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money

Johnson Bank Closing 4 Offices In Arizona

Johnson Bank offices in Phoenix, Mesa Peoria and Rio Verde will close their doors on Jan. 8, 2011, it was announced today.

The closings come as a part of the bank’s plan “to maintain the health of the business in the midst of depressed economic conditions,” according to a company press release.

Arizona office closing are at 1850 N. Central Ave., in Phoenix; 1001 W. Southern Ave., in Mesa; 16155 N. 83rd Ave., in Peoria; and 18815 E. Four Peaks Blvd., in Rio Verde.

The bank has an additional five locations in Phoenix and Scottsdale that will remain open. Approximately 12 associates will be affected.

“These carefully planned branch consolidations will result in fewer locations, yet allow us to continue to provide good coverage of the Scottsdale and Phoenix areas and most importantly the same high level of service our clients are accustomed to,” said Russ Weyers, COO/incoming CEO. “We’re making the right decisions to remain a strong, long term financial partner for our clients.”

The banks will remain open until the closing date. Weyers said he expects the impact on clients to be minimal.

“Our client relationships are important to us, we appreciate their business and feel our five remaining full service financial services locations will continue to meet their needs,” Weyers.

Photo from Wikimedia Commons.

Newly Formed Arizona Commerce Authority Convenes Its Inaugural Board Meeting

Vowing that “today the rubber hits the road,” Gov. Jan Brewer and Jerry Colangelo assembled and introduced 35 state leaders representing diverse backgrounds for the inaugural board meeting of the Arizona Commerce Authority.

The private-sector board will work to align diverse assets and opportunities within the state to compete economically in both domestic and international markets to create high-quality jobs for the Arizona residents.

“For the first time in our state’s history, we convene the Governor, the Speaker of the House and the Senate President, and more than 35 of our nation’s most acknowledged leaders within both the private sector and academia – all with one express purpose: to advance the global competitiveness of our state the economic prosperity we seek for each person, each family and, perhaps more importantly, each child – it’s about a vision for a strong, vibrant economic future for this great state,” Gov. Brewer said.

“When I became Governor, I promised to get Arizona back on track by creating quality jobs, attracting high-growth industries, and advancing our competitive position in the global economy. We are doing just that. With this board, I have now delivered a model to advance Arizona.”

Presentations to the board outlined the impacts of the global economic crisis on the state, the forecasts if Arizona does not address diversification and growth in base industries, the state’s overall global competitiveness, and a focused approach to four core areas on which the ACA will focus and develop a planned approach to advance the state.

The authority will focus on improving the state’s infrastructure and climate to retain, attract and grow high-tech and innovative companies. That focus will be on aerospace and defense, science and technology, solar and renewable energy, small business and entrepreneurship.

“During one of the most challenging economic conditions in our nation’s history, Arizona is competing for something that is even greater than Olympic Gold; we are fighting for the health and future of our families and this state,” said Colangelo, co-chair of the board. “Today, with the expertise and leadership of each board member, we begin to compete aggressively for what really matters.”

Don Cardon, current director of the Department of Commerce, will serve on a selection committee to recruit a president and CEO of the ACA. Other committee members are Gov. Brewer’s chief of staff Eileen Klein; Mo Stein, senior vice president of HKS; Jerry Fuentes, president, AT&T Arizona/New Mexico; and Michael Kennedy, co-founder and partner, Gallagher & Kennedy.

Other notable board members include Kirk Adams, speaker, Arizona House of Representatives; Benito Almanza, state president, Bank of America; Michael Bidwill, president, Arizona Cardinals; Dr. Michael Crow, president, Arizona State University; Linda Hunt, president, St. Joseph’s Hospital and Medical Center; Anne Mariucci, chairman, Arizona Board of Regents; Doug Pruitt, chairman and CEO, Sundt Construction; and Roy Vallee, chairman of the board and CEO, Avnet.

money in vice

The Economic Recovery Begins In 2009, But It Will Be Slow Going

The national and state economies are expected to start feeling the effects of a recovery during the last quarter of 2009. However, the recovery over the next year will be slow, with unemployment continuing to rise and economic growth anemic at best. Meanwhile, the state’s expenditures are rising, even as revenue continues to fall, setting the stage for future budget cuts and an expected tax increase.

