . . . . . . . . . . . . . . . . . .
43
Tempe lakeside subdivision is celebrated (2011-04-16 16:39) . . . . . . . . . . . . . . . . . .
43
Radical Bunny told to pay penalties (2011-04-16 16:42) . . . . . . . . . . . . . . . . . . . .
44
Raising the debt limit a GOP dilemma (2011-04-16 16:46) . . . . . . . . . . . . . . . . . . .
45
No easy solutions for U.S. deficit (2011-04-16 16:48) . . . . . . . . . . . . . . . . . . . . . .
47
Arizona jobless rate drops to 9.5% (2011-04-16 16:57) . . . . . . . . . . . . . . . . . . . . .
48
Workers: Low pay imperils industry (2011-04-16 17:05) . . . . . . . . . . . . . . . . . . . .
50
Vacancy rate in industrial market down (2011-04-16 17:09) . . . . . . . . . . . . . . . . . .
51
Mortgage woes send down BofA’s income (2011-04-16 17:12) . . . . . . . . . . . . . . . . .
52
Audit: $513 mil in IRS homebuyer credits questioned (2011-04-16 17:19) . . . . . . . . . . .
53
BofA revives billionaire’s bond insurer (2011-04-17 10:50) . . . . . . . . . . . . . . . . . . .
54
Foreclosure fraud: The homeowner nightmares continue - Fortune Finance (2011-04-17 11:00)
55
Real estate: It’s time to buy again - Fortune Finance (2011-04-17 11:04) . . . . . . . . . . .
58
Real estate: It’s time to buy again - Fortune Finance (2011-04-17 11:07) . . . . . . . . . . .
64
Retail developer Vestar hopes to repeat feat of 1990s, acquire distressed properties for a song (2011-04-17 13:58) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
Site tracks foreclosures (2011-04-17 14:09) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
Canadians inject more money into U.S. markets (2011-04-17 14:13) . . . . . . . . . . . . . .
74
The Dangers of Real Estate: ”Criminals Don’t Want Witnesses,” Safety Expert on Keeping Real Estage Agents Safe - ABC News (2011-04-17 14:56) . . . . . . . . . . . . . .
74
Short sales and foreclosures equally degrade FICO scores « HousingWire (2011-04-24 12:11)
76
Expanding a financing Facebook for lenders « HousingWire (2011-04-24 12:17) . . . . . . .
77
Robo-Banks Federal Regulators Hit Banks on Mortgage Practices - CNBC (2011-04-24 12:21)
78
Homeownership still considered best long-term investment: Pew « HousingWire (2011-04-24 12:23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
Three Questions You Must Ask Yourself Before Buying a Home - DailyFinance (2011-04-24 12:33) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
City-rehabbed apartments almost ready for move-in (2011-04-24 13:11) . . . . . . . . . . .
82
U.S. stunned by Wall St. alert on debt (2011-04-24 13:38) . . . . . . . . . . . . . . . . . . .
83
Metro Phoenix housing market showing signs of upswing (2011-04-24 13:43) . . . . . . . . .
85
Trends show promise for new-home market (2011-04-24 13:46)
. . . . . . . . . . . . . . . .
87
. . . . . . . . . . . . . . . . . . . .
87
Investor-backed financing carves homes niche (2011-04-24 13:58) . . . . . . . . . . . . . . .
89
Realty Execs in lease dispute (2011-04-24 14:03) . . . . . . . . . . . . . . . . . . . . . . . .
90
Canadians flocking to buy homes in Southeast Valley (2011-04-24 14:05) . . . . . . . . . . .
91
Arizona’s middle class further out of reach for young (2011-04-24 14:39) . . . . . . . . . . .
92
Freeport income jumps $603 million (2011-04-24 13:49)
4
Maricopa County Housing market showing some life (2011-04-24 14:46) . . . . . . . . . . .
94
Young adults face future of self-reliance (2011-04-24 14:49) . . . . . . . . . . . . . . . . . .
95
Get the lowdown on government notes, bonds (2011-04-24 14:51) . . . . . . . . . . . . . . .
97
Fulton Homes still has no debt plan (2011-04-26 08:07)
. . . . . . . . . . . . . . . . . . . .
98
Study: Underwater owners who walk are more credit savvy (2011-04-26 08:10) . . . . . . .
99
Lack of financial savvy hinders youths in debt (2011-04-26 08:13) . . . . . . . . . . . . . . .
100
Fed eyes keeping inflation in check (2011-04-26 08:22) . . . . . . . . . . . . . . . . . . . . .
102
5
6
Chapter 1
2011 1.1
April
Why the Housing Market is Three Times Worse Than You Think - Yahoo! Real Estate (2011-04-02 14:08)
Between the recent report that sales of new homes hit a record low in February and this week’s news that 19 of the 20 largest metro areas tracked by the Standard & Poor’s/Case-Shiller home price index saw a price slump in January, it hasn’t exactly been a stellar few weeks for the housing market. And yet another data dump tracking foreclosed and distressed homes that have yet to hit the markets - what’s known as ”shadow inventory” - suggests things are not likely to get a whole lot better for a long time. Supply Sigh Economics More robust economic growth, a pickup in job creation (and wage growth), and a renewed desire by banks to actually write mortgages are all central pieces of any housing rebound. Job growth last month was indeed stronger than in past months, and a new survey of CEOs finds them increasingly upbeat about hiring. But even if those green shoots emerge, it may take a whole lot longer to see any pickup in [1]home values given the alarming backlog of homes currently on the market, as well as homes that may soon be for sale. [foreclosure_sign1.jpg] Sign of the times in some markets
In terms of homes for sale, we have three inventory tracks to keep an eye on: * The official inventory: 3.5 million homes. The National Association of Realtors says the current inventory of existing homes that are listed for sale would take 8.6 months to work down at the current sales pace. In ”normal” times, the inventory backlog is more in the vicinity of six months. * The unofficial shadow inventory: 1.8 million homes. According to research firm CoreLogic, there’s another 1.8 million homes sitting in shadow inventory. These are homes that don’t yet show up in NAR’s Multiple Listing Service as being for sale, but that are likely to hit the market at some point. They include homes that banks have already foreclosed on but have yet to put up for sale, homes that are somewhere in the[2]foreclosure process, and homes in which owners are at least 90 days late on their mortgage payments. CoreLogic estimates that those 1.8 million homes represents an additional 9 months of potential supply given the pace of how bank-owned property and pending foreclosures make their way to market. 7
* The severely underwater inventory: 2 million. CoreLogic uses this category to refer to homeowners that are at least 50 percent underwater on their mortgages. Now there’s nothing that says homeowners with negative equity will in fact walk away from their mortgages. But it’s reasonable to presume that short of a quick turnaround in home values or a settlement between the state attorneys general and lenders that leads to substantial loan modifications, a significant chunk of these homes will end up on the market in the coming months or years. Add it all up, and NAR’s 8.6 month official backlog triples to about two years or so. Distress Points To get a sense of where your housing market stands, take a look at CoreLogic’s comparison of each state’s tally of mortgages that are at least 90 days late to its current sales rate. The states with the most distressed housing inventory are [3]New Jersey, [4]Illinois, [5]Maryland, and [6]Florida, while those with the least distressed inventory are [7]North Dakota, [8]Alaska, [9]Wyoming, and [10]Montana. Of course, even state-level data doesn’t capture what’s going on in your local area. If you’re looking to buy or sell, one important step at this juncture is to look beyond the official sales and inventory data, and try to get a sense of local shadow inventory. This is where a solid and straight-up real estate agent is going to be crucial. You don’t want sugarcoating; you need an honest assessment of what’s in your local pipeline. The fact that your local market has a large shadow inventory doesn’t necessarily mean more steep price declines. But if there is indeed a big backlog of shadow inventory, it’s hard to make a case that home values will rebound any time soon given the large supply that needs to come to market and be absorbed. If you’re looking to buy, a high shadow inventory is seemingly an argument to take your time looking, but keep all the moving pieces of this in mind. For example, even if you don’t have to worry about rising prices, what about mortgage rates? No one can predict where mortgage rates will be in six months or a year, but we do know that current rates are at historic lows. As for sellers, well, if you really want to sell and you find you are in an area with a lot of shadow inventory, waiting might not be in your best interests. Even if prices stabilize, working through that backlog could make it a while before prices start to climb again. [distressed_map.jpg] States with the most distressed properties are expressed in red Source: CoreLogic
By Carla Fried, CBS MoneyWatch.com March 31, 2011 [11]Why the Housing Market is Three Times Worse Than You Think - Yahoo! Real Estate 1. http://realestate.yahoo.com/Homevalues;_ylt=An7kp3NwUkmwU5HSo4WWw9jxkdEF 2. http://realestate.yahoo.com/Foreclosures;_ylt=AhJaOflx.6NBtFxim3h369HxkdEF 3. http://realestate.yahoo.com/New_Jersey/;_ylt=Aq9DTj_IzKxvieY5IQAs1g3xkdEF 4. http://realestate.yahoo.com/Illinois/;_ylt=AhPqFL5cUt8yDcA1X6B2G8PxkdEF 5. http://realestate.yahoo.com/Maryland/;_ylt=Ar.fGZAcKmQVSoLHybYFJZLxkdEF 6. http://realestate.yahoo.com/Florida/;_ylt=AvCeYIDjzBL0QsoS8qQIdkzxkdEF 7. http://realestate.yahoo.com/North_Dakota/;_ylt=AqmBl712HiHaAx_fXpcys.fxkdEF 8. http://realestate.yahoo.com/Alaska/;_ylt=Aoacx4kGRCXmbBPCuLuKkiTxkdEF 9. http://realestate.yahoo.com/Wyoming/;_ylt=AvJhNVFp5ixpk8JG_htxVgvxkdEF 10. http://realestate.yahoo.com/Montana/;_ylt=Aizmi3Q7vlciFGaLrckoDTrxkdEF 11. http://realestate.yahoo.com/promo/why-the-housing-market-is-three-times-worse-than-you-think.html
8
Calculated Risk: CoreLogic: Shadow Inventory Declines Slightly (2011-04-02 14:45) Click
on
graph
for
larger
image
in
graph
gallery.
[1]
This graph from CoreLogic shows the breakdown of ”shadow inventory” by category. For this report, CoreLogic estimates the number of 90+ day delinquencies, foreclosures and REOs not currently listed for sale. Obviously if a house is listed for sale, it is already included in the ”visible supply” and cannot be counted as shadow inventory. CoreLogic estimates the ”shadow inventory” (by this method) at about 1.8 million units.
CoreLogic ... reported today that the current residential shadow inventory as of January 2011 declined to 1.8 million units, representing a nine months supply. This is down slightly from 2.0 million units, also a nine months supply, from a year ago. CoreLogic estimates current shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLS) that are seriously delinquent (90 days or more), in foreclosure and real estate owned (REO) by lenders. Transition rates of delinquency to foreclosure and foreclosure to REO are used to identify the currently distressed non-listed properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory. ... Of the 1.8-million unit current shadow inventory supply, 870,000 units are seriously delinquent (4.2 months supply), 445,000 are in some stage of foreclosure (2.1 months supply) and 470,000 are already in REO (2.2 months supply).
[2]
The second graph shows the same information as 9
”months-of-supply”. This is in addition to the [3]visible months-of-supply (inventory listed for sale). Note: It is the visible inventory that mostly impacts prices, but this suggests the visible inventory will stay elevated for some time (no surprise). CoreLogic also notes:
In addition to the current shadow inventory supply, there are nearly 2 million current negative equity loans that are more than 50 percent upside down that will likely become shadow supply in the near future. This report provides a couple of key numbers: 1) there are 1.8 million homes seriously delinquent, in the foreclosure process or REO that are not currently listed for sale, and 2) there are about 2 million current negative equity loans that are more than 50 percent upside down . by Calculated Risk March 30, 2011 [4]Calculated Risk: CoreLogic: Shadow Inventory Declines Slightly 1. http://cr4re.com/charts/charts.html?Existing-Home#category=Existing-Home&chart=CoreLogicShadowJan2011.jpg 2.
http:
//cr4re.com/charts/charts.html?Existing-Home#category=Existing-Home&chart=CoreLogicShadowMonthsJan2011.jpg 3. http://cr4re.com/charts/charts.html?Existing-Home#category=Existing-Home&chart=EHSMonthsFeb2011.jpg 4. http://www.calculatedriskblog.com/2011/03/corelogic-shadow-inventory-declines.html
Forgiven mortgage debt not taxable (2011-04-03 12:54) Question: If I ”short sell” my home, is the forgiven debt income to me? - Roy Sancious Phoenix Answer: According to Consumer Reports, a 2007 tax law will help you dodge this tax bullet. In a short sale, the lender agrees to accept an amount for the home that’s less than what you owe. In years past, the amount of debt the lender forgave would have been reported as taxable income to the seller. Under the Mortgage Forgiveness Debt Relief Act, qualified home debt forgiven in years 2007-12 won’t be taxed. The debt must have been incurred to buy, build or improve your principal residence. If you receive a 1099 from the lender for the forgiven debt, tax lawyers I spoke with say you should add that amount to the sale price when filing your federal income-tax return. Don’t add it to income. by Dave Cherry Ask Dave Mar. 28, 2011 12:00 AM [1]Forgiven mortgage debt not taxable 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/03/27/
20110327biz-cherry0328-forgiven-mortgage.html
Homebuilders pin hopes on retiring Baby Boomers (2011-04-03 13:00) The current housing-bust survival strategy for many Phoenix-area homebuilders leans heavily on a generation with the word ”boom” in its name. With relatively few working-age families willing or able to invest in a new home, older Baby Boomers, many of whom are in retirement or eyeing it, represent the best hope for some local homebuilders to keep busy. 10
Developers have spent the past few decades refining the concept of paradise for a key segment of retirees and empty-nesters who crave a balance of relaxation and excitement. It’s called the ”active-adult lifestyle.” The Valley’s dozen active-adult communities under development are designed for them - a fusion of safe, quiet neighborhood and ritzy country club with golf courses, health spas and multipurpose clubhouses offering exercise classes, sports, games, arts, crafts and other activities. As in the rest of the new-home market, sales are down dramatically in active-adult communities since the housing slump began. But Jim Belfiore, a Phoenix-based housing analyst, said the active-adult market has shrunk only half as fast as the rest of the new-home market. The new-home market share belonging to age-restricted communities has doubled since 2005 in metro Phoenix, to 10 percent from 5 percent, Belfiore said. It’s a sales trend many builders and housing analysts expect to continue. Baby Boomers age 55 or older, the intended consumers for those homes, are the country’s fastest-growing demographic. Already, one out of every four U.S. residents is 55 or older, according to U.S. Census Bureau data from 2009. Builders such as Scottsdale-based Meritage Homes, a relative newcomer to the active-adult market, and veteran active-adult developer Del Webb, now a division of mega-homebuilder PulteGroup, are counting on the growing number of retiring Boomers to drive up age-restricted home sales in Arizona over the next few years, at a time when many younger residents may be struggling to get careers on track, rein in expenses, rebuild damaged credit or move ahead after a foreclosure. The long-term future for active-adult development, even in the retirement mecca of Arizona, is far less certain, they said. Although active-adult communities make up only a fraction of all local subdivisions selling new homes, most are massive in scale, take years to reach potential build-out and cost developers far more to build and maintain than other master-planned housing projects, local active-adult builders said. But as long as there are lots available in existing active-adult neighborhoods - and there are lots of lots developers of age-restricted communities should see sales grow along with the number of Boomers hitting retirement, Belfiore said. ”It’s a good place to be for homebuilders,” he said. The average 55-year-old, just old enough for most active-adult communities, has hardly been immune to the recession’s effects of reduced home equity, diminished job opportunities and leaner nest eggs. From September 2007 to May 2009, U.S. retirement accounts lost about $2.7 trillion - about 30 percent of their value. The slump had a disproportionately high impact on Boomers, according to a 2010 study by the Federal Interagency Forum on Aging Related Statistics. However, that’s because Boomers have far more personal wealth than any other age group, the report said. Bigger market share Not all local homebuilders have age-restricted projects, but those with active-adult communities under development rely more on those projects as a revenue source today than they did just a few years ago. Larger age-restricted communities in Arizona include Shea Homes’ Trilogy at Vistancia in the West Valley, Del Webb’s Sun City Anthem at Merrill Ranch in Florence, and Sun Lakes developer Robson Communities’ Robson Ranch in Eloy. In 2005, Belfiore said, about 3,000 new homes sold in active-adult developments, nearly 6 percent of the total 54,000 new-home sales. Last year, he said, 730 out of 7,300 new homes sold were in age-restricted communities - 10 percent. 11
The industry is counting on continued growth in demand, particularly from a subset of Boomers known in homebuilding circles as ”actives.” Homebuilders describe actives in loose terms such as ”motivated,” ”affluent” and ”social.” But what really defines an active is the desire to purchase a home in an age-restricted, active-adult-lifestyle community. Virtually all actives are Boomers, but only about one-third of Boomers are actives, according to Jacque Petroulakis, spokeswoman for Sun City developer and active-adult pioneer Del Webb, which now operates as a division of PulteGroup. ”More and more marketing is being centered around people who are 55-plus,” the minimum-age requirement for most active-adult communities, Petroulakis said. One reason is that actives tend to go house-hunting right around the time they retire, and the number of Boomers expected to retire in the coming decade numbers in the tens of millions. But local builders said the appeal of 55-and-older buyers extends far beyond anticipated population and market-share growth. Even after losses in investments and home equity, Boomers still hold a disproportionately large amount of the nation’s wealth and are willing to pay a premium for amenities and construction quality - often with cash.
Selling a lifestyle Recently retired couple Pat and Becky McWaters relocated about a year ago from Portland, Ore., to the Robson Ranch community in Eloy, about 45 minutes south of downtown Phoenix. ”We were looking for someplace to get out of the damp cold,” Pat said. 12
The McWaterses said developer Robson Communities went to extremes to earn their patronage, including flying them out to Arizona and putting them up in free, resortlike accommodations built and operated by Robson inside the community. Overnight stays allow prospective buyers a chance to ”test-drive” the amenities, neighbors and lifestyle, they said, sampling the organized activities, meeting existing residents and touring model homes and other facilities. ”I came here hesitant, waiting for the big, hard sell, but they didn’t do that,” Pat said. The sort of red-carpet treatment Robson lavishes upon prospective buyers is typical for active-lifestyle developers and illustrates just how differently the economics of the segment work, especially when compared with the low-priced, aesthetically bare-bones products that builders are marketing to first-time homebuyers. It also helps explain the challenges and risks associated with selling an active lifestyle, said Deborah Blake, senior vice president of marketing at Robson Communities, which originally developed active-adult community Sun Lakes. Risk and reward For decades, active-adult buyers have been the darlings of the homebuilding industry, Blake said, in part because homebuyers in the 55-plus range are more likely to understand the value of quality construction and have the financial means to buy a well-made home. Still, there are unique financial risks associated with developing massive, lifestyle-oriented communities, she said. For instance, developers don’t have the option of waiting to build promised golf courses, clubhouses and other community facilities, because prospective homebuyers want to see all amenities completed before buying. ”When you get to the age of our customers, they’re savvy,” Blake said. Del Webb’s Petroulakis said building active-adult communities is hardly a get-rich-quick business. The up-front costs are huge, and it can take years to see the return on investment. Homebuyers in 55-plus communities also take on certain, unique risks, according to a number of consumeradvocacy groups. One such risk applies to married couples who straddle both sides of the age limit, which usually is 55 years old, based on language in a 1988 amendment to the Civil Rights Bill that gave active-adult communities protection from age-discrimination claims. For example, a husband and wife whose ages are 60 and 50, respectively, would qualify to live in an agerestricted community because the rules require only one household member over the age limit. However, if the husband died before the wife turned 55, she would most likely be forced to sell the home and would not be allowed to remain there alone. Other risks faced by all age-restricted buyers include potential difficulty selling their home because most of today’s age-restricted buyers want a home built to their own specifications, and there’s no guarantee the next generation will be at all interested in age-restricted housing. ’Good place to be’ Even with the risks, homebuilders with at least one actively selling 55-plus community are relatively wellpositioned to weather ongoing economic challenges in the Phoenix-area housing market, analyst Belfiore said. ”The sales rates among active-adult are higher than for other sectors of the market,” he said. ”It’s a good place to be for homebuilders.” 13
Local analyst Mike Orr, who publishes the ”Cromfort Report,” a daily housing-market update, noted that recent foreclosure rates in the Phoenix area’s age-restricted communities have been low compared with the market overall.
Low foreclosure rates have not prevented median home-price declines in those communities, however.
Analysts can track changes in median home price with relative ease in active-adult communities that take up most or all of a particular ZIP code. Among them, Robson’s Sun Lakes community near Chandler appears to have fared the best, according to Information Market, a Glendale-based housing-data analysis firm.
It reported that the median home-resale price in Sun Lakes’ ZIP code, 85248, decreased by less than 17 percent from 2005 to 2010.
Median-price declines during that period in the three ZIP codes occupied by Del Webb’s Sun City and Sun City West ranged from 33 percent to 43 percent. These declines compare with the overall market’s drop of about 50 percent.
Last of a kind?
One relative newcomer to the active-adult sector is Scottsdale-based Meritage Homes, which broke into the market in 2001 by acquiring other builders in that market.
Jeff Grobstein, president of the company’s active-adult division, said homebuilders currently have two workable strategies to pursue: selling stripped-down homes at the lowest possible price or cultivating a customer base that can afford to pay more for high-quality homes.
Meritage and several other Valley builders believe the wisest path is to pursue both strategies simultaneously.
With construction lenders now more reluctant to finance large, expensive residential projects and an upcoming generation of homebuyers who appear to be more urban-oriented and carbon-conscious, Grobstein said there is a chance that the latest batch of active-adult communities could end up being the last of their kind.
Still, he said, projected growth in retirement-age Boomers, a group whose number is expected to peak just below the 90 million mark, should provide today’s active-lifestyle builders with plenty of qualified customers.
”There’s no question that that generation carries the wealth,” Grobstein said, ”but you still have to be able to show them a great value.”
MORE ON THIS TOPIC 14
Active-adult communities selling new homes - Sundance (Buckeye) - Meritage Homes - Sun City Festival (Buckeye) - Del Webb - Ironwood Village (Casa Grande) - Keystone Homes - Mission Royale (Casa Grande) - Meritage Homes - Robson Ranch (Eloy) - Robson Communities - Sun City Anthem at Merrill Ranch (Florence) - Del Webb - CantaMia (Goodyear) - Joseph Carl Homes - PebbleCreek (Goodyear) - Robson Communities - Province (Maricopa) - Meritage Homes - Sunland Springs Village (Mesa) - Farnsworth Homes - Trilogy at Vistancia (Peoria) - Shea Homes - Trilogy at Encanterra (Pinal County) - Shea Homes - Arizona Traditions (Surprise) - D. R. Horton Source: Belfiore Real Estate Consulting by J. Craig Anderson The Arizona Republic Mar. 29, 2011 12:00 AM [1]Homebuilders pin hopes on retiring Baby Boomers 1.
http://www.azcentral.com/arizonarepublic/news/articles/2011/03/29/20110329senior-housing-market-boomers.
html
15
US economy outpaces rivals even as job growth lags (2011-04-03 13:39) WASHINGTON - The United States is out of step with the rest of the world’s richest industrialized nations: Its economy is growing faster than theirs but creating far fewer jobs. The reason is U.S. workers have become so productive that it’s harder for anyone without a job to get one. Companies are producing and profiting more than when the recession began, despite fewer workers. They’re hiring again, but not fast enough to replace most of the 7.5 million jobs lost since the recession began. Measured in growth, the American economy has outperformed those of Britain, France, Germany, Italy and Japan - every Group of 7 developed nation except Canada, according to the Associated Press’ new Global Economy Tracker, a quarterly analysis of 22 countries representing more than 80 percent of global output. Yet the U.S. job market remains the group’s weakest. U.S. employment bottomed and started growing again a year ago, but there are still 5.4 percent fewer American jobs than in December 2007. That’s a much sharper drop than in any other G-7 country. The U.S. had the G-7’s highest unemployment rate as of December. Canada and Germany have actually added jobs since the recession ended in June 2009. U.S. companies aren’t acting the way economists had expected them to. In the past, when the U.S. economy fell into recession, companies typically cut jobs but often kept more than they needed. Some might have felt protective of their staffs. Or they didn’t want to risk losing skilled employees they’d need once business rebounded. Among manufacturers, for example, some tended to hoard workers during downturns by giving them makework assignments - sweeping factory floors, counting inventory, painting warehouses. The result is that productivity - output per workers - has typically decelerated or even dropped as the economy has weakened. Japan and Europe have been following that script. At the depth of the recession in 2009, productivity shrank 3.7 percent in Japan and 2.2 percent in Europe. The United States has been the exception. Productivity growth doubled from 2008 to 2009, then doubled again in 2010, according to the Organization for Economic Cooperation and Development. Panicked by the 2008 financial crisis and deepening recession, U.S. employers cut jobs pitilessly. They slashed an average of 780,000 jobs a month in the January-March quarter of 2009. ”My sense is there was much more weeding out of the weakest workers - the ones they didn’t want,” says Harvard economist Kenneth Rogoff. Yet after shrinking payrolls, many companies found they could produce just as much with fewer workers. And with that higher productivity came higher profits. By July-September quarter of 2010, U.S. corporate earnings were 12 percent more than when the recession began. By contrast, corporate profits fell 6 percent in Japan and 16 percent in Canada from the October-December quarter of 2007, according to Haver Analytics. In Reading, Pa., Remcon Plastics moved fast once sales evaporated in the fall of 2008. ”I have never seen my business go so quiet,” says Peter Connors, founder of the company, which makes pharmaceutical equipment. ”I recognized that business wasn’t going to be strong for some time.” So he laid off 25 temporary workers. And he put his 50 full-time employees on a three-day workweek. Remcon rethought how it did business - restructuring the workplace, for example, so employees didn’t have to walk as far to do their tasks. A plastic part that once had to be made by six workers now needs three. It can be produced faster. ”So even as demand came back, we could wait to add people,” Connors says. Japanese, European and Canadian companies are less inclined to purge workers. Their customs, labor regulations and unions discourage aggressive layoffs. U.S. management practices ”make it easier for employers to avoid adding permanent jobs,” says economist Erica Groshen, a vice president at the Federal Reserve Bank of New York. ”They have temporary help they can hire easily. They’re less constrained by traditional human-resources practices or by union contracts.” Fewer than 12 percent of American workers belong to unions, which provide some protection against job cuts. That’s the fourth-lowest union participation rate among 31 countries the OECD tracks. 16
”When there’s pressure to cut costs in the United States, it’s borne by the workers,” says Howard Rosen, visiting fellow at the Peterson Institute for International Economics. ”In Europe, it’s borne differently.” In Germany, unemployment is lower now than before the recession. To limit layoffs, German companies spread the pain by reducing workers’ hours. ”Japanese companies took it upon themselves to paint the factory - do more stuff that kept people on the payroll,” says Gary Burtless, senior fellow in economic studies at the Brookings Institution. That helps explain why Japan’s unemployment rate was the lowest among G-7 countries in December at just 4.9 percent, though it may rise after the earthquake and nuclear disaster that struck Japan’s northeastern coastline. The United States is ”on the other end of the spectrum,” says Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University. ”Everything is tilted in favor of the employers... The employee has no leverage. If your boss says, I want you to come in the next two Saturdays,’ what are you going to say - no?” by Paul Wiseman Associated Press Mar. 30, 2011 09:05 PM [1]US economy outpaces rivals even as job growth lags 1. http://www.azcentral.com/business/articles/2011/03/31/20110331us-economy-jobs-lag.html
Irish stress tests expected to lead to bank takeovers (2011-04-03 13:41) DUBLIN, Ireland - Ireland is publishing stress tests on its four surviving banks Thursday - and analysts expect the results to force all of them to come under majority state control and perhaps even shove the country into an eventual default. Regulators are revealing numbers on two banks that are already majority state-owned - Allied Irish Banks and the Educational Building Society - and two others expected to join that club soon: the Bank of Ireland and Irish Life & Permanent. The results are widely expected to show that last year’s estimated potential losses for Irish banks - 54 billion euros ( $76 billion) - were far too low. Economists said the new total would likely approach 80 billion euros ( $110 billion) or more, about half of Ireland’s entire economy. ”The government is trying to remove uncertainty,” said Jim Power, chief economist at Friends First, a Dutchowned insurance company in Ireland. ”But if we are going to spend up to 80 billion to recapitalize our banks, that’s just too big for us to manage. It will not work. We need a major European initiative quickly, otherwise the future of the euro is under serious threat.” Ireland plunged into a financial morass after its six banks spent a decade gorging themselves on real-estate loans that started going sour in 2008. Ireland’s government - uncomfortably close to many of the country’s real-estate barons - tried to discourage investors from fleeing Ireland’s six banks by issuing a blanket guarantee that instead has left taxpayers on the hook for all their losses. Last year, as Ireland found itself unable to fund a deficit ballooning because of the bank bailout bill, the nation was forced to negotiate a 67.5 billion euro ( $95 billion) bailout credit line from the European Union and the International Monetary Fund. At the time, that loan was designed to cope with Ireland’s cash needs through 2014. But if the bank-rescue costs soar as expected, analysts warn the EU-IMF loans won’t be enough. Ireland’s weak growth prospects, hobbled by years of spending cuts and tax hikes, are already making it hard to see any solution that doesn’t involve eventual default. The new government led by Prime Minister Enda Kenny has warned that foreign bondholders in Irish banks may have to start sharing the losses. The Irish Central Bank notes that the majority of Ireland’s outstanding bank bonds are no longer covered by the state guarantee. About 21 billion euros ( $30 billion) is guaranteed and must be repaid when the bonds mature, but 40 billion euros ( $55 billion) more is unguaranteed, unsecured or both - and could become targets of a negotiated partial default. 17
But if Ireland went down this route, it would require EU support because of Ireland’s membership in the 17-nation eurozone - and would send shockwaves through financial systems worldwide. The biggest holders of Irish bank bonds are British, German and U.S. banks, which until now have suffered virtually no losses from Irish debt restructuring. Still, the soaring rising bailout bill may leave Ireland with no choice. The estimated 80 billion figure to save the banks represents nearly 18,000 euros ( $25,000) for every man, woman and child in the Republic of Ireland - or 45,000 euros ( $63,000) for every worker paying income tax. by Shawn Pogatchnik Associated Press Mar. 31, 2011 12:00 AM [1]Irish stress tests expected to lead to bank takeovers 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/03/31/20110331biz-ireland-banks0331.html
Activist investors to companies: Show us the money - Times Union (2011-04-03 13:45)
[1] NEW YORK (AP) Companies stopped paying dividends and stockpiled cash during the Great Recession, and shareholders didn’t complain. Now they want a reward for their patience. American companies are holding $1.9 trillion in cash, a record. The large businesses that make up the Standard & Poor’s 500 index, all of which answer to public shareholders, have $940 billion on hand $300 billion of it accumulated since late 2008, says [2]Howard Silverblatt, senior index analyst at S &P. Shareholders want the companies to start putting that cash to use. The most pressure is coming from activist investors, who buy stakes in companies and then try to influence management to make certain changes that they say are in shareholders’ interest. ”We’ve been in bunker mentality for too long,” says [3]Eric Jackson, who runs the hedge fund Ironfire Capital. He predicts that activist shareholders are about to become ”a lot noisier.” The loudest investors are finally being heard. Companies are letting go of some cash: Since the start of this year, 116 companies in the S &P 500 have raised their dividend, up from 78 a year ago. Overall, S &P 500 companies have paid out $16.6 billion more this year in dividends than last year. Companies are buying back more of their own stock. Kohl’s, Conoco and Intel all recently announced buyback plans recently. Stock buybacks by S &P 500 companies increased to a record $86.4 billion in the 18
final quarter of 2010, the latest data available. That was 81 percent more than the same period the year before. Investors like buybacks because they tend to push up a stock’s price since earnings are divided among fewer shares. Companies are doing bigger deals than they did a year ago. Global mergers and acquisitions were valued at $755 billion for the first three months of the year, 24 percent more than the same period last year, according to financial data-tracker Dealogic. The number of deals declined slightly, to 9,568 this year from 9,825 in early 2010. Large investors want higher dividends because it means more cash in their pockets to make other investments. Individual investors, especially retirees who depend on dividends for a big part of their income, want more cash to live on. With acquisitions, investors hope the deals will eventually lead to higher corporate profits. Investors also don’t want companies to let cash sit in the bank since interest rates are nearly zero, which means the money isn’t earning much. ”The best use of cash is to deploy it,” says [4]Bill Miller, chairman and chief investment officer of mutual fund giant [5]Legg Mason Capital Management. ”If companies could maintain profitability and generate cash two years ago ... then they don’t need that kind of cash on their books today.” What has happened over the past few months at Family Dollar illustrates the tension between companies and investors. Hedge fund [6]Trian Fund Management disclosed last July that it had bought a 6.6 percent stake in Family Dollar. Trian is run by activist investor [7]Nelson Peltz, who is known for making big investments and then forcing change at companies. When the investment was announced, Trian said it would work with Family Dollar to boost sales and open new stores, and that it had ideas on how the retailer could use its cash. At the time, the dollar-store chain’s cash balance ran about $503 million, a record high. By September, Family Dollar had announced plans to spend $750 million, including some cash and some new debt, to buy back its stock. In January, Family Dollar increased its quarterly dividend by 2.5 cents, to 18 cents a share. Family Dollar says it worked with Trian to boost shareholder value. ”They shared their ideas and we listened,” spokesman [8]Josh Braverman says. He also noted that some of what Trian wanted, including the buybacks and more rapid expansion, was in the works before Trian invested. But Trian still wasn’t satisfied. It made a $7 billion, all-cash, hostile bid for control of Family Dollar on Feb. 15 and announced it had raised its stake in Family Dollar to 7.9 percent, making it the largest shareholder. Family Dollar rejected the bid in early March, saying it undervalued the business, and adopted a defense strategy to discourage unsolicited offers. Trian responded by sending a letter to Family Dollar’s board saying that the company had ”embarked on a path of poor corporate governance.” Trian didn’t respond to a request for additional comment. It has already seen the value of its investment rise. Since it disclosed its investment in July, Family Dollar stock has gained about 26 percent, to about $52. Fights like this are likely to be more common this year if companies don’t accelerate their use of cash. ”Activists are interested in getting an outcome, but most do not need to storm the castle to get it,” says [9]David Rosewater, a partner at the law firm Schulte Roth & Zabel who advises companies and investors on shareholder activism. Shareholder [10]Joseph Stilwell, who mostly invests in community banks through his investment firm [11]Stilwell Group, has spent the last few months meeting with corporate managers privately to discuss what he’d 19
like to see done with the money. Those discussions usually happen in winter, well ahead of annual shareholder meetings that typically take place in the spring. That’s when investors elect the board and vote on other proposals. If he doesn’t see a resolution to his liking, he says he might seek a board seat, or as a last resort, file a lawsuit. In the past, he has filed lawsuits to have directors removed from boards for breaching their responsibility to shareholders. Some companies recognize that shareholders are focused on their ballooning cash balances. Kohl’s, the discount department store chain, had a record $2.3 billion in cash on its books at the end of its fiscal year in January. The company recently announced plans for its first dividend, with a payout of 25 cents a quarter. The company also said it would more than triple its stock buyback program to $3.5 billion. ”We have had a very strong, consistent performance, and we wanted to make sure to give back to our shareholders,” Kohl’s CEO [12]Kevin Mansell tells [13]The Associated Press. General Electric, with a cash balance of about $20 billion for its industrial businesses spree. In the past five months, it has announced acquisitions worth more than $11 billion, mostly in its energy business. One of the biggest bids came this week a $3.2 billion deal for a French power conversion company. Overall, GE has almost $80 billion in cash. The financial parts of its businesses, like lending arm GE Capital, are required to keep more resources on hand. GE has also raised its quarterly dividend twice in the last seven months, first from 10 cents to 12 cents a share and then from 12 to 14. For the year, that means it would pay out 56 cents a share. Two years ago, GE’s dividend was more than twice that $1.24 a year. Like many companies, it has a long way to go before it starts rewarding shareholders as well as it did before the Great Recession. by Rachel Beck Associated Press March 31, 2011 [14]Activist investors to companies: Show us the money - Times Union 1. http://media.kval.com/images/110330record_cash_graphic.jpg 2.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Howard+Silverblatt%22 3.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Eric+Jackson%22 4.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Bill+Miller%22 5.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Legg+Mason+Capital+Management%22 6.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Trian+Fund+Management%22 7.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Nelson+Peltz%22 8.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Josh+Braverman%22 9.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22David+Rosewater%22 10.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Joseph+Stilwell%22 11.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Stilwell+Group%22 12.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22Kevin+Mansell%22
20
13.
