Author Archives: W. P. Carey School of Business

W. P. Carey School of Business

About W. P. Carey School of Business

The Center for Executive and Professional Development (CEPD) within the W. P. Carey School of Business at Arizona State University develops practical business education that enables employees at all levels of an organization to address current and future business challenges. Whether you’re looking to broaden your personal knowledge or develop your company’s workforce, in an online program or a face-to-face one, CEPD is your one-stop resource.

grocery

Expect to Pay More for Certain Groceries

With California experiencing one of its worst droughts on record, grocery shoppers across the country can expect to see a short supply of certain fruits and vegetables in stores and to pay higher prices for those items. Professor Timothy Richards of the W. P. Carey School of Business at Arizona State University recently completed some research on which crops will likely be most affected and what the price boosts might be.

“You’re probably going to see the biggest produce price increases on avocados, berries, broccoli, grapes, lettuce, melons, peppers, tomatoes and packaged salads,” says Richards, the Morrison Chair at the Morrison School of Agribusiness within the W. P. Carey School of Business. “We can expect to see the biggest percentage jumps in prices for avocados and lettuce – 28 percent and 34 percent, respectively. People are the least price-sensitive when it comes to those items, and they’re more willing to pay what it takes to get them.”

Industry estimates range from a half-million to 1 million acres of agricultural land likely to be affected by the current California drought. Richards believes between 10 and 20 percent of the supply of certain crops could be lost, and California is the biggest national supplier of several of those crops. For avocados, the state is the only major domestic source.

Richards used retail-sales data from the Nielsen Perishables Group, an industry analytics and consulting firm, to estimate price elasticities – how much the prices might vary – for the fruit and vegetable crops most likely to be affected by the drought. Those most vulnerable are the crops that use the most water and simply won’t be grown, or those sensitive to reductions in irrigation.

He estimates the following possible price increases due to the drought:

* Avocados likely to go up 17 to 35 cents to as much as $1.60 each.
* Berries likely to rise 21 to 43 cents to as much as $3.46 per clamshell container.
* Broccoli likely to go up 20 to 40 cents to a possible $2.18 per pound.
* Grapes likely to rise 26 to 50 cents to a possible $2.93 per pound.
* Lettuce likely to rise 31 to 62 cents to as much as $2.44 per head.
* Packaged salad likely to go up 17 to 34 cents to a possible $3.03 per bag.
* Peppers likely to go up 18 to 35 cents to a possible $2.48 per pound.
* Tomatoes likely to rise 22 to 45 cents to a possible $2.84 per pound.

“We predict the increased prices will change consumer purchasing behavior,” says Sherry Frey, vice president of Nielsen Perishables Group. “We’ve identified certain consumers who will be more heavily affected by the price increases — for example, younger consumers of avocados. In addition, there is a larger department and store impact retailers will need to manage. While some consumers will pay the increased prices, others will substitute or leave the category completely. And, for a category like avocados, there are non-produce snacking categories, such as chips, crackers and ethnic grocery items, that will be negatively impacted.”

Richards adds, “One other thing for shoppers to understand — Because prices are going to go up so much, retailers will start looking elsewhere for produce. This means we’ll see a lot more imports from places like Chile and Mexico, which may be an issue for certain grocery customers who want domestic fruit and vegetables.”

89524671

Love-It or Hate-It Brands Are Less Risky

Are you a big fan of Apple or Nike, or a hater of McDonald’s? A new study from the W. P. Carey School of Business at Arizona State University shows love-it or hate-it brands probably won’t perform exceptionally well in the stock market, but they also offer investors less risk because you know just what to expect – the good and the bad. It’s something to consider in our volatile stock climate.

“Investors and company officials need to better understand the impact of brand dispersion – when consumers are polarized both for and against a certain brand,” explains Assistant Professor Michael Wiles of the W. P. Carey School of Business, one of the study’s authors. “Increasing brand dispersion may mean less amazing company returns overall, but it also means less volatile returns because some customers are super loyal and some haters will never buy the brand’s products, no matter what.”

Wiles and his co-authors, Professor Xueming Luo of Temple University and Assistant Professor Sascha Raithel of Ludwig Maximilian University of Munich, looked at data from more than 3 million users of more than 2,600 brands in the United States, the United Kingdom and Germany. They considered people’s perceptions of brand quality, value and satisfaction, as well as whether they would recommend the brand, feel good about using its products, or feel good about working for the company. The results of their study were published in the academic Journal of Marketing Research and the Harvard Business Review.

“Dispersion can affect investors’ confidence in a brand, such as when there’s a lot of negative chatter on social media,” says Wiles. “Downside dispersion has a stronger pull on returns in the short term.”

Walmart, Fox News Channel and AT&T are some brands that have high dispersion. Intel and Amazon are low-dispersion brands. Wiles says brand managers should pay close attention to brand dispersion and engage, even with the haters, when appropriate. They should either placate the haters or amplify the polarizing issue to rally and interest loyal fans.

Wiles weighs in on recent examples in the news that illustrate the importance of considering brand dispersion:

* General Motors is under scrutiny right now for its handling of faulty ignition switches. The negative information may lead GM’s more marginal customers to become brand haters and less likely to purchase the company’s stock. Wiles says the issue will probably lead to lower stock returns going forward, but the stock will also become less risky.

* Sochi was a problem for the normally low-dispersion brand of the Olympics. Wiles says holding the Winter Games at a “subtropical beach resort with palm trees” was inconsistent with the brand, and there were security questions and other logistical issues, as well. Consequences? Attendance was relatively low, and television viewership right away was down 8 percent in comparison to the opening ceremony of the Vancouver Olympics.

* Coca-Cola, a high-dispersion brand, decided to embrace a recent controversy over its multilingual “America the Beautiful” ad that ran during the Super Bowl. The lovers and haters brought in 8.4 million YouTube views for the ad, delivering both positive and negative reviews on social media. The company decided to air an even longer version of the ad during the opening ceremony of the Olympics with an added “E Pluribus Unum” disclaimer.

* Taco Bell, another brand with lots of lovers and haters, recently launched a new breakfast menu with a brazen ad campaign that pokes at McDonald’s. Several real people named Ronald McDonald sing the praises of the new breakfast items. Those who already liked underdog Taco Bell appreciated this needling, and it drew a response and social-media postings from McDonald’s lovers and Taco Bell haters, increasing buzz and ad awareness.

The full study on brand dispersion can be found online at http://journals.ama.org/doi/abs/10.1509/jmr.12.0188.

140054736

W. P. Carey Honors Executive of the Year

Jim Davidson has played a key role in some of the biggest deals in the technology industry, including investments in Dell, Skype, Go Daddy, Alibaba, Avago, Seagate and Sabre Holdings, which operates Travelocity. For his impressive work in the investment arena, the W. P. Carey School of Business at Arizona State University will honor Davidson – co-founder, managing partner and managing director of Silver Lake – with the school’s annual Executive of the Year Award next week.

“Jim Davidson has helped many businesses to strategically invest and grow into market leaders,” says W. P. Carey School of Business Dean Amy Hillman. “He has been an active advisor in the technology industry for more than a quarter of a century and is considered a pioneer in the world of technology investments.”

Davidson co-founded Silver Lake in 1999 and has helped the technology-focused private-equity firm grow to manage more than $23 billion in assets and employ more than 200 professionals around the world. The firm’s portfolio currently includes or has previously included such companies as Alibaba, Ameritrade, Avago, Go Daddy, the NASDAQ OMX Group, Sabre Holdings, Seagate and Skype. The firm was also instrumental in the recent $25 billion deal in which Silver Lake partnered with Michael Dell to take Dell Inc. off stock exchanges to become private again.

Prior to his work at Silver Lake, Davidson was a managing director at Hambrecht & Quist, a technology-focused investment bank and venture capital firm that helped underwrite the initial public offerings (IPOs) of Apple, Netscape and Amazon.com. He was also a corporate securities attorney.

Davidson serves on the board of SMART Modular Technologies, a designer, manufacturer and supplier of flash memory cards and other digital storage products. He has also served on the boards of directors of many other Silver Lake investments, including Avago, Seagate and Skype. He is an active angel investor and advisor to several private tech companies and also serves on the boards of nonprofits, including the University of California, Berkeley’s Center for Entrepreneurship & Technology and the U.S. Olympic Foundation Board of Trustees.