That was the consensus forecast unveiled by top economic experts from the W.P. Carey School of Business at Arizona State University and the Arizona governor’s office at the annual Economic Outlook Luncheon on May 20. Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at W.P. Carey and editor of Economy@W.P. Carey, provided an overview of current economic conditions on the state and national level, and offered a forecast for the coming year.
“The economy is going to show some signs of recovery in the last part of 2009, but the way I like to look at this is that lots of our economic indicators will still be underwater in a sense — they just won’t be as far underwater,” he said. “We’ll probably see positive growth in GDP, we will see job losses getting smaller, but there will still be job losses. There will still be people claiming unemployment insurance and, of course, unemployment rates will still be going up.
“It’s going to be a deep, sort of U-shaped recovery and 2011 will probably be a pretty good year of job growth,” McPheters added. 
In the meantime, job losses will continue to mount. In March, with an over-the-year employment decline of 7.1 percent and 136,000 jobs lost, the Valley just edged out Detroit as the weakest large metro labor market in the nation. And even as the economy begins to recover, the Greater Phoenix area will still see its labor market contract by 1 percent in 2010, according to McPheters.
Nationally, McPheters stressed that while the current recession has been painful, it still is not on par with the Great Depression. The Great Depression was marked by four consecutive years of decreases in Gross Domestic Product (GDP), while the current recession is expected to result in four consecutive quarters of decrease in inflation-adjusted GDP. In fact, in the first year of the recession, the national GDP actually increased by 1.1 percent.
“During 2008, the first year of the recession, you would expect that the GDP would be decreasing,” he said. “Well, one of the factors holding it up was exports. Exports continued strong in the United States through 2008.”
This year, however, exports are expected to drop by 10 percent. That’s just one example of how the national and state economies will continue to struggle as the recovery begins to take hold. Another example is the expected freefall in the commercial real estate market, especially in Arizona.
“Commercial is the next shoe to drop and we have seen this pattern before,” McPheters said. “Even as you see residential (construction) begin to pick up, I think you can expect that commercial building is going to be very, very weak all the way through 2010 and probably 2011, because what we need to see is population growth come back and job growth to come back. There’s no point in building retail space and office space if the jobs are not there and the consumer is not coming out to shop.”
And it is consumers, who account for 71 percent of GDP, who really hold the key to the economic recovery.
“The consumer is the only part of this economy that can bring us back,” McPheters said. “Consumers are not going to come back into the game until home prices stop falling, until the stock market stabilizes, until they see unemployment rates have peaked out and job losses start to get smaller and smaller. And the consumer has to have confidence to buy, and believe it or not, the consumer has to back off of their inclination to save their money.”
In March, the savings rate as a percent of disposable income was 4.2 percent, up from 2.6 percent six months earlier. While increased savings are considered a good thing in robust economic times, a pullback by consumers as an economy tanks can have devastating effects. McPheters pointed out that for each 1 percent increase in the savings rate, approximately $100 billion are being pulled out of the consumer-spending stream.
However, McPheters expressed confidence that the very calamity that sent our state and national economies reeling will eventually add to Arizona’s attractiveness to new residents and businesses — falling home prices.
“Housing prices have now returned to the traditional level, where Arizona housing prices are now more affordable than the national average,” he said. “In 2005 and 2006, we had come to the point where we were one of the least affordable markets. That has turned around and it has turned around very quickly. Of course that has been very painful.”

Dennis Hoffman, director of the L. William Seidman Research Institute at W.P. Carey, agreed with McPheters, adding that he believes the state’s economic rebound will be strong.

“This of course is the big question: What kind of bounce will take place? Now, I’ll have to say that the dramatic shakeout in prices in housing, while it has been absolutely disastrous for a number of folk and put a lot of pressure in a lot of different places, it might set us up for a more robust recovery than I would have thought six to nine months ago,” he said. “The thinking is really, very, very simple; an attractive attribute of Arizona has historically been great climate, affordable housing and a place to get a job. That third aspect really doesn’t exist right now, but it could exist if our economy recovers at a little faster pace.”
In the economic downturns of the past four decades, Arizona has bounced back strongly, and Hoffman is confident history will repeat itself, especially if the state and Valley can re-create the environments that people from around the country have found so attractive.

However, a major wrench in making the state attractive again is Arizona’s current budget crunch. In fiscal year 2009, the state’s budget gap stands at $1.6 billion. In fiscal year 2010, that’s expected to almost double to $3 billion dollars. As the economy has worsened, unemployment has soared to almost 8 percent, foreclosures have skyrocketed and businesses have closed their doors. As a result, billions of dollars in revenue from income, property, sales and business taxes have evaporated. Conversely the need for state services has exploded.