http://www.timesunion.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=
1&query=%22The+Associated+Press%22 14. http://www.timesunion.com/business/article/Activist-investors-to-companies-Show-us-the-money-1314828.php
Scottsdale-based Taylor Morrison to be purchased by investors (2011-04-03 13:53) The British parent organization of Scottsdale-based homebuilder Taylor Morrison said Thursday that it has agreed to sell the builder and its Canadian subsidiary to a private-investment consortium for $955 million. Parent Taylor Wimpey plc, a publicly held company that trades on the London Stock Exchange, said it plans to sell Taylor Morrison and Ontario-based builder Monarch to a group of investment funds managed by TPG Capital, Oaktree Capital Management and JH Investments Inc. The sale, subject to approval by regulators and Taylor Wimpey shareholders, is expected to close in May, company officials said. ”We see this as a positive sign for the future of our business,” said Sheryl Palmer, Taylor Morrison president and CEO. ”The commitment and tenacity of our team have helped pave the road for today’s announcement.” Taylor Morrison and Monarch have ongoing homebuilding operations in Arizona, California, Colorado, Florida, Texas and Canada. Palmer said Taylor Morrison met its primary objective for 2010, which was for all the company’s U.S. divisions to return to profitability after suffering losses in 2009. ”We’ve weathered the storm while remaining true to our core values,” she said. ”We’ve pulled through with a structure that we feel is very viable in today’s market.” Investor TPG Capital is a private-equity firm based in Fort Worth, Texas, that was founded in 1992. During its nearly 20 years of operation, the company has invested in a variety of companies, including Lucent Technologies, Beringer Wine, Del Monte Foods, Ducati Motorcycles and clothing-maker J. Crew. In recent years, TPG Capital has invested in a number of real-estate-related companies, including Chicagobased ST Residential, owner of the 44 Monroe condominium project in downtown Phoenix, which reopened recently as an upscale apartment community. ”We are pleased to add Taylor Morrison to our growing portfolio of real-estate-related businesses,” said Kelvin Davis, TPG senior partner. ”We’re looking forward to working with the company’s management team, which has done an excellent job leading the businesses through a difficult economic environment.” Los Angeles-based Oaktree Capital Management, another investor in the deal, manages a number of investment funds including GFI Energy Ventures LLC, which invests exclusively in the energy and power industry. ”We believe that the company’s international platform is an ideal vehicle for participating in the future recovery of the homebuilding industry,” said John Brady, head of Oaktree’s global real-estate investment unit. JH Investments Inc., the third investor in the Taylor Morrison deal, is based in Vancouver, Canada. Its owner is Joe Houssian, founder and former CEO of Intrawest Corp., an international resort and real-estate developer that was sold in 2006 for $2.8 billion. ”We have been very intrigued with Taylor Morrison and Monarch for quite some time, and we are looking forward to being associated with this first-class organization,” Houssian said. by J. Craig Anderson The Arizona Republic Apr. 1, 2011 12:00 AM [1]Scottsdale-based Taylor Morrison to be purchased by investors 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/01/
20110401scottsdale-taylor-morrison-bought.html
21
Foreign banks tapped secret Fed loans (2011-04-03 13:56) WASHINGTON - Federal Reserve Chairman Ben Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya. Dexia, based in Brussels, Belgium, and Paris, borrowed as much as $33.5 billion through its New York branch from the Fed’s ”discount window” lending program, according to Fed documents released Thursday in response to a Freedom of Information Act request. Dublin, Ireland-based Depfa Bank, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion. The biggest borrowers from the 97-year-old discount window as the program reached its crisis-era peak were foreign banks, accounting for at least 70 percent of the $110.7 billion borrowed during the week in October 2008, when use of the program surged to a record. The disclosures may stoke a re-examination of the risks posed to U.S. taxpayers by the central bank’s role in global financial markets. ”The caricature of the Fed is that it was shoveling money to big New York banks and a bunch of foreigners, and that is not conducive to its long-run reputation,” said Vincent Reinhart, the Fed’s director of monetary affairs from 2001 to 2007. Separate data disclosed in December on temporary emergency-lending programs set up by the Fed also showed big foreign banks as borrowers. Six European banks were among the top 11 companies that sold the most debt overall - a combined $274.1 billion - to the Commercial Paper Funding Facility. Those programs also lent tens of billions of dollars to each of the biggest U.S. banks, including JPMorgan Chase, Bank of America, Citigroup and Morgan Stanley. The discount window, which began lending in 1914, is the Fed’s primary program for providing cash to banks to help them avert a liquidity squeeze. In an April 2009 speech, Bernanke said that revealing the names of discount-window borrowers ”might lead market participants to infer weakness.” The Fed released the documents after court orders upheld FOIA requests filed by Bloomberg LP, parent company of Bloomberg News, and News Corp.’s Fox News Network. In all, the Fed was ordered to release more than 29,000 pages of documents, covering the discount window and several Fed emergency-lending programs established during the crisis from August 2007 to March 2010. ”The American people are going to be outraged when they understand what has been going on,” Rep. Ron Paul, a Texas Republican who is chairman of the House subcommittee that oversees the Fed, said in a Bloomberg Television interview. ”What in the world are we doing thinking we can pass out tens of billions of dollars to banks that are overseas?” said Paul, who has advocated abolishing the Fed. ”We have problems here at home with people not being able to pay their mortgages, and they’re losing their homes.” The Monetary Control Act of 1980 says that a U.S. branch or agency of a foreign bank that maintains reserves at a Fed bank can receive discount-window credit. David Skidmore, a Fed spokesman, declined to comment. Wachovia Corp. was the only U.S. bank among the top five discount-window borrowers as the crisis peaked. The Charlotte, N.C.-based bank borrowed $29 billion from the discount window on Oct. 6, in the week after it nearly collapsed, the data show. Wachovia agreed in principle to sell itself to Citigroup Inc. on Sept. 29, before announcing a definitive agreement to sell itself to Wells Fargo on Oct. 3. The Wells Fargo deal closed at the end of 2008. Wells Fargo spokeswoman Mary Eshet declined to comment on Wachovia’s discount-window borrowing. Bank of Scotland, which had $11 billion outstanding from the discount window on Oct. 29, 2008, was a unit of Edinburgh-based HBOS, which announced its takeover by London-based Lloyds TSB Group in September 2008. The borrowings in 2008 didn’t involve Lloyds, which hadn’t completed its acquisition of HBOS at the time, said Sara Evans, a spokeswoman for the company, which is now called Lloyds Banking Group. ”This is historic usage, and on each occasion, the borrowing was repaid at maturity,” Evans said. ”The 22
discount window has not been accessed by the group since.” Other foreign discount-window borrowers on Oct. 29, 2008, included Societe Generale, France’s secondbiggest bank; and Norinchukin Bank, which finances and provides services to Japanese agricultural, fishing and forestry cooperatives. Paris-based Societe Generale borrowed $5 billion that day, and Tokyo-based Norinchukin borrowed $6 billion. ”We used it in concert with Japanese and U.S. authorities in the purpose of contributing to the stabilization of the market,” said Fumiaki Tanaka, a spokesman at Norinchukin. Bank of China, the country’s oldest bank, was the second- largest borrower from the Fed’s discount window during a nine-day period in August 2007 as subprime-mortgage defaults first roiled broader markets. The Chinese bank’s New York branch borrowed $198 million on Aug. 17 of that month, while two Deutsche Bank divisions borrowed $1 billion each, according to a document released Thursday. Arab Banking Corp., then 29 percent-owned by the Libyan central bank, used its New York branch to borrow at least $1.1 billion from the discount window in October 2008. The foreign banks took advantage of Fed lending programs even as their host countries moved to prop them up or orchestrate takeovers. Dexia received billions of euros in capital and funding guarantees from France, Belgium and Luxembourg during the credit crunch. Dexia’s outstanding balance at the Fed has been reduced to zero, Ulrike Pommee, a spokeswoman for the company, said in an e-mail. ”This information is backward-looking,” she said. by Bradley Keoun and Craig Torres Bloomberg News Apr. 2, 2011 12:00 AM [1]Foreign banks tapped secret Fed loans 1. http://www.azcentral.com/arizonarepublic/news/articles/2011/04/02/20110402fed-assistance0402.html
Unemployment rate declines to 8.8% (2011-04-03 13:57) WASHINGTON - The unemployment rate fell to a two-year low of 8.8 percent in March, capping the strongest two months of hiring since before the recession began. The economy added 216,000 jobs last month, the Labor Department said Friday. Factories, retailers, the education and health-care sectors, and professional and financial services all expanded payrolls. Those job gains offset layoffs by local governments. Another month of brisk hiring provided the latest sign that the economy is strengthening nearly two years after the recession ended. Still, a surprisingly large number of people who stopped looking for work during the downturn have yet to start looking again. Private employers, the backbone of the economy, are driving the gains. They added more than 200,000 jobs for a second straight month. It was the first time that’s happened since 2006 - more than a year before the recession started. ”The U.S. labor market is finally making some serious progress,” said Sal Guatieri, economist at BMO Capital Markets Economics. The unemployment rate dipped from 8.9 percent in February. The rate has fallen a full percentage point over the past four months. That’s the sharpest drop since 1983. Economists predict employers will add jobs at roughly the same pace for the rest of this year. That would generate about 2.5 million new positions. Still, that would make up for a small portion of the 7.5 million jobs wiped out during the recession. A big factor in the lower unemployment rate is that the proportion of people who either have a job or are looking for one is surprisingly low for this stage of the recovery. People who stopped looking for work during the downturn are not counted as unemployed. If many outof-work people start looking for work again, they will be counted and the unemployment rate could go up. That could happen even if the economy is adding jobs. 23
Local governments, wrestling with budget shortfalls, cut 15,000 workers last month and are expected to keep shedding jobs. Home prices are falling amid weak sales and a record number of foreclosures. Construction spending dropped in February to a 12-year low. Higher food and gas prices are leaving consumers with less disposable income to spend on other goods and services. Workers’ paychecks were flat in March. Average hourly earnings held steady at $22.87, unchanged from February. Over the past 12 months, wages have lagged behind inflation. Workers have little bargaining power to demand big pay raises because the job market is still healing slowly. Another report out Friday showed that manufacturing activity cooled off a bit last month after expanding in February at the fastest pace in nearly seven years. Still, the sector grew for the 20th straight month, another positive sign for the economy. The number of unemployed people dipped to 13.5 million in March, still almost double since before the recession began in December 2007. Including part-time workers who would rather be working full time, plus people who have given up looking altogether, the percentage of ”underemployed” people dropped to 15.7 percent in March, the smallest share in two years. Professional and business services, including accountants, bookkeepers, engineers and computer designers, added 78,000 positions, the most since November. Of those, 29,000 were temporary positions. Factories added 17,000 jobs in March, the fifth straight month of gains. Retailers added nearly 18,000 jobs, after cutting them in February. Financial services expanded payrolls by 6,000, following two straight months of cutbacks. Education and health services expanded employment by 45,000; leisure and hospitality added 37,000 jobs. by Jeannine Aversa Associated Press Apr. 2, 2011 12:00 AM [1]Unemployment rate declines to 8.8 % 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/02/20110402biz-economy0402.html
Nasdaq joins global competition for NYSE with bid (2011-04-03 14:14) NEW YORK - Instead of fighting the NYSE, Nasdaq wants to own it. Nasdaq OMX Group Inc. and another U.S.-based market, the IntercontinentalExchange Inc., submitted a joint $11.3 billion bid Friday for NYSE Euronext, the parent company of the New York Stock Exchange. The offer, which was expected, raises the possibility of a bidding war for the NYSE with Deutsche Boerse. NYSE agreed to a $10 billion deal with the German exchange operator in February. The dueling bids for the NYSE show how intense the competition for trading in stocks, options and other investments has become. Though mergers between exchanges have little, if any, impact on small investors, they are a means for survival for these markets. Technology has driven down the cost of trading to almost nothing. Newer, smaller and more high-tech companies such as the BATS Exchange and Direct Edge have emerged to give investors the opportunity to find the best price for a security in milliseconds. That has taken business away from institutions like the NYSE and Nasdaq. ”We’re in the midst of a pretty fundamental reshaping of the way people trade stocks, bonds and derivatives,” said Kenneth B. Marlin, managing partner at Marlin & Associates, a boutique investment bank that’s done merger related work with exchanges. ”This bid is a recognition that they are riding a powerful wave of change.” Moreover, stocks are becoming a smaller part of the trading business. Exchanges are making more of their money from options and the complex investments known as derviatives. In response, the world’s major exchanges have been combining with one another. In February, the London Stock Exchange and the parent company of the Toronto Stock Exchange announced a $2.9 billion merger, and the Singapore Exchange and Australia’s ASX revised its own $8.3 billion merger plan. 24
The NYSE is itself a combination of several exchanges including those in Paris, Brussels, Amsterdam and Lisbon. Nasdaq OMX owns exchanges in Scandinavia as well as the Nasdaq Stock market. There is some irony in a Nasdaq bid for the NYSE - Nasdaq once expected to defeat the company that it now wants to own. by Pallavi Gogoi Associated Press Apr. 2, 2011 12:00 AM [1]Nasdaq joins global competition for NYSE with bid 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/02/20110402biz-nasdaq0402.html
Scottsdale-area housing market may be flattening out (2011-04-03 14:18) It’s still a buyer’s market, but a shrinking inventory of homes and fewer foreclosures are giving analysts and real-estate agents hope that housing prices are flattening out. The overall median price in Scottsdale of $375,000 fell 6 percent last year from 2009. But that follows two years of double-digit percentage price declines in most Scottsdale neighborhoods, according to data from the Information Market. Prices were off just under 2 percent in the Pinnacle Peak area of Scottsdale and Rio Verde’s median price edged up 1 percent, providing a glimmer of sunshine for the Northeast Valley. ”We’re seeing more stability at the top end of the market,” said Mike Orr, an analyst who produces the Cromford Report on the Valley housing market. The market has absorbed a fair share of the distressed properties that have been a drag on prices. Rick Amos, a Realty Executives agent, said buyers are finding it’s harder to find a good house at a good price than they thought it would be. As an example of the shifting market, Amos said a DC Ranch neighborhood southeast of Pima Road and Legacy Boulevard has gone from 23 foreclosures a year ago to just one. ”It was the epicenter of the subprime-mortgage meltdown,” he said. One home in the 9200 block of East Trailside View that sold new for $711,500 in November 2005 dropped to $435,000 in a sale that closed in late February. The cash buyer got a two-story, 2,800-square-foot home, built by Ashton Woods, with a three-car garage. Cash is king ”Homes are very affordable, but loans are very hard to get,” Orr said. Investors are seeing that the time is right to buy and hold homes, not flip them. ”It’s not difficult to make 8 to 10 percent return being a landlord even if you deduct the management fees,” Orr said. Mark Tait, a HomeSmart agent, said banks are getting wiser about selling foreclosed homes by cleaning them up and installing new appliances. ”It’s not like there’s a bunch of beat-up homes out there,” he said. There are examples of unfinished custom homes that have sold at bargain prices. Doug Koch, a restaurant franchisee, bought a 10,000-square-foot home on the golf course in Troon’s Glenmoor neighborhood for $1.85 million about 15 months ago, Tait said. The 1.85-acre property had been valued at more than $7 million. Koch completed the home and moved in with his family last fall. The five-bedroom home includes a theater and game room, wine cellar, eight fireplaces and six-car garage. Tait now has it listed for $4.2 million. ’Extend and pretend’ At the top end of the market, bankers have been reluctant to foreclose on luxury homes, according to David MacIntyre, Arizona Best Real Estate owner-broker. They prefer to ”pretend and extend,” he said. That is they pretend the payments are current and extend the terms of loan for good customers. 25
At the lower end of the market, first-time buyers with good credit scores are buying homes in the area for $200,000 to $300,000, about half their value at the peak of the housing bubble, MacIntyre said. Karl Stauffer, Capital Asset Management associate broker, said that a decline in the housing inventory is a good sign for a recovery in prices. The Valley’s inventory of single-family homes was 26,332 in February, down 10 percent from the previous month and it was down 5 percent in the Northeast Valley, he said. The Scottsdale area has about a five-month supply of homes, while a stable market typically has a six-month supply, Stauffer said. The lower inventory should be putting more upward pressure on prices, but the shadow inventory of bankowned properties could be stalling an uptick in prices, according to Stauffer. Orr, of the ”Cromford Report,” said the Valley is in the peak buying season now and sales will start to taper off after May. A lot of people from colder areas who like the desert climate are coming here to shop for houses, he said. ”They think it’s OK to come to Arizona again,” Orr said, of the fallout from the state’s illegal-immigration crackdown. ”Fewer people were coming when we were talking about headless corpses in the desert.” That gruesome image is perhaps fitting for the Valley’s troubled housing market and the slow recovery. ”It’s been bloody for certain,” Amos said.
26
by Peter CorbettThe Arizona Republic Apr. 2, 2011 06:04 AM [1]Scottsdale-area housing market may be flattening out 1.
http://www.azcentral.com/community/scottsdale/articles/2011/04/01/
20110401scottsdale-area-housing-market-values.html
Median price of homes in Phoenix rose by 21.1% in 2010 (2011-04-03 14:21) Phoenix is the only community in the Valley to see a double-digit percentage increase in its overall median price in 2010, compared with 2009. But overall Phoenix values remain far below much of the rest of the Valley. The increase was 21.1 percent. Phoenix, with a median price of $109,000, had 18 ZIP codes with improvements in median prices. More than half of the ZIP codes in the Valley with increases in their overall median are in Phoenix. The other side of the picture is that most of those areas had low median prices - the price level at which half the homes sold above and half below. The latest Valley Home Values report, provided by the Information Market, includes five years of data about median prices, percentage changes and overall sales. It also includes foreclosures. Left out are short sales, in which a lender agrees to accept less than owed on a home, and data about newhome sales vs. resales. For northeast Phoenix, the portion of the city north of the Phoenix Mountain Preserve and east of Cave Creek Road, the data show: - Continued declines in median prices, although not at the high rates seen in 2008 and ’09, the worst years for most areas. - Since 2005, one of the last years of the housing boom when prices were the highest, homes have lost a third to a half of their previous values. - Foreclosures have made up about a third of all sales, with prices far below those of non-foreclosures. Depending on the ZIP code, foreclosure sales in northeast Phoenix were $40,000 to $90,000 less than nonforeclosure sales. - Sales totals are far below the heights in 2005, the biggest sales year of the previous five. But they have climbed quite a bit from the low sales numbers of 2008. - Median prices remain among the highest in the Phoenix area, topped only by the Arcadia neighborhood and Ahwatukee. The exception is ZIP code 85032, which includes some of the area’s oldest neighborhoods. It shows a median sales price of $123,000, still above the citywide norm. For north Phoenix, the areas bordering Interstate 17 from Cactus Road north, the data show: - Continued declines in median prices but mostly in single-digit percentages, compared with the 20 to 40 percent declines in the previous two years. - Since 2005, one of the last years of the housing boom when prices were the highest, homes have lost a quarter to a half of their previous values. - Foreclosures in the southernmost areas made up more than a third of sales. In the northern areas, including Anthem, foreclosures claim half of sales in ZIP code 85087. Foreclosure prices are running $20,000 to $60,000 less than non-foreclosure sales. - Sales totals are far below the heights achieved in 2005, the biggest sales year of the previous five. They have remained relatively steady over the past two years. - Median prices in some cases are less than half the peak reached in 2006 or ’07 and in others are approaching half. For central Phoenix, the data show: - A mixed picture for median prices, with declines far below the worst years of 2008 and ’09 and increases 27
in seven of 11 ZIP codes. The rise in median price was relatively low, although in 85051, one of the lowest median-price areas in the city, the median price rose by more than 20 percent. - Since 2005, one of the last years of the housing boom when prices were the highest, homes have lost close to 75 percent of their previous values in ZIP code 85017. In ZIP code 85019, the drop was 66.3 percent. In the other central Phoenix ZIP codes, declines ranged from just under 40 percent to well beyond 50 percent. - Foreclosures have made up about a third to a half of all sales, with prices far below those of non-foreclosures. Depending on the ZIP code, foreclosure sales in central Phoenix ranged greatly. In 85012, foreclosure sales came in at median prices of $162,000 less than non-foreclosures, which sold at $355,000. - Sales totals are below the heights achieved in 2005, the biggest sales year of the previous five, but the area has some of the lowest totals overall in the entire city. In some areas, sales rebounded from the previous year, but overall the sales are about half the number reached in 2005. - Median prices are among the lowest in the Phoenix area, with one exception: 85012. That ZIP code had very few sales - 65 for the year - at a median price of $339,000, one of the city’s highest. The neighborhood includes the Phoenix Country Club on the south and the pricey neighborhoods on the north. But the area also includes 85017, west of I-17, which has one of the lowest median prices in the entire city at $40,000. by Michael Clancy The Arizona Republic Apr. 2, 2011 06:19 AM [1]Median price of homes in Phoenix rose by 21.1 % in 2010 1. http://www.azcentral.com/business/realestate/articles/2011/04/01/20110401phoenix-median-price-home-values. html
Empty houses taking toll on Valley (2011-04-03 14:42) On a typical block in metro Phoenix, there’s at least one empty home, often several. Overbuilding during the housing boom, record foreclosures during the subsequent crash and a significant drop in population growth have led to more than 100,000 vacant homes across the region, five times what was once considered normal. With an average of three people per residence, the swath of vacant homes is equivalent to a city bigger than Chandler sitting empty. An empty house - or a row of them - changes the character of a neighborhood and the way residents feel about where they live. Vacancy even has a direct effect on the house itself. Without someone living in a home, weeds grow, dust collects, pipes freeze in winter, wood dries and splits in summer. Houses left vacant are easy targets for vandals, thieves and squatters. Many are eyesores with broken windows, swamplike pools and driveways littered with fliers. On a larger scale, vacant homes can drive the entire housing market and the Arizona economy. With more houses than there are families to fill them, prices stay low. For the market to change, something has to change about the vacant homes. Until they are sold to new buyers, fixed up for new renters or even torn down, home prices won’t rebound. Census data released in early March show Arizona’s housing vacancy rate is more than 15 percent. Many cities in metro Phoenix have much higher vacancy rates, particularly newer suburbs on the fringe where homebuilders flocked to construct the least-expensive new houses. Buckeye has a housing vacancy rate of almost 21 percent, according to the Census Bureau. A study last year by a realty-studies group at Arizona State University showed similar housing vacancy rates for metro Phoenix and found nearly 140,000 total vacant houses and condominiums. ”We can’t overestimate the impact of vacant homes on everyone who is part of the Valley’s housing equation,” said Jay Butler, the group’s director. ”Buyers aren’t drawn to the blocks with too many run-down, empty homes. Homeowners surrounded by empty homes often feel trapped and even depressed about their situation.” 28
There are a few bright sides. Vacant homes, when they are listed for sale, often sell fast to investors for bargain prices. And in some neighborhoods, homeowners near empty houses are uniting to take care of the properties. Still, Butler said, many people in the Valley love their homes, but they don’t love the empty houses they have to drive by now to get to them. The neighborhoods In a central Phoenix historic neighborhood, a house on a cul-de-sac has been vacant for nearly a year. The home, which sold for $500,000 in 2005, was designed by renowned Valley architect Ralph Haver. It has a 1,000-square-foot living room, slate floors and a guesthouse. It had a kitchen with stainless-steel cabinets and a towering limestone backsplash. The home’s last owners gave it back to the lender in July. Since then, many of its unique fixtures, including its kitchen cabinets, have been stolen. Neighbors used to smile at the distinction of the noted architecture on their block. After the house went vacant, they watched it warily. Some mowed its yard, pulled weeds, cleaned up after stray dogs. They watched for break-ins and anxiously waited for a new owner. ”That house was the pride of our neighborhood,” said John Beshears, who lives on the same block. ”We want to see it back to its former glory.” Vacant houses tend to lower home values in a neighborhood, even if they aren’t foreclosures. Homebuyers shy away from areas with too many empty houses, particularly if many are on the market at the same time. A foreclosure auction for the central Phoenix historic house was pushed back several times. Some neighbors considered bidding. ”There are too many examples of vacant homes in Phoenix neighborhoods not being maintained. Neighbors are stuck next to these houses and can’t do anything about it,” said Phoenix City Councilman Tom Simplot, who owned the house in the late 1990s. He is also president of the Arizona Multi-Family Association, an industry group for rental properties. ”Unfortunately, one of my former homes is now a prime example of a neglected vacant house.” The home sold at a foreclosure auction last week for $215,000. The house’s new owner plans to fix it up and move in. The houses In northwest Phoenix, a house on a quarter-acre lot is surrounded by huge shade trees. The large front porch would be ideal for a swing. A picture window looks out over the yard. But the house sits empty. A look through the window reveals no furniture, only dust. The roof is missing shingles. The paint around the front window is chipping. And the view of the front yard now includes a broken, mildew-stained couch, abandoned there weeks ago. Phoenix real-estate agent Brett Barry summed up the way vacancy eats away at a house. Where there’s roof damage outside, there’s water damage inside. ”The priciest fix for a home sitting empty is water damage,” said Barry, who works with mortgage giants Fannie Mae and Freddie Mac on fixing up and selling foreclosure homes. ”I have walked into homes and seen bathroom ceilings covered with black mold.” The prices on most foreclosure homes in metro Phoenix are discounted significantly because they are sold ”as is.” About $340,000 was owed on the northwest Phoenix house when the lender foreclosed on it last July. The house didn’t sell at a foreclosure auction and now is listed for $240,000. The house is better off in one way because it doesn’t have a swimming pool. Barry said one of the first things he does when he gets a listing on a foreclosure home is drain the swimming pool. Fannie Mae, the government-owned mortgage agency that now holds more than 10,000 foreclosed homes in the Valley, will pay to have it refilled and maintained to try to sell it. The physical effects on a vacant home with no utilities are the worst. There’s no water for yards or pools. No air-conditioning when temperatures soar past 100 means floors and walls can crack. With no lights on, the homes are targets for vandals and thieves. Houses not closed up properly can quickly be taken over by insects and even small animals. Still, even when it is maintained, one vacant home can be dragged down by others around it. 29
Recently, Barry was hired to manage a foreclosure home in Phoenix near Bell Road and Interstate 17. He drained the pool and hired a firm to take care of it. ”I started receiving calls from neighbors of the house complaining its pool was swarming with mosquitoes. They even called Fannie Mae to complain about me,” he said. ”It wasn’t the pool at the house I was taking care of. There were several other foreclosure homes on the same block vacant with pools drawing mosquitoes.” Barry advises neighbors of vacant foreclosure homes unhappy about their upkeep to call the company servicing the foreclosure for the lender. ”It may be hard to find who is responsible for the home,” Barry said. ”But it’s the servicer who can fix the problems.” Neighbors of neglected foreclosure homes can contact the real-estate agent maintaining the property or look up the house’s owner on the Maricopa County assessor’s website. The market Some metro Phoenix neighborhoods have more vacant homes than others. In the San Tan Valley area, southeast of Phoenix across the Pinal County line, the housing vacancy rate is 16 percent, according to census data. Most of the area’s houses were built from 2003 through 2007. Many homeowners unsuccessfully tried to sell them to avoid foreclosures. One three-bedroom, two-story house in San Tan Valley’s Johnson Ranch has been empty for a year. On the same block, there are at least five other homes that are empty or will be soon - the owners are in foreclosure. A couple bought the three-bedroom beige stucco home from a builder in 2005 for $220,000 and lost it to foreclosure late last year. The home isn’t currently listed for sale. But the house next to it is larger, a four-bedroom, and is listed for a $60,000 short sale. Across the Valley in Tolleson, the housing scene is similar. A taupe stucco home has sat empty since last summer when the lender foreclosed. The house, bought from a builder in 2002 for $110,000, isn’t listed for sale. A home two doors down from it is also vacant; its asking price is $65,000. At least eight other homes on the block have been foreclosed on during the past two years. A couple of them are rentals now. A few others are for sale. The scenario is the same for almost every block in the neighborhood. Metro Phoenix’s oversupply of homes for sale has been dragging down prices since 2008. Many more homes remain vacant and aren’t on the market. Either lenders have yet to resell them, or owners are holding them without a tenant, waiting to rent or resell. Tracking the number of empty homes in metro Phoenix has been a priority for local governments and the real-estate industry during the past few years. Population projections for the region were overblown during the boom, which led to overbuilding and botched budget planning for government and business. Now the census has provided more accurate population and housing vacancy counts for the area. While vacancies undermine the market, some housing advocates are concerned about their effect on people. ”We don’t take into account enough what empty homes do to a neighborhood. We talk about having too much inventory or homes for sale,” said John Smith, president of the Mesa-based non-profit Housing Our Communities. ”If 15 to 25 percent of a neighborhood is empty, there are social risks for the people who are living there.” by Catherine Reagor The Arizona Republic Apr. 3, 2011 12:00 AM [1]Empty houses taking toll on Valley 1. http://www.azcentral.com/business/realestate/articles/2011/04/03/20110403vacant-homes-phoenix.html
Live-in homebuyers necessary for a sustained resurgence, analysts say (2011-04-03 14:53) The Phoenix area’s troubled housing market was propped up by a number of factors in 2010, including the lowest interest rates in decades, seemingly insatiable investor demand and some of the most affordable home prices the market has ever seen. But housing-market analysts said those factors alone would not be sufficient for long-term recovery to take 30
hold. What the market really needs, they say, is for the typical homebuyer to regain prominence as the biggest source of demand for residential properties. ”I think it (recovery) has to come from those who are buying a home to live in the home,” said James ”Bart” Patterson, CEO of Phoenix-based Clear Title Agency of Arizona. As a title-insurance provider, Patterson said he had a rough idea of how much of the demand for local housing has been coming from investors compared with homeowner-occupants. Lately the split has been about 50-50, he said. A number of factors are preventing traditional buyers from dominating the market as they once did, Patterson and others said. However, local real-estate professionals said they were seeing some new opportunities emerge for them, too. Who is buying? Traditional homebuyers tend to come from two groups: those new to the market, and those ”moving up” in it, such as by purchasing a larger or more expensive home. Move-up buyers have been largely out of commission in recent years, mostly because their homes have lost so much value that it would cost them money to sell. However, it’s possible that a portion of the absent move-up-buyer demand could be replaced by a third group: lower-income residents who can now afford to buy because homes are less expensive, Goodyear-based real-estate agent Sergio Polanco said. But their opportunities have been limited severely by home investors, who have been competing aggressively for lower-priced homes, he said. Polanco, a former teacher who specializes in affordable homes in the West Valley, brought a handful of clients recently to a home auction in Phoenix that did not allow investors to participate. He described the auction as a rare opportunity for traditional buyers, whom he said have been all but shoved out of the affordable-home market by cash-paying investors. ”On a normal sale, you get outbid all the time,” Polanco said. Beating the investors The auction was organized by BLB Resources, an asset-management firm based in Irvine, Calif., that has been charged with disposing of all foreclosed Arizona homes for which the former owners had U.S. Federal Housing Administration-backed loans. Responsibility for reselling those homes falls to U.S. Department of Housing and Urban Development, which has a policy of giving traditional buyers at least 30 days to bid on new listings before opening them up to investors. BLB Outreach Manager Ray Warda said there were several thousand HUD homes in the Phoenix area, and that it had been selling them via an online bidding process at hudhomestore.com. The live auction, which featured 150 HUD homes and did not allow investors, was something of an experiment, Warda said. It turned out to be phenomenally successful, attracting about 600 attendees, said Crystal Wright, spokeswoman for Phoenix-based auctioneer Hudson & Marshall, which conducted the auction on March 26 at the JW Marriott Desert Ridge Resort & Spa in Phoenix. One of Polanco’s clients, 23-year-old solar panel-installer Aldo Reyes of Phoenix, was the winning bidder on a three-bedroom, 2,700-square-foot home in Tolleson built in 2008. Reyes’ winning bid on the U.S. Housing and Urban Development-owned home was $82,500. ”I told all of my clients, this is a one-time opportunity,” Polanco said, beaming, just after Reyes was declared the winning bidder. ’Shock and disbelief’ Phoenix resident Jacqueline Freeman, 39, was another winning bidder at the HUD auction. She ended up buying a stylish, two-story patio home in central Mesa for $72,500. Freeman said she had wanted to move to Mesa because both of her jobs were located in that city - she teaches at Mesa Community College and works in the student-affairs department at A.T. Still University, a private 31