Davidson becomes the 31st annual Executive of the Year chosen by the Dean’s Council, a national group of prominent executives who advise the W. P. Carey School of Business. Previous honorees include Howard Schultz, chairman and chief executive officer of Starbucks Coffee Company; Alan Mulally, president and chief executive officer of Ford Motor Company, and Mike Ahearn, chairman of the board of First Solar, Inc.

Davidson will be honored at a luncheon at the JW Marriott Camelback Inn in Scottsdale on April 17. The event, which starts at 11:45 a.m., is part of the Economic Club of Phoenix speaker series. For more information about the club or to reserve seats, call (480) 727-0596 or visit www.econclubphx.org. Tickets are $75 per person for non-club members.

Job

Phoenix ranks 7th for job growth

Unemployment and job growth continue to capture attention as the U.S. economy rebounds from the Great Recession. This week, the final, revised numbers on state and city job growth for the year 2013 as a whole are out. Research Professor Lee McPheters of the W. P. Carey School of Business at Arizona State University provides rankings and analysis of the winners and losers, based on the latest figures from the U.S. Bureau of Labor Statistics.

Top 10+ cities and surrounding metro areas (1 million or more workers) for non-agricultural job growth, comparing 2013 to 2012:

Riverside, Calif. – up 4 percent
San Francisco – up 3.9 percent
Denver – up 3.6 percent
Houston – up 3.5 percent
Orlando, Fla. – up 3.2 percent
Seattle – up 2.8 percent
Phoenix – up 2.7 percent
Dallas – up 2.6 percent (four-way tie)
Los Angeles – up 2.6 percent
Miami – up 2.6 percent
San Diego – up 2.6 percent

Top 10 states for non-agricultural job growth, comparing 2013 to 2012:

North Dakota – up 3.6 percent
Utah – up 3.2 percent
California – up 3 percent
Colorado – up 2.9 percent (tie)
Texas – up 2.9 percent
6. Nevada – up 2.7 percent
7. Idaho – up 2.6 percent
8. Florida – up 2.5 percent
9. Washington – up 2.2 percent
10. Arizona – up 2.1 percent

Analysis:

Overall, the job-growth rate for the United States in 2013 was an increase of 1.7 percent, the same pace we saw in 2012. The number of jobs added nationwide last year was 2.26 million.

On the state list, North Dakota continues to dominate, having ranked No. 1 for multiple years in a row, largely thanks to its oil and gas production. However, a total of 12 states showed job growth of at least 2 percent last year.

“Several newcomers made the Top 10 job-growth states list this time,” says McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “Nevada, Idaho, Florida and Washington all hadn’t made the Top 10 in 2012. Nevada, in particular, is finally demonstrating a good rebound, cracking the Top 10 for the first time since the recession and taking the biggest leap up from No. 19 to No. 6. It led all states in the rate of new construction-job growth, with a gain of nearly 10 percent.”

The bottom 10 states for 2013 are South Dakota, Virginia, Maine, New Mexico, Vermont, Wyoming, Alaska, Pennsylvania, Arkansas and West Virginia. The only state that actually lost jobs was West Virginia at No. 50. Mining employment there fell by 5 percent, and they also had losses in construction and manufacturing.

McPheters notes very high interest in state economic performance right now because 31 governors are up for reelection, including those in Top-10 states California, Nevada, Idaho and Florida. Incumbents are also eligible for reelection in seven of the bottom 10 states: South Dakota, Maine, New Mexico, Vermont, Wyoming, Alaska and Pennsylvania.

On the Top 10 cities list, certain states have multiple winners.

“California is well-represented among the fastest-growing major metro labor markets with four cities, including Riverside and San Francisco in the top two spots,” explains McPheters. “Florida and Texas each have two large metro areas in the Top 10.”

Five big metro areas achieved job growth of at least 3 percent: Riverside, Calif.; San Francisco; Denver; Houston and Orlando, Fla. McPheters says the Riverside area was one of the most dynamic in 2013, leading all metro areas in the job-growth rate for construction, wholesale trade, warehousing and health care.

McPheters adds the biggest surprise may be what drove 2013 growth in the No. 7 Phoenix area, which was hit very hard by the recession. Phoenix led all large metro areas in information-sector and finance job-growth rates. In fact, Phoenix created the same number of information jobs in 2013 as the San Francisco area (2,000). Phoenix was also first nationwide in both the growth-rate percentage (5.6 percent) and absolute number of finance jobs added (8,400).

“Metro Phoenix economic-development efforts seem to be paying off, since both of these industries pay nationally competitive salaries and attract college-educated workers,” says McPheters. “This growth is happening in Phoenix more rapidly than anywhere else.”

The bottom cities for job growth in 2013 were Pittsburgh, Philadelphia, St. Louis and Cleveland, which all added less than 1 percent. Pittsburgh took last place.

The full 50-state ranking and other job-growth data from McPheters can be found at the W. P. Carey School of Business “Job Growth USA website: www.wpcarey.asu.edu/jobgrowth. IMPORTANT: For the annual numbers, select “Total Nonfarm,” “12-Month Moving Avg.,” “December” and “2013.”

WPCarey-School-Sign

W. P. Carey School Ranks Top 30 Again

U.S. News & World Report announces its prestigious annual list of the “Best Graduate Schools” in the country today. For the seventh year in a row, the W. P. Carey School of Business at Arizona State University ranks Top 30 nationwide among full-time MBA programs. The school’s evening MBA program also ranks Top 20 among part-time MBA programs.

“We’re happy the new rankings confirm we’re achieving consistent excellence here at the W. P. Carey School of Business,” says the school’s dean, Amy Hillman. “We have a phenomenal group of faculty, staff and students who repeatedly boost us to the top, year after year.”

On the new rankings list, the W. P. Carey School’s full-time MBA program comes in at No. 27, the best ranking for any Arizona school. The numbers are largely based on the positive reputation of schools among corporate recruiters — who offer students jobs — and among top administrators from peer business schools in the know.

“We are proud to offer one of the three least expensive programs in the Top 30,” explains Stacey Whitecotton, the W. P. Carey School’s senior associate dean of graduate programs. “We also have one of the two smallest programs in the Top 30, allowing us to keep the class sizes small and personal.”

The W. P. Carey School’s evening MBA program ranks No. 18 for part-time MBA programs nationwide. The evening program is offered in both Tempe and north Scottsdale, and it’s the highest ranked part-time MBA program in Arizona. The school also offers other part-time programs not eligible for inclusion in this particular set of new rankings: an acclaimed online MBA program that U.S. News & World Report ranked No. 2 nationwide earlier this year and a weekend MBA program that mixes online learning and campus classes every other Friday and Saturday.

The new U.S. News & World Report rankings also include other graduate-level “specialties” lists. The W. P. Carey School’s renowned supply chain management program ranks No. 3 for supply chain/logistics. The information systems program ranks No. 12 in its category. In addition, ASU’s Ph.D. program in economics ranks No. 36.

Other recent high rankings for the W. P. Carey School of Business:

> U.S. News & World Report ranks the school’s undergraduate business program No. 27 in the nation.
> Britain’s Financial Times ranks the school’s online MBA program Top 10 worldwide.
The Financial Times ranks the school’s China-based executive MBA program No. 28 worldwide.
> The University of Texas at Dallas ranks the W. P. Carey School Top 25 in the United States and Top 30 worldwide for business-school research productivity.
The Center for World-Class Universities at Shanghai Jiao Tong University ranks the W. P. Carey School No. 21 in the world for economics/business.

housing.prices

Phoenix Home-Price Rebound May Be Over

The big home-price rebound in the Phoenix area may officially be over. For the first time since last summer, the market experienced a month-to-month decrease in the median single-family-home sales price. A new report from the W. P. Carey School of Business at Arizona State University reveals that and other details about Maricopa and Pinal counties, as of January:

> The median single-family-home sales price was $196,900.
> Demand is very low, from both investors and normal homeowner-occupiers.
> Phoenix-area home prices are finally back in line with the Consumer Price Index, as if the recession and recovery had never happened.

Valley home prices started quickly rising after hitting a low point in September 2011, but they began slowing down this past July. Finally, this January, the median single-family-home sales price hit $196,900 — down 4 percent from December. It was the first month-to-month drop since the normal summer seasonal blips, and it’s largely due to a big drop in demand/sales activity.

“January is usually the quietest month of the year for sales, but this January was far weaker than January 2012 and 2013,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Despite the huge price increases between January 2013 and 2014, the total dollars spent on homes here this January actually dropped by 7 percent. This is the second lowest level of demand we’ve seen in 14 years, behind only 2008.”