“We’re really seeing the effects of the downturn in the economy, both in terms of state revenues — our collections are down at a very significant rate — and likewise, our caseloads are up at a very significant rate, because more of our citizens are in need of services,” said Eileen Klein, director of the Arizona Governor’s Office of Strategic Planning and Budgeting, adding that in the past two months alone the Arizona Health Care Cost Containment System (AHCCCS) has enrolled 50,000 people.
Hoffman pointed out that in the past, $48 to $50 out of every $1,000 of personal income had gone into the state’s general fund.

Small Businesses getting help in down economy

Despite Weak Economy, Credit Unions Are Providing Financial Assistance To Small Businesses

When talking about credit unions and business loans, the key word is small. The percentage of business loans to credit union assets nationally is about 2 percent; business loans in Arizona average about $240,000, compared to $180,000 nationally. And because the loans are relatively small, the focus is on small businesses. Federal law caps credit union business loans at 12.25 percent of total assets.

“With business loans hovering at around 2 percent, it tells you that a lot of credit unions are not doing business loans. But they have plenty of room to assist businesses,” says Scott Earl, CEO of the Arizona Credit Union League and Affiliates.

One of the reasons that a majority of credit unions, especially smaller ones, don’t dabble in business lending is because of the level of expertise required.

“You need to be fairly sophisticated,” Earl says. “Traditionally, larger credit unions have the ability and staff support to make business loans.”

Of course, not all business loans require a lot of sophistication. Perhaps a teacher has a summer job doing yard work and needs a trailer to haul things around. In fact, many of the loans go to sole proprietors, and some involve small-business owners who were turned down by a bank.

“We hear stories like that all the time,” Earl says, “and not because of economic conditions.”
Traditionally, a credit union gets involved in business loans because some loans are too small for the average bank — not worthy of their time and effort. That’s probably a bigger issue during an economic boom, Earl says.

“We’re making business loans. You hear about banks pulling out of business lending. But we have not done that,” says Mark Olague, assistant vice president of business lending for Desert Schools Credit Union.

He tells of a business prospect who had a construction loan with a bank and was having difficulty getting timely advances. Not only did the credit union make the construction loan, refinancing was approved for commercial loans on several of the client’s other Phoenix area properties, as well.

“We were able to step up and do the construction loan for that small business, making our member happy,” Olague says. “The key regarding the credit union world is that not only are we here to service business loans, we’re looking for relationships. We are relationship-oriented.”

In addition to providing an attractive interest rate on a business loan, credit unions offer such services as a checking account, credit card options for sales and purchases, and a 401(k).
“We’re like a one-stop shop,”

Olague says. “We can make loans for an overdraft line of credit for as small as $2,000 or for the purchase of a business vehicle for $30,000 to $40,000. Generally our footprint is from $25,000 to $2 million.”
Desert Schools’ business members generally seek loans for purchasing a fixed asset to start a new business.

“We’re not entertaining startups,” Olague says. “Normally, we’re looking at businesses that have been in existence for at least two years.”

All, however, is not rosy among credit union business members. A few have had bankruptcy issues and cash flow difficulties.

“We’re here for them in good times and bad times,” Olague says. “We may modify their loan to make payments easier for the interim.”

At First Credit Union, which has been making business loans for four years, Joe Guyton, senior vice president of credit, says he’s not seeing startups like he did a year earlier.

“The economy is clearly having a big impact on the capital needs of beginning a business,” Guyton says.

“There are not many people out there with the confidence to start a business. Our business members are coming in to maintain their borrowing relationship. They are concerned about losing that relationship. The amount of inquiries regarding new projects has almost dried up — anything with construction dollars on it.”

Although some business members have filed for bankruptcy, because First Credit Union is relatively new to business lending, the impact on it is considerably less than it would be on a major bank, Guyton says. Fewer than 1 percent of the credit union’s 60,000 members are businesses.

“We’re in a good position to continue to help them,” he says.
Michael Hollar, vice president of business financial services for Arizona Central Credit Union, says most of his business members are struggling. Last year, when gas prices skyrocketed, business members making deliveries took a huge hit. They were looking for alternate sources of fuel and were not seeking loans to buy new vehicles. They repaired what they had.

“A few of the savvy ones, when interest rates started dropping on the real estate side, came in to refi a loan with lower rates,” Hollar says. “We accommodated most of them. We charged a fee, but they were OK with that, rather than staying with the same payments.”

The volume of loan requests dropped considerably during the last three-to-four months of 2008. There were a few startups, mainly from people who had been laid off and were trying to go into business for themselves.

“In this environment, there is very little interest in businesses buying a new piece of equipment or looking for a building,” Hollar says. “They’re hunkering down to ride out the storm, hoping that 2009 brings a brighter day.”