medical college in Mesa. Still, Freeman said she almost didn’t go to the auction because of doubts that she really would be able to afford a home. ”I almost chickened out and didn’t come,” she said. Like all participants in the auction, Freeman already had gotten pre-approval from a lender for an FHAinsured mortgage. Despite having good credit and steady income, Freeman said she had not seriously considered buying a home, in part because she had heard stories of frustration from friends who had tried to buy foreclosed homes. She said that when homes at the auction started selling, usually between $60,000 and $80,000, it was clear from the reactions of other attendees that they had been doubtful, too. ”We were all sitting there, looking at each other in shock and disbelief,” she said. Growth and jobs Despite Reyes’ and Freeman’s traditional-buyer success stories, economists say the area’s housing market won’t recover fully unless Arizona’s job opportunities and population grow again. Based on those requirements, it could take longer than expected, according to University of Arizona economist Marshall Vest. Arizona lost nearly 300,000 jobs in the recession and hasn’t begun to grow them back. In his latest Arizona Economy Forecast, Vest discussed findings that Arizona’s population actually has shrunk in recent years. The period from 2009 through 2012 might prove to be a period of zero growth for the state. Vest said he revised his economic and population projections ”significantly downward” this quarter as a result. Vest and others, including Mike Orr, publisher of the Cromford Report, a daily update on the housing market, agreed that the tough job market and stricter immigration policies appear to have driven down the population in some heavily Hispanic areas, which they said could slow the housing market’s recovery in those communities for years to come. by J. Craig Anderson The Arizona Republic Apr. 3, 2011 12:00 AM [1]Live-in homebuyers necessary for a sustained resurgence, analysts say 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/03/
20110403valley-home-values-live-in-homebuyers-wanted.html
Despite signs of stability, Valley’s foreclosure-stressed market remains vulnerable (2011-04-03 14:55)
The Phoenix-area housing market in 2010 settled into a pattern of activity that, while it could hardly be described as normal, at least kept home prices relatively stable, according to the latest Valley Home Values data. But housing analysts said the market remained vulnerable to a number of potential threats, including a lack of job-market recovery, rising interest rates, overly cautious mortgage-lending practices and loss of investor confidence in the market’s future recovery. The supply of homes on the market in 2010 continued to come primarily from home foreclosures, short sales and recently foreclosed-on homes bought and resold by investors, according to an Arizona Republic analysis of housing data provided by Glendale-based Information Market. Demand for homes came from more diverse sources, including first-time homebuyers, out-of-state residents looking for winter-home bargains and investors seeking revenue from home rentals and resales. There were signs in a number of communities that home prices began to find more solid footing in 2010, particularly in Phoenix and parts of the West Valley, where post-peak declines in value were the most immediate and severe. Meanwhile, median home prices in communities with relatively little foreclosure activity such as Tempe and Scottsdale experienced a gradual decline, which local housing analyst Mike Orr described as a necessary step 32
toward reestablishing the standard price differentials that exist between communities in a stable market. ”The whole market is looking better than it did a year ago,” said Orr, who publishes a daily housing-market update called the Cromford Report. Still, local analysts said long-term stability in the housing market would require a gradual shift away from the current, investor-dominated market to one in which the bulk of demand comes from homebuyer occupants. Recovery also would require home-foreclosure activity to decrease significantly from the current level - about 40 percent of all sale transactions - to a level much closer to the historical norm of less than 5 percent of transactions. The good news, Orr said, is that monthly pre-foreclosure notices continue to decrease, along with the number of pending foreclosure transactions. That means the worst of the Phoenix-area housing market’s foreclosure crisis is likely behind it, he said. ”I think we’re well past the peak of foreclosures,” Orr said. On the rebound In some communities, Valley Home Values data revealed a departure in 2010 from the price trends of previous years. Nowhere was that departure more apparent than in Phoenix, which had been the market leader in homevalue decreases since 2007. From 2009 to 2010, Phoenix home prices rebounded by a whopping 21.1 percent, far more than in any other community. The same phenomenon occurred to a lesser degree in Goodyear, where prices bounced back 4.8 percent, as well as in Tolleson, El Mirage and Rio Verde, where prices rebounded by 2 percent or less. All of those areas suffered steep and immediate price declines beginning in 2007, Valley Home Values data show, and they remain among those communities where homes have lost the biggest percentage of their peak-market value. Still, Orr said the rebounds in price in 2010 indicated that those markets had been caught in the momentum of a downward trend and were due for a positive readjustment. Meeting in the middle Just as sharp downward price trends created a certain momentum, communities with relatively little sales activity had experienced a form of inertia that kept home prices artificially high, Orr said. It was inevitable that the local housing market’s slow march toward stability would require higher-price communities to break free from that inertia, Orr said. As a result, communities such as Tempe, Paradise Valley, Scottsdale and Wickenburg in which home prices had fallen relatively little in 2007 and 2008 began to experience more significant declines. Those declines were most pronounced in 2009 but continued in 2010, the data show. Communities that experienced double-digit losses in median home price in 2010 included Wickenburg (-16.8 percent), Waddell (-15.4 percent), Tempe (-11.7 percent) and Paradise Valley (-11.6 percent). Outside influences Changes in the local housing market in 2010 could not be explained without taking into consideration employment trends, population shifts and political issues, Orr said. For example, heavily Hispanic communities including areas in west-central Phoenix continued to experience an ongoing decline in home prices in 2010, which Orr attributed to population losses that decreased the local demand for housing. That phenomenon helps explain why ZIP code 85009 in west-central Phoenix did not experience a rebound in median home price despite having the lowest median of any Phoenix- area ZIP code in 2009. It remained the same - $29,000 - in 2010, according to the data. Orr said there is also circumstantial evidence that controversial statements made by politicians arguing over Arizona’s border security placed a temporary drag on home sales to out- of-state buyers in fall 2010, although the negative effects of those comments appear to have dissipated. ”There was a big dip last year when we were talking about headless corpses, but those things wear off,” Orr said, referring to Gov. Jan Brewer’s statements on the 2010 campaign trail that there have been beheadings 33
in the Arizona desert. Orr noted that some communities were able to boost local demand for housing by boosting the availability of high-paying jobs. He cited Chandler as an example. ”It’s done a better-than-average job of attracting jobs,” Orr said. by J. Craig Anderson, Ryan Konig and Matthew Dempsey The Arizona Republic Apr. 3, 2011 12:00 AM [1]Despite signs of stability, Valley’s foreclosure-stressed market remains vulnerable 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/03/
20110403valley-home-values-phoenix-market-remains-vulnerable.html
Banks curtail rewards for debit-card use (2011-04-03 14:58) You won’t be hearing that ka-ching sound as much when you swipe plastic. Several banks, including two of the biggest operating in Arizona, are scaling back or ending their rewards incentives on debit cards. The programs have provided a nice way to collect a small rebate for using debit cards for all sorts of purchases. But with debit-fee revenue set to be capped, more banks are curtailing their rewards. This new trend has its roots in the Durbin Amendment to last year’s financial-reform bill. The amendment authorizes government curbs on swipe charges, known as interchange fees, with details to be set by the Federal Reserve. The Fed could cap the fees that card issuers collect from merchants at 12 cents per transaction, possibly lower. That’s down from 1 to 2 percent of the value of the transaction now. Merchants long have complained about these charges, because they’re the ones who pay them. But the banking industry says the proposed new caps are below what it costs them to run the debit-card program, including the losses that banks and credit unions face on fraudulent transactions. There has been movement in Congress to delay the fee caps. But in the absence of any deferral, the Fed is expected to render a final decision by April 21, with fee caps going into effect three months later. Wells Fargo said it no longer will make debit rewards available to new customers but hasn’t announced changes for existing customers. The curtailments took effect last month for new customers at former Wachovia branches. New Wells Fargo customers won’t be able to earn rewards after April 15. Existing customers continue to accrue points. Earlier this year, Chase announced more-severe restrictions. Chase stopped qualifying customers for debit rewards in February and will end the program for existing customers in July. Existing customers continue earning points until then, and the rewards won’t expire after July. ”It’s definitely a reaction to the Durbin Amendment,” said Mary Jane Rogers, a Chase spokeswoman. More debit-rewards programs could be curtailed. ”Many other banks will likely cut their rewards program if the Federal Reserve upholds this 12-cent limit on the debit-card-interchange fee,” predicted Bill Hardekopf, chief executive officer at Low Cards.com. Bank of America, the other big bank operating in Arizona, hasn’t announced a curtailment of its debit-reward program, but other entities have, including U.S. Bancorp, PNC Bank and SunTrust. Banks already had lost some fee revenue from the recent Credit Card Act, and the debit caps represent another setback. ”Banks will always find a way to make up for lost revenue, and it will usually be at the expense of the consumer,” Hardekopf said. - Speaking of the credit-card-reform act, the Federal Reserve has approved a new rule designed to help consumers manage their debts better. Unfortunately, some say, it could make credit harder to come by for certain people, including stay-at-home moms or dads. The Credit Card Act requires card companies to evaluate a person’s ability to make payments before opening a new account. 34
Previously, an applicant could cite his or her ”household income,” but the Fed decided that term was too vague to allow issuers to make a proper credit evaluation. Now, lenders will need to rely on an applicant’s own income or salary, starting in October. Some groups claim that the new rule will make it harder for non-working spouses, especially women, to establish credit in their own names. But Odysseas Papadimitriou, CEO of CardHub.com, said the rule would help prevent borrowers from taking on more debt than they can handle. - Bankrate.com recently released an updated study on credit cards that offer cash-back rewards. One interesting finding: The programs generally weren’t hurt by the credit-card-reform legislation. If you’re considering a cash-back credit card, plan on getting at least 1 percent back on your purchases. Of the 32 cards surveyed, nearly half pay cash rebates of at least 1 percent, starting with your first dollar of spending. Many cards pay more than that on certain purchases (groceries, gasoline and travel, for example) or with higher levels of spending. The survey also found introductory bonuses are common, while annual fees are rare. The study didn’t rate specific cards, which included those from American Express, Bank of America, Capital One, Chase, Fidelity and Wells Fargo. But you can compare key terms on the 32 cards in the ”Credit Cards” section at Bankrate.com. - In an era of rising bank fees, here’s another one to beware of: charges for using ATMs operated by a bank of which you’re not a customer. Chase is testing a higher ATM surcharge of up to $5 per transaction in Illinois and $4 in Texas. Arizona and other states aren’t yet affected. Nearly all banks charge fees when non-customers use their ATMs, averaging $2.33 per transaction, according to a 2010 study by Bankrate.com. That’s in addition to fees your own bank might charge for going out of network. These costs average $1.41. by Russ Wiles The Arizona Republic Apr. 3, 2011 12:00 AM [1]Banks curtail rewards for debit-card use 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/03/20110403biz-Wiles0403-debit-cards.
html
Crowne Plaza San Marcos Golf Resort files for bankruptcy (2011-04-09 21:48) Owners of the Crowne Plaza San Marcos Golf Resort in downtown Chandler have filed for Chapter 11 bankruptcy protection. The filing by Denver-based San Marcos Capital Partners LP halted a trustee sale that had been scheduled for March 29. Business at the hotel will carry on as usual, and no managers or employees will change, said general manager Frank Heavlin. Financial trouble became evident in October when the property went into receivership under Kirby Payne at Smiling Hospitality in Rhode Island. A court hearing on whether the receivership will continue is set for this week. Bankruptcy Court papers filed last month listed assets of the owners at less than $50,000 and liabilities between $10,000,001 and $50 million. The number of creditors is between 1,000 and 5,000. The bills owed creditors are disputed, according to court papers. Among the claims on file are $2.3 million to Arizona Public Service Co. and $3 million to InterContinental Hotel Group. The bill at Mission Linen Service of Phoenix is $1.4 million and at Phoenix-based Shamrock Foods, it’s $2 million. Chandler is owed $318,000 for utilities. Other creditors and the bills, in round figures, include Sysco, $1.8 million; Scottsdale-based Lions Gate Communications, $501,548; Humana, $443,000; GE Capital, $385,000; Southwest Gas Corp., $289,000; Stern Produce of Phoenix, $325,000; and Fireman’s Fund Insurance, $376,000. 35
The San Marcos limited partnership involves 22 members, including Heavlin, who said that business is good despite the bankruptcy. ”We are running the hotel’s day-to-day operations, and it has been a very successful first quarter for us,” he said. ”We are honoring all reservations, group bookings and weddings, and we are out there aggressively seeking future business.” Heavlin said he is optimistic the hotel will survive the bankruptcy. Whether the property will remain in receivership is in dispute. San Marcos Capital Partners’ main bankruptcy attorney, Duncan Barber of Denver, met with a lawyer for the lender, Guaranty Bank and Trust Co., and demanded that the hotel be turned over to the owners. The bank said it would be detrimental to remove the receiver, and it asked the Bankruptcy Court to decide the issue. That hearing is set for Friday. Payne, the receiver, echoed Heavlin in saying business is up. ”I understand the hotel’s going to be pretty much sold out in the next couple of weeks,” he said. ”They have a great sales team, and it’s a property that’s very attractive to area companies and brides and social events. It’s just a wonderful hotel in a wonderful location.” by Luci Scott The Arizona Republic Apr. 4, 2011 12:00 AM [1]Crowne Plaza San Marcos Golf Resort files for bankruptcy 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/03/
20110403chandler-san-marcos-crowne-plaza-bankruptcy.html
High-end beach club planned for downtown Scottsdale (2011-04-09 22:05)
[1] Triyar Entertainment Aerial view of Triyar Entertainment’s Scottsdale Beach Club, to be built on the northeast corner of Stetson Drive and Wells Fargo Avenue. The latest phase of Triyar Entertainment’s makeover of downtown Scottsdale’s entertainment district is a high-end beach club on the northeastern corner of Stetson Drive and Wells Fargo Avenue. Triyar purchased the nearly 2-acre parcel several years ago and has been working on its plans for redevelopment, said Shawn Yari, Triyar’s owner. It now houses an older medical office building, and most tenants already have vacated, he said. Triyar plans to invest around $6 million to build Scottsdale Beach Club, a one-story complex that will include a resort-style pool, four bar areas, private cabanas, a floating stage overlooking the pool, the state’s largest LED video screen, locker areas with showers, a full restaurant, a poolside taco bar, and clubhouse area with video games, billiards, shuffleboard and TVs. ”It’s a day place and a nighttime place,” Yari said. ”Maybe a girlfriend and a boyfriend come, and the girl36
friend wants to lay out and the boyfriend wants to watch an NFL game, you’re going to get both experiences. That’s the idea.” Triyar developed the W Scottsdale Hotel & Residences southeast of Scottsdale and Camelback roads. In 2007, Triyar proposed a $390 million redevelopment of a 10-acre area southeast of the same intersection, with new clubs, restaurants, condos, offices, a hotel and a bowling alley. That plan was scrapped when the recession hit, and Triyar has instead focused on a smaller, more gradual plan to redevelop the entertainment district. The first phase was the Downtown Entertainment Plaza, a three-building restaurant/bar complex on Saddlebag Trail south of Camelback. Majerle’s Sports Grill and El Hefe Super Macho Taqueria already have opened there, and a soon-to-be named nightclub will open in the third building. ”The reason we selected this location for the pool is it’s centralized, it’s a large piece of land and initially the main component of our large development was going to be there,” Yari said. ”And we felt that, what a unique situation it will be that in the middle of the desert you create a beach club.” The idea behind the beach club is to offer the atmosphere of a ”hip hotel pool without the hotel,” he said. The beach club will include a 15,000-square-foot building, 35,000 square feet of outdoor space and at least 60 parking spaces. ”Obviously we have the W Hotel and we operate the pool there,” Yari said. ”We do allow some public in . . . but at times we have to limit that because hotel guests have to take preference over somebody who comes in and wants a lounge chair. This is unique in the sense that this is built for the general public.” Last weekend, a similar concept debuted in the entertainment district with the opening of Spanish Fly on the property that used to house Drift, a Tiki lounge, at 75th Street just north of Stetson. It is the latest creation of Greg Donnally, the entrepreneur behind Drift, Stingray Sushi, Geisha-A-Go-Go and Jimmy Woo’s. ”I really like those guys and I really think they’re going to do great,” Yari said. ”I believe in synergy and I think they’re going to serve a different customer and we are going to serve a different customer. And even if it’s the same customer, they can spend a couple of hours there and come spend a couple of hours with us.” Triyar doesn’t need to request rezoning because the property’s current commercial zoning designation allows for the beach club, he said. Triyar will have to obtain a construction permit, contingent on approval of its plans, and a bar conditionaluse permit from the city, said Dan Symer, senior city planner. Triyar hasn’t yet submitted its application to the city, he said. Demolition of the medical office building should begin in June followed by several months of construction, and then the beach club should be ready to open in mid-to late summer 2012, Yari said. ”Visitors absolutely are going to come and enjoy it, but in the dead of summer . . . people who live here are going to have a great time there and (without the) restrictions from a hotel,” he said. In the meantime, Triyar has begun planning the third phase, which may include a ”hip bowling concept,” Yari said. ”The pool took 100 renditions to finalize and we’re probably in the fourth rendition of the third phase, so it’s just beginning to mold,” he said. ”We’re talking about a lot of concepts and different size buildings, how to address parking and things like that because, as the area gets denser, at that point we’re going to have to start talking about structured parking.” by Edward Gately The Arizona Republic Apr. 5, 2011 09:11 AM [2]High-end beach club planned for downtown Scottsdale
1. http://i.azcentral.com/i/sized/C/1/2/e298/j350/PHP4D9B3F147F21C.jpg 2.
http://www.azcentral.com/community/scottsdale/articles/2011/04/05/
20110405scottsdale-beach-club-plans-laid-out-by-triyar.html
37
Banker’s hours (2011-04-09 22:11) Plenty of people think about sports during work. But at least Robert Sarver has an excuse for it. He’s best known in Arizona as the largest owner and managing partner of the Phoenix Suns and Phoenix Mercury. If any reminder was needed, his 14th-floor office looks out on US Airways Center. But despite the sports connection, Sarver is first and foremost a banker. He also is the newest CEO of an Arizona public company, following the relocation of his firm from the Las Vegas area late last year. ”By far the majority of my time is spent running Western Alliance Bancorporation,” said Sarver, 49, who also serves as chairman. ”About 80 percent of my time is spent here.” He describes his commitment to the Suns as more about being accessible and available to attend various functions, citing a recent golf tournament that raised money for Phoenix Suns Charities. ”It’s not so much about the day-to-day responsibilities, like I have here,” he said. Sarver’s bank responsibilities have kept him busy lately. Stung by the recession and real-estate slump, the company has been unprofitable for the past three years. It lost $10.8 million, or 17 cents a share, during the fourth quarter of 2010, although that was much better than the year-earlier loss of $26.9 million, or 41 cents a share. Western Alliance responded to the challenges by raising more capital. This included the sale of $48 million in stock at relatively depressed prices last year, along with the issuance of $74 million in high-yield bonds. It also received $140 million from a sale of preferred stock to the government through the Troubled Asset Repurchase Program. The company plans to repay the money over the next 24 to 36 months, while paying dividends in the meantime. ”The government gets 5 percent after tax, so it’s a pretty good return on its money,” Sarver said of the TARP dividend payments the firm makes. Western Alliance shares, which trade on the New York Stock Exchange, closed Wednesday up 10 cents, to $8.27, near the low end of their five-year range of between roughly $3 and $39 a year. Turning the corner Despite the challenges, Sarver senses the worst is over in several respects. He said the banking industry has stabilized, and he thinks the Arizona real-estate market has hit bottom. ”We’re definitely seeing more buyers than a year ago,” said Sarver, who also founded and is an investor in Southwest Value Partners, a 25-year-old real-estate investment firm that has bought 30,000 residential lots in Maricopa County over the past three years. Also, Western Alliance’s loan portfolio has improved, with non-performing assets, loan charge-offs and credit losses all easing. Sarver senses the Arizona economy has started to heal, basing that observation not just on improving statistics such as retail sales but also on conversations with bank employees and customers. He spends about three days a week visiting Western Alliance offices in Arizona and the other states where it operates: California, Colorado and Nevada. ”I spend a lot of time on the road visiting branch managers and customers,” he said. ”My sense is that small-business owners are feeling more optimistic.” Western Alliance moved to Phoenix late last year, and large ”Alliance Bank” signs recently were installed on the CityScape tower that is now the company’s headquarters. On game days when he’s in town, Sarver walks to the arena. ”It’s convenient and nice having two businesses so close together,” he said. Local banking Western Alliance’s move to Phoenix was prompted by Arizona’s population growth and by an opportunity to expand its banking presence here, he said. Western Alliance employs 1,000 people, including 212 in Arizona, primarily in its Alliance Bank of Arizona subsidiary. He took a poke at the three giant banks that dominate in Arizona by saying he feels locally based institutions 38
are more inclined to meet the credit needs of local customers. ”If your market is Arizona, you’re forced to lend in Arizona,” he said. Ironically, Western Alliance last year consolidated and centralized its operations in a move that, observers say, could make the firm a bit less flexible and responsive to customers. ”This would allow the bank to cut costs and improve its efficiency,” research-firm Morningstar Inc. wrote in a recent report. ”However, we are concerned that these changes will cause senior managers who enjoyed the fairly decentralized structure to leave the firm.” Morningstar suggested Western Alliance might become less flexible and personal under the new model. Community support With Western Alliance now in Phoenix, Sarver and other top executives are becoming more involved with groups such as the Greater Phoenix Economic Council and Arizona Bankers Association and non-profits such as the Children’s Museum of Phoenix. Sarver said he is personally interested in supporting education, especially for young kids, and jobs. ”Those are the two biggest things we can do to improve this state,” he said. Sarver and his wife, Penny, also donated to the Sarver Heart Center at the University of Arizona, named in honor of his father, Jack, a hotel and savings-and-loan executive who died of heart disease in 1979 at age 58. Robert Sarver recalls an era as recently as the 1980s when Arizona banks and S &Ls, prior to several highprofile failures and acquisitions, played a much more prominent role in the community. He founded National Bank of Arizona in 1984 and served as president until its sale to Zions Bancorp. in 1994. Sarver hopes to develop a similar local presence for Western Alliance. ”We see this as an opportunity to build a premier local banking institution in this state,” he said. by Russ Wiles The Arizona Republic Apr. 7, 2011 12:00 AM [1]Banker’s hours 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/07/20110407biz-sarver0407.html
Meritage expands to North Carolina (2011-04-09 22:19) Scottsdale-based homebuilder Meritage Homes Corp. has expanded into the Raleigh, N.C.-area, which, compared with the Phoenix and Las Vegas markets, is ranked the healthiest region in the country for that industry. Meritage, which is Arizona’s only publicly traded homebuilder, bought a partly developed community with 46 one-acre lots on the edge of Raleigh and plans to build one of its newer energy-efficient communities there, offering Research Triangle professionals homes that are believed to be twice as energy-efficient as standard homes. This is Meritage’s first expansion since 2005 and its first outside its current footprint of 12 markets in six Western and Southern states. Brent Anderson, Meritage’s vice president of investor relations, said the company has been looking at the Raleigh area for some time because it’s poised to be a strong market. ”There is population growth and job growth in the (Raleigh) area, which are the two biggest things we look for as homebuilders in a market,” Anderson said. ”Prices have been stable and actually had increased until just recently. And there are low foreclosure rates.” Hanley Wood Market Intelligence, a Costa Mesa, Calif.-based residential real-estate research company, last month rated the Raleigh-Cary, N.C., area the healthiest homebuilding market in the country. Hanley Wood also noted that although existing Raleigh home prices grew 4 percent last year, they are expected to fall 10 percent this year because of a spreading foreclosure problem. Job growth, though, is expected to continue to lure residents to absorb new homes. Meritage, meanwhile, is not looking for other expansions but plans to focus on its current markets in the Southwest and Southeast, Anderson said. 39
”We think there is growth potential in every one,” he said. ”We have been increasing market share in all except maybe Las Vegas.” He expects Meritage to begin selling homes at its Raleigh community in the third quarter. Jim Belfiore, a Phoenix-based housing analyst, said that the expansion into North Carolina is a good move and that he is surprised Meritage hasn’t gone there before. He said that he was involved in some North Carolina deals in 2004 and that every major homebuilder was setting up shop there. But the company’s earnings statements show the recession hasn’t been kind. Last year, it was able to report a profit of $7.2 million after three years of losses. It sold 3,700 homes in 2010, a decrease of 8 percent from 2009. The expansion into North Carolina shows optimism on Meritage’s part, Belfiore said. ”I think the majority of homebuilders believe the market is going to improve in the next 18 to 24 months,” he said. After the expansion was announced late Tuesday, Meritage’s share price remained virtually unchanged at $24.61. On Thursday, it rose 1.38 percent, to $24.95. Belfiore said Meritage’s focus on green building in Raleigh should distinguish the homebuilder from others. Green offerings include energy-efficient appliances, double-pane windows, programmable thermostats and blown-in insulation. ”I would say they are on the cutting edge in that respect in this market,” Belfiore said. ”They are a leader, and other builders are taking notice because Meritage’s sales rates are generally higher compared to their competition. As homebuilding comes out of its doldrums, you will start to see more production homebuilders incorporating some of these features.” by Betty Beard The Arizona Republic Apr. 8, 2011 12:00 AM [1]Meritage expands to North Carolina 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/08/20110408biz-meritage0408.html
Demand high for Tempe’s West 6th luxury apartments (2011-04-09 22:35) The bird’s-eye views from the long-stalled high-rises in downtown Tempe were stunning enough to draw gasps from those who last week took a guided tour of the West 6th luxury apartments. Last week marked the first time prospective renters could tour the units since Tempe’s tallest buildings were sold to the Zaremba Group and the project was converted from high-end condominiums to apartments. The scheduled tours of about 25 people were booked through the week, said Capstone Cos. leasing agent Preston Baehr. Despite the still-lagging real-estate market, demand for the apartments is high, he said. The 10 three-bedroom units in the 22-story tower, which is expected to be open by August, were leased within in the first five hours Capstone started accepting applications. The units, at $1,995 a month, are the most affordable for roommates to share. Studios start at $945, one-bedrooms at $1,175 and two-bedrooms at $1,550. Bob Kammrath, of Mesa real-estate research firm Kammrath & Associates, said the property is benefiting from the buzz of being the new kid on the block. West 6th is also getting a marketing boost because of the years of publicity surrounding the towers since the project broke ground six years ago as Centerpoint Condominiums, he said. When the real-estate market was flush, Centerpoint’s studios were slated to sell at prices beginning in the mid $300,000s and larger units beginning at $1 million. Kammrath said the initial interest in the apartments could help fill the first wave of units but suggested Zaremba may have difficulty filling the majority of its inventory. Once the 30-story Tower II is completed in December, West 6th is expected to have 375 units. Kammrath said the project will face competition from the flood of affordable rental homes available in the Phoenix metro area. ”Houses are much bigger than any apartment,” he said. ”Frequently, you find tenants who are bundling up 40
(and saying) three or four of us can rent . . . a house that has three bathrooms and I get my own private swimming pool rather than a community pool.” But Baehr, a Tempe resident and Arizona State University graduate, says the students and Valley residents who are lining up to rent at West 6th are looking for a lifestyle different from that of the average home renter. ”We knew there was going to be demand, but it’s far exceeded our expectations,” he said. ”You’re paying for the entire experience. The incredible views as far as you can see. The incredible pool deck, our spa, our tanning facilities, our gym that is going to be all brand-new, state-of-the-art equipment.” West 6th’s development plan includes penthouses on the top floors, underground parking, a conference and study area and mixed retail that could include a small grocery store and restaurant. Nico Svoboda, a 22-year-old ASU student, applied for a three-bedroom apartment without seeing it in person. His was among a three-page-deep list of applications. Svoboda joked that waiting to hear on his application was ”more stressful than school.” While on his first tour of the apartments last week, Svoboda snapped photos from the window of a 17th-floor unit, one floor below his future home. On the tour, prospective renters called Svoboda ”one of the lucky ones” to have secured a three-bedroom to share with roommates. ”I wanted to be able to live somewhere cool my senior year,” he said. ”I’d consider this the ultimate.” Svoboda said he was looking forward to ”being able to walk onto my balcony and see that view. And, honestly, be able to see the building at a distance and say I live there.” Joy and Ron Clark were on the same tour as Svoboda. The couple are eager to trade in their Ahwatukee home for a West 6th unit. ”We’re looking for high-rise living,” Joy said. ”The kids are grown, we don’t want a pool to keep up with, we don’t need all that space. We want to have a sexy house.” Ron said he finds the urban lifestyle more attractive than suburban living. ”I was born and raised in Tempe. I own a business just near here. I’d bike to work,” he said. ”I think this is great for Tempe.” The high-rises are a landmark change in development for Tempe and the Valley, said Adolfo Salazar, who moved to Arizona about two years ago from Hollywood. Salazar hopes to rent a two-bedroom unit. ”I’ve never seen anything like it before in Arizona,” he said. ”People in California don’t expect Arizona to have anything like this. This is what we need more of in Phoenix.” by Dianna M. Náñez The Arizona Republic Apr. 8, 2011 01:29 PM [1]Demand high for Tempe’s West 6th luxury apartments 1.