Still, the median single-family-home sales price remained up 21 percent from last January, when it was at $163,000. Realtors will note the average price per square foot was up 19 percent. The median townhouse/condo price was up about 17 percent.

“The price gains now are weak, but it’s not clear that they’ll get much weaker or stronger,” explains Orr. “We’ve already seen a significant change in the market, which has completed its rebound from the artificially low prices between 2009 and 2011. Pricing is back to the level it would have attained if it had increased from 2000 in line with the Consumer Price Index.”

Demand from both investors and ordinary owner-occupiers is way down. Even though the available supply of homes for sale was up 47 percent from Feb. 1 of last year to Feb. 1 of this year, sales activity plummeted. Sales of single-family homes were down 23 percent from last January to this January. Sales of townhomes and condos were down 18 percent.

Luxury homes are one of the only bright spots in the market, with homes above a half-million dollars representing 14 percent more of the sales transactions this January than last January. However, even the supply of luxury homes is quickly rising, so sellers in that space will face tougher competition in 2014.

Investors continue looking to other parts of the country for bigger bargains, since Phoenix prices have risen. In January, the percentage of residential properties bought by investors was down to 21.1 percent from the peak of 39.7 in July 2012.

New home sales were also down 21 percent from last January to this January, representing the steepest fall in new-home closings in several years. Millennials and those who lost their homes to foreclosure or short sale in the recession appear more interested in renting than buying. That’s led to an upward trend in multi-family construction permits. It could also lead to higher rental rates in the next two years, during which time, home sales may continue to be relatively slow.

“The market conditions suggest prices will struggle to make any further upward progress in 2014,” Orr adds. “With February through June the strongest part of the year, we may yet see a little forward movement, but it’s likely to be tentative at best. The real test will come in the second half of the year, which is likely to see lower prices unless demand takes a distinct turn for the better.”

Foreclosure levels remain below the normal, historic trends for Maricopa and Pinal counties. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – were down 55 percent from January 2013 to this January. Completed foreclosures were down 54 percent.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed and downloaded at www.wpcarey.asu.edu/realtyreports. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

Sandra Wilken Luxury Properties

Phoenix-area Housing Market Officially in Slowdown

Expect those big price increases we’ve seen for Phoenix-area homes to slow down, possibly even stop or reverse a little this year. A new report from the W. P. Carey School of Business at Arizona State University predicts two-plus years of large gains to come to an end in 2014. The latest data for Maricopa and Pinal counties, as of December, reveals:

The median single-family-home sale price was still up 25 percent from December 2012.

However, demand was already falling sharply, with home and condo sales activity down 16 percent from the previous December.
Investors are showing less interest in the market, and construction-permit numbers remain small by historic standards.

Phoenix-area home prices have been going up since they hit a low point in September 2011, but the increases have been slowing down in recent months. The median single-family-home sales price was up 25 percent – $164,000 to $205,000 – from December 2012 to December 2013. Realtors will note the average price per square foot went up about 20 percent. The median townhouse/condo price rose 20 percent, to $120,000. However, those annual gains don’t accurately reflect the cooling pattern that started in July.

“We are seeing a big drop in demand compared with the last two years, and there are ominous indications of a softening market when we dig deep into the numbers,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Sales of single-family homes were down 17 percent from December 2012 to this December. Townhome/condo sales were down 11 percent.”

The supply of homes available for sale also fell in a normal seasonal pattern in December. However, the number of active listings was still up 36 percent from Jan. 1, 2013 to Jan. 1, 2014.

Orr says one other bright spot is the luxury market – homes priced over $500,000. That end of the market is doing well, with activity up 21 percent from December 2012 to this December, as jumbo loans are readily available and the stock market is still near historic highs. At the low end of the spectrum, sales activity for homes priced under $150,000 is down an incredible 47 percent.

“Overall, buyers are enjoying less competition in bids for homes, but sellers should be prepared for possible cuts in asking price,” says Orr. “A larger portion of the population is simply choosing to rent, instead of buy. That includes much of the Millennial generation and those who lost their homes to foreclosure or short sale. They either prefer the rental lifestyle, don’t feel that secure in their jobs, or don’t have the credit history or down payment needed for a purchase.”

Orr says there’s more competition to get rental homes than homes for sale. He also says this could lead to rent increases over the next two years, especially since more owners are now institutional investors who will have less hesitation in raising rents than traditional mom-and-pop landlords.

Investors continue to lose interest in buying more in the Phoenix area, as better bargains can be found in other areas of the country. The percentage of residential properties purchased by investors was just 19.3 percent in December, down from the peak of 39.7 in July 2012.

Foreclosed homes aren’t plentiful anymore. Orr says Maricopa county was 19 percent below its normal, historic foreclosure-notice level in December. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – were down 43 percent from December 2012 to December 2013. Completed foreclosures dropped 53 percent.

New-home sales had an excellent month, increasing their market share to 16 percent this December from 13 percent in December 2012. However, Orr says this was a normal seasonal bump. Construction-permit numbers remain low by historic standards.

Orr adds, “We’re seeing growing evidence the housing slowdown is also being experienced in other parts of the country, including southern California. If current conditions persist in the Phoenix area for several months, downward pressure on pricing will become hard to resist.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed and downloaded at www.wpcarey.asu.edu/realtyreports. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

141245827

Those Who Don’t Know You Are More Likely to Retweet

Big news can spread like wildfire via Twitter, but did you ever think about why certain people choose to retweet? A new study from the W. P. Carey School of Business at Arizona State University shows — if someone doesn’t know you well, then he or she is actually more likely to retweet something significant you say.

“We found that people with weak ties, such as those who only have a one-way relationship on Twitter – who don’t both follow each other – are more likely to retweet,” explains Assistant Professor Zhan Michael Shi of the W. P. Carey School of Business, one of the paper’s authors. “We believe the retweeters are sharing the information because they think it will boost their reputation and influence by providing something new. People with stronger ties might not retweet because they believe their followers already know the details and/or they may have communicated with each other in other ways.”

The new research by Shi and his co-authors, Professor Huaxia Rui of the University of Rochester and Professor Andrew Whinston of the University of Texas at Austin, will be published in the academic journal MIS Quarterly in March. For their study, they put together a complex program utilizing 20 computers over 140 days. They were able to follow the progress of certain tweets for five-day periods and see whether the Twitter relationships between the author and retweeters were strong or weak. It’s believed to be the first information-systems study using publicly available Twitter data to explore how people voluntarily relay information.

For example, the paper mentions a famed tweet in 2011, when a highly placed official in Washington said, “So I’m told by a reputable person they have killed Osama bin Laden.” That tweet was sent out more than an hour before the White House officially announced the event. By the time the presidential announcement was made, tens of thousands of Twitter users had already spread the word, even though most of them didn’t know anyone directly involved.

“Twitter is incredibly popular and fast-growing as a social medium, with more than 500 million registered users worldwide by April 2012,” says Shi. “It’s a combination of a broadcasting service and a social network, so our results aren’t necessarily translatable to more pure social networks, such as Facebook. However, we think the new information is going to be very useful to people like social-media managers and marketers trying to understand how information is spread via social-broadcasting networks like Twitter.”

Among the results: Those with a two-way Twitter relationship are only 6-percent likely to retweet a remark like the ones of the median quality these researchers studied. However, one-way followers are 9.1 percent likely to tweet it. That’s a boost of more than 50 percent.

The full study can be found online at http://misq.org/content-sharing-in-a-social-broadcasting-environment-evidence-from-twitter.html?SID=86knf65su27v98u9npsa31heh3. More analysis is also available from knowWPCarey, the W. P. Carey School’s online resource and newsletter, at http://knowwpcarey.com.

Arizona Economic Forecast 2011

Arizona Still 2 to 3 Years from Full Economic Recovery

You can expect more slow growth in Arizona next year, but we’re still two to three years away from full economic recovery. That’s according to experts today at the 50th annual Economic Forecast Luncheon co-sponsored by Arizona State University’s W. P. Carey School of Business and JPMorgan Chase.

About 1,000 people attended the event at the Phoenix Convention Center. Key experts covered the state and national economies, as well as the stock market and housing market.

“We expect 2014 to be the eighth year in a row for subpar growth in Arizona, which was hit harder than most states in the recession,” said Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “While growth is slow compared to past recoveries, we are making good progress compared to other states. Arizona jumped all the way up from the No. 49 state for job growth in 2010 to No. 8 in 2012 and No.7 by October of this year. The long-term economic outlook here is positive.”