http://www.azcentral.com/business/realestate/articles/2011/04/08/
20110408demand-high-tempes-west-6th-luxury-apartments.html
Arizona hurt by stagnant, declining population (2011-04-10 15:56) If Arizona has lost people in recent years, as some evidence indicates, Arizona could go four years - from 2009 through 2012 - with virtually no population increase, says University of Arizona economist Marshall Vest in his latest ”Arizona’s Economy” forecast. And that’s not good for the economy, especially the housing market. Vest, who produces quarterly forecasts, revised his economic and population predictions ”significantly downward” this quarter because of indications that the state’s population may have fallen in recent years. Vest cautioned that his new forecast is just a ”preliminary, exploratory kind of look at what if the population actually declined.” Census numbers are in dispute. Even the Census Bureau said in February that Arizona’s population, which the bureau estimates at almost 6.4 million, may have been undercounted by as much as 4 percent. The tough job market and stricter immigration policies may have persuaded many Hispanics and others to 41
leave in recent years. The Pew Hispanic Center has estimated the number of Hispanics in Arizona, Utah and Nevada fell by 160,000 from 2007 through 2010. A declining population would help explain, Vest points out, why Arizona’s job, retail-sales and housing numbers have had such a tough time recovering. Arizona naturally gains about 45,000 to 50,000 residents a year because of births that exceed deaths. But new census estimates show that aside from those babies, the state’s net population growth was negative in 2009 and 2010. Vest forecasts no net population change this year and a gain of about 36,000 net new residents, 0.5 percent, next year. His new forecast calls for about 7.5 million Arizonans by 2020, a gain of 1.1 million during the current decade compared with the past decade. That’s almost a million less than he predicted in his last forecast. Based on a declining population, Vest revised several economic projections. Although he had predicted the job growth would be 3.3 percent next year, he now predicts it will be 1.3 percent. Personal income, previously expected to grow 5 percent in 2012, is now expected to rise 2.9 percent. Instead of adding 228,400 jobs from this year through the end of 2013 as he previously predicted, he now forecasts only 91,000 new jobs. Vest believes declining housing prices are preventing many homeowners elsewhere from selling their homes and moving to Arizona. ”This is the lowest mobility rate we have seen in this nation for six decades,” Vest said. He worries about a downward spiral. As foreclosures rise, housing prices fall. That, in turn, causes more foreclosures. And that, in turn, causes prices to fall more. He predicts, or hopes, that spiral will stop by 2015 and people once again will be on the move - to Arizona. by Betty Beard The Arizona Republic Apr. 10, 2011 12:00 AM [1]Arizona hurt by stagnant, declining population 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/10/20110410biz-insider0410beard.html
Foreclosure filings drop in the Valley (2011-04-16 16:01) Metro Phoenix’s foreclosure activity reached an interesting equilibrium in March. The number of preforeclosures fell to nearly the level of actual foreclosures. Pre-foreclosures, or notice of trustee sales, usually outpace actual foreclosures or trustee sales by a few thousand in the region. Last month, the number of new notice-of-trustee sales filed dropped to 5,692, according to Information Market, a real-estate data firm. At the same time, the number of trustee sales, or foreclosures completed, reached 5,003. New Phoenix foreclosure filings have been falling during the past few months, a good sign that fewer people are losing their homes or opting to walk away. Actual foreclosures haven’t dropped at the same rate. But that doesn’t surprise housing-market watchers who have expected foreclosures placed on hold last fall due to lender moratoriums to still be working their way through the foreclosure process. More of those foreclosure homes are being auctioned on the courthouse steps. Last month, a nearly record 1,311 metro Phoenix foreclosure houses were purchased by third-party investors at trustee-sale auctions, which are most often held at noon in front of the Maricopa County courthouse in downtown Phoenix. Fewer new foreclosures and more homes that sell at foreclosure auctions could mean fewer cheap homes on the market to drag down prices. Information Market reports the region’s median home price has held steady at $115,000 for the past few months, after a double-dip drop last year. Tucson foreclosures A California group called [1]ForeclosureRadar.com is tracking Arizona’s housing market. According to its 42
data, foreclosure filings in Tucson fell 43 percent in March from February’s level. ForeclosureRadar filings include both notice-of-trustee sales and trustee sales. Foreclosure filings dipped slightly to 7,323 in Pinal County, home to several of metro Phoenix’s newer affordable edge communities. There were 7,350 foreclosure filings in Pinal during February. Sean O’Toole, chief executive of ForeclosureRadar, said the one thing clear about foreclosures now is that there’s ”no consensus on a viable solution (to help homeowners) other than to eliminate the excess mortgage debt that has left millions underwater and continues to hinder the broader economy.” by Catherine Reagor The Arizona Republic Apr. 13, 2011 12:00 AM [2]Foreclosure filings drop in the Valley 1. http://ForeclosureRadar.com/ 2. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/13/20110413biz-catherine0413.html
Default on HELOC may bring tax bill (2011-04-16 16:06) Question: Four years ago, we bought a new home in Tucson with a first mortgage loan. The real-estate market was still booming at that time, and by the time we moved into the home there was an additional $40,000 in appreciation. We took out a $40,000 home-equity line of credit. We used this $40,000 to buy a new car and to pay off our credit cards. Our home is now underwater by potentially $80,000 and we can no longer afford to make the payments on our first mortgage loan. If we stop making payments both on our first mortgage loan and on the $40,000 HELOC, when will the foreclosure occur? Will our wages be garnisheed? Would we be responsible for any income taxes if the first mortgage or the HELOC don’t get payment of their loans? Answer: If the first mortgage loan forecloses, you generally would not have liability for any deficiency. Until the actual foreclosure sale, which you should attend, you will have to keep the home in reasonably good condition, which means also that you must keep in effect the homeowner’s insurance policy. The $40,000 HELOC will not foreclose, but you will get a judgment against you for $40,000, and the lender can garnishee your wages and take other collection action. As for taxes, you will have no liability on the potential $80,000 debt forgiveness because there is no income tax on debt forgiveness of a mortgage loan used to purchase a primary residence, or to make improvements such as landscaping or a new roof to a primary residence. Since the HELOC was not used to purchase or make improvements to a primary residence, if the HELOC lender gets less than $40,000, you owe taxes on the difference between the amount paid and the full $40,000. by Christopher Combs The Arizona Republic Apr. 13, 2011 12:00 AM [1]Default on HELOC may bring tax bill 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/13/20110413biz-combs0413.html
Tempe lakeside subdivision is celebrated (2011-04-16 16:39) In 1972, Connie and Lloyd Snook built their house in the central Valley’s first major artificial lakeside development on a plot attached to a miniature island that was just big enough for Lloyd to plant two trees. Their children imagined the island a seaside enchanted forest for sleepovers and treasure hunts. The Lakes, in a central Tempe community near Rural and Baseline roads, was a novelty. The neighborhood attracted residents who longed to enjoy lakeside living in the parched desert, even if their lake was fake. ”We all had boats, and we’d all go around in the evening, maybe here for a cocktail and then maybe to 43
somebody else’s next for a cocktail,” Connie, 85, said, chuckling at the memory. On Saturday, the Lakes celebrated its 40th anniversary with a waterfront bash. Many of the original homeowners who still live there, like Connie, were celebrating the landmark. A boat parade, fishing for prizes and a carnival were among the water-centered festivities. Connie’s husband, Lloyd, who died three years ago, was the project’s designing manager and visionary for the development built in 1971. The Snooks’ house was one of the first in the subdivision. Despite drought conditions and a 1987 state law to restrict water developments, lake subdivisions thrived. Other Valley cities recognized that artificial waterways lured tourism and development dollars, and they followed in Tempe’s steps. There are at least 264 artificial lakes in the Valley, according to the Arizona Department of Water Resources. At Val Vista Lakes in Gilbert, homeowners can dig their toes in the community’s sandy beach or man a kayak on one of the four lakes. At Garden Lakes in Avondale, boating is a favorite pastime. And at a handful of properties, lakes that allow waterskiing are within a stone’s skip from families’ backyards. Connie Snook recalls the Lakes being so imaginative that Barry Goldwater, the U.S. senator, was hopeful waterfront projects would create a new era in Valley development. ”Barry Goldwater was so taken by this place, so he would come around and Lloyd would take him around in our boat,” she said. ”There hadn’t been any water properties like this. (Goldwater) thought this was going to make a number of people stay in Phoenix in the summer enjoying the water.” During the 1970s and ’80s, massive housing developments were built that weaved around man-made lakes. Cities built sprawling parks alongside them. The artificial lakes were not without controversy. Concerns over water usage and evaporation drew critics. It wasn’t until the late 1980s that lawmakers tried to limit private lake development. Citing a concern over the state’s water resources, lawmakers approved what was referred to as the ”Lakes Bill,” designed to prohibit the construction of most new lake communities. But the law had so many exceptions that water developments, including Tempe Town Lake, continued to appear in the desert. by Dianna M. Náñez The Arizona Republic Apr. 14, 2011 12:00 AM [1]Tempe lakeside subdivision is celebrated 1. http://www.azcentral.com/arizonarepublic/local/articles/2011/04/14/20110414lakes40th0414.html
Radical Bunny told to pay penalties (2011-04-16 16:42) A U.S. District Court judge has ordered four former executives of Mortgages Ltd. investment firm Radical Bunny LLC to pay more than $3.7 million in combined penalties, plus interest. The order was issued Tuesday in response to a motion for summary judgment by the case’s plaintiff, the U.S. Securities and Exchange Commission. Judge Susan R. Bolton agreed with SEC attorneys that former Radical Bunny partners Tom Hirsch, Harish Shah, Howard Walder and his wife, Berta ”Bunny” Walder, violated federal rules against fraud and failing to register with the SEC. ”The court finds that the individual defendants acted knowingly, in that they continued their violations after receiving advice to the contrary from multiple, knowledgeable sources,” said the ruling, filed Wednesday in U.S. District Court for the District of Arizona. Attorneys for the defendants did not respond Wednesday to requests for comment, but they have argued throughout the case that Hirsch, Shah and the Walders had operated Radical Bunny in good faith and had relied on the advice of attorneys and others they knew and trusted. ”(Hirsch, the Walders and Shah) acted pursuant to sound business judgments based upon known facts, circumstances and strategies in consultation with reliable professionals,” said the defendants’ original response to the SEC complaint, now part of the court record. The SEC filed fraud charges against Phoenix-based Radical Bunny in July 2009. The firm has since filed for 44
bankruptcy protection. Radical Bunny raised more than $197 million from nearly 900 investors and then used the money to make high-interest loans to Mortgages Ltd. According to the SEC, the defendants told investors that their money could only be used for commercial development, when in fact Mortgages Ltd. could use the money for anything. When Mortgages Ltd. went into bankruptcy, it had almost $1 billion in loans outstanding to developers. Since then, most of those projects have stalled because of a shortage of money and the real-estate market’s downturn. Several developers, who had been getting loans from Mortgages Ltd., have since gone into bankruptcy. Radical Bunny’s investors forced it into bankruptcy in late 2008. An estimated 4,000 investors are still trying to recover their money from Radical Bunny and Mortgages Ltd. Purposefully misleading investors is a violation of federal security laws. According to the SEC, the defendants allegedly told investors they weren’t subject to securities law. According to the SEC, Radical Bunny was not registered with the SEC and did not register any offering under securities laws. In addition to the securities-fraud charges, Hirsch, Shah and the Walders are charged with offering and selling unregistered securities and acting as unregistered broker-dealers. The SEC also alleges that Hirsch received at least $3 million, the Walders received at least $2 million, and Shah received at least $700,000 as part of a ”vendor fee” for the money they pooled from investors to lend to Mortgages Ltd. The former Radical Bunny executives’ attorneys have insisted all along that the business was not selling ”investments” and that the SEC did not have proper jurisdiction to prosecute the case. Spencer E. Bendell, senior trial counsel for the SEC’s Los Angeles Regional Office, said the federal commission proved several times over that Radical Bunny executives lied in order to solicit investments from their clients. ”We alleged and then proved to the judge that they committed fraud, that they lied to investors,” Bendell said. by J. Craig Anderson The Arizona Republic Apr. 14, 2011 12:00 AM [1]Radical Bunny told to pay penalties 1.
http:
//www.azcentral.com/arizonarepublic/business/articles/2011/04/14/20110414radical-bunny-to-pay-penalties.html
Raising the debt limit a GOP dilemma (2011-04-16 16:46) Rep. David Schweikert vividly recalls the reaction he got in February at the Tea Party Patriots summit in Phoenix when, almost immediately after he started speaking, he said Congress shouldn’t play risky political games with the federal debt ceiling because of possible negative ramifications to the economy. ”Have you ever seen a speaker get a standing ovation and booed within 60 seconds?” Schweikert, R-Ariz., said. The ”tea party” crowd’s hostile reaction to Schweikert, a like-minded fiscal conservative, illustrates the pressure that he and other GOP House freshmen face as a high-stakes vote to increase the $14.3 trillion legal debt limit approaches. Some conservative critics seem to view the federal government’s statutory debt ceiling as akin to a credit card’s limit. Raising it, they say, would enable more government spending and borrowing, which is what they want to avoid. But it’s not that simple. Congress already has cut the deals and borrowed the money that is causing the country to careen toward the limit. A congressional refusal to raise the ceiling could result in the United States defaulting on its financial obligations for the first time in history. ”The right analogy is to say you’ve already incurred the debt on your credit card,” said Paul Posner, a professor at George Mason University in Virginia and the U.S. Government Accountability Office’s former 45
director of federal budget and intergovernmental relations. ”Do you refuse to pay your credit-card bill when it comes due? That’s exactly what this is.” Still, Schweikert and establishment Republican leaders are hoping to use the looming debt-ceiling vote to wring budget-reform and spending concessions out of President Barack Obama and Democrats who control the Senate. Their goal is to change the trajectory of the rocketing debt that they say sooner or later will have catastrophic consequences for the nation. But, for the most part, they can’t see in the short term a way around lifting the ceiling, a conclusion not necessarily shared by the tea-party activists who helped Republicans retake the House last year. In a speech Wednesday at George Washington University, Obama laid out his own new plan to trim the federal deficit (the difference between the government’s revenue and its spending) by $4 trillion over 12 years. ”Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order,” Obama said. Rep. Ed Pastor, D-Ariz., said that what should be a bipartisan vote on the debt ceiling could be imperiled if House Republicans pile on too many terms and conditions. ”They’re in the majority, and they have the responsibility to make sure the government runs smoothly,” Pastor said. ”If they decide not to raise it, it’s on their watch.” Must-pass measure The statutory debt limit was first enacted in 1917 and has been legislatively increased 10 times since 2001, according to an April report by the Congressional Research Service, Congress’ nonpartisan research arm. The ceiling amount covers the publicly held debt and the debt owed because of government raids on the Social Security Trust Fund and similar accounts. The U.S. Treasury expects the total debt, which was $14.251 trillion on April 1, to hit the current limit by May 16, although the Treasury may be able to take emergency steps to stretch its borrowing power to July 8, congressional researchers said. Right now, the federal government borrows about 40 cents for every dollar it spends, meaning steep spending reductions are certain if the ceiling is never lifted. But if the United States stiffs its creditors - those who own Treasury bonds, bills and notes - the harm to its global credit and its currency, which could include stifling inflation, could be long term, experts say. ”We’ve never failed to pass a debt ceiling; we’ve never failed to pay our bonds back; and to do so now would be economically cataclysmic,” Posner said. ”Basically, if you want to see interest rates go through the roof and the recovery choked off, that would be the best formula to do it.” Such dire predictions so far haven’t stopped the rhetoric by some lawmakers, who continue to either vow to oppose raising the ceiling or demand deep spending cuts. Because it is viewed as must-pass legislation, some Republicans are determined to use the vote to force changes in budget policies. In past years, some lawmakers cast symbolic votes against raising the ceiling, knowing there was little chance it would fail. In 2006, Obama, then a senator from Illinois, voted against the debt-ceiling hike, at the time characterizing the need to increase the limit as a ”leadership failure” and ”a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies.” Obama this week told ABC News that the vote was an example of a new senator casting ”a political vote as opposed to doing what was important for the country.” ”When you’re a senator, traditionally, what’s happened is this is always a lousy vote. Nobody likes to be tagged as having increased the debt limit for the United States by a trillion dollars,” Obama said Thursday in an interview with ABC’s George Stephanopoulos. ”As president, you start realizing, ’You know what? We can’t play around with this stuff. This is the full faith and credit of the United States.’ ” Others worry that just the brinkmanship and ongoing threat of a debt clampdown could rattle the bond markets and spike still-stable interest rates. ”It’s political theater right now,” said Jeff Chapman, an economist and professor of public affairs at Arizona State University. ”I can’t believe anybody really wants to default.” Willing to be ’tough’ 46
Sen. Jon Kyl, R-Ariz., agreed that Congress will eventually have to raise the debt ceiling, but, like other Republicans, called some of the doomsday scenarios over the top. The Obama administration has the authority to prioritize obligations, he said, and decide which bills are to be paid based on the revenue that will continue to come in. But Kyl acknowledged ”problems and dislocations and inconveniences” are likely the longer the United States goes without increasing the limit. ”What we are trying to say is, ’But we don’t want to keep doing this,’ ” said Kyl, the Senate minority whip. ”So, instead of asking the credit-card company to keep giving us more credit so that we can put more and more stuff on the credit card, eventually we are going to take the credit card away.” Schweikert said he hopes Congress can conduct the discussion that signals to the world that the United States is serious about reforming its finances. ”I think there will be lots and lots and lots of political theater . . . and right at the end, we will come to some kind of agreement that will hopefully help save the republic,” said Schweikert, who serves on the House Financial Services Committee, which oversees the Treasury. ”But there are a lot of us who are willing to be really tough on this one.” by Dan Nowicki The Arizona Republic Apr. 15, 2011 12:00 AM [1]Raising the debt limit a GOP dilemma 1.
http://www.azcentral.com/arizonarepublic/news/articles/2011/04/15/
20110415federdal-budget-crisis-republican-issue.html
No easy solutions for U.S. deficit (2011-04-16 16:48) WASHINGTON - The deficit-reduction plans offered by President Barack Obama and his Republican nemesis don’t have much in common beyond this: Both envision huge savings by closing popular tax loopholes and bedrock deductions enjoyed by Americans and corporations, but neither one says what it would get rid of in the process. Obama’s speech Wednesday and the ”Path to Prosperity” offered by House Budget Committee Chairman Paul Ryan, R-Wis., suggest that about $1 trillion in savings is to be had by closing tax loopholes and deductions. These changes would happen in order to bring the top tax rate down to about 25 percent for corporations and individuals. They didn’t spell out what they’d scrap on these so-called tax expenditures, so to make good on their promise they’d have to anger the rich, the poor, charities, unions, real-estate agents, builders and bankers - just to name a few of those affected. Although neither the president nor Ryan provided details about what popular tax breaks he’d end, both gave a shout-out to the bipartisan deficit-reduction proposals that the National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center offered late last year. Obama welcomed the chairmen of the commission to the White House on Thursday, saying that it’s ”important that we look at our tax code and find a way to work together.” The separate proposals from the commission and the center provide great detail, calling for scrapping the mortgage-interest deduction and the deduction from federal taxes for what homeowners pay in state and local property taxes. Deductions for charitable giving would change, and the so-called Cadillac health-care plans offered by employers, which aren’t now treated as income, would lose their tax-break status. ”Those four items ... have extraordinarily active and powerful lobbies behind them. And just those four alone would be a huge bite to swallow, especially if you didn’t touch any of the other tax expenditures, many of which go to larger businesses or other activities we want to encourage (through the tax code),” said Steve Bell, a senior director at the Bipartisan Policy Center, a research group whose members are former lawmakers and top staff. ”That’s why the fight over eliminating these expenditures will be so nasty and bloody. You will see tens if 47
not hundreds of millions of dollars spent on lobbying.” Bell should know. He was the staff director of the Senate Budget Committee during President Ronald Reagan’s tax overhaul in 1985 and was deeply involved in the Senate’s negotiations to carve out what’s now called the Gramm-Rudman-Hollings balanced-budget act. That law imposed binding caps on federal spending, and the painful experience taught Bell how difficult it will be to undertake serious changes to the sacred cows that are embedded in the tax code. The Bipartisan Policy Center and the president’s fiscal commission offered solutions to the nation’s twin problem of deficits and debt. The center would change the mortgage-interest deduction to a refundable credit, and homeowners with mortgages valued above $500,000 would get no government support in the tax code. Second homes wouldn’t qualify for the tax credit, an idea that won’t sit well with resort communities on both coasts and in the mountain states. The president’s fiscal commission, similarly, would scrap the mortgage-interest deduction and replace it with a 12 percent non-refundable tax credit. Among those opposed to these ideas are governors and mayors across the U.S. They aren’t likely to support the end of federal tax deductions for state and local property taxes and an end to deductibility for interest on state and municipal bonds. Reagan succeeded in ending deductibility of state sales taxes in 1985, but he failed to scrap the deductibility of property taxes. The fiscal commission and the center called for ending this break, which supports real-estate investment and development. Few changes would be as controversial as the call in the fiscal commission’s and center’s plans to scrap the 15 percent tax rate on capital gains and dividends, earnings that usually come from stock-market investments. Under both plans, capital gains and dividends would be taxed at the rate of ordinary income. If investors were in the 12 percent or 22 percent income-tax rate, that’s the rate they’d be taxed for capital gains and dividends. If they were at the top rate, they’d be taxed at the top rate of 25 percent to 28 percent. At a briefing Thursday, White House spokesman Jay Carney declined to answer questions about tax specifics, referring them to the Office of Management and Budget. An OMB spokesman, Kenneth Baer, said the administration’s proposed 2012 budget would reduce the maximum rate of itemized deductions for families with taxable income above $250,000, but other than that, the White House wasn’t commenting on the specific large cuts the commission and center advocated. ”Those bipartisan groups have done a real service by charting out some options for policymakers. It’s going to really help inform this debate ... over how we get a fiscal plan together.” An aide to Ryan also declined to provide specifics, noting that the tax changes called for in the Path to Prosperity are in the jurisdiction of the tax-writing Ways and Means Committee. The congressman had no position on what should happen to the capital-gains tax. Obama and Ryan envision a top corporate tax rate in the 25 percent to 28 percent range and an end to corporate tax breaks in exchange. But again, neither camp offered specifics. ”It’s easy for business in general to rally around a 25 percent rate, or a lower rate, but when you get to (tax) base broadening, that’s where it’s going to be very tricky,” said Dorothy Coleman, vice president of tax policy for the influential National Association of Manufacturers. by Kevin G. Hall McClatchy Newspapers Apr. 15, 2011 12:00 AM [1]No easy solutions for U.S. deficit 1. http://www.azcentral.com/arizonarepublic/news/articles/2011/04/15/20110415congress-taxes0415.html
Arizona jobless rate drops to 9.5% (2011-04-16 16:57) A strong tourism season this spring has boosted hiring more than usual at restaurants, bars and hotels, and it helped lower the state’s unemployment rate for the first time in four months, the Arizona Department of Commerce said Thursday. Arizona added 9,900 new jobs from February to March. And 6,700 of those were in the leisure and hospitality 48
industry, mostly at restaurants and bars. The unemployment rate dipped to 9.5 percent from 9.6 percent, where it has been stuck since November. The numbers have not been seasonally adjusted and are subject to revisions. The hospitality numbers confirm what those in the industry and analysts have already discovered, that 2011 has brought the state a more robust winter-visitor and tourism season than it has experienced in several years. ”Hiring has increased, which isn’t uncommon at this time of year because businesses tend to ramp up more for spring training, and also due to the great weather we experience this time of year,” said Steve Chucri, president of the Arizona Restaurant Association. ”But we have been busier than in more recent years. It’s been a nice boost to restaurants.” Arizona restaurant sales last year grew by an unexpected $880 million, to reach $9.25 billion, he said. In the boom years of the mid-2000s, the growth was about $600 million to $700 million a year. ”I had the statistician run the numbers twice. To have that kind of growth in a year, well you don’t expect that,” Chucri said. Hiring in the leisure and hospitality industry has been a little heavier this March than on average from 2001 through 2010, the Commerce Department said. On average, March usually shows a 1.8 percent gain in jobs over February, but this year, the March increase was 2.6 percent. Hotels and resorts are also having a good season. ”Most of the properties I have talked to had a pretty strong first quarter. So, that kind of gives them the confidence to continue to move forward,” said Kristen Jarnagin, a spokeswoman from the Arizona Hotel and Lodging Association. Smith Travel Research said that occupancy at Phoenix-area hotels, resorts and motels grew 9 percent in February compared with a year earlier. Nationally, occupancy increased 5 percent. Jarnagin also said hotel rates have dropped about 25 percent over the past two years and have yet to recover. Overall, Arizona’s job gain was just a fraction, or 0.2 percent, compared with March 2010. It appears that, after almost three years of job losses, the state is finally gaining again. Here is how the state stands on some key sectors: - Health services and private education added 14,000 jobs over the year, a 4 percent increase. Of those, 9,300 were in health care. Arizona State University economist Lee McPheters said his data shows that the Phoenix area ranks first among all metro areas for growth in health care, with 10,000 more jobs added over the year and a 5 percent growth rate. ”Health care is growing nationally, but its not growing more rapidly in any other big metro area,” he said. - The trade, transportation and utility industry added 4,500 jobs in March, compared with a year earlier. That is a 1 percent increase. The bulk of that growth was in transportation and warehousing. - The manufacturing sector has had weak hiring: only 1,100 jobs over the year, or less than 1 percent. Aerospace and parts lost 1,400 positions. - Construction added 2,000 jobs over the month. The Commerce Department said that is typical and is about average for March. But the sector is still down 2,700 jobs from a year earlier. - Professional and business services have shown the greatest losses, or about 10,800 jobs over the year. These jobs include lawyers, accountants, scientists and employment-service or temp jobs. - Government job losses continue to mount. The state had about 4,600 fewer government jobs in March than a year earlier, mostly at city, county and school-district levels. by Betty Beard The Arizona Republic Apr. 15, 2011 12:00 AM [1]Arizona jobless rate drops to 9.5 % 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/15/
20110415arizona-unemployment-rate-drops-march.html
49
Workers: Low pay imperils industry (2011-04-16 17:05) Recently implemented federal reforms to boost pay for home appraisers have not fixed the problem, according to a group of Phoenix-area appraisers who said low pay was destroying their profession. The Dodd-Frank Wall Street Reform and Consumer Protection Act approved by Congress and signed into law in July contains several provisions intended to ensure that home appraisals are impartial, thorough and accurate. Appraisers were hoping the new measure would correct problems they began to experience in May 2009, when a set of rules known as the Home Valuation Code of Conduct was adopted by the profession. In a recent survey by the Arizona Association of Real Estate Appraisers, an overwhelming majority of members said they used to earn $350 to $375 per job. Lately they’ve been earning about half that amount, they said. Aris Abakuks, an independent, board-certified appraiser based in Gilbert, said it had been difficult for local appraisers to earn a living since the 2009 code of conduct took effect, because the group of intermediary companies put in place to assign appraisers to specific jobs has not been paying them enough. The largest intermediaries, known as appraisal-management companies, are owned by the major mortgage lenders such as Bank of America and Wells Fargo. Appraisers who demand more pay risk being dropped from the management company’s eligibility list, which one local appraiser described as the equivalent of being blacklisted. ”It’s basically controlled by the larger lenders,” Abakuks said. ”They can just pay whatever they want.” Abakuks said he was dropped from one of the major management companies’ list because he refused to perform extra work for no pay on an appraisal he had completed and received payment for already. Abakuks would not specify which company had barred him from working, but he and others said the practice was common. The new measure to prohibit unfair pay, which took effect April 1, states that ”lenders and their agents shall compensate fee appraisers at a rate that is customary and reasonable for appraisal services performed in the market area of the property being appraised.” It goes on to explain that a ”fee appraiser” is any licensed, board-certified appraiser who charges a fee for his or her services. Some appraisers, but not all, say the 2009 code of conduct has devastated their profession and reduced the quality of home appraisals. Others say it was necessary, because bribery and collusion had been rampant in the appraisal business and contributed to the hyperinflation of home prices in the middle of the previous decade. It essentially put a wall between appraisers and mortgage brokers by inserting a middle man into the process. In most cases, appraisers are no longer allowed to speak directly with brokers. The problem, opponents of the code say, is that some management companies keep too big a chunk of the appraisal fee to run their own operations. Joanna Conde, a board-certified residential appraiser who heads the statewide Arizona Association of Real Estate Appraisers, and other trade group members said overworked appraisers who need to maintain a high volume of business are more likely to cut corners, miss deadlines and make mistakes. Nearly every major bank owns an appraisal-management company, which is set up to assign an appraiser from a pool of available candidates each time a home needs to be appraised for a mortgage-loan purchase or refinancing. Some of the major mortgage lenders, including Bank of America and Wells Fargo, also own appraisalmanagement companies. An appraisal is required only if the buyer is taking out a loan. It gives the lender a basis for deciding how much to lend. Arizona lawmakers recently approved a new law that will force management companies to meet higher standards of conduct and disclose their fees to consumers. It also will require the state’s nearly 200 management firms to register and pay a license fee of $2,500 every 50
two years, Conde said. Most appraisers and even some management firms supported Senate Bill 1351, which also requires background checks on appraisal-management company owners, forces companies to reveal hidden fees to consumers, and makes them comply with rules for lenders and appraisers. It also would allow appraisers to file complaints. However, the new state law is still being implemented and might not take effect until this summer, Conde said. Meanwhile, several local appraisers said management firms still underpay them and make unreasonable demands, such as expecting them to do follow-up work or drive long distances for no additional compensation. Even appraisers with steady work are having a difficult time paying the bills, Abakuks said. As a result, many veterans are leaving the profession, and virtually no young people are entering it. ”The problem is going to come five to 10 years from now when there aren’t enough appraisers,” he said. by J. Craig Anderson The Arizona Republic Apr. 16, 2011 12:00 AM [1]Workers: Low pay imperils industry 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/16/20110416biz-appraisers0416.html
Vacancy rate in industrial market down (2011-04-16 17:09) Although metro Phoenix is a long way from replacing the jobs and businesses lost in the downturn, the commercial-real-estate sector performed better in the first quarter than during the previous year, Valley commercial-real-estate analysts said. The sector is significant because it houses the industries in which a majority of working Arizonans earn their paychecks. The industrial-real-estate market, which includes buildings such as warehouses, distribution centers and manufacturing facilities, gained about 2 million square feet of occupied space in the first quarter, also known as positive absorption. In other words, 2 million square feet of warehouse and other industrial space that was vacant in the fourth quarter of 2010 is now occupied, according to two Phoenix commercial-real-estate brokerages, NAI Horizon and CB Richard Ellis. Those new occupants helped reduce the overall vacancy rate for industrial properties to 14.2 percent, compared with 14.7 percent in the fourth quarter, said Craig Henig, senior vice president and managing broker at CB Richard Ellis. Mark Wilcke, senior vice president at NAI Horizon, estimated the vacancy rate to be a bit higher at 15.6 percent, but his firm’s data also show that vacancies decreased slightly. Not every commercial-real-estate firm measures vacancy the same way. Some companies that took up occupancy in Phoenix-area industrial properties did so through leasing and others by purchasing the property. Wilcke said that sale and lease prices for warehouse and other industrial space were at all-time lows in the first quarter, but that the decline in rent and sale prices that began in 2008 was much closer to leveling off than it had been a year earlier. The biggest industrial-market lease transaction in the first quarter was by Mach 1 Global Services, which signed for about 260,000 square feet of distribution space in Goodyear, according to an NAI Horizon report. The biggest sale transaction was by Alliance Commercial Partners LLC, which purchased a 66,000-squarefoot warehouse building at 450 N. 54th St. in Chandler for $30.45 million, or about $55 per square foot, the report said. A report from CB Richard Ellis that broke down the industrial market into regions showed that the southeastern and southwestern portions of the Phoenix area had the largest amount of positive absorption. Nearly 80 percent of the gain in occupancy came from buying and leasing existing buildings, Henig said, 51
which means very little new construction occurred. He said even bigger deals were coming soon along with more jobs, based on a handful of recent company announcements. ”In early 2010, both First Solar and Intel Corp. announced plans to expand their presence in the Valley,” Henig said. by J. Craig Anderson The Arizona Republic Apr. 16, 2011 12:00 AM [1]Vacancy rate in industrial market down 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/16/20110416biz-commercial0416.html
Mortgage woes send down BofA’s income (2011-04-16 17:12)
[1] NEW YORK - Bank of America Corp.’s first-quarter income fell 39 percent on higher costs related to its mortgage business and litigation. The bank also settled a claim over faulty mortgage investments and set aside less money to cover soured loans. The Charlotte, N.C., bank on Friday said that it earned $1.7 billion, or 17 cents per share, compared with $2.8 billion, or 28 cents a share in the first quarter of last year. The earnings fell short of the 28 cents a share estimated by analysts surveyed by FactSet. Revenue fell to $26.9 billion from $32 billion in the same period last year. ”All the businesses have moved back to profitability except our mortgage business,” CEO Brian Moynihan said in a call with analysts. Bank of America continued to be weighed down by losses, lawsuits and higher costs related to its mortgage businesses. Its real-estate-services business reported a loss of $2.4 billion compared with a loss of $2.1 billion for the same period in 2010. The bank is fighting lawsuits from investors and insurers who say they were duped into buying mortgage loans that were based on fraudulent documents. Bank of America set aside $1 billion in the first quarter to repurchase those mortgages. That’s on top of $4.1 billion that the bank had already set aside in the fourth quarter of 2010 and $526 million in the first quarter of last year. 52
Litigation expenses, related mostly to mortgages, were up $352 million from the first quarter of 2010. Bank of America was among 16 of the nation’s largest mortgage lenders who were directed by the Federal Reserve and other federal banking regulators Wednesday to reimburse homeowners who were improperly foreclosed upon. The Fed also warned of more fines in the future. Attorneys general of all 50 states are also investigating allegations of improper foreclosures, and the banks will likely pay more fines once the probe is over. Separately, Bank of America paid $1.1 billion in cash to Assured Guarantee, an insurer that also said the bank should repurchase shoddy mortgages. The bank also entered into an agreement worth $470 million to share losses on insuring additional mortgages. Much of Bank of America’s mortgage-related woes stem from its 2008 acquisition of Countrywide Financial Corp., which was facing bankruptcy after payment defaults and foreclosures. Last month, Bank of America became the only one of the four largest U.S. banks that wasn’t allowed by the Federal Reserve to increase its dividends. Moynihan had promised investors that he would increase dividends in the second half of the year. Along with the 19 largest banks in the country, it was subject to a ”stress test” by the Federal Reserve to see if they were strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to increase dividends. The Fed has now asked the bank to submit a revised plan. As the largest U.S. bank serving about half of the nation’s households, Bank of America also provides a snapshot for the health of the American consumer and the overall economy. The bank said the number of customers who were late on their credit-card payments by 30 days or more fell to near all-time lows in the first quarter. It was the sixth straight quarterly decline. The bank set aside a total of $3.8 billion to cover losses from loans in the quarter, down sharply from $9.8 billion in the same period a year ago. That reflects an improving economy and fewer customers falling behind on debts. by Pallavi Gogoi Associated Press Apr. 16, 2011 12:00 AM [2]Mortgage woes send down BofA’s income 1. http://obama.net/wp-content/uploads/Bank_of_America.jpg 2. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/16/20110416biz-bofaearns0416.html
Audit: $513 mil in IRS homebuyer credits questioned (2011-04-16 17:19) WASHINGTON - The Internal Revenue Service has paid out more than a half-billion dollars in homebuyer tax credits to people who probably didn’t qualify, a government investigator said Friday. Most of the money - about $326 million - went to more than 47,000 taxpayers who didn’t qualify as first-time homebuyers because there was evidence they had already owned homes, said the report by J. Russell George, the Treasury’s inspector general for tax administration. Other credits went to prison inmates, taxpayers who bought homes before the credit was enacted and people who did not actually buy homes. Friday’s report is the latest in a series of audits George has conducted on the homebuyer tax credit. It says the agency paid out $513 million in questionable claims for the homebuyer tax credit. ”The IRS has taken positive steps to strengthen controls and help prevent the issuance of inappropriate homebuyer credits,” George said. ”However, many of the actions occurred after hundreds of thousands of homebuyer credits had already been issued, including fraudulent and erroneous credits totaling millions of dollars.” The popular credit provided up to $8,000 to first-time homebuyers and up to $6,500 to qualified current owners who bought another home during parts of 2009 and 2010. IRS spokeswoman Michelle Eldridge said the agency worked hard to enforce a complicated tax credit that provided nearly $29 billion to more than 4 million taxpayers. The agency audited nearly 448,000 returns and blocked or denied nearly 426,000 questionable claims, she said. 53
In all, the agency’s enforcement efforts saved more than $1.3 billion and identified more than 200 criminal schemes, she said. The tax credit for first-time homebuyers was part of the economic-recovery package enacted in 2009. In November 2009, Congress extended the credit and expanded it to longtime owners who bought new homes. by Stephen Ohlemacher Associated Press Apr. 16, 2011 12:00 AM [1]Audit: $513 mil in IRS homebuyer credits questioned 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/16/20110416biz-hometaxcredits0416.html
BofA revives billionaire’s bond insurer (2011-04-17 10:50) Shares of Assured Guaranty ([1]AGO), the Bermuda-based bond insurer that the billionaire vulture investor (right) bought into three years ago, surged as much as 30 % after Bank of America ([2]BAC) agreed to pay it $1.1 billion to close out policies backing 29 residential mortgage securities. [3]
Rich get sort of richer The deal, which eliminates any risk that Assured Guaranty will have to make up missed payments on $5 billion of mortgages, is worth a $250 million economic gain to Assured Guaranty, UBS analyst Brian Meredith estimates in a note to clients Friday. The agreement could be worth millions as well to Ross, whose [4]big investment in Assured Guaranty has been under water practically since it was struck in the early days of the financial crisis. He agreed Feb. 29, 2008, to buy as much as $1 billion of Assured Guaranty at around $22 a share. Update: He owns 8.7 % of the stock, the company said. After trading above that level through the summer of 2008, the stock plunged as low as $2.69 in the near collapse of the financial system, which sharply increased the prospect of defaults on the bonds the company insures. Assured Guaranty shares rose $4 to $18 and change, their highest level since January. [5]
Rich get sort of poorer Investors are hoping Friday’s deal will pave the way for more such agreements by Assured Guaranty, which is effectively the only insurer writing policies on bonds issued byU.S. municipalities. The company had a smaller portfolio of policies backing Wall Street-originated housing finance deals than two rivals that were 54
essentially forced out of business by their exposure to possible payouts, but the scope of potential losses at Assured Guaranty remains a concern to investors. Trying to limit that exposure has been a top priority for CEO Dominic Frederico, by doing things like demanding that bond issuers such as BofA repurchase mortgages that weren’t underwritten according to guidelines. ”The numbers that have been recognized to date are very low compared with what the ultimate liability will potentially be” for banks, Frederico told the Financial Times last year. ”I think we’re at the tip of the iceberg.” That iceberg has already sunk one onetime Assured Guaranty rival and severely damaged another. Ambac filed for bankruptcy last November, and the other big monoline insurer, MBIA ([6]MBI), hasn’t been writing new business since a series of downgrades during the crisis. Even so, MBIA shares surged 20 % Friday amid hopes for more bond insurance settlements – maybe even ones that don’t necessarily prop up wrong-way bets by billionaires. by Colin Barr CNNMoney.com April 15, 2011 [7]BofA revives billionaire’s bond insurer 1. http://money.cnn.com/quote/quote.html?symb=ago 2. http://money.cnn.com/quote/quote.html?symb=bac 3. http://fortunewallstreet.files.wordpress.com/2011/04/wilbur_ross__cnnmv_03.jpg 4.
http://www.google.com/url?sa=t&source=web&cd=1&ved=0CBcQFjAA&url=http%3A%2F%2Fwww.assuredguaranty.com%
2Fnews%2Farticle.aspx%3Fid%3D1113954&ei=b2-oTajFFpO10QHQ97z5CA&usg=AFQjCNGgTj9TbMFzqkvRL_gUdcEhnCfGjw&sig2= JnGJlNsILgZwPq7taEUvIg 5. http://fortunewallstreet.files.wordpress.com/2011/04/ago041511.png 6. http://money.cnn.com/quote/quote.html?symb=mbi 7. http://finance.fortune.cnn.com/
Foreclosure
fraud:
The
homeowner
nightmares
continue
-
Fortune
Finance
(2011-04-17 11:00)
FORTUNE – Over the past several months regulators have finally noticed what consumer attorneys have been saying for years: the big banks have routinely committed [1]fraud in their foreclosure filings and their records of how much people owe [2]are too often wrong. And the mortgage modification process, which was meant to help homeowners, has been exposed as an abject failure. Salvageable mortgages are being foreclosed because the banks, wearing their ”mortgage servicer” hats, find it more profitable to foreclose than modify loans. And even when the banks sincerely try to modify loans, they often seem incompetent. In early March, a [3]settlement proposal surfaced claiming to represent what the 50 states’ attorneys general think the big banks should do to fix the problems. Although not all of the AGs are in agreement yet some think it’s too harsh and others too weak it was the first peek inside the settlement negotiations. The proposal mostly amounted to saying ”thou shalt obey the law and not abuse borrowers.” One term was ”sworn statements shall not contain information that is false or unsubstantiated.” That is, ”Thou shalt not commit perjury.” Given how basic the term sheet was, it was hard to imagine how the big banks could make a good faith counter-proposal that was significantly weaker. And yet a recently [4]leaked document shows they did. 55
The banks’ counter-proposal, dated March 28th, rewrites the ”banks can’t commit perjury” term as the banks ”shall implement processes reasonably designed to ensure the factual assertions made in&sworn statements&are accurate and complete&” and ”sworn statements shall not contain information that is false or unsubstantiated in any material respect.” Translation: It’s not perjury if we make a reasonable effort not to lie under oath and we don’t consider the lie to be important. What kind of lie in a sworn statement isn’t ”material?” What about a small detail, like the date? Well, consider documents [5]Bank of America and [6]Wells Fargo filed in a case brought by homeowners in Hawaii – the securitized trusts trying to foreclose on the loans were supposedly given the mortgages before the trusts existed. Are those dates material? Wells Fargo, responding to a request for comment, did not address the impossible date issue: ”The borrowers lost their home following a protracted judicial foreclosure, the issues raised in their petition [i.e. the claim that documents were fraudulent] were argued and ruled upon by the courts twice already and the most recent petition was actually denied by the Hawaii Supreme Court on March 17.” Bank of America ([7]BAC) did not respond to a request for comment. The attorney for the homeowners, Gary Victor Dubin, disputes Wells Fargo’s ([8]WFC) characterization. Bottom line: Wells filed a document to give a trust a mortgage before the trust existed. Would the banks’ proposed settlement language make that okay? Or perhaps the banks are suggesting that they could be wrong about precisely how much a borrower owes. If the borrower is in default, they might say, we’re right to foreclose. Does it really matter if our math is precisely correct? Well, yes. For starters, the bad math might mean the borrower shouldn’t be facing foreclosure. For example, the Matthews family of Missouri would not be facing foreclosure if JPMorgan Chase ([9]JPM) hadn’t collected some $3,000 for an insurance policy the Matthews didn’t need – the Matthews already had insurance – and if Chase’s computer system would acknowledge the Matthews’ payment should be $1,216, not the $1,611 Chase started charging to pay for the insurance. When asked about the Matthews’ account, a Chase spokesman responded: ”The customer’s account has been corrected, reducing the payment back to the proper amount, and we are reaching out to the customer to resolve the past issues. In the meantime we will amend her credit and remove foreclosure actions from her record.” However, the Matthews countered that it remained unresolved. Again, the bottom line: Chase’s computer system had the wrong payment in place and that caused the Matthews to face foreclosure wrongly. A mess of records Like the language regarding perjury, the attorneys general and the banks have a different view of the banks’ need to keep accurate records of what people owe. The attorneys’ general term sheet says the banks ”&shall maintain procedures to ensure the accuracy and timely updating of borrowers’ account information&” The banks’ counter offer again inserts the weasel words ”reasonably designed,” as in ”procedures reasonably designed to ensure accuracy&” One theme running through the banks’ counter proposal is their unwillingness to be responsible for their employees’ actions. For example, the AG term sheet flatly says ”Servicer’s employees shall not instruct, advise or recommend that borrowers go into default in order to qualify for [a mortgage modification].” The banks’ counter offer says ”Servicer shall instruct its employees not to advise &” Inserting that ”shall instruct” is all about plausible deniability: Look, we told our employees not to tell borrowers to default, who cares if we were winking and nodding when we told them that? 56
Telling people to default before a modification can be considered is insidious, because it triggers many preventable foreclosures. As it is, during trial modifications when the borrowers promptly make the full, modified payment – the only payment they’re supposed to make – the banks consider the payment late because it’s less than the original amount, and charge a late fee. If the borrower is already three months delinquent when he starts the mortgage modification, the fees have grown so much that the borrower ends up in a big hole. The bank then starts on the foreclosure path while considering the modification – the so-called ”Dual Track” – and the borrower ends up foreclosed on. I’ve spoken to many borrowers who were told to default. Most recently, I’ve been chatting with Joe, a homeowner in Georgia who works in the financial industry. Joe and his family have been struggling with SunTrust Bank ([10]STI) since 2009. At that time, they wanted to refinance their house. The couple’s credit was stellar, rates were low, they had a long and deep relationship with the bank, and they were willing to pay closing costs. Seemed like a no-brainer. Unfortunately they owed more than the house was worth, so the bank wouldn’t do the deal. Instead, in January 2010 the bank told him to seek a mortgage modification. When an appropriate program became available in July, Joe submitted his application package. But SunTrust didn’t reply at all until December, and in January 2011, it told him he didn’t qualify for a modification because he was still current on his mortgage. Meanwhile, the family blew through their life savings. Joe’s income was reduced, his wife fell ill and could no longer work, and her medications were expensive. But they stayed current on their mortgage through December 2010. Despite that heroic effort to stay current, Joe is now facing foreclosure. The bank told him to default in January, and it’s now made a modification offer that reduces his payment by a mere $250 a month – not enough for him to be able to save his house, and half of what he could have saved by doing the 2009 refi. And if the refi had gone through, they would still have their life savings, and their credit would still be great. Joe has asked SunTrust to explain its math in calculating what kind of modification he qualifies for, but it refused. The AG proposal would solve this problem, but the banks’ counteroffer wouldn’t. In fact, most recently, SunTrust demanded that Joe give it some $7,000 – three months of trial payments. But SunTrust wouldn’t tell him how the money would be applied, whether for fees, principal, or interest, until it decided – if it decided – at the end of that time to give him a permanent modification. Nor would it tell him what the terms of a permanent offer would be if it were made. SunTrust refused to put anything in writing. Joe wouldn’t pay on that basis, of course. Joe recorded his conversations with SunTrust, which he shared with Fortune. SunTrust said: ”While we are not at liberty to discuss a specific client relationship or our internal policies and procedures, generally speaking we work with clients on a case-by-case basis regarding potential loan modifications taking into account investor guidelines and the fact that every situation is different.” The AGs must not lose sight of people like Joe, a former marine who served during the first Gulf War, and condemn troubled borrowers as unsympathetic ”deadbeats.” The banks are relying on that stereotype to carry the day for them. If the banks won’t deal, throw the book at them. Just like it’s been thrown at baseball great Barry Bonds for his comparatively trivial alleged perjury. If we can prosecute Bonds but not the banks, what kind of country are we? by Abigail Field CNNMoney.com April 7, 2011 [11]Foreclosure fraud: The homeowner nightmares continue - Fortune Finance 1. http://www.cbsnews.com/stories/2011/04/01/60minutes/main20049646.shtml?tag=contentMain;contentBody 2.
http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=
57
2ab0a78e-12ee-4cf8-bb70-745d0d0372ab 3. http://cdn.americanbanker.com/media/pdfs/27_page_settlement2.pdf 4. http://www.creditslips.org/files/duass.pdf 5. http://www.scribd.com/doc/52332346/re-misdated-BofA-Assignment 6. http://www.scribd.com/doc/52332498/re-misdated-Wells-assignment 7. http://money.cnn.com/quote/quote.html?symb=BAC 8. http://money.cnn.com/quote/quote.html?symb=WFC 9. http://money.cnn.com/quote/quote.html?symb=JPM 10. http://money.cnn.com/quote/quote.html?symb=STI 11. http://finance.fortune.cnn.com/2011/04/07/foreclosure-fraud-the-homeowner-nightmares-continue/
Real estate: It’s time to buy again - Fortune Finance (2011-04-17 11:04)
From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. ”I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. ”The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65 % of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank – from Pulte ([1]PHM) and KB Home ([2]KBH) to Bank of America ([3]BAC) and Wells Fargo ([4]WFC).
The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory – the key metric in determining whether a market has a surplus or a shortage of new housing. 58
[5] Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. ”If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. ”We’d see an incredible shortage. And that’s where we’re heading.” If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, [6]as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S &P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. [7]Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: ”The lack of new home building is a huge help that a lot of people are ignoring,” says Case. ”People think I’m crazy to be optimistic, but housing is looking like the little engine that could.” To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled ”[8]Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market – the cost of owning vs. renting and the level of new construction – were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals – only now they’re pointing in the opposite direction. So let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30 % nationwide since 2006, and as much as 55 % in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year. [9] 59
Drumming up sales Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal. One big fear is that today’s tight credit standards will chill the market. But we’re really returning to the standards that prevailed before the craze, and those requirements didn’t stop prices and homebuilding from rising in a good economy. ”The credit standards are now at about historical levels, excluding the bubble period,” says Mark Zandi, chief economist for Moody’s Analytics. ”We saw prices rising with fundamentals in those periods, and it will happen again.” To see why, let’s examine the remarkable shift in home affordability. A new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8 % of their income in after-tax mortgage, tax, and insurance payments. That’s down from 17.2 % at the bubble’s peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it’s now cheaper to pay a mortgage and other major costs than to rent the same house. What’s most compelling is that in all of the distressed markets, owning now wins by a wide margin – a stunning reversal from four years ago. It now costs 34 % less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner. (For more, see [10]The top 10 cities for home buyers) Not all markets will bounce back equally, of course. Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now. We’ll call them the ”nondistressed markets” and the ”foreclosure markets.” A more detailed look shows why the forecast for both is favorable. Nondistressed markets: Ready for launch No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities – the foreclosure markets we’ll get to shortly – chiefly because they didn’t get nearly as many speculators who thought they could flip the homes or rent them to snowbirds. The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, 60
they don’t need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That’s a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.
But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average. So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets – including Silicon Valley, Northern Virginia, and Texas – are now showing good job growth.
Zandi of Moody’s Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, [11]which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.
In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. ”The market got completely inflated, then it crashed, so prices are coming back to where they should be,” says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month. They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay less per month for a mortgage.
The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing ”starts” – measured when a builder pours a foundation for a new home – will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. ”Our main competition is from resales,” says Jeff Mezger, CEO of KB Home. ”The prices of those homes have stayed so low, because of low demand, that it’s hampered the ability of builders to sell new houses.”
But many would-be buyers simply prefer a brand-new house. Eventually they’ll move from renters to buyers, and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate-colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. ”We wanted to buy a house, and we’ve been waiting and waiting and waiting,” says Qu. ”The prices went down for so long, we finally thought they couldn’t keep falling.” For Qu the only choice was new construction. ”We’re not very handy people,” she admits. 61
Foreclosure markets: The outlook is brightening [12] A home off the market in Mesa, Ariz. The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and[13]Miami – places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won’t rebound for years because they’re both vastly overbuilt and far from big job centers; a prime example is California’s Inland Empire, a real estate disaster zone 80 miles east of Los Angeles. But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in these cities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. ”We had levels of inventory even higher than this in 1990 and 1991,” says MIT economist William Wheaton. ”But they were traditional listings, not foreclosures, so they didn’t create the big discounts you get with foreclosures.” Wheaton reckons that we’ll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb Nechayev, an economist with real estate firm CB Richard Ellis ([14]CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country. Remember, the millions who lost their homes to foreclosure still need somewhere to live. A typical investor is Alex Barbalat, a Russian immigrant who’s purchased seven homes east of San Francisco in the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices he paid of around 12 %, and he’s in no hurry to sell. ”I’m holding them until prices drastically rise,” he says. Investment funds are also entering the game. Dotan Y. Melech looks for bargains in Las Vegas for UnitedAMS, a firm he co-founded that manages apartments and other real estate investments. The firm has raised more 62
than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around 300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95 %. The ”cap rate,” or return on investment after all expenses, is between 8 % and 10 % – twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. ”A lot of people can’t be buyers because their credit got hurt,” he says. Even with investors jumping in, buying activity in foreclosure markets hasn’t yet increased enough to bring inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed markets in the short run. ”But that will be overshooting,” he says. ”It’s like an elastic band. If prices do drop this year, they will need to bounce back because they’ll be far too low compared with rents and replacement cost.” Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past few years. Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38 % home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. ”The timing was about as good as it could get,” says Dynda. [15]
Mike Castleman’s company tracks the inventory of new homes in 19 states across the country. He sees supply getting tight. ”Home prices are fixin’ to rise,” he says. Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from ”a hundred tons of fine central Texas limestone.” As he shows off his collection of custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic. Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. ”It takes three years between the time a bull mates with a cow and when you get a calf ready for market,” he says. ”That’s how it is in housing too. We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place. ”And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd. by Shawn Tully Fortune Magazine March 28, 2011 [16]Real estate: It’s time to buy again - Fortune Finance 63
1. http://money.cnn.com/quote/quote.html?symb=PHM 2. http://money.cnn.com/quote/quote.html?symb=KBH 3. http://money.cnn.com/quote/quote.html?symb=BAC 4. http://money.cnn.com/quote/quote.html?symb=WFC 5. http://fortunewallstreet.files.wordpress.com/2011/03/housing_graphs.jpg 6. http://money.cnn.com/2011/03/16/news/economy/housing_starts/index.htm 7. http://money.cnn.com/2011/03/03/real_estate/housing_buy_or_not/index.htm 8. http://money.cnn.com/magazines/fortune/fortune_archive/2004/09/20/381175/index.htm 9. http://fortunewallstreet.files.wordpress.com/2011/03/street_salesman.jpg 10. http://money.cnn.com/galleries/2011/news/1103/gallery.best_cities_for_buyers.fortune/ 11. http://money.cnn.com/2011/03/15/real_estate/rent_rise_housing/index.htm 12. http://fortunewallstreet.files.wordpress.com/2011/03/sold_sign.jpg 13. http://money.cnn.com/2011/03/18/real_estate/florida_vacant_homes/index.htm 14. http://money.cnn.com/quote/quote.html?symb=CBG 15. http://fortunewallstreet.files.wordpress.com/2011/03/mike_castleman.jpg 16. http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/
Real estate: It’s time to buy again - Fortune Finance (2011-04-17 11:07)
From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. ”I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. ”The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.” Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65 % of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank – from Pulte ([1]PHM) and KB Home ([2]KBH) to Bank of America ([3]BAC) and Wells Fargo ([4]WFC). The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory – the key metric in determining whether a market has a surplus or a shortage of new housing. 64
[5] Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the frenzy in mid-2006, and well below the level of a decade ago. ”If we had anything like normal levels of buying, those houses would sell in 2½ months,” says Castleman. ”We’d see an incredible shortage. And that’s where we’re heading.” If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, [6]as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S &P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. [7]Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: ”The lack of new home building is a huge help that a lot of people are ignoring,” says Case. ”People think I’m crazy to be optimistic, but housing is looking like the little engine that could.” To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled ”[8]Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market – the cost of owning vs. renting and the level of new construction – were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals – only now they’re pointing in the opposite direction. So let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30 % nationwide since 2006, and as much as 55 % in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year. [9] 65
Drumming up sales Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal. One big fear is that today’s tight credit standards will chill the market. But we’re really returning to the standards that prevailed before the craze, and those requirements didn’t stop prices and homebuilding from rising in a good economy. ”The credit standards are now at about historical levels, excluding the bubble period,” says Mark Zandi, chief economist for Moody’s Analytics. ”We saw prices rising with fundamentals in those periods, and it will happen again.” To see why, let’s examine the remarkable shift in home affordability. A new study by Deutsche Bank measures affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8 % of their income in after-tax mortgage, tax, and insurance payments. That’s down from 17.2 % at the bubble’s peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it’s now cheaper to pay a mortgage and other major costs than to rent the same house. What’s most compelling is that in all of the distressed markets, owning now wins by a wide margin – a stunning reversal from four years ago. It now costs 34 % less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or stucco cottage as an owner. (For more, see [10]The top 10 cities for home buyers) Not all markets will bounce back equally, of course. Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now. We’ll call them the ”nondistressed markets” and the ”foreclosure markets.” A more detailed look shows why the forecast for both is favorable. Nondistressed markets: Ready for launch No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities – the foreclosure markets we’ll get to shortly – chiefly because they didn’t get nearly as many speculators who thought they could flip the homes or rent them to snowbirds. The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, 66
they don’t need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That’s a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.
But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average. So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets – including Silicon Valley, Northern Virginia, and Texas – are now showing good job growth.
Zandi of Moody’s Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents,[11]which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.
In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. ”The market got completely inflated, then it crashed, so prices are coming back to where they should be,” says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month. They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay less per month for a mortgage.
The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing ”starts” – measured when a builder pours a foundation for a new home – will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. ”Our main competition is from resales,” says Jeff Mezger, CEO of KB Home. ”The prices of those homes have stayed so low, because of low demand, that it’s hampered the ability of builders to sell new houses.”