Arizona saw 2-percent job growth through the 12 months ending in October 2013. The state has regained 46 percent of the jobs it lost in the recession, but it still has 170,000 more jobs to go. That doesn’t compare well to the nation as a whole, which has already regained 83 percent of its lost jobs. Still, several of the industries gaining in Arizona tend to have higher wages. The state ranks among the top 10 for growth in construction, wholesale trade, finance, information and real estate.

Among the Arizona expectations from McPheters for next year:
> Employment growth could rise from 2.1 percent this year to 2.4 percent in 2014.
> Personal income could go up from 4 percent this year to 5.4 percent next year.
> Population growth may jump from 1.4 percent to 1.5 percent.
> Retail sales will likely fall from 7.6 percent this year to 6.5 percent next year.

McPheters maintains that uncertainty continues to inhibit consumer spending, and Arizona tends to follow the U.S. economic cycle, which remains sluggish. Professor Lee Ohanian, associate director of ASU’s Center for the Advanced Study in Economic Efficiency and an advisor to the Federal Reserve Bank of Minneapolis, echoed that message.

“The U.S. economy remains significantly depressed, and many facets are in worse shape now than five years ago,” said Ohanian. “Employment as a fraction of the adult population and most components of gross domestic product (GDP) are farther below their normal trend levels today than during the financial crisis. Severe recessions are typically followed by very rapid recoveries to the economy’s long-term trend, but that isn’t happening this time.”

Ohanian says productivity growth is very low and the government has been using mostly short-term stimulus measures, instead of long-term economic policy changes, to combat this. He sees no evidence most of the short-run fiscal policies have increased employment. He says the federal debt, tax-rate increases, the structure of certain social safety-net programs, current immigration policy and a drop in entrepreneurship are all playing negative roles in the American economy.

“Current economic policy represents a drag on our economy,” said Ohanian. “I anticipate the 2014 U.S. economic growth will be similar to the last few years, with slow job growth and slow productivity growth that will expand real GDP per capita around 2 percent or perhaps a bit higher, and total real GDP around 3 percent.”

James Glassman, managing director and senior economist for JPMorgan Chase & Co., talked about the generally positive outlook for the financial markets. He noted that the stock market is at an all-time high and corporate profits are at record margins. Layoffs are back to normal.

“The financial markets take their cue more from business earnings than from Federal Reserve actions,” explained Glassman, who previously served in various research divisions at the Federal Reserve Board in Washington, D.C. “The stock market remains very attractive, although stock prices are unlikely to continue to rise at the pace of the last several years. Despite this year’s strong advances, the market is ‘fairly valued’ relative to the record level of earnings in the business sector.”

Glassman adds interest rates, including mortgage rates, will likely rise as the economy continues to improve. He also believes home prices will appreciate in line with economic expansion and income growth, with foreclosures falling to more normal levels.

Elliott D. Pollack, chief executive officer of Scottsdale-based economic consulting firm Elliott D. Pollack and Company, also discussed the housing market. He noted Arizona’s residential real-estate market is improving, with some estimates showing the median single-family-home price up by more than 20 percent since last year. Also, new foreclosure notices are down to pre-housing-crisis levels, and single-family building permits should be up about another 10 percent this year, on top of a 71-percent boost last year.

“It’s difficult not to be excited about the outlook for housing,” explained Pollack. “Home prices have been going up because relatively low inventory was available for sale.”

Pollack adds the office and retail real-estate sectors are finally starting to improve, though he doesn’t expect any significant new office construction in the Valley until at least 2016 or 2017. The industrial market was improving, but might see a setback now with too much space — 6.4 million square feet — under construction.

More details and analysis from the event, including the presentation slides, are available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com.

carey school - graduate

W. P. Carey School Announces New Degrees

One of the largest and highest-ranked business schools in the nation is announcing several new degree offerings for next year. The W. P. Carey School of Business at Arizona State University is adding new choices in the areas of “big data,” supply chain management and finance, plus a certificate in sales.

“We’re seeing tremendous growth in demand for professionals who can analyze the mountains of ‘big data’ coming into companies through social media, networking with customers, and other methods,” explains Amy Hillman, dean of the W. P. Carey School of Business. “That’s why we’re adding a new bachelor’s degree in data analytics and an online version of our existing master’s degree program in business analytics. We’re also introducing new degrees in global logistics from our Top 10-ranked Supply Chain Management Department and a new master’s degree in finance.”

Experts estimate 4.4 million data analysts will be needed worldwide by 2015, so this is a big area of career growth. The new bachelor’s program in business data analytics will be available at ASU’s Tempe campus, and the master’s will be a flexible online program lasting 16 months, allowing working professionals to take part. In addition, the school will launch an undergraduate certificate in applied business data analytics.

The undergraduate analytics offerings are from the school’s Information Systems Department, and the master’s degree is a joint effort from that department and the school’s Supply Chain Management Department. U.S. News & World Report ranks both departments Top 20 in the nation in their fields.

“We’re also starting up two new degrees in global logistics to help companies with efficiency, cost savings and risk reduction in their logistics operations,” says Professor John Fowler, chair of the Supply Chain Management Department at the W. P. Carey School. “The supply-chain field plays a growing role in the business world as companies work more on an international scale to meet the needs of their customers. The school has spectacular rankings and a stellar career-placement record in this area.”

Logistics knowledge is also vital after disasters like Hurricane Sandy or the big earthquake in Haiti, when countless crews and resources have to be moved. The new bachelor’s and nine-month master’s programs in global logistics will be offered at ASU’s West campus in northwest Phoenix. This is especially helpful for the business community because several global companies have facilities near this campus, including Amazon, Target, Walmart and numerous transportation companies. Also, Phoenix is relatively close to ports in Mexico and California that are heavily involved in shipping.

Next year, the W. P. Carey School will also launch a new master’s in finance program. This type of program is very popular in Europe and growing in demand in the United States, as more new college graduates want short, specialized business master’s programs to complement their undergraduate knowledge from other fields. The nine-month finance program will be available at ASU’s Tempe campus, as will a new undergraduate certificate in professional sales from the school’s Marketing Department. All of the new offerings will start in fall 2014, pending final approval.

The W. P. Carey School of Business is currently ranked Top 30 in the nation by U.S. News & World Report for both undergraduate and MBA programs. For more information on the school’s offerings, go to www.wpcarey.asu.edu.

customer.service

Getting Better Customer Service

How can your favorite businesses improve your customer experience and offer better types of service? Business leaders from around the world will gather in Phoenix next week to learn how to gain an advantage and win your loyalty. The 24th annual Compete through Service Symposium will feature speakers from Cisco, Disney Institute, FedEx Services, HP, IBM, Vanguard and other household names.

Some of the topics being covered this year: How services can help differentiate your business, lessons in innovation, how to use smart analytics, and how to create “wow” through the smallest things to make a difference for your customers.

This event is hosted by the prestigious Center for Services Leadership at the W. P. Carey School of Business at Arizona State University. The center was created in response to the unique challenges faced by companies as services have become a driving force in economies around the world, with less growth happening in products and manufacturing. The center’s member firms include Boeing, FedEx, GE, IBM, Mayo Clinic, Michelin, PetSmart, State Farm Insurance Company and other household names. The center also offers online courses, a list of which can be found at http://wpcarey.asu.edu/research/services-leadership/online-courses.

WHEN: Wednesday to Friday, Nov. 6-8, Full schedule available at http://wpcarey.asu.edu/symposium

WHERE: Marriott Renaissance Phoenix Downtown Hotel, 50 E. Adams St., Phoenix, AZ 85004

customer.service

Center for Services Leadership presents symposium

Now in its 24th year, the Compete Through Service Symposium, hosted by the Center for Services Leadership at the W. P. Carey School of Business at Arizona State University,  brings together the most innovative business minds and visionary thought leaders in engaging, enlightening environment to share ideas that are certain to inspire you.

The symposium is designed to leverage the science of service to help your organization build a solid infrastructure for success in this ever evolving, always-accelerating environment.

The 24th Annual Compete Through Service Symposium, presented with IBM, takes place November 6-8, 2013, at the Renaissance Phoenix Downtown Hotel. To learn more about the symposium, click here.

The Center for Services Leadership is a groundbreaking research center that concentrates on expanding service innovation by combining the latest scientific insights from the academic world with the best of business strategy in the real world.

The CSL was created in 1985 as a response to the unique set of challenges that companies faced. While others were focusing on products and manufacturing enterprises, the CSL pioneered the study of services. Today, the Center is a globally recognized authority and thought leader in the science of competing strategically through the profitable use of services.

WPCarey-School-Sign

W. P. Carey School Dedicates New McCord Hall

One of the nation’s largest and highest-ranked business schools dedicated a brand new, state-of-the-art facility today. The W. P. Carey School of Business at Arizona State University held a ceremony to mark the official opening of its 129,000-square-foot McCord Hall.

“We believe we’ve built the most advanced learning environment available for graduate business students,” says W. P. Carey School of Business Dean Amy Hillman. “Every detail was designed to teach students in a way that makes them better contributors to today’s work environment. The building has an emphasis on collaboration, discussion-based learning and flexibility.”

The new building is being added to the school’s two existing structures, which were renovated during this project. Together, they will ease overcrowding for the 10,000-plus students who attend the W. P. Carey School. McCord Hall will be home to the school’s graduate and executive-education programs, including the Top 30 nationally ranked MBA programs.

The impressive facility features modern architecture, technologically advanced tiered and flat classrooms, a multipurpose event space, a new graduate-level career center, team rooms, study areas, outdoor assembly areas, a lounge for honors undergrads, and a health-conscious café. McCord Hall is also environmentally friendly, with less water and energy use than similar buildings and a solar array that returns power to the campus grid. The project totaled $57 million, and the return on investment is expected to be great.

“We estimate the project has already had an economic impact on the gross state product of $64 million and the creation of 880 jobs,” says Professor Dennis Hoffman, director of the L. William Seidman Research Institute at the W. P. Carey School of Business. “Of course, the value of the construction does not include the added value that will accrue from the human capital produced in McCord Hall’s learning environment, allowing students to acquire knowledge and skills to compete in today’s economy.”

ASU President Michael Crow and Hillman presided over the dedication ceremony at the university’s Tempe campus. Philanthropist Sharon Dupont McCord and other building donors also took part. McCord and her late husband, Bob, are the major donors behind the facility’s name. More than $17 million in gifts and pledges from area companies and families, as well as other various sources, are helping to fund the building. Student support has been robust.

To learn more about the W. P. Carey School of Business, visit wpcarey.asu.edu. For more information about McCord Hall, go to http://building.wpcarey.asu.edu/. Donations to the building campaign can still be made at asufoundation.org/wpcbuilding. The W. P. Carey School’s full-time MBA, evening MBA, online MBA and undergraduate business programs are all currently ranked Top 30 in the nation by U.S. News & World Report.

WPCarey-School-Sign

New High Global Rankings for W. P. Carey School

Three new reviews are in for the W. P. Carey School of Business at Arizona State University, and the praise is unanimous. The Financial Times, The Economist and The Princeton Review all rank and rate the school among the very best in the world.

“These new global rankings reaffirm that the W. P. Carey School of Business is among the top business schools on an international scale,” says Amy Hillman, the school’s dean. “The Financial Times and The Economist both place us in the Top 50 worldwide for specific programs, and The Princeton Review delivers glowing reviews from our own students, confirming their excellent experience here.”

The new rankings out this week from the Financial Times — Britain’s equivalent of The Wall Street Journal — look at executive MBA programs around the globe. The W. P. Carey School’s program in China comes in at No. 28 worldwide and the No. 2 executive MBA program affiliated with any U.S. public university. Students in the Shanghai program are senior-level business executives and government leaders responsible for decisions influencing literally millions of people.

“Our Shanghai program provides world-class management education to key members of the global business community,” says Professor Buck K. W. Pei, executive dean of Asia programs for the W. P. Carey School of Business. “Our alums include three vice governors of China’s major provinces, six vice mayors of Shanghai, the chief executive officer of the Shanghai Stock Exchange, several bank chairmen, the chairman of Shanghai Airlines and other top leaders.”

The new rankings released this month by The Economist examine full-time MBA programs on an international scale. The W. P. Carey School’s program in Tempe cracked the Top 50 in only its second year of survey participation, ranking No. 45 overall and No. 28 among U.S.-based offerings. The full-time W. P. Carey MBA program is known for its small, personal classes and superior return on investment.

The Princeton Review also includes the W. P. Carey School of Business in its new book “The Best 295 Business Schools: 2014 Edition,” published this month. The book is based largely on student surveys and points out the school’s “friendly” and “happy” students, “good peer network,” “cutting-edge classes,” and “solid preparation in general management and teamwork.” The book gives the school a 97 career rating (graduate employment/salaries), a 95 academic-experience rating, and a 94 admissions-selectivity rating, on a scale with a maximum of 99.

For more information on the W. P. Carey School, which also has highly ranked undergraduate business, evening MBA and online MBA programs, visit www.wpcarey.asu.edu.

credit

Study: Young Credit Card Users Are MORE Responsible

If you think young people don’t know how to manage money and pay down their credit cards, then you should think again. A new study from the W. P. Carey School of Business at Arizona State University and the Federal Reserve Bank of Richmond shows young borrowers – 18 to 25 years old — are among the least likely credit card users to have a serious default on their cards. Not only that, they’re also more likely to be good credit risks later in life.

“Young credit card users actually default less than middle-age borrowers,” says Assistant Professor Andra Ghent of the W. P. Carey School of Business. “Also, those who choose to get credit cards early in life are more likely to learn from any minor defaults and move on, avoiding major credit card problems in the future. Plus, they’re more likely to be able to get a mortgage and become a homeowner at a young age.”

The new research by Ghent, as well as Peter Debbaut and Marianna Kudlyak of the Federal Reserve Bank of Richmond, is now a Federal Reserve working paper. In it, the researchers analyzed consumer data from the New York Federal Reserve Bank Consumer Credit Panel/Equifax to determine whether young borrowers are worse credit risks than others and to estimate the effect of individuals choosing to get a credit card at a young age.

The results demonstrate that part of the Credit Card Act of 2009 may not have been necessary. The act made it illegal to issue a credit card to individuals under 21 unless the person has a cosigner or submits financial information indicating an independent means of repaying the debt. It also includes a provision banning companies from recruiting credit card users within 1,000 feet of any college campus or at college events.

“Letting students apply for credit cards may actually make sense,” says Ghent. “These students are the people who want credit, need to build up a good credit history, and have a steeply sloped income profile. If they don’t have a student loan, then a credit card may be the only way they can establish a decent credit history.”

The researchers found that while people in their early 20s are more likely to experience minor delinquencies (30 or 60 days past due), they are much less likely to experience serious delinquency (90 days or more past due). In fact, someone age 40 to 44 is 12 percentage points more likely to have a serious delinquency than a 19 year old.

However, the Credit Card Act of 2009 has clearly had an impact on how many young people are getting credit cards. Individuals under 21 are 18-percent less likely to get a credit card following passage of the act, and that’s not necessarily a good thing.

“You can’t learn by just watching credit card use,” adds Ghent. “You have to get a card, pay it down every 30 days, and experience, in order to learn. It’s also hard to get a mortgage if you can’t get a credit card to build up your credit history.”

The full study is available at http://www.public.asu.edu/~aghent/research/DebbautGhentKudlyak_July2013.pdf.

Phoenix-Area Housing Market

Phoenix-area Housing Supply Increasing

Over the past two years, the tight supply of homes for sale in the Phoenix area has helped to dramatically drive up prices. However, a new report from the W. P. Carey School of Business at Arizona State University shows change on the horizon. The data for Maricopa and Pinal counties, as of August, reveals:

* The median single-family-home price is up 28 percent from last August, to $192,000.
* However, supply is finally starting to increase to help meet demand, and may be in balance by the end of the year.
* The luxury market is powering back, but might be derailed if the economy is pounded by the government shutdown and other events in Washington, D.C.

Phoenix-area home prices have shot up since hitting a low point in September 2011. From last August to this August, the median single-family-home price rose 28 percent – from $150,000 to $192,000. Realtors will note the average price per square foot went up 22 percent. The median townhouse/condo price rose 31 percent.

“We predicted the price-increase slowdown that happened over the summer months,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Now that temperatures are cooling, prices will start rising again, at least for the near term. However, they’re likely to go up at a less furious pace than the last two years.”

Orr says increases in the amount of homes for sale are helping to stop the price boom. As of Sept. 1 this year, the area had 29 percent more active listings (not under contract) than at the same time last year. As supply has been going up, demand has gone down, with sales of single-family homes 12 percent lower this August than last August.

“Although demand still exceeds supply, they are fast moving toward each other,” says Orr. “If the current pace of change continues, they are likely to be in balance before the end of the year. The seller is no longer holding all the cards in the Greater Phoenix housing market, and if their offers are countered aggressively, some potential buyers may walk away because they now have more alternatives.”