But many would-be buyers simply prefer a brand-new house. Eventually they’ll move from renters to buyers, and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate-colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. ”We wanted to buy a house, and we’ve been waiting and waiting and waiting,” says Qu. ”The prices went down for so long, we finally thought they couldn’t keep falling.” For Qu the only choice was new construction. ”We’re not very handy people,” she admits. 67
Foreclosure markets: The outlook is brightening [12] A home off the market in Mesa, Ariz. The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and[13]Miami – places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won’t rebound for years because they’re both vastly overbuilt and far from big job centers; a prime example is California’s Inland Empire, a real estate disaster zone 80 miles east of Los Angeles. But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in these cities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. ”We had levels of inventory even higher than this in 1990 and 1991,” says MIT economist William Wheaton. ”But they were traditional listings, not foreclosures, so they didn’t create the big discounts you get with foreclosures.” Wheaton reckons that we’ll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb Nechayev, an economist with real estate firm CB Richard Ellis ([14]CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country. Remember, the millions who lost their homes to foreclosure still need somewhere to live. A typical investor is Alex Barbalat, a Russian immigrant who’s purchased seven homes east of San Francisco in the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices he paid of around 12 %, and he’s in no hurry to sell. ”I’m holding them until prices drastically rise,” he says. Investment funds are also entering the game. Dotan Y. Melech looks for bargains in Las Vegas for UnitedAMS, a firm he co-founded that manages apartments and other real estate investments. The firm has raised more 68
than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around 300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95 %. The ”cap rate,” or return on investment after all expenses, is between 8 % and 10 % – twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. ”A lot of people can’t be buyers because their credit got hurt,” he says. Even with investors jumping in, buying activity in foreclosure markets hasn’t yet increased enough to bring inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed markets in the short run. ”But that will be overshooting,” he says. ”It’s like an elastic band. If prices do drop this year, they will need to bounce back because they’ll be far too low compared with rents and replacement cost.” Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past few years. Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38 % home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. ”The timing was about as good as it could get,” says Dynda. [15]
Mike Castleman’s company tracks the inventory of new homes in 19 states across the country. He sees supply getting tight. ”Home prices are fixin’ to rise,” he says. Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from ”a hundred tons of fine central Texas limestone.” As he shows off his collection of custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic. Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. ”It takes three years between the time a bull mates with a cow and when you get a calf ready for market,” he says. ”That’s how it is in housing too. We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place. ”And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd. by Shawn Tully Fortune Magazine March 28, 2011 [16]Real estate: It’s time to buy again - Fortune Finance 69
1. http://money.cnn.com/quote/quote.html?symb=PHM 2. http://money.cnn.com/quote/quote.html?symb=KBH 3. http://money.cnn.com/quote/quote.html?symb=BAC 4. http://money.cnn.com/quote/quote.html?symb=WFC 5. http://fortunewallstreet.files.wordpress.com/2011/03/housing_graphs.jpg 6. http://money.cnn.com/2011/03/16/news/economy/housing_starts/index.htm 7. http://money.cnn.com/2011/03/03/real_estate/housing_buy_or_not/index.htm 8. http://money.cnn.com/magazines/fortune/fortune_archive/2004/09/20/381175/index.htm 9. http://fortunewallstreet.files.wordpress.com/2011/03/street_salesman.jpg 10. http://money.cnn.com/galleries/2011/news/1103/gallery.best_cities_for_buyers.fortune/ 11. http://money.cnn.com/2011/03/15/real_estate/rent_rise_housing/index.htm 12. http://fortunewallstreet.files.wordpress.com/2011/03/sold_sign.jpg 13. http://money.cnn.com/2011/03/18/real_estate/florida_vacant_homes/index.htm 14. http://money.cnn.com/quote/quote.html?symb=CBG 15. http://fortunewallstreet.files.wordpress.com/2011/03/mike_castleman.jpg 16. http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/
Retail developer Vestar hopes to repeat feat of 1990s, acquire distressed properties for a song (2011-04-17 13:58)
Michael Chow/The Republic The partners behind Vestar Development Co., Rick Kuhle (from left), David Larcher, Paul Rhodes, Peter Thomas and Lee Hanley, have kept their business afloat in the downtrodden economy. Vestar Development Co. knows how to survive and thrive in the harshest real-estate climates. The relatively low-profile Phoenix-based shopping-center developer cut its teeth in the savings-and-loan crisis of the early 1990s that sent commercial real-estate values through the floor and wiped out many of its competitors. Through savvy negotiating, Vestar was able to line up a deep-pocketed partner that allowed it to scoop up bargain real estate, forge key relationships with retailers and grow while other companies stood on the sidelines. It’s a scenario that Vestar is poised to repeat during the current down real-estate cycle -a downturn that industry analysts say is even deeper and more prolonged than the one two decades ago. The day in 2011 that will change your life - overnight Economic prognosticator Porter Stansberry is making his biggest prediction yet. This has nothing to do with the stock market... but these events could change your life in a dramatic way, literally overnight. Vestar has formed key relationships with powerful real-estate investment firms such as Equity One Inc. and 70
Rockwood Capital LLC that have allowed it to refinance key projects and take advantage of record low real-estate prices by making strategic acquisitions. ”Vestar is one of the premier retail developers on the West Coast,” said Jeff Olson, Equity One’s CEO. ”We have known the Vestar principals for almost twenty years, and we are delighted to be working with them again.” A $280 million deal with Rockwood in December allowed Vestar to refinance its 1.3 million-square-foot Tempe Marketplace shopping center and buy out its initial partner in the project, DLJ/Credit Suisse. An approximately $100 million partnership in January with Equity One and Rockwood allowed Vestar to refinance its troubled Canyon Trails Town Center project in Goodyear and acquire two distressed shopping centers in California. Vestar President Rick Kuhle said the company will continue to seek acquisition opportunities while it waits for demand to return for shopping-center construction. ”For the time being, we see ourselves as an acquirer,” he said. Kuhle said Vestar expected to make $350 million in acquisitions this year and $500 million next year. The company is looking for opportunities in Arizona, California, Nevada, Texas and other states, Kuhle said. Like other shopping-center developers in the mid- to late 2000s, Vestar got out ahead of the houses in the sprawling new subdivisions on the outskirts of metro Phoenix and in Southern California. In the past, the rooftops always filled in around the shopping centers that Vestar opened in growth areas. This time, foreclosures, the recession and falling values caused many new homes to fall vacant and others never to be built. Newly completed projects such as Canyon Trails Towne Center in Goodyear, Queen Creek Marketplace in Queen Creek and Oro Valley Marketplace have struggled to become fully leased. Projects on the drawing board such as Maricopa Towne Center in Maricopa, Sycamore Farms Towne Center in Surprise and Kingman Crossing in Kingman have been put on hold until the market improves. Projects could be delayed as long as five years in some areas, Kuhle said. The company also has seen the value of the dozens of shopping centers’ interests, which the company holds, decline substantially, along with rents at those centers. Lee Hanley, Vestar’s chairman and CEO, said, ”These are very challenging times.” The recession’s impact on Vestar was lessened somewhat by the fortuitous 2006 sale of an interest in 17 shopping centers, including the huge Happy Valley Towne Center in Phoenix, to UBS Realty Investors. The transaction refreshed Vestar’s balance sheet and gave it a cash cushion as it was heading into the downturn. ”It was very fortunate in that regard,” Hanley said. Crash at takeoff This isn’t the first time that Vestar has seen tough times. The company was launched near the end of a lavish commercial building boom that had been financed by the reckless lending practices of the nation’s savings-and-loan industry. Founding principals Hanley, Kuhle, David Larcher, Paul Rhodes and Peter Thomas borrowed $100 million to buy the commercial-building division of Tucson’s Estes Homes in 1989 just as the boom was about to end in a spectacular bust. Hanley, a University of Arizona graduate who worked at real-estate brokerage CB Commercial, was recruited by homebuilder Bill Estes in 1977 to set up a non-residential development operation as an adjunct to Estes’ Tucson homebuilding business. Hanley recruited Larcher, Kuhle, Rhodes and Thomas, and 12 years later, when Estes was looking to sell the commercial division to raise money, the five men stepped up to the plate. The deal included 35 commercial properties developed by Estes Development Co., including the 1.2 millionsquare-foot Scottsdale Pavilions project at Pima and Indian Bend roads, arguably the nation’s first power center. The Vestar partners at first couldn’t believe their bad timing as they watched commercial real-estate values plunge in metro Phoenix and around the country. But their outlook soon would change. 71
Their acquisition was financed by the pension plan of Chicago-based Ameritech Corp., one of the seven so-called ”Baby Bells” created with the government’s breakup of AT &T in 1984. Ameritech was looking to expand its portfolio of real-estate investments in the West and become Vestar’s capital partner in the venture instead of a mere lender. As a result, Vestar had access to a vast amount of capital at a time when there was virtually no conventional money available for real-estate developments and acquisitions. ”Out timing turned out to be very fortuitous,” Hanley said. Ameritech’s deep pockets enabled Vestar to make key acquisitions at bargain prices and to form key relationships with retailers who still were looking to expand. Vestar helped bring Walmart to Southern California, building the retailer’s first six stores there while many other developers couldn’t finance such projects. Focus on retail Estes had developed office buildings, warehouses and hotels, but the Vestar partners decided to limit their activities to retail projects. ”We were very good at shopping centers and not that good at offices and hotels,” Hanley said. After Scottsdale Pavilions, Vestar went on to refine the power-center concept with massive lifestyle centers such as Tempe Marketplace in Tempe and Desert Ridge Marketplace in Phoenix. Fellow metro Phoenix retail developer Marty De Rito, who in 2008 bought Scottsdale Pavilions from Vestar for $88 million, said, ”Vestar is one of the best shopping-center developers in the West. They are very focused, and they are very good at what they do.” In Southern California, Vestar’s area of focus outside metro Phoenix, the company has built innovative projects such as the Long Beach Towne Center near Los Angeles and the College Grove Shopping Center in San Diego. The Long Beach Towne Center converted an old Navy hospital and surplus military-housing site into an award-winning shopping center. In San Diego, Vestar redeveloped a derelict shopping center into a top retail destination. ”It’s refreshing to deal with gentlemen,” Vince Coughlin, Long Beach’s former property services manager, said in a 2000 Arizona Republic story on Vestar. ”They’re very straightforward and aboveboard. If there are problems, they deal with them.” Executive Vice President David Larcher said that about 40 percent of the company’s development activity has been focused in Southern California, principally the San Diego and Los Angeles areas and 60 percent in Arizona. Vestar is one of the top five retail developers in the West and among the top 15 nationwide. When the business was organized in 1989, the principals decided to limit the development to areas that could be reached by a ”one-hour America West Airlines” flight from Phoenix. ”That pretty much limited us to Phoenix, Tucson, Los Angeles, San Diego and Las Vegas,” Larcher said. Vestar actively developed in the Las Vegas area in the early 1990s but got out midway through the decade. ”We didn’t understand Las Vegas and thought it was overpriced and ready to tank,” Kuhle said. While the market eventually did tank, it wasn’t for another 10 years. Vestar missed out on a decade of explosive Las Vegas growth in one of its few tactical misses. ’Build and hold’ Vestar has developed 22 million square feet of retail space in hundreds of shopping centers over the years. It still has an ownership interest in about 18 million square feet of that. ”Our philosophy is to design, build and hold,” Hanley said. Many other privately held retail developers have to sell their finished projects to move on to the next ones. But in Vestar’s case, a string of deep-pocketed capital partners has allowed the company to hold on to an interest in existing projects while continuing to build. Those partners include Ameritech Pension Trust, Lend Lease Real Estate Investments of Australia, Credit Suisse First Boston and, more recently, Rockwood Capital and Equity One Inc. Continuing to have an interest in the center allows the company to maintain the integrity of the development plus enjoy an income stream from the rents. It also strengthens the relationship the company has with its 72
retailer tenants. Some of its most challenging projects have been in California, where retail development sites are scarce. ”In California, it’s all infill and special situations,” Larcher said, noting that projects can take much longer to get off the ground there than in Arizona, where retail sites are more available. But there have been challenges in Arizona. Scottsdale Pavilions was one of the first major commercial developments to be built on land owned by a Native American tribe, the Salt River Pima-Maricopa Indian Community. Tempe Marketplace was developed on land so polluted it was designated a Superfund site by the U.S. Environmental Protection Agency. Because Vestar retains an ownership of management interest in most of its shopping centers, the company also maintains an active role in the surrounding communities. ”We’ve involved in Boys and Girls Clubs, chambers of commerce and economic development groups wherever we go,” Larcher said. MORE ON THIS TOPIC Vestar Development Co. What: Developer of large-format retail centers. Headquarters: Phoenix. Founded: 1989 with a management-led buyout of Tucson’s Estes Development Co. Principals: Lee Hanley, Richard Kuhle, David Larcher, Paul Rhodes, Peter Thomas. Employees: 75. Assets: $1 billion. Properties owned or managed: 28. Square feet owned or managed: 20.2 million. Signature properties: Tempe Marketplace, Tempe; Desert Ridge Marketplace, Phoenix; Scottsdale Pavilions, Scottsdale; Long Beach Towne Center, Long Beach, Calif.; District at Tustin Legacy, Tustin, Calif. by Max Jarman The Arizona Republic Apr. 17, 2011 12:00 AM [1]Retail developer Vestar hopes to repeat feat of 1990s, acquire distressed properties for a song 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/17/
20110417vestar-acquire-distressed-properties.html
Site tracks foreclosures (2011-04-17 14:09) Phoenix-area residents don’t need to hang out on the courthouse steps in downtown Phoenix to get a detailed view of what’s happening at Maricopa County’s daily trustee’s sale auctions, where homes either get bought by competing bidders or become bank-owned property. California-based Foreclosure Radar has been gathering and reporting a variety of data on foreclosure auctions in major metro areas including Phoenix. The company from Discovery Bay operates a Web portal partly reserved for paying clients, but the free and publicly accessible areas offer much information at [1]foreclosureradar.com. The site’s Maricopa County page tracks several aspects of area foreclosure sales, such as the percentage of properties that become bank-owned because no third parties bid on the property or because the minimum price was too high. It provides a breakdown of lender repossessions, sales to third-party buyers, the average opening bids and winning bids, the average length of time it took to complete a foreclosure, and more. For example, the average time it took to foreclose on a home in Maricopa County in March, the most recent month available, was 191 days - more than twice the minimum notice requirement of 90 days. That’s up 33 percent from the average of 144 days in March 2010, according to ForeclosureRadar. The website also analyzes monthly foreclosure totals based on factors including property size, amount of mortgage-principal owed and the year the mortgage loan was issued. 73
Of the 5,606 homes foreclosed on in March, the largest number had loans issued in the second quarter of 2007 (828 homes), followed by homes with loans issued in the first quarter of 2006 (752 homes). by J. Craig Anderson The Arizona Republic Apr. 17, 2011 12:00 AM [2]Site tracks foreclosures 1. http://foreclosureradar.com/ 2.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/17/20110417biz-insiders0417anderson.
html
Canadians inject more money into U.S. markets (2011-04-17 14:13) TORONTO - Canadian investors are buying U.S. stocks at the fastest pace in at least six years after valuations for the benchmark Toronto Stock Exchange index rose to the highest level compared with American equities since 2002. Money managers in Canada overseeing a combined $227 billion bought $288.7 million more of U.S. shares than they sold in the four weeks ending March 23, the most in any comparable period since at least 2004, data compiled by Emerging Portfolio Fund Research Inc. show. Companies in the Standard & Poor’s/Toronto Stock Exchange Composite Index trade for 20.8 times earnings, 34 percent more than the S &P 500, data show. The S &P/TSX beat the S &P 500 each year since 2003, rising almost five times as much, according to data compiled by Bloomberg. Surging demand for commodities drove up producers of oil, gold and copper and Canada avoided a banking crisis. Bloomberg News Apr. 17, 2011 12:00 AM [1]Canadians inject more money into U.S. markets 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/17/
20110417canadians-inject-money-into-us-markets.html
The Dangers of Real Estate: ”Criminals Don’t Want Witnesses,” Safety Expert on Keeping Real Estage Agents Safe - ABC News (2011-04-17 14:56) The murder of 27-year-old real estate agent Ashley Okland in a suburban Iowa model home is the latest example of rising violence in an industry that has been buffeted by the mortgage meltdown. Okland was found inside a model home in West Des Moines, Iowa, last week after being shot by an unknown assailant. The victim is one of more than a hundred in the real estate profession who have been killed on the job since the foreclosure mess began in 2008. ”A real estate agent makes a living meeting a complete stranger in an empty home,” says Tracey Hawkins, owner and safety product speaker at [1]Safety and Security Source. The recent recession hasn’t improved safety as agents show properties much more often to make a sale and visit rougher areas for distressed or abandoned properties. ”Agents may encounter squatters, angry former homeowners or even encounter abandoned pets that may be aggressive,” says Hawkins. ”These properties are often meth labs, or pot houses, and encroaching upon them is dangerous.” To keep agents safer, Hawkins created a program for selling foreclosed, real estate owned (REOs) and abandoned homes called Real Estate Agent Safety for Distress Properties. 74
Social media is increasingly becoming a tool used by criminals to track their prey as agents leave a Web trail on places like Facebook and Twitter. ”They announce their open houses, therefore would-be criminals know where they are,” says Hawkins. Stalkers can target them at an open house or go rob their homes, thanks to the information divvied out on social media Web sites, says Hawkins. In the group that Hawkins [2]moderates on Linkedin called The Real Estate Agent Safety Forum, the 209 members discuss violence taken from news headlines. After a real estate agent was choked and robbed in Seattle, one member posted, ”I would have reached into my ankle holster, pulled out my gun and shot him. End of problem.” Violence is quite a problem in the field. The real estate and rental and leasing occupation has seen an average of 75 deaths a year from 2003 to 2009, according to the [3]Bureau of Labor and Statistics. Hawkins is seeing more agents carrying pepper spray, guns and Taser guns as safety measures. To stay safe she recommends first meeting clients at the office where others are around. ”Criminals don’t want witnesses,” says Hawkins. She advises agents to get a copy of a client’s driver’s license and keep someone informed about your whereabouts at all times. ”Agents must trust their instinct. If they have a bad feeling about a person or situation, instead of being politically correct, they need to listen to their bodies,” says Hawkins. And, don’t be afraid to call 911. ”Police officers will tell you they rather come to a false call than a crime scene.” 6 Crimes Against Real Estate Agents [4]Andrew VonStein, a 51-year-old real estate agent in Ohio’s Portage County, was shot dead by a disgruntled client in one of the homes listed by the agent. The top agent was allegedly lured to the home by Robert W. Grigelaitis, who was upset about a sour deal that resulted in his wife losing her home. Vivian Martin, the owner of Essence Realty, was found dead [5]in a listed home engulfed in flamesin Youngstown, Ohio. The real estate agent, a colon cancer survivor who was battling liver cancer at the time, was robbed of $56 and strangled by [6]men claiming to be home buyers. [7]40-year-old Sarah Anne Walker was hosting an open house at a model home in McKinney, Texas, when she was stabbed 27 times by a felon out on parole. Her alleged killer was later arrested. The body of Brenda Wilburn was found [8]bound inside the closet at her home in Pulaski, Tenn. The real estate agent was allegedly murdered and robbed by Robert Wayne Garner,[9] who will stand trial on August 8. 71-year-old [10]Ann Nelson was robbed, strangled and beaten with a fireplace poker in 2008 while showing a home to a man she believed was a prospective home buyer. An Orange County real estate agent was raped and bludgeoned by a man masquerading as a prospective home buyer. The man raped the agent after finding her photo online. The agent was able to survive the brutal attack by alleged assailant[11]Shawn David Yates after pretending to be dead. [EMBED] by Lyneka Little ABC News April 15, 2011 [12]The Dangers of Real Estate: ”Criminals Don’t Want Witnesses,” Safety Expert on Keeping Real Estage Agents Safe - ABC News 1. http://www.safetyandsecuritysource.com/ 2.
http://www.linkedin.com/groupItem?view=&gid=2022992&type=member&item=27427747&qid=
77b3a99d-b236-4c91-b106-307c0e186d6e&goback=%2Egdr_1302803650174_1%2Egmp_2022992 3. http://data.bls.gov/gqt/RequestData 4. http://www.recordpub.com/news/article/4901398 5. http://www.vindy.com/news/2010/sep/22/police-reportedly-have-3-suspects-in-fat/ 6. http://www.blackamericaweb.com/?q=articles/news/moving_america_news/22559
75
7. http://www.amw.com/fugitives/capture.cfm?id=39697 8. http://www.wksr.com/wksr.php?rfc=src/article.html&id=23112 9. http://www.newschannel5.com/story/14190514/trial-date-set-for-man-accused-in-burning-murder 10. http://www.nbc15.com/home/headlines/18430774.html 11. http://www.pe.com/localnews/corona/stories/PE_News_Local_D_webrape22.f2a080.html 12.
http://abcnews.go.com/Business/dangers-real-estate-criminals-witnesses-safety-expert-keeping/story?id=
13375723
Victoria Block (2011-04-19 19:34:54) Ow.. That was a bad news. I never thought that being a real estate agent could be that dangerous. I hope and pray for the safety of those who stayed on the field. And pray for the souls of this people who’ve been murdered. Maybe its better to work in partner in your jurisdiction, it could be much safer than bringing something for self-defense. Just a suggestion.
Short sales and foreclosures equally degrade FICO scores « HousingWire (2011-04-24 12:11) Distressed homeowners looking to preserve their credit are unlikely to gain a FICO-score advantage by launching short sales in lieu of foreclosure, according to a recent post on the credit score database’s Banking Analytics Blog. FICO made this conclusion after studying mortgage delinquency data from the nation’s three major credit bureaus. FICO said homeowners with short-sales and foreclosures on their records ended up with similar credit scores, assuming their scores were similar as distressed homeowners (see illustration below).
[1] At one credit bureau, homeowners that entered short-sales found themselves with FICO scores in the 575to-595 range the same range reported for parties with foreclosures on their records. At the remaining two credit bureaus, parties in short-sale and foreclosure faced similar outcomes, with their FICO scores landing in either the 570-to-590 range or the 620-to-640 range, depending on the credit bureau. Homeowners that offloaded properties through short sale and foreclosure also faced the same three-to-seven year credit restoration period, FICO said. 76
by Kerri Panchuk HousingWire April 22, 2011 [2]Short sales and foreclosures equally degrade FICO scores « HousingWire 1. http://www.housingwire.com/wp-content/uploads/2011/04/fico2.jpg 2. http://www.housingwire.com/2011/04/22/short-sales-and-foreclosures-equally-degrade-fico-scores?utm_source= feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29
Expanding a financing Facebook for lenders « HousingWire (2011-04-24 12:17)
[1] Martin Goodman (pictured top) and Robert Hodes (pictured bottom) are expanding their online business that puts lenders and investors directly in touch with one another. The goal, according to the president/founder and director of institutional accounts, is to streamline that process and return liquidity to the market for loan sales and purchases.
[2] it sounds like
With almost 9,000 members, San Diego-based LoanMLS is almost exactly what a marketplace of professionals to list their assets and connect with interested parties.
Goodman and Hodes sat down with HousingWire for this edition of In This Corner to explain how this technology could reshape the face of mortgage lending. HousingWire: Please explain this online exchange concept. It sounds a little bit like a forum. Robert Hodes: The way that we operate is really from an arms-length. What we do is give people the opportunity to connect people that have individual notes or pools of notes they would like to sell. They have the opportunity to post those on the site. The members on the site are able to see the listings that have been posted. And if they’re interested in the listing based on what they see, they can make an inquiry directly to the entity that posted the listing. And that’s how the conversation begins. HW: You’re running your whole business online. Where do you see the mortgage finance industry headed relative to online usage? Martin Goodman: In the old model a lot of people got a warehouse line and then they would have different people they send their loans through, different channels. And they’d almost table fund deals so they could put it on their warehouse line and then service it for a month then figure out who to sell it to. This model 77
you’re almost creating the channel tailored for the specific loans. You can either completely bypass the channel and go directly to an investor, which many of our clients do, or you can work with other brokers and create participating loans. It’s creating a new animal if you would, a new product that’s really a new way to finance loans. HW: What are the biggest changes you’re seeing in the functionality of the industry as a whole because of this type online capability? MG: There are many parallels between this system and the Realtor MLS system. Before, agents used to have things in little books and the Realtors didn’t talk to each other much, but now there’s a true market for homes. While you might not get the price you want, I don’t think anybody doubts they can put their home ”on the market” and sell it. But the same is not true with loans. Loans have typically been transacted either in very large pools to hedge funds or large commercial buyers, or on a buddy system, a little black book that’s still in use today I’ll take your pool and send it out to a handful of people. It’s just terribly inefficient. So this creates almost the Facebook of lenders. The lenders are able to get on, interact with each other and create their own market. There’s huge disparity between private money financing and traditional bank financing. If you want to get a commercial loan on an office building in today’s market maybe you’ll pay 5 % to 6 %. But if you have the same credit and just step outside and say ”I want to privately finance this either with a company that provides private financing or individuals that do private financing,” you’re looking at 9 % to 11 %. And the reason for that is a lack of liquidity in the loan. HW: What do you think an online exchange such as this one could mean for securitization in the future? RH: The short answer is yes securitization could be done. Let’s say for a second there’s a given entity that is licensed in all the states and they need a platform to be able to run their notes through, this can be completely setup to bear their name. It can be put on their site as a widget, and things like that. But that is going to depend on the need of the individual entity. MG: We’re about to see an increase in the number of private lenders again. And I don’t know that it will impact necessarily securitization, but I think lenders might find they have an avenue that doesn’t involve securitization. Before the name of the game was: ”We have to do enough volume, we have to have a warehouse line big enough to put all the loans out there to aggregate them so that we can securitize them.” With LoanMLS you don’t have that issue because if you can find all your investors before you fund the loans, you already have the funds committed. That doesn t mean we’re going to replace securitization. HW: Where would you say the majority of demand is? What is a hot buy right now? MG: Right now anything that’s discounted that gives a higher than 12 % yield to maturity, you can’t keep it on the shelf if it’s decent. Investors are hungry for yield. Where else are you going to get that kind of yield? by Christine Ricciardi HousingWire April 22, 2011 [3]Expanding a financing Facebook for lenders « HousingWire 1. http://www.housingwire.com/wp-content/uploads/2011/04/martygoodman.jpeg 2. http://www.housingwire.com/wp-content/uploads/2011/04/roberthodes.jpeg 3.
http://www.housingwire.com/2011/04/22/expanding-a-financing-facebook-for-lenders?utm_source=
feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29
Robo-Banks Federal
Regulators
Hit
Banks
on
Mortgage
Practices
-
CNBC
(2011-04-24 12:21)
It’s not the big penalty from the fifty state attorneys general, but it will hit big bank bottom lines in a big way. 78
[bank_owned2_200.jpg] Getty Images _________________________________________________________________
The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision released enforcement action against fourteen major bank/servicers in the form of consent orders. Bank of America , JP Morgan Chase , Ally Financial, Wells Fargo, SunTrust, Citibank,HSBC, MetLife, PNC, U.S. Bank, Aurora Bank, EverBank, OneWest Bank and Sovereign Bank will all be hit with no fewer than 16 new requirements for mortgage servicing and loss mitigation. They will also have to overhaul oversight of third-party vendors, including lawyers, who provide foreclosure services. ”These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers,” according to acting Comptroller of the Currency John Walsh. While there is no penalty involved in this action yet (penalties often follow enforcement actions), the Federal Reserve release says, ”The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties.” The Fed regulates Ally Financial, SunTrust [1][STI 27.10 -0.53 (-1.92 %) ] and HSBC [2][HBC 54.36 0.88 (+1.65 %) ]. The OCC also says the enforcement actions, ”do not preclude determinations regarding assessment of civil money penalties.” As part of the enforcement though, the banks will be required to engage an independent firm to review foreclosure actions from January 1, 2009 through December, 2010 to assess whether foreclosures complied with federal and state laws and whether there were in fact grounds to foreclose. If the foreclosures are found to be faulty and borrowers were harmed financially by ”deficiencies,” the banks will have to remediate the borrowers in some way. There’s your big can of worms. I asked an OCC spokesman if this wouldn’t release an incredible floodgate of claims, he replied, ”There are going to be a large number of claims submitted.” He said that remediation could include monetary damages and even the borrower getting the home back. The banks will have to submit a plan to regulators for this review process for approval. The process must allow anyone who believes they have suffered financial harm to submit a claim for consideration. While this part may get the most attention, the overhaul of the foreclosure process is what you might expect. It’s mostly forcing the servicers to improve on foreclosure documentation, oversight, and chain of ownership. It requires independent reviews and a single point of contact for borrowers facing foreclosure. The action prohibits dual tracking, when one arm of the bank pursues foreclosure while another pursues modification. ”We will work hard to address these issues and believe executing on the required changes will make a meaningful difference in our customers experience with us,” according to a JP Morgan statement. Bank of America [3][BAC 12.31 0.04 (+0.33 %) ] and Wells Fargo [4][WFC 28.54 -0.29 (-1.01 %) ] had no comment before the 1 pm release. All of this is supposed to happen pretty quickly, within 120 days of the order. Most of the big banks have already implemented many of these requirements. This morning JP Morgan Chase [5][JPM 44.68 0.12 (+0.27 %) ] [6]reported $1.1 billion in Q1 risk management losses for new mortgage servicing procedures. 79
The action comes before any settlement with the fifty state attorneys general, headed by Iowa’s Tom Miller. That process has hit many snags, especially over a proposed $20 billion bank penalty that could be used to write down principal on troubled loans. The federal regulators say they are working with the Department of Justice, which is taking the lead with the 50 state attorney’s general. ”These actions do not preclude any action by other regulators, including the attorneys general, for issues they uncover within their jurisdictions,” the OCC spokesman added. by Diana Olick CNBC April 13, 2011 [7]Robo-Banks Federal Regulators Hit Banks on Mortgage Practices - CNBC 1. http://data.cnbc.com/quotes/sti 2. http://data.cnbc.com/quotes/hbc 3. http://data.cnbc.com/quotes/bac 4. http://data.cnbc.com/quotes/wfc 5. http://data.cnbc.com/quotes/jpm 6. http://www.cnbc.com/id/42557112/ 7. http://www.cnbc.com/id/42573141?__source=RSS*blog*&par=RSS
Homeownership still considered best long-term investment:
Pew « HousingWire
(2011-04-24 12:23)
The housing crash seems to have had little impact on consumer confidence, as 81 % of adults believe buying a home is the best long-term investment a person can make. According to a report by Pew Research released this week, this figure is only down 3 % from 1991. Pew cites a CBS News/New York Times survey completed in 1991. Of those 81 % of the adult sample, 37 % ”strongly agree” that a home is the ultimate long-term investment, while 44 % only moderately agree. Both figures indicate less adamant view than the 1991 survey.
[1] Pew finds the overwhelmingly positive results notable in light of the fact that 47 % of survey respondents said their home value depreciated since the beginning of the recession. About one-third of those surveyed claimed their home value has stayed the same, while 17 % said their homes are now worth more than before the recession. The [2]national median home price in March was $177,001, according to Denver-based RE/MAX. Almost half (44 %) of individuals whose homes lost value said they expect to recoup their equity losses in three to five years. Another third are less optimistic and believe it will take between six and 10 years. Homeowners aren’t the only people who consider a house the best long-term investment one can make. Approximately 81 % of current renters surveyed by Pew reported they would like to buy a house at some point. One-quarter said they would continue to rent. 80
Homeownership ranked first among long-term financial goals for those who took the survey. That prospect was followed closely by living comfortably during retirement, being able to pay for their children’s college and being able to leave an inheritance.
[3] Pew Research polled 2,142 adults between March 15 and March 29 for this survey. The survey sample was comprised 57 % of current homeowners and 30 % of renters. The remaining percentage of people had special living arrangements, such as living with family members. by Christine Ricciardi HousingWire April 22, 2011 [4]Homeownership still considered best long-term investment: Pew « HousingWire 1. http://www.housingwire.com/wp-content/uploads/2011/04/Pew-agreeance.png 2. http://www.housingwire.com/2011/04/19/march-home-sales-increase-in-almost-all-metros-remax 3. http://www.housingwire.com/wp-content/uploads/2011/04/Pew-financial-goals.png 4.
http://www.housingwire.com/2011/04/22/homeownership-still-considered-best-long-term-investment-pew?utm_
source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+housingwire%2FuOVI+%28HousingWire%29
Three Questions You Must Ask Yourself Before Buying a Home - DailyFinance (2011-04-24 12:33)
It’s a brave new world in the U.S. housing market – one in which many of the old familiar norms have come in to question. To say that the current housing market is likely to punish those who don’t painstakingly evaluate their decision to buy a home would be an understatement. In most parts of the country, there’s no strong tailwind of buyer demand to provide a safety net against home purchase mistakes. With all that in mind, here are three questions that prospective home buyers would be wise to incorporate into their evaluation process: 1. Are you prepared to own the house for five to seven years? The housing bubble is long since gone, and with it, the old idea that you could count on a 5 % to 10 % average annual appreciation in your home’s value. Today, that only applies in a few high-demand niche markets. That means if you have to move again in a few years, you’re probably going to pay a high transaction cost. Between the costs of selling, and the possibility of a decline in value of your home, or a minimal increase, you may end up netting less money than your outstanding mortgage principle. So examine your goals. If you’re thinking you’ll be able to flip this home for a quick profit in a few years, the odds are against you in most markets. If you don’t see yourself owning the new home for at least five years, you’re probably better off from a financial transaction standpoint in your current home, all other factors being equal. 2. Are you buying the best house in the neighborhood? The value of the best home in a less-than-ideal neighborhood will always be constrained by its sub-par locale, but the effect is magnified in a soft housing market because buyer demand does not exist to offset the neighborhood factor.ot exist to offset the neighborhood factor. 81
Never buy the best home on the street or in the neighborhood. What you want is a home comparable to the homes around it, and one whose value is also bolstered by several well-maintained, higher-value homes nearby. The current situation is not a bust – the housing market is recovering in selected markets – but it’s a sluggish, uneven recovery, with some metropolitan areas stabilizing, and others showing signs of falling into a doubledip. In such a soft market, think extra carefully about location liabilities: Does the street have many homes worth less than the one you’re considering? Too many vacant homes? A rainwater drainage problem? To guard against such issues, do the following test: Examine two homes to the left of the house, two homes to the right, and at least four across the street. If more than three appear to be of lower value than the prospective house, eliminate that home from contention, and proceed to the next potential house in another neighborhood. 3. Does your monthly budget have room for an oil shock? Determine exactly how much it costs to commute to work from the prospective new house. For example, if you face a 45-mile commute one-way from your prospective new home in Van Nuys, Calif., to your office in Anaheim, and you travel by car, determine exactly how much your commuting costs would be if the price of gasoline doubled. Admittedly, the price of gas – currently about $4.20 per gallon for regular unleaded in[1]Southern Californiaand about $3.80 per gallon[2]nationally– is not likely to double to $8 per gallon in the immediate years ahead. But it could, if another oil shock occurs. Some probably view this spring’s $1 per gallon surge in gas prices as an oil shock, but the reality is prices could vault much higher if[3]Middle East civil unrestworsens, or if some other factor reduces the supply of oil to the U.S. for a sustained period. Given that uncertain energy climate, it’s best to stress test your monthly budget for higher fuel prices. If your 45-mile commute to work at roughly $4 per gallon would become a serious hardship at $6 per gallon or $8 per gallon, then a comparable home closer to work – perhaps one that has a 20-mile or 15-mile commute – may make more sense, depending on other cost and location factors. It’s also worth considering your potential new home’s ease of access to mass transportation, because as long as the U.S. continues to use gas as its primary transportation fuel, the nation will be vulnerable to an oil shock. There’s no way to sugarcoat it: Buying a home is more complex than it used to be. In addition to adequate living space, good schools and public services, and the potential for quiet enjoyment, prospective buyers have to think in longer terms, and gauge risks they might once have ignored. The boom is over, and the safety net is gone – so be careful. by Joseph Lazzaro DailyFinance April 21, 2011 [4]Three Questions You Must Ask Yourself Before Buying a Home - DailyFinance 1. http://www.losangelesgasprices.com/ 2. http://www.gasbuddy.com/ 3. http://www.aolnews.com/2011/04/20/journalist-tim-hetherington-killed-in-libya/ 4. http://www.dailyfinance.com/2011/04/21/home-buying-advice-questions-tips-advice/
City-rehabbed apartments almost ready for move-in (2011-04-24 13:11) Residents may begin moving into five blocks of affordable housing in north-central Phoenix by the end of May. The two-story brick buildings at Park Lee Apartments have fresh paint and new carpeting and appliances. The community clubhouse and three pools look new and sparkling. In December 2009, Phoenix used federal funds to buy the apartments, 1600 W. Highland Ave., to provide stability and affordable-housing options near the light-rail line. Park Lee is closest to the stop at Camelback 82
Road and 19th Avenue. Tom Elgin, who lives in the Grandview Neighborhood east of the 523-unit community, said he’s extremely happy with the city’s effort to clean up the blighted area. ”The police used to be there a lot,” Elgin said. ”Drugs, graffiti . . . was a real problem. I’d paint over graffiti every weekend. All of that has basically gone away.” Kim Dorney, Phoenix Housing Department director, said the city paid about $5.2 million to buy the community, built in 1955. It consists of 34 buildings and sits on nearly 32 acres. Councilman Tom Simplot, who represents the area, told residents at a neighborhood meeting that city staff uncovered extensive water damage and vandalism in the multifamily community. Some units required extensive electrical repairs and upgrades. Angela Duncan, deputy housing director, said the city budgeted $5.36 million to rehabilitate the community in phases. Approximately 160 apartments will be available to rent by the end of May. Chain-link fencing surrounds the community to deter criminal activity. In July 2010, juvenile-arson-caused fires destroyed 12 units. Insurance proceeds will be used to rebuild the fire-damaged homes, including transforming six apartments into handicapped-accessible units. ”Units are being leased as work is completed,” Dorney said. ”Fencing will come down when apartments are leased.” Federal Neighborhood Stabilization Program funding requires Phoenix to set aside affordable housing for a percentage of qualified renters. Duncan said approximately 75 percent of Park Lee will have affordable rents. The city defines affordable housing as housing provided to those who earn 40 to 60 percent of the adjusted area median income, or $26,650 to $39,960, for a family of four. The homes, one- and two-bedroom apartments and two-bedroom cottages, are priced at $275 to $575 a month. The city will host an affordable-housing gathering 8-10 a.m. May 14. Information: 602-264-1195. by Sadie Jo Smokey The Arizona Republic Apr. 17, 2011 06:08 PM [1]City-rehabbed apartments almost ready for move-in 1.
http:
//www.azcentral.com/arizonarepublic/local/articles/2011/04/17/20110417phoenix-park-lee-apartments-ready.html
U.S. stunned by Wall St. alert on debt (2011-04-24 13:38) The ratings agency Standard & Poor’s warned the United States on Monday that it could lose its coveted status as the world’s most secure economy if lawmakers don’t rein in the nation’s nearly $14.3 trillion debt. The finding, the first of its kind in the 60 years that S &P has been judging the country’s credit quality, sent a jolt through the markets and injected a new sense of urgency into the debate gripping Washington over whether to allow the Treasury to keep borrowing. S &P changed its outlook on the United States from ”stable” to ”negative” and said the federal government could lose its AAA rating if officials fail to bring spending in line with revenue. The AAA rating identifies the United States as one of the world’s safest investments - and has helped the nation borrow at extraordinarily cheap rates to finance its government operations, including two wars and an expensive social safety net for retirees. A downgrade would drive up the cost of borrowing and throw into question the global role of the Treasury bond. The Treasury serves as a crucial risk-free place to invest money - and has been a stalwart of stability amid the economic upheaval of the past few years. Stock prices fell nearly 2 percent in the hours after the report’s release before ending the day down about 1 percent. The dollar and Treasury bonds also slid in the wake of the report but recovered by the end of the day. 83
Lawmakers on both sides of the deficit debate tried to take advantage of the warning from Wall Street, but that just highlighted the point of the report - which is that the polarization in Washington is the problem. ”We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013,” S &P said in the report. ”If an agreement is not reached ... this would, in our view, render the U.S. fiscal profile meaningfully weaker.” S &P is one of the nation’s three major rating agencies, whose assessments influence the decisions of investors worldwide. The other two major agencies have not changed U.S. ratings. The Obama administration responded to the report by saying that the likelihood of a compromise is greater than the agency realizes. Officials stressed that S &P essentially played the role of political pundit - and its guess is as good as anyone else’s. ”We believe S &P’s negative outlook underestimates the ability of America’s leaders to come together to address the difficult fiscal challenges facing the nation,” said Mary Miller, assistant Treasury secretary for financial markets. ”Addressing the current fiscal situation is well within our capacity as a country.” Last week, President Barack Obama laid out a plan to trim $4 trillion from deficits over the next 12 years. On Friday, House Republicans adopted a budget resolution that would cut deficits by $4.4 trillion over 10 years. Although the goals are similar, there is sharp disagreement over how to reach them. Obama wants to cut spending, including on defense, and raise taxes on businesses and the wealthy. Republicans would protect defense spending but cut deeply elsewhere, including Medicare and Medicaid. They have rejected any new taxes. In a conference call with reporters Monday, David Beers, S &P’s global head of sovereign ratings, said the agency took the action after warning for years of ”what we considered to be the gradual deterioration of the U.S. fiscal profile.” The deterioration was hastened, Beers said, by December’s $858 billion deal between the White House and congressional Republicans to cut the payroll tax for one year and to extend a variety of George W. Bush-era tax cuts through 2012. S &P analysts said they had hoped that Obama’s fiscal commission, which offered a plan in December to reduce borrowing by nearly $4 trillion over the next decade, would provide the needed momentum to rein in the debt. But Obama declined to embrace those recommendations and put out a budget plan in February that was ”below our expectations,” analyst John Chambers said. Now, the analysts said, odds for a prompt resolution look especially grim. ”When you pull all this together ... we think the fiscal profile of the United States is increasingly diverging from a number of its AAA peers,” Beers said. The report also fed into the debate about whether to raise the legal limit on government borrowing. Republicans want spending cuts as a condition of increasing that limit; the White House has said that a vote to raise the debt limit should not be linked to other issues. The deadline is early July. ”S &P sent a wake-up call to those in Washington asking Congress to blindly increase the debt limit,” said House Majority Leader Eric Cantor, R-Va. ”The debt-limit increase proposed by the Obama administration must be accompanied by meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt.” But Rep. Peter Welch, D-Vt., said the S &P report underscores the danger of using the debt limit as an occasion for political haggling over spending, because failure to raise the limit would leave the government in default - demonstrating the inability of the political system to manage the nation’s finances. ”I hope Majority Leader Cantor and those in Congress seizing upon debt-ceiling pressure as a leverage opportunity are listening to the markets today and thinking twice about their risky strategy,” said Welch, who on Monday released the names of 114 House Democrats who support his position. On Monday, another major credit-rating agency, Moody’s, issued a routine report holding the U.S. rating steady and calling it a ”positive” that lawmakers are seriously discussing deficit cuts. by Zachary A. Goldfarb and Lori Montgomery Washington Post Apr. 19, 2011 12:00 AM [1]U.S. stunned by Wall St. alert on debt 84
1. http://www.azcentral.com/arizonarepublic/news/articles/2011/04/19/20110419us-wall-street-debt.html
Metro Phoenix housing market showing signs of upswing (2011-04-24 13:43) Metro Phoenix’s housing market took a turn for the better last month, and if current trends continue, home prices could start to climb again before the end of the year. Market experts say now is still too early to declare the beginning of a recovery for the region’s battered home values. But the number of successful home sales is at near-record levels, the number of homes for sale is dropping, future foreclosures are in decline and home prices, although low, are holding steady. The shift in the region’s housing market started in March. An upward turn, if one materializes, would be much more significant than just another twist in an ever-changing market. It would mark the end of the worst housing bust metro Phoenix has ever experienced. Overbuilding during the first half of the past decade preceded a collapse of the American mortgage industry and, later, the global economy. Phoenix-area houses lost more than half their value since the peak in 2006. During the bust, foreclosures soared and home sales dropped. Arizona’s economy, long dependent on housing, fell apart. The years since have seen new construction grind nearly to a standstill. Job losses and foreclosures meant there were many more homes for sale than there were buyers. Prices finally rose slightly in 2010, then fell again as still more foreclosures flooded the market. That ”double dip” has made many market watchers wary of being too optimistic about the latest positive news. Phoenix real-estate analyst Tom Ruff of the Information Market, a real-estate data firm, said almost all the key market indicators that turned negative during the summer of 2010 and led to the second dip in home prices late last year have now turned positive. ”I am not being overly optimistic when I say home prices could climb during the next six to nine months,” he said. ”Those same market indicators that went negative last year are now turning positive.” Home sales Last month, existing-home sales in metro Phoenix climbed to their highest level since October 2005, which was in the midst of the boom. There were 10,031 resales in March. The number includes a record 1,311 homes that were sold at auction as part of a foreclosure. Last spring, home sales jumped as buyers rushed to take advantage of a federal tax credit that gave first-time buyers $8,000. Analysts believed the credit spurred most of the likely buyers in the market to make a move, meaning few other prospective buyers would exist after the credit expired. Indeed, by the expiration that summer, sales fell off substantially and remained low, averaging about 7,000 a month until March. New homes accounted for as much as one-third of all metro Phoenix home sales before and during the boom but have since plummeted to only about 7 percent of the market. Jay Butler, director of realty studies at Arizona State University, said March is traditionally a strong homesales month in metro Phoenix. During the spring, homebuyers try to purchase so they can finalize their deals and move before the next school year. Butler’s monthly housing report, released Tuesday, was more upbeat about the market’s recovery than it has been in past months. However, he still is concerned that a ”glut” of foreclosure homes on the market could continue to delay a recovery. And although sales are up, most of those sales - about 65 percent in March - are what the industry calls ”distressed” properties: homes sold at foreclosure auctions, taken back by lenders through foreclosure and resold, or short sales. Foreclosures 85
Although foreclosures continue to drive the market, signs indicate those could soon start to decline. The historic recession left many in metro Phoenix without jobs, and plummeting home values meant many homeowners who couldn’t afford their mortgages also couldn’t sell their homes for what they owed. The result was a huge wave of foreclosures: Buyers defaulted on their mortgages, and banks either sold the homes at auction or took them back and waited to resell them on the market. The result was a glut of inexpensive foreclosure homes for sale. Experts have long said that home prices wouldn’t recover until foreclosures subsided. Last month, the number of homes foreclosed on actually climbed - but the shift was expected. Lenders last fall put a moratorium on foreclosures amid questions about their handling of the practice. Those foreclosures are now being finalized and artificially inflating the monthly numbers. In March, there were 5,000 foreclosures or trustee sales in the Phoenix area, up by about 500 from February. The more important indicators are so-called pre-foreclosures, or notices-of-trustee sales. The legal filing notes that a lender plans to seize a home from a delinquent buyer and sell it at auction; it typically precedes a foreclosure by three to nine months. Pre-foreclosures have been hovering around 5,000 a month this year, after averaging 7,000 a month in 2010. This signals fewer homeowners are falling behind on payments or abandoning their homes, meaning fewer future foreclosures. For the past year, investors have bought the majority of the region’s foreclosure homes and turned them into rentals that are filling up quickly with tenants who lost their homes or can’t afford to buy. Listings The number of homes for sale in the Phoenix area has been dropping steadily during the past four months, signaling the supply of homes for sale is down while demand is up. Homes being sold after foreclosure or homes offered for short sale - in which banks let homeowners sell for less than they owe - now typically make up about half of all homes listed for sale. Although that remains the case, the total number of homes on the market was about 36,000 on Tuesday, a more than 15 percent drop from last year’s supply. ”Both investors and owner-occupied buyers are starting to burn through the inventory of homes for sale,” said Beth Jo Zeitzer, president of Phoenix-based ROI Properties and an expert on distressed property sales. She said buyers who can pay cash, usually investors, continue to dominate the market. Julie Bieganski, a Phoenix real-estate agent and investor, said it’s becoming more difficult to find inexpensive homes, including foreclosures, in popular neighborhoods because there are so many more buyers vying for them. Prices The median price of resales in metro Phoenix has held steady at $115,000 since December. Although it’s good news prices haven’t dropped this year, the median remains at the low it fell to last fall after the second dip. Not every indicator points to an uptick. The Arizona Regional Multiple Listing Service, an index of homes for sale run by local Realtors, maintains data on homes under contract for upcoming sales. This data, the Pending Price Index, has called for another big drop in Valley home prices this year. However, in January, the index predicted the area’s median would fall to $100,000 by March. Instead, prices remained steady. The group’s index is now forecasting the median price for metro Phoenix home sales will be $113,000 in April. Based on the pending sales index from the ”Cromford Report,” a daily analysis of listings data and public records, home sales and prices this month are supposed to stay at March’s levels or climb higher. Preforeclosure filings are down so far this month. ”The housing market is showing encouraging signs of a strong recovery in demand and a correction of an oversupply problem we have had since 2006,” said Phoenix housing analyst Mike Orr, publisher of the report. He said metro Phoenix home prices could start to gradually climb later this year or there could be a ”sharp 86
movement” up in prices. ”My guess would be (home prices will increase) sometime before the end of the year,” he said, ”and possibly quite sooner.” by Catherine Reagor The Arizona Republic Apr. 20, 2011 12:00 AM [1]Metro Phoenix housing market showing signs of upswing 1.
http:
//www.azcentral.com/arizonarepublic/news/articles/2011/04/20/20110420phoenix-housing-market-improving.html
Trends show promise for new-home market (2011-04-24 13:46) Metro Phoenix’s surge in home sales during March even gave the more expensive new-home market a little boost. Both new-home sales and building permits increased last month, according to the ”Phoenix Housing Market Letter.” The gains aren’t huge but are an improvement over several dismal months of sales. Last month, there were 645 new-home construction permits issued in the region, compared with 435 in February and 358 in January. During March, 581 new homes sold in the Phoenix area, compared with 433 in February. The uptick could continue based on contracts written for new-home purchases, the best leading indicator for the homebuilding market. The Housing Market Letter, published by real-estate analysts RL Brown and Greg Burger, reports 766 new-home contracts in March, compared with 653 in February. Investors looking for deals on short sales and foreclosure resales continue to dominate the existing-home market in Phoenix. But first-time buyers are homebuilders’ top customers now. Research from Brown and Burger shows nearly three-fourths of all new homes in the region are being purchased by first-time buyers using Federal Housing Administration loans. Fannie Mae incentive This incentive won’t affect the housing market like last year’s homebuyer tax incentive, but it could entice more buyers to purchase foreclosure homes. Mortgage giant and government entity Fannie Mae is offering to cover 3.5 percent of closing costs for homebuyers who close before June 30. The catch is that the homes have to be foreclosure properties that are part of Fannie’s HomePath program, but there are some great deals to be found in that inventory. Buyers who are eligible for the HomePath program are offered low-down-payment mortgages and can skip mortgage insurance and appraisal requirements. Shopping in the Valley Potential homebuyers are definitely shopping in the Valley. New data from Realtor.com shows metro Phoenix is the fifth-most-popular area in the nation for homebuyer searches. Chicago is No. 1, followed by Detroit, then Los Angeles and Las Vegas at No. 4. Tucson was listed at No. 82. by Catherine Reagor The Arizona Republic Apr. 20, 2011 12:00 AM [1]Trends show promise for new-home market 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/20/20110420biz-catherine0420.html
Freeport income jumps $603 million (2011-04-24 13:49) Phoenix-based Freeport-McMoRan Copper & Gold Inc. officials said Wednesday that they were confident that the strength of the copper market would support ongoing expansions at its mines. Officials also said that although two workers were killed in a Monday accident at the company’s Indonesian 87
mines and that underground mining there had stopped, the company did not expect that to significantly affect earnings. ”We are very positive about the copper business,” President and CEO Richard Adkerson said during a conference call with investors. ”We are the world’s largest producer. We think the world is going to need copper.” The company produced 950 million pounds of copper in the first quarter, compared with 929 million in the comparable quarter last year. Much of the increase came from ramped-up production at its Morenci mine and other North American properties. It also produced 466,000 ounces of gold, compared with 449,000 a year ago, and 20 million pounds of molybdenum, up from 17 million. Molybdenum is a metallic element used to strengthen steel. Freeport has been increasing production at Morenci in the past year and also is exploring increasing production from or restarting operations at its Sierrita, Bagdad, Ajo, Twin Buttes and Safford/Lone Star mines in Arizona, in addition to foreign opportunities, Adkerson said. One option would be to expand the mill at Morenci to double the current design, he said. ”We are seeing opportunity for significant growth,” he said, giving credit to the company’s exploration team for identifying minerals near many of its existing operations. Expanded mining already is taking place at its Miami mine, where the company was conducting reclamation activities. Adkerson said Freeport expected to mine as much as 100 million pounds of copper a year from the restarted Miami mine. ”The economics are extraordinarily positive there,” he said. The expanded mining activity is possible because of the high price of copper and gold and the earnings that trend is creating. Freeport said that the company earned a first-quarter profit of $1.5 billion, or $1.57 per share, compared with $897 million, or $1 per share, in the same quarter last year. All of its share prices have been adjusted to reflect a February stock split. Revenue for the quarter topped $5.7 billion, compared with $4.4 billion in the comparable quarter. The company’s financial performance easily topped analysts’ estimates. Freeport was expected to earn $1.26 per share on $5.3 billion in revenue. The company sold its copper during the quarter for an average of $4.31 per pound, compared with $3.42 per pound in the same quarter last year. It sold its gold for an average of $1,399 per ounce, compared with $1,110 per ounce. It got $18.10 per ounce of molybdenum, up from $15.09 per ounce in the same quarter last year. The company sold less copper from its seven North American mines in the quarter despite the increased production, which officials attributed to timing of shipments. Production dropped slightly at its South American operations and rose slightly at its Indonesian and African operations. ”Congratulations to the whole Freeport team on another great quarter,” JPMorgan Equity Research analyst Michael Gambardella said. He asked how the Monday accident at the Grasberg mine in Indonesia might affect operations. Adkerson provided more detail than had previously been released. ”I’m very sad to report that we lost two of our workers,” Adkerson said. The miners were killed when mud flowed into the underground mine, he said, blaming the accident on extremely wet conditions. ”With heavy rainfall and wet conditions at Grasberg, the risks are more pronounced at the (deep underground) mine,” he said. He said that in the 1990s, Freeport invested in robotic mining equipment to collect ore from the mine when wet conditions made it too dangerous for workers, and the company could use those robots more often following the accident. Adkerson said that the underground portion of the mine had been shut down while government investigators review the accident. He said the shutdown should not affect the company’s production significantly because the underground mine does not produce as much copper as the adjacent open pit. 88
”We will get to the bottom and review our procedures and do everything we can to ensure it doesn’t ever happen again,” he said. Analyst Tony Rizzuto from Dahlman Rose asked if using robots more at the mine would hurt production in the long run. ”We’ve been using remote, robotic machines now 10 years,” Adkerson said. ”It is a fairly significant part of the draw points we are using them on. They have been working well. It is a bit slower than manned draw points. It is not like this is new technology.” Shares closed up $1.58, or 3.05 percent, to $53.30. by Ryan Randazzo The Arizona Republic Apr. 21, 2011 12:00 AM [1]Freeport income jumps $603 million 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/21/20110421biz-freeport0421.html
Investor-backed financing carves homes niche (2011-04-24 13:58) A Scottsdale real estate investment company has carved out a small niche in the troubled housing market by putting investors together with homebuyers who cannot get traditional financing. For the past 18 months, Jason Loewen and John Janssen, partners in Investment Resources LLC, have been buying homes at the lower end of the market and renovating them for sale with investor-backed financing. That includes a handful of homes in southern Scottsdale and about two dozen others in Maryvale and other parts of the Valley. The individual investors provide capital to buy and fix the homes in return for a 10 percent return on their investment that is paid monthly, quarterly or annually, said Loewen, a former Merrill Lynch financial adviser who has been in the Valley for seven years. During the run-up in home prices, he bought and sold almost 50 homes and did his own remodeling work. Janssen, who grew up Scottsdale, has been in real estate development and the mortgage business for 35 years. The two partners in 2009 bought a house on Belleview Street in Scottsdale for $112,000, spent about $12,000 renovating it and sold it for $170,000. But the market has gone down since then. They bought a home on nearby Garfield Street for $104,000 and spent $15,000 remodeling it. But there were no buyers after several months, so they leased it. Safety net of rentals That is the safety net of their investments in lower-end houses. With a strong rental market, Investment Resources can rent its homes to pay the debt service if they don’t sell, Loewen said. That helps protect investors. The partners also keep a 15 to 20 percent stake in the property and collect all the payments and send them to the investors, Janssen said. The buyers put 20 percent down, leaving the investors with a 60 to 65 percent stake in the home, Loewen said. Investors have a first-position deed of trust and hazard insurance on the homes. Steve Rudy, a physician in Laguna Beach, Calif., has been pleased with his investment properties through Investment Resources. ”They delivered on everything they said they would,” said Rudy, adding that he has invested a few hundred thousand dollars in four houses. The 10 percent return on investment is ”very attractive,” he said. Janssen noted that local investors can ”drive by and see their money at work” in their investment homes. The investments are also helping stabilize neighborhoods as the renovated houses often spur other owners to clean up or improve their homes, he said. ”It’s an investment in the community,” Janssen said. Buyers pay higher rate 89
Investment Resources helps buyers who have a down payment for a home but credit dings, such as a short sale, that precludes them from qualifying for a loan. The loan process is lot quicker than the 60 to 90 days it can take for a conventional loan, he said. Buyers pay interest rates of nearly 10 to 12 percent, but they can refinance the mortgage, Janssen said. Many buyers sign up for five-year loans so they can quickly own their home free and clear. Investment Resources would foreclose on delinquent buyers if it became necessary. As with any investment, there is risk and potential investors are advised to do their due diligence on Investment Resources. The company has been accredited with the Better Business Bureau since November. by Peter Corbett The Arizona Republic Apr. 23, 2011 06:09 AM [1]Investor-backed financing carves homes niche 1.
http://www.azcentral.com/community/scottsdale/articles/2011/04/22/
20110422scottsdale-nvestor-backed-financing-carves-homes-niche.html
Realty Execs in lease dispute (2011-04-24 14:03) Scottsdale-based Realty Executives Inc. has not made a lease payment on its Pinnacle Peak branch office building since October, according to a landlord complaint filed recently in Maricopa County Superior Court. The company, one of Arizona’s largest residential real-estate agencies, recently vacated the property without notice, a violation of its lease agreement, according to the lawsuit, filed by building owner Saypo Cattle Co. Richard Rector, Realty Executives owner and executive chairman said through a company spokeswoman that Realty Executives, like most other real-estate firms, has experienced financial losses in the past two years and has been working to renegotiate several of its office lease agreements in an effort to cut costs. Realty Executives has 1,230 licensed agents in Arizona, ranking No. 4 in the state. It also is among Arizona’s largest real-estate firms in terms of local sales volume. Realty Executives has not yet filed an official response to the lawsuit, but spokeswoman Andrea Kalmanovitz said the pending response may include argument that the Saypo complaint contains defamatory statements about Rector personally. The Saypo complaint, filed March 31, seeks about $143,000 in past-due lease payments, as well as damages for breaching the Pinnacle Peak lease contract, which the lawsuit says was not set to expire until May 2014. It also accuses the company of fraud, arguing that Realty Executives staff surreptitiously vacated the building just a few weeks after negotiating a lower lease rate. ”We allege that, based on the timing of their midnight move, that they were already planning to move to another space,” said Phoenix attorney Daniel Kloberdanz, who is representing Montana-based Saypo in the lawsuit. Kloberdanz said he had been in discussions with a financial consultant hired by Realty Executives, and that the lease-payment lawsuit could be resolved relatively quickly with a settlement agreement. But Kloberdanz said the consultant, MCA Financial Group Managing Director Paul Roberts, also has indicated that Realty Executives might file for bankruptcy protection, which could put the lawsuit on hold while the company undergoes financial restructuring. ”They’ve alluded that they plan to file for Chapter 11,” Kloberdanz said. Kalmanovitz said Realty Executives hired Phoenix-based MCA Financial to help with lease renegotiations and not to advise on a possible Chapter 11 reorganization filing. ”Rich (Rector) did hire MCA Financial but not to pursue restructuring,” she said. Realty Executives Inc., the flagship agency of parent company Realty Executives International Inc., is embroiled in a second lawsuit with its former president, John Foltz. The company has accused Foltz of a number of violations of his multiple employment contracts, including theft and mismanagement. In the lawsuit, it accused the former president of infractions, including breach of contract and failing to meet 90
his fiduciary responsibilities while working as an independent contractor for the agency. The complaint also accused Foltz of ”making negative and disparaging remarks” about Rector and his wife and business partner, Robyn Rector, to employees, executives and potential investors ”as part of an effort to undermine their authority and credibility.” Foltz has denied the allegations. He filed a counterclaim arguing that the Rectors invented the malfeasance charges to justify breaching a compensation agreement with Foltz that was supposed to remain in effect through 2015. Foltz also is suing for defamation of character. The counterclaim alleged that Realty Executives owes Foltz for wages dating to April 2010, and for bonus pay dating as far back as 2009. Foltz argues in his claim that Realty Executives attempted to force him into a new compensation deal that involved a set salary and no profit-sharing or bonuses. When Foltz refused, the company sued, the counterclaim said. ”Realty Executives has notified Foltz that such amounts due and owing will not be paid, and that its material breaches are intentional,” the claim says. More than 100 pretrial briefs, motions and documents have been filed in the Foltz case. No trial date has been set. by J. Craig Anderson The Arizona Republic Apr. 23, 2011 12:00 AM [1]Realty Execs in lease dispute 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/23/20110423biz-realtyexecutives0423.