The types of transactions happening in the market are also noticeably shifting. Luxury homes over $500,000 grew their market share from 15 to 21 percent of the money being spent over the past year, while the lowest-priced homes (below $150,000) fell from 25 to 14 percent of the market.

“Access to finance at the high end of the market is very good, and we are seeing interest rates for jumbo loans even lower than the rates for conventional loans,” Orr explains. “However, if the stock market is negatively affected by events in Washington, then this will have an impact on the luxury housing market in Arizona.”

Investors continue to lose interest in the Phoenix market, with better bargains available in other parts of the country. The percentage of residential properties purchased by investors fell from the peak activity of 39.7 percent in July 2012 down to just 23.7 percent this August. The rates of all-cash buyers and out-of-state buyers are also dropping. In fact, the percentage of Maricopa County residences sold to non-Arizona owners in August was only 17 percent, the lowest percentage since January 2009.

Prices in all areas of Maricopa County are up over last year, and cheap foreclosures are tough to find. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – declined 61 percent from last August to this August. Completed foreclosures went down an incredible 73 percent.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed and downloaded at www.wpcarey.asu.edu/realtyreports. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

WPCarey-School-Sign

W. P. Carey School Honors Top Business Leaders

Three top business leaders will be honored for their innovation and achievements, when they are inducted into the W. P. Carey School of Business Homecoming Hall of Fame this month. They include the head of a famed jewelry company, a high-profile business founder from China, and a corporate leader at one of Arizona’s biggest companies.

On Oct. 17, they will join previous Arizona State University alumni inductees from such diverse organizations as the American Red Cross, Motorola, the U.S. Air Force, Wells Fargo Bank, XM Satellite Radio and the Arizona Diamondbacks.

“These stellar inductees represent strength, leadership and accomplishment in the business world,” says W. P. Carey School of Business Dean Amy Hillman. “They demonstrate how far our students can go and have gone in making their mark on the global economy.”

The 36th annual W. P. Carey School honorees are:

> Eddie LeVian, chief executive officer of the Le Vian Corporation, who has made Chocolate Diamonds® a red-carpet staple in Hollywood. LeVian earned a business degree from the W. P. Carey School in 1979 and took his innovative marketing ideas back to his family’s fine jewelry business in New York. The company’s sales have more than quadrupled over the past decade, and the LeVian family is active with many charities, raising $75 million in the past decade alone.

> Canglong Liu, a high-profile business leader in China, who founded one fertilizer factory in 1979, which grew into a conglomerate of major companies, including the Sichuan Hongda Group, now with 30,000 employees and 60 subsidiaries around the world. Liu is chairman of businesses that focus on finance, minerals and real estate. He is also a member of the national committee of the Chinese People’s Political Consultative Conference and the standing committee of the All-China Federation of Industry and Commerce. The Hongda Group has given $8 million to AIDS prevention and research in China. Liu received his MBA from the W. P. Carey School’s prestigious executive MBA program in Shanghai in 2007.

> MaryAnn Miller, chief human resources officer and executive leader of corporate communications for Avnet, a Phoenix-based Fortune 500 company with more than 18,000 employees and customers in 80 countries. Avnet is one of the largest distributors of electronic components, computer products and embedded technology in the world. Miller has more than 30 years of experience in human resources and operations management, and is responsible for leading the company’s human resources, organizational development and corporate communications worldwide. She is also a member of the Avnet Executive Board. She received her MBA from the W. P. Carey School’s executive MBA program in 2001.

About 200 alumni, business leaders and students are expected to attend the Homecoming Hall of Fame event on Thursday, Oct. 17 at the JW Marriott Desert Ridge Resort & Spa in Phoenix. A reception starts at 5:30 p.m., followed by the awards ceremony.

Space is limited. For more information on tickets or sponsorship, go to www.wpcarey.asu.edu/homecoming or call (480) 965-2597.

real estate market

Phoenix Housing Moves Toward ‘Normal’

The Phoenix-area housing market – hit especially hard during the recession — appears to be starting its slow march back to normal. The W. P. Carey School of Business at Arizona State University reveals the latest data for Maricopa and Pinal counties, as of July:

* The median single-family-home price rose again to $194,150, up slightly over 30 percent from July of last year.
* Townhome prices are soaring, and the luxury market continues to bounce back.
* Other significant factors now point to the beginning of an overall slow return from extremes to normalcy in the Phoenix housing market.

Phoenix-area home prices have risen dramatically since hitting a low point in September 2011. From just last July to this July, the median single-family-home price rose 30.3 percent — from $149,000 to $194,150. Realtors will note the average price per square foot went up 24.3 percent. Perhaps the most startling boost was in the median townhome/condo sales price, which shot up 50 percent – from $82,000 to $123,000 – as the low-end supply of townhomes dried up.

“The Greater Phoenix housing market has been dominated by supply constraints for the last two years,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The shortage has applied to both houses and townhomes for purchase, as well as homes for lease, but it is most severe for low-priced homes for sale.”

The overall supply of available area homes is finally starting to rebound somewhat. The number of listings not already under contract went up 26 percent from last Aug. 1 to this Aug. 1. Orr says he’s starting to see some inventory improvement in the middle range from $150,000 to $500,000, where almost all new construction is focused.

Also, he says increased access to jumbo loans is helping to boost the luxury market. Orr expects the high end to keep improving as long as the stock market performs well. The rate of single-family-home sales over $500,000 has already grown a whopping 64 percent from July 2012 to this July.

Still, the amounts of overall sales activity and month-to-month price movement were pretty stagnant this summer. Orr says that’s normal for this time of year.

“We predicted prices would rise significantly during the first half of the year and then upward pricing pressure would ease during the summer, which is exactly what happened,” says Orr. “The upward pressure is likely to return once temperatures drop below 100 degrees and the snowbirds return, around October. However, I expect less dramatic price hikes than we’ve seen over the past two years.”

Rising interest rates have discouraged many people from refinancing existing home loans this summer, while others rushed to lock in rates and complete home purchases in July. Orr expects an August/September pause for those who may be reconsidering their options now that loan payments could be higher than expected. Then, he expects activity to pick up again in October.

Orr adds, “Change is in the air. Several factors are pushing the market away from extremes and back toward normality and balance.”

Orr lists the following significant changes:

* Investor purchases represent a falling share of the market, having already dropped from a peak of 39.7 percent last July to 27 percent this July.
* Owner-occupiers are gaining more share, as investors look for bargains in other parts of the country.
* Arizona residents are gaining market share, with out-of-state purchasers completing only 18 percent of this July’s transactions in Maricopa County, the lowest percentage since February 2009.
* Financed transactions are gradually replacing all-cash transactions.
* Demand is falling to be more balanced with the low existing supply, and supply is gradually rising.
* The rate of foreclosures also continues to subside from the peak levels of spring 2009. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – dropped 61 percent from July 2012 to this July. Completed foreclosures went down 56 percent.

One continued challenge is the lack of new homes being built, though. Current new-home sales rates are less than a third of what would normally be needed to keep up with current area population growth.

“We have been through enormous turbulence since 2002, and it will be a relief to many to be operating in a normal, healthy market,” says Orr. “We are not there yet, but the direction is becoming clear.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed and downloaded at www.wpcarey.asu.edu/realtyreports. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

WPCarey-School-Sign

U.S. News Ranks W. P. Carey School Top 30 Again

New rankings are out today from U.S. News & World Report, and once again, the W. P. Carey School of Business ranks among the Top 30 undergraduate business schools in the nation. The Arizona State University school comes in at No. 27. This marks the ninth time in 10 years the school has made the prestigious Top 30.

“This new ranking confirms we’re achieving consistent excellence,” says W. P. Carey School of Business Dean Amy Hillman. “This particular ranking is determined by deans and senior faculty members at peer schools across the nation, who understand what makes a great program. We want to thank our phenomenal faculty, students and graduates for their hard work, which keeps us on top.”

In addition to ranking No. 27 overall, the undergraduate business program is also among the top 10 in the West. The school’s renowned supply chain management program ranks No. 3 in the nation on the specialty list for its field. Other departments making the Top 25 in their specialties — accounting at No. 22 and management information systems at No. 17.