html
Canadians flocking to buy homes in Southeast Valley (2011-04-24 14:05) Virtually every week during the past two years, a Valley home was sold for at least $1 million to a Canadian buyer. The majority of the homes are in Scottsdale, but Mesa, Gilbert and Queen Creek are also on the luxury list, with individual sales between $1.3 million and nearly $3.8 million. The transactions, totaling nearly $300 million, are an indication that Canada’s preference for Arizona as the No. 1 place to invest is growing, said Glenn Williamson, founder and CEO of the Canada Arizona Business Council, a non-profit that promotes bilateral trade. The Canadian purchases represent at least 6 percent of the 1,742 homes sold in Maricopa County for $1 million, or more, since Jan. 1, 2009, according to Ben Toma, broker for Toma Partners, a Phoenix realestate firm that specializes in sales of luxury homes. Toma and other agents called the transactions a significant chunk of the high-end housing market and said there are probably more such sales to Canadians that have not yet been identified in surveys. A recent report by Valley real-estate analyst R.L. Brown identified nearly 500 Valley home sales to Canadians in 2010. The report said the homes were bought from more than builders. Many of the sales in Mesa - 96 of them in communities developed by builder Jeff Blandford - indicated that Canadians were influencing other Canadians to buy homes in the same communities. Other sales were in Gilbert, Chandler and Queen Creek. ”What perhaps is the most surprising is the number of homebuilders that failed to capture substantive numbers of Canadian new homebuyers over the data period, begging the question of what marketing strategies or product positioning was used by the builders with the highest capture of these buyers,” Brown said in his report. Williamson said the Business Council obtained records of the sales from the Canadian government to compile a more complete Arizona/Canada trade and investment picture. Canada is Arizona’s largest foreign investor, a statistic reflected by the state’s $2.3 billion bilateral trade with Canada, excluding tourism, Williamson said. 91
The Business Council is bringing industrial leaders from Canada and Arizona together to try to increase bilateral trade between Canada and Arizona to $5 billion U.S. by 2012. Williamson said Canadians have been purchasing homes in the Valley for years, but the recent trend seems to be increasing. The momentum, he said, has been influenced by many factors, including the prices of homes and the current pro-Canadian, currency exchange rate that turns their $20 into 21 U.S. dollars. ”First it was people coming down here on their own, now dozens of Arizona residential and commercial brokers are making trips all across Canada and promoting the concept of buying homes and commercial buildings as well as land in Arizona,” he said. Williamson said the Business Council has also noticed that more and more eastern Canadians, a demographic that traditionally purchased winter homes in Florida, are now choosing the Valley. ”We’re seeing this trend for the first time,” he said. ”Taxation was one reason. If you’re a second-home purchaser in Florida, odds are you pay more taxes. Hurricane insurance also is expensive.” Fulton Homes CEO Doug Fulton said US Airways flights to and from Phoenix Sky Harbor International Airport to the city of Toronto and the province of Quebec, are also an indication of the growing eastern Canadian interest in the Valley. Fulton, Beazer Homes, Shea Homes and Robson Resort Communities are marketing aggressively to reach more Canadian buyers in Canada and Arizona, and US Airways has three salespeople dedicated to the Canadian market, Williamson said. ”The Canadians are looking at Arizona as if our homes were half price,” said Terence Murnin, a spokesman for Fulton Homes. ”It’s been great, and it is such a neat relationship with our neighbors to the north.” Fulton said it is no surprise that Canadians are big players in the high-end home market and that they seem to be responding to promotions tailored to their tastes. ”We have an aquatics center in one of our developments because when they come in winter they want to go swimming,” he said. ”Another thing we noticed is that they love west-facing backyards, which is perceived as a negative here. They have brought a different flavor to the market.” by Art Thomason The Arizona Republic Apr. 23, 2011 12:00 AM [1]Canadians flocking to buy homes in Southeast Valley 1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/23/20110423biz-mr-canadians0423.html
Arizona’s middle class further out of reach for young (2011-04-24 14:39) The deep recession and slow recovery have caused financial stress for Arizonans of all ages. But in many ways, the downturn has hit young adults - many of whom came of age during almost 20 years of unprecedented U.S. prosperity - the hardest. A tough job market, daunting student-loan balances, misuse of credit cards, the housing-market crash and reduced workplace benefits are among the challenges that have put many people under age 40 in a bind. Will they be able to match the standard of living attained by their parents? Time, of course, is on their side, but for many, the middle-class dreams are on hold. ”This is the first time, for a lot of people in my generation, when things haven’t gone their way financially,” said Jacob Gold, a 32-year-old financial adviser in Scottsdale. ”The last few years have been a real wake-up call.” Jobs and the housing market are at the root of the issues. Job losses, limited opportunities and paltry pay raises have made it difficult to pay off massive student loans. Many young adults bought their first homes at the peak of the housing market and have struggled to make payments on underwater mortgages. Beyond that, many battle debt because they have used plastic to survive tough times, or to live beyond their means, or both. These workers have time - if they downsize their aspirations - to repair some of the financial damage, financial 92
advisers say. But young Arizonans say that the recession will have a lasting impact on their middle-class dreams. Many are retraining or adjusting their career plans. Some are delaying starting families. They are putting off saving for retirement or forgoing health insurance. Many rely financially on aging parents or, conversely, must help support relatives who lost their jobs. Blindsided by crisis Baby Boomers got a taste of a rough economy during the stagflation era of the 1970s. Their parents and grandparents grappled with stressful economic conditions around World War II and during the Depression. But the past few years have been marked by the first prolonged financial crisis for adults now in their 20s and 30s. Many younger workers were blindsided by the recession because they were certain they would find goodpaying jobs and the housing market would keep going up, said Kimberly Bridges, manager of financial planning at Stoker Ostler Wealth Advisors, a Scottsdale-based affiliate of Harris Private Bank. ”A lot of people in that age group came into adulthood with a lot of confidence,” she said. ”They thought they could get a good education and - even if they had to charge it with student loans - they were going to come out making good money. They really thought that everything was going to work itself out and they were going to be able to pay off all this debt, and now they are hitting a spot where they can’t.” Arizona shed about 12 percent of its jobs during the recession, about 324,000 positions, since the downturn began in December 2007. The workers who lost positions had to defer or default on debts that they couldn’t repay. Those who managed to cling to their jobs were making less money than they anticipated. If they bought a house in Arizona within the past 10 years, they are likely making mortgage payments on a home that isn’t worth what they paid for it. In addition, banks have clamped down on lending standards, making it harder for first-time buyers. Making ends meet For Ryan Hutchins, the wake-up call came in November, when he got laid off from his job at a local bank. His wife, Bethany, continues to work as a community-college instructor, but the loss of his income has caused stress for the Gilbert couple and their young daughter. The family is renting a home from a relative, Ryan said, adding that neither he nor Bethany currently has health insurance. Nor do they use credit cards for purchases anymore. ”We had to go through our savings,” said Hutchins, 36. ”We had to liquidate what little we had in our 401(k) plans to make ends meet.” The couple also has debts - about $40,000 in student loans, more than $10,000 for credit cards and $2,000 for federal income taxes, he said. Hutchins has started training to become an insurance agent. He credits the layoff for helping him find a career that he likes better, and he recognizes that he and Bethany, 31, have time to rebuild their finances. Still, he doesn’t downplay the seriousness of their situation. ”Our biggest priority is in paying down debt and putting aside money for retirement and to buy a house,” he said. ”At times it gets you down, but I have to focus on the fact that my family needs me.” Special challenges The recession scarred all generations, but several trends are making it particularly rough on young adults: - Unemployment has been running higher for young adults. Some 15 percent of people in the 20 to 24 age group were out of work nationally in March, as were 9.1 percent of those ages 25 to 34. Both rates were above the overall jobless level of 8.8 percent. - Changing employment trends make it much less likely that people new to the workforce will be able to stick with one job for most or all of their careers. - Employers have cut back on benefits, virtually ending traditional pensions for new workers while paring health coverage in many cases as well. - A slow-growth economy means that a two-decade stock market boom like Baby Boomers and their parents enjoyed in the 1980s and 1990s doesn’t seem probable anytime soon. 93
- The long-term viability of Medicare and Social Security is much less certain for young adults than it is for retirees and older workers. - The nation’s yawning debt woes likely will need to be handled by people paying taxes in coming decades and that means today’s young adults. Personal-debt issues Meanwhile, many young adults have accumulated considerable personal debts. People in this age group grew up with credit cards, yet often didn’t know how to manage them or receive the financial education to use them wisely. Education costs also have taken a toll. College costs, which have been rising faster than the general inflation rate, now average more than $20,000 a year (including room and board) for in-state students at public schools and more than $40,000 annually at private institutions, reports the College Board. Among Arizonans with actual loan balances, the average student-loan debt is $27,960, reports Credit Karma, a free credit-management service based in San Francisco. Plenty of young adults are graduating with five- and even six-figure debts, with dim job prospects. Limits of bankruptcy Diane Drain, a Phoenix bankruptcy attorney, said she has noticed more young adults facing financial stress than in decades past. She attributes that to various factors, from a tight job market to the often-reckless use of credit cards. ”It’s not unusual to see someone with $25,000 to $30,000 in credit-card debt when they’re not even earning that much in a year,” Drain said. Because of student loans, many young adults face a difficult time digging out of their financial holes. Although medical and credit-card bills, some car loans and some types of real-estate loans can be discharged in a bankruptcy, student loans can’t be removed except in the most dire hardship cases, Drain said. Consequently, many young adults have subpar credit scores. The typical Arizonan has a grade of 666 on the standard scale of 300 to 850, reports Credit Karma. But it’s only 640 for Arizona residents between ages 18 to 24, and 649 for those in the 25 to 44 group. Time on their side Despite the pressures, young adults do have time on their side. People who will collect paychecks for another 30 or 40 years have the chance to learn smart money-management habits, watch their spending, save more and invest better. Also, with the Internet, young adults have access to more and better financial information. Whether they use it favorably is a big question, though financial adviser Gold expresses optimism. ”One positive is that this is a generation that’s very tech-savvy, innovative and entrepreneurial, with aspirations to create something,” he said. ”Given time and opportunity, they will blossom.” by Russ Wiles and Jahna Berry The Arizona Republic Apr. 24, 2011 12:00 AM [1]Arizona’s middle class further out of reach for young 1.
http:
//www.azcentral.com/arizonarepublic/news/articles/2011/04/24/20110424arizona-middle-class-decline-young.html
Maricopa County Housing market showing some life (2011-04-24 14:46) New-home sales in Maricopa County were down significantly from a year earlier during the first quarter, according to The Arizona Republic’s latest quarterly housing snapshot, based on numbers from realty studies at Arizona State University and Mesa-based Ion Data. Sales of new homes fell by about 24 percent from the first quarter of 2010, from 1,530 sales to 1,170 sales. Meanwhile, existing-home sales increased slightly from a year earlier, accompanied by a decrease in mediansale price, according to the data. Total sales volume for existing homes in the first quarter was 16,535 transactions, an increase of almost 8 94
percent from 15,335 sales during the same period in 2010. Housing analyst Jim Belfiore, president of Phoenix-based Belfiore Real Estate Consulting, said the increase was especially encouraging because it came primarily from an increase in ”move-up” buyers: those with existing homes who are selling in order to buy a larger or nicer home. ”I’d attribute that to consumer confidence being higher overall,” he said. The decrease in new-home sales occurred primarily because the 2011 new-home-buying season got off to a late start compared with the previous year, when there was still some momentum from a now-expired federal tax credit for new buyers. Belfiore said new-home sales picked up significantly in the latter half of March and have remained strong through the first three weeks of April. The median sale price for new homes in the first quarter was $222,450, a 2 percent decrease from the median price of $227,115 in the first quarter of 2010, according to ASU’s realty studies at the W.P. Carey School of Business. The median sale price for existing homes decreased by about 11 percent, from $140,000 in the first quarter of 2010 to $125,175 during the same period a year later. Realty-studies professor Jay Butler said he was concerned that the continued decline in median home prices would push some homeowners who are upside-down on their mortgages to give up and walk away, particularly those who were exhausting all other financial resources to make the mortgage payments. ”There’s a high level of frustration out there,” Butler said. There were 11,425 foreclosures in the first quarter of 2011, up slightly from 11,190 foreclosures during the same period a year earlier. However, pre-foreclosure notices were down considerably, from 18,245 notices issued in the first quarter of 2010 to 15,232 notices issued during the same period a year later. Butler said the decrease in new notices seemed logical after four years of heavy foreclosure activity. ”First of all, you’ve foreclosed on 11 percent of the homes in the Valley, so you’ve got to be running out of properties to foreclose on,” he said. by J. Craig Anderson The Arizona Republic Apr. 24, 2011 12:00 AM [1]Maricopa County Housing market showing some life 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/24/
20110424maricopa-county-housing-market-showing-some-life.html
Young adults face future of self-reliance (2011-04-24 14:49) For workers younger than 40, the recession helped drive home a sobering lesson: You are on your own. When their middle-class parents and grandparents were the same age, they could count on long careers with the same employer, regular pay raises, pensions and generous medical benefits. This younger, ”do it yourself” middle class must shoulder the responsibility of crucial aspects of their financial and work lives - saving for their twilight years, tackling soaring health-care costs and carefully managing their careers - with little help from an employer and dwindling help from Uncle Sam. Debt also is a recurring theme for younger workers, in part because housing and credit-card debt are stacked on top of enormous school loans that, in many cases, are much larger than what their parents tackled. Emily Duda, 28, and her husband, Bryan, 24, are working to whittle down nearly $60,000 in student loans, plus other debts. Duda, who has a master’s degree in divinity, was laid off from her job at a Tempe church in 2010 and spent nearly two months out of work. She now is employed as a security guard. ”We were hoping to start a family when I turn 30,” said Duda, adding that they may delay that if they haven’t paid off their debts. She thinks it may take at least three years. ”I don’t want to bring a kid into a household with debt,” she said. ”I want to bring them into a world with solid principles.” 95
Life lessons A generation ago, a student could go to a local state university, work part time during the school year and full time in the summer and graduate with little or no school debt, said Lauren Asher, president of the Institute for College Access and Success. That’s not possible now. ”The cost of education has outpaced family income and grant income,” Asher said. Young, do-it-yourself workers must manage their middle-class expectations, said Kimberly Bridges, manager of financial planning at Scottsdale-based Stoker Ostler Wealth Advisors, an affiliate of Harris Private Bank. Focusing their careers, living within their means, paying down debt and saving for retirement are essential, she said. Managing expectations Media images of excess and easy credit inflated consumers’ expectations of what middle-class life should be like. Sprawling suburban homes and high-tech toys were viewed as entitlements during boom times, but historically, middle-class life was more modest. In the early post-World War II era, families had one car and homes were about 950 square feet, Bridges said. Most workers under 40 will have time to adjust to the reversal of fortunes, Bridges said. ”We had a great wake-up call, and I think for that age group, it has come in time for them,” she said. The biggest asset that young workers have is their human capital, she said. Usually workers under 40 have not hit their highest-earning years. So if they manage their careers carefully, they have time to repair financial wounds from the recession. Career management has been an expensive lesson for Duda. She racked up nearly $60,000 in debt working her way toward a master’s degree in divinity, with hopes of teaching theology one day. After she earned her master’s, she ultimately took a job at a Tempe church for $25,000 annually. She loved working in the church, but, in hindsight, she said, she should have considered the ability to pay off the loans when she contemplated a career. Now, as a security guard, she makes slightly more than what she did at the church. She and her husband are devoted coupon clippers and try to stick to a budget. Looking back, she said, ”I love my degree and I love the education that I got, but they aren’t the most practical degrees.” Health-care burden Health-care costs are a growing burden on all workers, including the youngest members of the workforce. The number of employers that provide health insurance for workers is shrinking. The jobs that do offer coverage require workers pick up a bigger share of the tab. Workers pay larger co-pays for office visits, and they must kick in - often hundreds or thousands of dollars - for surgeries and medical tests. For young workers who are struggling with school debt, a shaky job or housing debt, a small medical emergency can cause a financial crisis. Some punch a clock at jobs that don’t provide health insurance and keep their fingers crossed that they stay healthy. Other financially strained workers can’t forgo health coverage. When Laura Limon’s husband lost his job in 2009 with the financial arm of Chrysler in Chicago, they paid $400 a month so their family of three could continue to get health benefits - and that included the 65 percent temporary discount that was part of federal stimulus funds. Without it, it would have cost $1,000, said Limon, 32. COBRA, or the Consolidated Omnibus Budget Reconciliation Act, allows laid-off workers to pay out of pocket to continue health insurance with their employer. Limon’s husband now works in the Valley at PayPal, where health insurance is an employee benefit. ”We are definitely having to manage expenses,” said Limon, a stay-at-home mom with a part-time homebased business, who has a 3-year-old daughter. Her family is still paying off debts accumulated during her husband’s layoff, she said. Saving for retirement Once personal debt is repaid, saving for the future takes on growing importance, because the national burden of Social Security and Medicare is only expected to grow. 96
Young adults have become more pessimistic about their long-term financial situation. When surveyed in 2007 by the Employee Benefit Research Institute, only 8 percent of people in the 25-34 age group said they weren’t at all confident about having enough money to live comfortably throughout retirement. Since then, the percentage of adults ages 25-34 expressing a lack of retirement confidence has steadily increased, reaching 27 percent this year. One bit of good news is that young adults are participating in 401(k)-style retirement plans and Individual Retirement Accounts at younger ages than prior generations did, said Dallas Salisbury, president of the EBRI. ”The other (part) of the picture is that they are likely to have less help from employers or the government when they do retire,” Salisbury said. MORE ON THIS TOPIC 5 tips for better money management Young adults face daunting financial challenges but do have time and other advantages on their side. Here are five tips for adopting sound money-management practices: Learn more. With the Internet a click away, educate yourself on credit cards, homeownership, investing and other financial matters. Start saving. Despite the many demands on your money to meet near-term expenses, make saving a priority. Strive to put away enough cash to meet at least three months of living expenses but, preferably, six to 12 months. Take advantage of company benefits. Fewer young people will enjoy pension coverage, and you might not receive full Social Security benefits, either. So it’s important to use benefits that are available. If offered a 401(k)-style plan at work, contribute as much of your own funds as needed to qualify for employer matching funds. Learn to save by having money taken automatically from each paycheck. Avoid dumb moves. Like everyone, you run the risk of getting scammed or making bad investments. If you spend a lot of time on the Internet and in social-media circles, beware of identity-theft risks and other tricks. Guard personal information and monitor online accounts. Check credit history by obtaining free reports at annualcreditreport.com. Don’t fear risk - within limits. You probably should hold the bulk of your long-term investments in stocks, stock funds and other assets likely to appreciate over time. These will gyrate over short periods but tend to track the economy’s expansion over time. Learn about your investments: Use common sense to avoid losing money in scams and speculations. - Russ Wiles by Jahna Berry The Arizona Republic Apr. 24, 2011 12:00 AM [1]Young adults face future of self-reliance 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/24/
20110424arizona-middle-class-young-adults-self-reliance.html
Get the lowdown on government notes, bonds (2011-04-24 14:51) U.S. Treasury notes, bonds and savings bonds have a well-established record as a long-term investment. Several websites offer good primers on government bonds. Here is a sampling of sites: - Bankrate.com: Serves up insights about U.S. Treasury bills, Treasury Inflation-Protected Securities and U.S. savings bonds. 97
[1]www.bankrate.com/brm/green/sav/svgs1e.asp. - Bonds Online: Explains the government’s TreasuryDirect bond purchase program. [2]www.bondsonline.com/asp/treas/direct.asp. - InvestorGuide.com: Offers snapshot of U.S. government bonds. [3]investorguide.com/igu-article-576-treasury-bonds.html. - Investopedia: Provides good overview of government bonds. [4]investopedia.com/university/bonds/bonds4.asp McClatchy-Tribune News Service Apr. 24, 2011 12:00 AM [5]Get the lowdown on government notes, bonds 1. http://www.bankrate.com/brm/green/sav/svgs1e.asp 2. http://www.bondsonline.com/asp/treas/direct.asp 3. http://investorguide.com/igu-article-576-treasury-bonds.html 4. http://investopedia.com/university/bonds/bonds4.asp 5.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/24/
20110424biz-moneywise0424-government-notes-bonds.html
Fulton Homes still has no debt plan (2011-04-26 08:07) Two years and three months after filing for bankruptcy protection, Tempe-based Fulton Homes Corp. still does not have a court-approved Chapter 11 reorganization plan. According to U.S. Bankruptcy Court documents, negotiations between the homebuilder and its creditors, led by Bank of America, appear hopelessly deadlocked. A hearing scheduled for 11 a.m. today will help determine what happens next. The options include continuing to work on a mutual settlement, which Fulton Homes favors, or bringing in a mediator, which the bank-led group favors. Like many builders, Fulton Homes was struggling in late 2008 to keep up with its debt payments as its lenders demanded additional cash to offset the declining value of real-estate assets, market analysts say. The company filed for reorganization in January 2009 and has since been engaged in an epic battle with its lenders. Fulton Homes and its creditors have submitted substantially different debt-repayment plans to allow the company to emerge from bankruptcy. The lenders’ proposed plan would force a much more rapid repayment of the company’s debt, with higher interest and less consideration for a $25 million debt owed to Fulton Homes Chairman Ira Fulton. Fulton Homes was founded in the mid-1970s by Fulton, a prominent community figure and philanthropist. The engineering college at Arizona State University bears Fulton’s name, and ASU’s Mary Lou Fulton Teachers College was named after his wife. Doug Fulton, Ira’s son, is president and chief executive of Fulton Homes. by J. Craig Anderson The Arizona Republic Apr. 25, 2011 12:00 AM [1]Fulton Homes still has no debt plan 1.
http://www.azcentral.com/business/realestate/articles/2011/04/24/20110424fulton-homes-still-no-debt-plan.
html
98
Study: Underwater owners who walk are more credit savvy (2011-04-26 08:10)
Associated Press People who default on mortgages they can afford to pay are savvy about credit and tend to have better credit histories than other defaulters, new research shows. FICO, the firm that created the widely used FICO credit score, studied credit bureau data to develop what it says is a more accurate portrait of strategic defaulters. FICO defines them as people who are underwater on their mortgage – owing more than their home is worth – and more than 90 days delinquent on payments but current on other credit lines. Compared with other mortgage defaulters, strategic defaulters generally: -Have higher credit scores. The majority of them have credit scores above 620, FICO’s research shows. FICO scores go up to 850. -Use credit more judiciously. More than 35 % of non-strategic defaulters max out their credit cards vs. less than 10 % of strategic defaulters. -Have not been in their home very long. -Shop for new credit card lines before they strategically default. ”They’re getting their life in order,” says Andrew Jennings, chief analytics officer at FICO. Lenders have traditionally used the degree of home price depreciation as a basis for predicting strategic defaults. But FICO’s research gives a more complete picture, Jennings says. The company last week announced new tools that it says will help lenders better identify strategic defaulters before they default. Other companies, including CoreLogic, have launched similar products as the strategic defaults continue to erode home values. While the exact number of strategic defaults can’t be determined, studies indicate they account for many lost homes. The University of Chicago Booth School of Business estimates that strategic defaults accounted for 35 % of defaults in September vs. 26 % in March 2009. In January, the Nevada Association of Realtors released a study showing that 23 % of Nevadans who lost homes admitted to strategically defaulting. Nationwide, 23 % of homeowners with a mortgage are underwater, CoreLogic says. That means the problem of strategic defaults is likely to persist, says Craig Focardi, a TowerGroup banking consultant. Strategic defaulters can be hard to identify because they typically make their house payments, and pay other bills, until they begin the strategic default process, Focardi says. By identifying at-risk borrowers sooner, lenders may be able to guide them to options other than strategic default, say Frank Pallotta of Loan Value Group. His company aims to reduce strategic defaults by getting lenders to reward borrowers who pay off their loans. by Julie Schmit USA TODAY Apr. 25, 2011 08:14 AM [1]Study: Underwater owners who walk are more credit savvy 1.
http://www.azcentral.com/business/realestate/articles/2011/04/25/
20110425Underwater-owners-who-walk-are-more-credit-savvy.html
99
Lack of financial savvy hinders youths in debt (2011-04-26 08:13) Millions of young adults in their 20s and 30s are mired in debt at a time when they should be building wealth as their careers grow. Many factors tied to a tough economy have contributed to this situation, but a lack of financial education isn’t helping. Credit cards don’t come with instructions. Student loans lack an owner’s manual. High-school and even college students don’t need to pass personal-finance courses before facing the real world. Instead, they typically gain their money education the tough way, through the school of hard knocks. While a student at Arizona State University, Holly Huntimer made purchases using credit cards without really pondering the consequences. The Surprise woman, now 27, earned her bachelor’s degree with relatively little in the way of student loans, just $3,500, thanks largely to scholarships. But her credit-card bills were another matter, with her balance eventually topping $20,000 a couple of years after graduation. ”My peers all had a lot of credit-card debt, and we never seemed to worry about money,” she said. ”It was a way to maintain the lifestyle I was used to.” Roughly half of households headed by someone under 35 have credit-card debt, according to a recent report by Demos, citing Federal Reserve figures. Four in 10 households headed by younger adults have an auto loan. Student loans pose special challenges for many because these debts can’t be eliminated through a bankruptcy or repossession. Instead, they can follow someone around for years like a zombie. Because of the recession and sluggish recovery, job prospects aren’t as solid for today’s young adults as they were for older siblings or parents, making it tough to repay debts. Unemployment rates are higher for those in their 20s and early 30s, and many employers have cut retirement, health and other benefits. ”After graduation, I felt I was drowning in credit-card debt,” said Huntimer, who earned her degree in 2006. ”And after graduating, I wasn’t making as much as I expected.” Much has been made of boomerang kids who move back home with their parents as young adults. Financial pressures contribute to this trend. ”A lot of them don’t have an option but to move home,” said Mike Sullivan, director of education at Take Charge America, a non-profit debt-management and counseling group in Phoenix. ”Many of them don’t have any income, but they still have that student loan and credit-card debt.” Attention on finances Heightened financial literacy can’t do much to correct a tough job market, but it can ease problems tied to overspending and debt. One hopeful sign is that finances seem to be emerging as more of a hot topic for people in this generation. ”The current credit crisis has caught the attention of a lot of students,” said Joyce Serido, an assistant research professor at the University of Arizona. She and her colleagues have launched a research project following over 1,500 college students into middle-age to assess changes in their attitudes and behaviors toward finances. One observation she makes is that parents can play an important role in educating their kids. ”We liken financial behaviors today to where drugs and sex were five or 10 years ago,” said Serido, who is associated with the Norton School of Family and Consumer Sciences. ”When parents started to talk more frankly to kids back then about sex and drugs, that’s when we saw declines in risky behavior.” Parents as role models Skeptics might question whether parents make the best role models, given that many have their own foreclosure, credit-card and overspending problems. But Serido said it can be instructive for parents to discuss their own financial missteps. ”When parents talk to them, they tend to stay in line,” she said. Sharon Lechter, a Paradise Valley financial author and certified public accountant, notes that parents often make incomplete role models, especially when it comes to paying bills. 100
”Most young adults see a credit card being used every day by their parents, yet rarely do those same teenagers see the credit being paid off,” she said. ”This builds in the expectation of instant gratification.” Lechter, who collaborated with Robert Kiyosaki in writing books for the ”Rich Dad, Poor Dad” series and served on the first President’s Advisory Council on Financial Literacy, views credit cards as a double-edged sword. They are the ”quickest way for young adults to build good credit,” she said, and ”the quickest way to destroy a young adult’s credit.” Role of education Although rare, financial-education classes also have value. Arizona now requires an economics class for highschool students, starting with the class of 2012. Serido applauds the effort. While a single economics class won’t help students deal much with real-world finances, she said, it could whet their interest enough that they’re encouraged to take money classes in college and learn on their own, such as through financial websites. Along with parents and formal education, Serido considers employment the third key part of the financialeducation equation, as jobs expose employees to paychecks, taxes, bank accounts, benefits and more. ”It forces you to interact with the financial-services system,” she said. Some of those interactions will be difficult for kids to make and for parents to watch. Many experts feel it is best for parents to let adult children work out their own money problems, especially if doing otherwise could drag down the parents, too. ”As much as you’d like to help your child, it’s better for the child to declare bankruptcy and start over than to ransom your own retirement,” Sullivan said. ”Taking your kids back into the home is a great thing but paying off their debt is a bad thing.” Time to recover As rough as many young adults may have it, they still have time to repair the damage and learn sound financial habits. When Huntimer decided she had to solve her credit-card problems, she turned to Take Charge America. Part of the group’s focus is on negotiating concessions from credit-card companies such as in lowering a borrower’s interest rate and reducing or waiving fees, then putting them on a plan to pay off the debt. Another component involves education - helping with budgets and other financial tools. ”They have to be willing to make these changes,” said Mona Flores, a Take Charge America counseling supervisor. ”It takes a serious commitment on their part.” Progress on debts Huntimer, who stopped using credit cards when she began the program in 2008, said she has pared her original $20,600 credit-card balance to $4,600. She also has cut her student-loan debt from $3,500 to $1,700. She qualified for a mortgage and bought a home last year. Huntimer, who is single, said she earns between $35,000 and $38,000 a year as a marketing assistant at Peoria Sports Complex and as a part-time pet-sitter. She’s even putting away money in a savings account and in a Roth Individual Retirement Account. Huntimer said participating in the debt-management program didn’t hurt her credit, and she feels optimistic about her future. ”It was a challenge, but I didn’t suffer,” she said. ”I’m a lot less stressed now.” MORE ON THIS TOPIC Get educated about finances Sharon Lechter, a Paradise Valley-based financial author and certified public accountant, offers several tips for young adults. These include: " Read the fine print on credit-card agreements, limit the number of cards you have and keep balances as low as possible. " Maintain a budget. ”Once you know where your money comes from and where it goes, it is easier to make changes,” she said. " Delay making purchases on items for at least two minutes when in stores. This can help control impulse buying. " Consider homeownership as a smart long-term financial strategy. While it might not appear obvious with 101
the market so depressed, current low housing prices and tax benefits provide solid opportunities for young adults. " View college as an investment in your future, despite benefits that might not be immediately obvious. If finances are tight, consider attending a community college first to minimize student loans. " Set achievable money goals from which you can gain momentum, such as paying off small-balance creditcard debts first. ”This feeling of accomplishment, this little win, will give you the courage to keep going,” she said. - Russ Wiles Test your financial knowledge Are you financially literate? Gauge your knowledge by taking the following quiz. Answers provided at the bottom. " 1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, would you have more than $102, exactly $102 or less than $102? " 2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less? " 3. If interest rates rise, what will typically happen to bond prices - rise, fall or stay the same? " 4. True or false: A 15-year mortgage usually requires higher monthly payments than a 30-year mortgage, but the total interest over the life of the loan will be less. " 5. True or false: Buying a single company’s stock usually provides a safer return than you’d get with a stock mutual fund. This quiz was developed by FINRA, the Financial Industry Regulatory Authority. Typical respondents, both nationally and in Arizona, got three questions correct out of the five. For details, go to finra.org. Answers: 1. More than $102. 2. Would buy less. 3. Prices would fall. 4. True. 5. False. by Russ Wiles The Arizona Republic Apr. 25, 2011 12:00 AM [1]Lack of financial savvy hinders youths in debt 1.
http://www.azcentral.com/arizonarepublic/business/articles/2011/04/24/
20110424arizona-middle-class-young-adults-lack-financial-savvy.html
Fed eyes keeping inflation in check (2011-04-26 08:22) WASHINGTON - The Federal Reserve is increasingly confident in the economy and about to end a $600 billion program to support it. Now for the next step: figuring out how to keep inflation from taking off. Since late last year, the Fed has bought government bonds to keep interest rates low. Fed Chairman Ben Bernanke and his colleagues are expected to signal this week that they will allow the program to expire as scheduled in June. The end of the bond-buying program would mean that, aside from tax cuts, almost all the extraordinary measures the government took to prop up the economy are over. Congress is fighting over how deeply to cut federal spending, not whether to spend more for stimulus. Since the Fed announced the plan in August, worries that the economy would fall back into recession have all but disappeared. The private sector is adding jobs, and the stock market is at its highest point since the summer of 2008. But higher oil and food prices pose a threat. If companies are forced to raise prices quickly to make up for escalating costs, that could start a spiral of inflation. Exactly how much of a threat inflation poses to the economy is a matter of disagreement within the central bank. A vocal minority, including the Fed regional chiefs in Philadelphia and Minneapolis, believe the Fed may need to raise interest rates by the end of this year to fight inflation. The Fed has kept its benchmark interest rate near zero since December 2008. Richard Fisher, president of the Federal Reserve Bank of Dallas, argues that the Fed has done its job and 102
should consider halting the bond program now, not in June. The majority - including Bernanke, Vice Chairwoman Janet Yellen and William Dudley, president of the Federal Reserve Bank of New York - believe interest rates should stay low longer, and the bond-buying program should run its course. Bernanke has predicted that the jump in oil and food prices will cause only a brief, modest increase in consumer inflation. Excluding those prices, which tend to fluctuate sharply, inflation is still low, he has argued. Bill Gross, who manages the world’s largest mutual fund at Pimco, worries that rates on Treasury bonds will rise when the Fed stops buying them. If other buyers don’t step in and there’s less demand for Treasury bonds, then the rates, or yields, on those bonds would rise. That would drive down prices on bonds. Rates on mortgages, corporate debt and other loans pegged to the Treasury securities would rise, too. Higher borrowing costs could slow spending by people and businesses, and slow the overall economy. Fed officials and others believe that because the end of the program has been well telegraphed, it won’t have much of an impact on bond rates. That was the case in 2010, when the Fed ended a $1.7 trillion stimulus program. In February 2010, Bernanke began laying out the Fed’s strategy for tightening credit. But the economy weakened in the spring and continued to struggle. Bernanke did an about-face, and the Fed announced the bond program during the summer. The bond-buying program was the Fed’s second since the recession. The economy would have to be in serious danger of tipping into another recession for the Fed to consider a third round. The Fed has other tools at its disposal. Since early August, it has taken about $17 billion a month that it earns in interest from mortgage-backed securities and used it to buy bonds, a separate and smaller step than the $600 billion program. So far this year, Bernanke has managed to forge consensus for his policies - all Fed decisions this year have been unanimous - but the deepening divides could make Bernanke’s job more difficult. The decision comes at a time when Congress and the White House are fighting over how deeply they should cut federal spending over the next decade to curb the nation’s budget deficit. The deficit is on track to be a record $1.5 trillion this year, marking the third straight year over $1 trillion. It’s the highest share of the total economy since World War II. House Republicans have passed a plan that would slash spending by nearly $6 trillion over the next decade, in part by overhauling Medicare and Medicaid. President Barack Obama wants $4 trillion in spending cuts over 12 years and would raise taxes on the wealthy. The economic benefit of another major government measure meant to stimulate the economy, an $821 billion package passed in 2009 for building roads, repairing bridges and other infrastructure projects, has already rippled through the economy. However, the economy is still getting support from a sweeping package of tax cuts, including a reduction in the Social Security payroll tax that will give an extra $1,000 to $2,000 to most households this year. The Fed meeting begins today. When it ends on Wednesday, Bernanke, who wants to make the Fed more of an open institution, will take an unprecedented step for a Fed chief and hold a news conference. The news conference gives Bernanke the chance to build support for the Fed. But it could backfire if what he says causes confusion and rattles Wall Street. Bernanke plans to conduct the news conference once a quarter to unveil the Fed’s updated economic forecasts. The Fed is expected to lower its forecast for economic growth slightly this year, bump up its inflation estimate and upgrade its outlook for jobs. Bernanke also is likely to use the news conference to emphasize the Fed’s prediction that the jump in oil and food prices will lead to only a modest and short-lived increase in consumer prices. But he’ll also stress that the Fed stands ready to act if inflation shows signs of taking off. by Jeannine Aversa Associated Press Apr. 26, 2011 12:00 AM [1]Fed eyes keeping inflation in check 103
1. http://www.azcentral.com/arizonarepublic/business/articles/2011/04/25/20110425biz-federalreserve0426.html
104
BlogBook v0.4, EX 2Îľ & GNU/Linux. http://www.blogbooker.com LAT
Edited: May 9, 2011