Other recent Top 30 rankings for the W. P. Carey School and its programs include:

* The Center for World-Class Universities at Shanghai Jiao Tong University ranks the W. P. Carey School No. 21 in the world for economics/business.
* U.S. News & World Report ranks the full-time MBA program Top 30 in the nation for the sixth year in a row.
* U.S. News & World Report ranks the part-time (evening) MBA program No. 22 in the nation.
* U.S. News & World Report ranks the school’s online MBA program No. 2 in the country.
* The Wall Street Journal ranks the school’s Arizona-based executive MBA program No. 13 in the world.
* Britain’s Financial Times ranks the school’s China-based executive MBA program No. 21 in the world.
* The University of Texas at Dallas ranks the W. P. Carey School No. 24 in North America for business-school research productivity.

For more information about the W. P. Carey School of Business, visit www.wpcarey.asu.edu.

home.prices

Rising Interest Rates Can’t Stop Phoenix Housing Recovery

Rising interest rates don’t appear to be stopping the big comeback in the Phoenix-area housing market. A new report from the W. P. Carey School of Business at Arizona State University reveals highlights for Maricopa and Pinal counties, as of June:

* The median single-family-home price rose again to $190,000, up about 27 percent from June of last year.
* The luxury market is finally booming back, now that more banks are willing to finance jumbo loans.
* Rising interest rates have caused some people to accelerate their housing purchases, not significantly slowed things down.

Phoenix-area home prices have risen dramatically since they hit a low point in September 2011. The median price for a single-family home went up 26.7 percent – from $150,000 to $190,000 – between June 2012 and this June. Realtors will note the average price per square foot jumped 21.1 percent over the same time. The median price for condominiums/townhomes went up 38.9 percent to $125,000.

The tight supply of homes available for sale continues to drive the upward price movement in the market, with multiple bids being offered for most resale homes in the lower price ranges. However, the luxury market is also roaring back, with sales higher this summer than for any of the last six years.

“Access to finance at the high end of the market has improved recently with more lenders offering jumbo loans,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “Along with good returns from the stock market, this has strengthened a recovery in the luxury market, where sales volumes were back to 2007 levels in June.”

Overall, the Phoenix-area market had 11,178 active single-family-home listings available without an existing contract as of July 1. However, about 84 percent of those were priced above $150,000, leaving just 26 days worth of inventory for buyers at the lower end of the market.

New-home builders aren’t completing houses fast enough to make a big dent in the supply problem. While analysts expected 17,000 construction permits to be issued this year, the area is only on track to have about 12,500.

“Current new-home sales rates are less than a third of what would normally be needed to keep up with the current population growth in the area,” says Orr. “Census estimates show that between 2010 and 2012, the combined population of Maricopa and Pinal counties grew by 2.9 percent, while the number of dwelling units – both owned and leased – grew by just 1 percent. Tight lending standards and a shortage of construction labor are two reasons for this.”

The Phoenix area is also seeing less cheap, “distressed” supply coming onto the market. Completed foreclosures on homes and condos in June were down 61 percent from last June. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – were down 64 percent. Foreclosure starts finally just dipped back below “normal” historical levels for the area this June.

Institutional investors are showing less interest in the Valley as bargains are more readily available in other areas of the country. The percentage of Maricopa County homes and condos acquired by investors, including mostly “mom and pop” investors, was down from 34.9 percent last June to 26.7 percent this June. However, the area is still seeing a lot of all-cash home purchases. In fact, 44 percent of the Maricopa County property transactions under $150,000 were all-cash deals this June.

“For those who need mortgages, there has been much talk of rising interest rates and the effect this might have on demand,” adds Orr. “Rising rates have certainly reduced the motivation to refinance existing loans, but they have also sped up purchases by some buyers who want to lock in prices and rates. Still, other buyers will stop to reconsider their options, likely causing a pause in new contract signings in July and August, but I expect normal activity to resume in October.”

Rental activity remains strong, with relatively low vacancy rates and no surge in vacancies expected. Orr says the supply of rental homes in the Phoenix area represents just about two months of inventory, and there’s fast turnover.

“President Obama referred to his objective of making it easier for middle-class renters to qualify for home loans, when he visited Phoenix on Aug. 6,” says Orr. “The low-end market will depend to a considerable extent on whether he can make this happen through the actions of the Federal Housing Administration, Fannie Mae and Freddie Mac.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201307.pdf. A podcast with more analysis from Orr is also available fromknowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

education.business

W. P. Carey Offers New Degrees for Evolving Business World

Thousands of students are descending on the Arizona State University campus for the new school year, with move-in starting tomorrow. Those coming to the highly ranked W. P. Carey School of Business will have several brand new degree options available to them. The three degrees are designed to address the needs of a rapidly changing business world.

“We always try to evaluate what businesses and recruiters are telling us they want in the workplace,” explains W. P. Carey School of Business Dean Amy Hillman. “They say they’re looking for talented individuals to analyze the mountains of ‘big data’ now coming in from social media and other technology. They’re also looking for great hires in HR, and we’re rounding out the new offerings with a degree in sports and media studies, which should be popular with students.”

The new graduate-level program starting this fall is the Master of Science in Business Analytics. The “big data” program is a joint effort between the school’s Information Systems and Supply Chain Management departments, both ranked Top 20 in the nation by U.S. News & World Report. The nine-month program was created largely for those who recently graduated from college, but who want to position themselves for faster advancement in the booming information field.

“The business-analytics program is an opportunity to jumpstart your career in using big data and computer models to solve complex business problems and really add value to your company,” says Professor Michael Goul, chair of the school’s Information Systems Department. “Only about a dozen master’s programs like this exist in the United States. It’s estimated 4.4 million data analysts will be needed worldwide by 2015, so it’s a big area of career growth.”

At the undergraduate level, the W. P. Carey School is introducing a Bachelor of Arts in Business with a human resources concentration and one with a sports and media studies concentration:

The HR degree focuses on learning how to help an organization of any size manage its personnel and make informed decisions about employees. This includes learning about staffing and employment law, as well as developing critical thinking and writing skills for effective corporate communication.
The sports and media studies degree covers fan loyalty, strategically leveraging communication channels, and increasing revenue. Classes include sports administration, sports relationship management, and sports media. The concentration courses for this degree are offered through ASU’s prestigious Walter Cronkite School of Journalism and Mass Communication.

Both of the new undergraduate programs are offered at ASU’s Polytechnic campus in Mesa. That’s also where the school is offering Bachelor of Arts in Business degrees with concentrations in agribusiness, business entrepreneurship, communication, food industry management, management and technology.

The W. P. Carey School of Business is currently ranked Top 30 in the nation by U.S. News & World Report for both undergraduate and graduate business programs. For more information on the school’s programs, go to www.wpcarey.asu.edu.

shopping

Are Republicans More Open to New Product Choices?

Some people may think of political conservatives as having a desire to maintain traditions, but a new study shows they also have a more adventurous side that seeks out variety in products.

The new research from the W. P. Carey School of Business at Arizona State University was recently posted online by the Journal of Consumer Psychology. It includes three experiments in which political conservatives prove they are more likely to choose a variety of consumer products than their liberal counterparts.

“Although political conservatives have been found in previous studies to have a higher desire for control, they have an even stronger motivation to follow social norms when there is no threat to the system or individual,” explains Professor Naomi Mandel of the W. P. Carey School of Business, one of the study authors. “Since we have a very individualistic culture in the United States and Europe, people tend to think of others more favorably when they include more variety in their consumption choices. Therefore, political conservatives may seek out that approval and positive evaluation.”

In a series of experiments, Mandel and her co-author – Assistant Professor Daniel Fernandes of the Catholic University of Portugal – found political conservatives wanted more variety in their products than liberals.

For example, the researchers first used several established scales to question and determine the political leanings of 192 college undergraduates. Then, they told the students to imagine four consecutive weekly grocery shopping trips during which they could select from four brands of snack chips. Overwhelmingly, the politically conservative students chose more variety in their chips for the month than the more liberal students did.

In another experiment, 111 undergrads were polled for their political leanings. Then, they completed other tasks before ultimately being asked to select three candy bars from five options as a reward for participating. Again, the political conservatives exhibited much more variety in the candy bars chosen.

“Differences between liberals and conservatives are rooted in basic personality dispositions that reflect and reinforce differences in fundamental psychological needs and motives,” says Mandel. “We wanted to understand how and why a consumer’s political ideology could affect his or her consumption choices.”

Mandel explains the findings could help marketing managers with future ad placements. For example, if a company wants to introduce a new product, it might decide to target politically conservative neighborhoods and outlets like Fox News and The Wall Street Journal.

To read the full study, go to http://www.sciencedirect.com/science/article/pii/S1057740813000478.

98427193

Phoenix-area Foreclosure Saga Ending

The Phoenix-area housing market has finally hit “normal, historical levels” for those going into foreclosure. After years of severe foreclosure trouble, a new report from the W. P. Carey School of Business at Arizona State University reveals that good news and more for Maricopa and Pinal counties, as of May:

* The median single-family home price rose again to $185,000, up about 26 percent from May of last year.
* The final chapter of the foreclosure crisis is wrapping up in Phoenix, as foreclosure starts — homeowners receiving notice their lenders may foreclose in 90 days – finally hit normal, historical levels in May.
* On the negative side, the chronic shortage of area homes available for sale continues to be an issue and could last for years.

Phoenix-area home prices hit a low point in September 2011 and have risen dramatically since then. The median single-family-home price reached $185,000 this May, up from $147,000 last May. That’s a boost of 25.9 percent. Realtors will note the average price per square foot went up 22 percent at the same time. The median townhouse/condo price went up about 27.1 percent.

“Between this January and May alone, the average price per square foot rose about 13 percent for area single-family homes,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “However, the upward pricing pressure should disappear during the summer. I expect the prices to resume their strong upward direction in the fall, once temperatures drop below 100 degrees and snowbirds return.”

Rising prices don’t appear to be dampening the housing recovery in the Phoenix area at this point. In fact, home-and-condo sales activity went up 6.6 percent between April and May. May is the second month in a row where activity increased from the same time during the prior year, reversing a long negative trend. Even the luxury market is gaining, with more sales in May than in any other single month over the past six years.

“There has been much talk of rising interest rates and the negative effect this might have on demand,” says Orr. “The sudden and recent increase in rates has certainly reduced the motivation to refinance existing home loans. However, it is almost certainly increasing buyers’ determination to purchase homes now, rather than later, when rates may go even higher.”

Orr adds he sees early signs some lenders may react to higher interest rates by easing up their rules, allowing more people to buy homes. He also believes prospective buyers may simply settle for purchasing smaller, more affordable houses than they originally wanted, in order to manage the higher interest payments.

At the same time, the wave of foreclosures triggered by the housing crisis appears to be ending in the Phoenix area. Completed foreclosures on single-family homes and townhome/condos in May were down 53 percent from last May. Foreclosure starts – owners receiving notice their lenders may foreclose in 90 days – went down an incredible 67 percent in the same period. Given population growth, this means the area finally hit its normal, historical level of foreclosure starts this May.

“Foreclosure starts dropped 15 percent just between April and May alone,” says Orr. “Foreclosure levels are now far below the peak levels of March 2009, and the number of pending foreclosures is below the level from the first quarter of 2002. We expect these numbers to continue to fall over the next several years due to the very tight underwriting standards in place.”

Without cheap foreclosures coming into the market — and with ordinary homeowners reluctant to sell because they’re either locked in by negative equity or waiting for prices to keep rising — the Phoenix-area housing market continues to struggle with a chronic shortage of homes available for sale that may last for years. The number of active single-family listings without an existing contract was just over 11,000 as of June 1. That’s down 0.4 percent since May 1, and 83 percent of the available homes are priced above $150,000, creating a problem for those looking in the lower price range. At least the shortage has improved somewhat from last year, when supply was dropping at a rate of 6 percent per month.

“The chronic shortage applies to both homes for purchase and homes for lease,” Orr explains. “The average time for a leased home to be on the market is down to about one month. With this fast turnover and relatively low vacancy rates, it’s perhaps surprising that single-family and condo rents have only very modestly increased.”

New-home builders don’t appear too anxious to help meet the demand. They are trying to make sure they don’t overbuild like they did before the housing crisis, and they want to keep prices moving up. Current new-home sales rates are less than a third of what would normally be needed to keep up with local population growth. As a result, Orr says the combined population of Maricopa and Pinal counties grew 2.9 percent from 2010 to 2012, but the number of owned and leased dwelling units only grew by 1 percent.

Lastly, institutional investors continue to lose interest in the Phoenix area. Their buying spree that began in 2011 is in a downward trend. The percentage of the area’s total single-family-home and condo sales carried out by investors is down from 39.7 in July 2012 to 27.3 percent this May. Most investor transactions are actually going to so-called “mom and pop” purchasers. Orr says they own roughly 96 percent of the area’s rental-home inventory.

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full_Report_201306.pdf. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.

housing.prices

No Housing Bubble for the Phoenix Area?

Despite dramatic home-price boosts, don’t expect another housing bubble anytime soon in the Phoenix area. A new report from the W. P. Carey School of Business at Arizona State University breaks down what’s happening in the Maricopa and Pinal County housing market, as of April:

* The median single-family home price climbed again to $181,399, up almost 30 percent from April of last year.
* The report’s author sees no housing bubble on the way, with a very tight supply of available homes for sale.
* He also sees no significant negative effect yet from rising interest rates on local housing demand.

Phoenix-area home prices have been soaring since they reached a low point in September 2011. The median single-family home price rose 29.6 percent — from $140,000 to $181,399 — between April 2012 and April 2013. Realtors will note the average price per square foot went up 23.5 percent. The median townhouse/condo price went up 34.6 percent.

“In previous reports, we predicted prices would rise significantly during the strong annual buying season that lasts until June,” says the report’s author, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “From February through April, the average price per square foot did rise more than 9 percent for single-family homes, but the upward pricing pressure may finally ease somewhat this month.”

One big reason for the price gains has been the chronic shortage of available homes for sale in the Phoenix area. The number of active single-family-home listings (not including those already under contract) fell 7.3 percent just from April 1 to May 1. Only 24 days of lower-end supply (priced under $150,000) is out there. However, the frequent drops in supply have at least slowed down enough to let the market accumulate 20 percent more listings than it had at the same time last year.

Investor interest in Phoenix has also waned as prices went up and better bargains were still available in other areas of the country. Orr says the institutional-investor buying spree here began in 2011, peaked in summer 2012, and is now in a downward trend. The percentage of homes purchased by both small and institutional investors in Maricopa and Pinal counties in April was 26.8 percent, down all the way from 39.7 percent in July 2012, and most of these purchases were actually made by small-scale investors.

Many of the investor-purchased homes have already been turned into rentals for people who lost their houses during the recession. Some commentators have been saying there might be another housing bubble when investors decide to sell these homes, but Orr strongly disagrees.

“Some commentators talk ominously of a bubble bursting when these homes come back onto the market,” he says. “Such talk gets a lot of attention because we are over-sensitized to bubble talk after the disruptive events of 2004 to 2006. However, this idea falls flat when we examine the actual number of homes involved. The entire institutional inventory of 10,000 to 11,000 rental homes here represents a tiny fraction, less than 1 percent, of our housing stock. If every single one were to be placed for sale next month, we would still have less supply than in a normal balanced market.”

Demand from investors is already being replaced by demand from owner-occupiers and second-home buyers. Most homes priced below $600,000 continue to attract multiple offers within a short time. The luxury market is also gaining some steam. Single-family-home sales activity overall went up 4 percent from April 2012 to this April, beginning to reverse a long downward trend in year-over-year activity.

“There has been much talk of the negative effect that rising interest rates might have on demand,” says Orr. “So far, the increases have been minor, and the main effect has been to reduce the motivation to refinance existing home loans. At the same time, higher interest rates often create a greater sense of urgency among home buyers, so if lenders simultaneously relax their underwriting rules, this could stimulate demand, rather than reduce it.”

The market also continues to recover from the foreclosure crisis. The number of completed foreclosures on homes and condos in April of this year was down 46 percent from April last year. Foreclosure starts – homeowners receiving notice their lenders may foreclose in 90 days – dropped 60 percent. Orr expects the rates to fall below long-term averages soon.

With fewer foreclosures coming on the market, some buyers have turned to new-home builders. However, Orr says the construction industry is still building far fewer homes than needed to keep up with rising population and demand in the area. This is partly because the prices of land, materials and construction labor are all rising as subcontractors struggle to attract more workers. He says the developers are also being very cautious in their expansion. They enjoy the fact that limited supply allows them to continue increasing prices faster than their costs and don’t want to disturb this trend by overbuilding.

“Given the balance between supply and population growth in Phoenix, home prices are unlikely to fall below today’s level and are more likely to continue to climb for a long time, though at a more gentle pace.”

Orr’s full report, including statistics, charts and a breakdown by different areas of the Valley, can be viewed at http://wpcarey.asu.edu/finance/real-estate/upload/Full-Report-201305.pdf. A podcast with more analysis from Orr is also available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com/index.cfm?cid=13.