Tucson, Arizona

Southern Arizona Trying To Set The Stage For A Post-Recession Surge

Like the rest of the state, Southern Arizona has been in a recession since 2007, and at least one prominent economist says the situation won’t be getting better anytime soon.

“My forecast is that it’s going to take a while to get (credit markets) straightened out again and functioning as they should,” says Marshall Vest, director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management. “I think that takes up most of 2009. Then we have all the excess housing that needs to be absorbed. That’s going to take some time and we’re not really absorbing the housing right now because credit markets have been essentially frozen. So, I think it’s the end of 2009 before the economy really regains its footing. I think we’ll start to move up in 2010. By move up, I mean the economy will once again begin to expand and enter a recovery phase.”

Joe Snell, president and CEO of Tucson Regional Economic Opportunities (TREO), says that despite the already deteriorating economic conditions, Tucson still managed to draw new companies and expansions in 2008.

“We’re definitely seeing a slow down in a lot of ways, both in the recruitment of companies and the expansion of companies, but not a massive downtick,” he says. “Our pipeline is as full as it’s ever been. But what we are seeing are companies that may have been ready to announce a $100 million expansion in November saying, ‘We’re going to wait on that until January, we’re cautious, we want to see what’s going to happen in the next three months.’ ”

Last year, the region still saw growth in the health care, bioscience, alternative energy and aerospace industries. Of particular note was the purchase of Ventana Medical Systems in Oro Valley by Swiss drug maker Roche for $3.4 billion. Roche also announced plans for a $100 million expansion at Ventana that would increase employment from 750 to about 1,000. In addition, Roche purchased more than 17 acres of land around the Ventana site to expand the location.

“Possibly the most significant thing we can point to though, is that 57 percent of the successful projects were in our targeted industries, and that’s important because those targeted industries represent quality rather than quantity, meaning, closing the wage gap,” Snell says. “Historically, Tucson has ranked somewhat below both the state and the national average in wages. So we’re rapidly moving in the right direction to close that gap. To me, that’s a big takeaway.”

Southern Arizona has not been immune to the effects of the housing market collapse and its devastating impact on the construction industry. For example, one of the first companies TREO recruited, window and doormaker Pella Corp., announced in November 2008 that it was idling its Tucson plant, affecting 65 workers. When Pella first located to Tucson in 2005, company officials said it had plans to employ more than 400 people at its facility.

Still, as Vest points out, since the construction boom was not as great in Southern Arizona as it was in the Phoenix area, the drop has been less precipitous. For example, year-over-year job losses in the construction industry in October 2008 stood at 4,000 in the Tucson metro area, according to figures from the Arizona Department of Commerce. In the Phoenix-Scottsdale-Mesa area, 30,000 construction industry jobs were lost during the same period.

“Commercial (construction) is still in relatively good shape. Vacancy rates are moving up, but they are still fairly low. Tucson didn’t see the construction boom in commercial that you saw in Phoenix, so, commercial construction here in Tucson doesn’t have as far to fall,” Vest says. “For residential, the indicators that I see are pretty comparable to Phoenix, except for the housing price data. I don’t think the declines have been quite as large (in Southern Arizona).”

Snell says that so far, Southern Arizona has managed to hold its own on employment.

“We have losses in construction, but we’re gaining it on biotech, we’re gaining it on solar, we’re gaining it in logistics companies. I think right now we’re sort of a wash,” he says.

Vest, however, expects more job losses across the state as the recession drags on through 2009. In fact, comparisons of unemployment rates from 2007 and 2008 already are startlingly eye opening.

In October 2008, the unemployment rate for the state, the Phoenix metro and the Tucson metro stood at 6.1 percent, 5.5 percent and 5.8 percent, respectively. In October 2007, the state’s unemployment rate was 3.9 percent, Phoenix’s was at 3.4 percent, and Tucson came in at 3.9 percent.

“I think the unemployment rate will likely reach 8 percent before we’re through,” Vest says.

Vest adds that rate is in line with the jobless figures of the last major recession of the early 1980s. Back then, unemployment peaked at 13 percent in the state, 8.9 percent in Phoenix and 10.5 percent in Tucson.

Fortunately for Southern Arizona, Vest says, the region’s economy is considerably more diverse than it was in the early ’80s. But with credit still tight and the housing market stuck in freefall, Vest cautions about being too optimistic on the strength of a recovery.

“I really think this recovery is probably going to be muted. I don’t see us rebounding very strongly. The process is going to take awhile,” he says. “This recession is going to be longer than the recessions of the early ’80s or mid ’70s. If it stretches through 2009 and the recession began in the fourth quarter of 2007, we’re talking about a two-year-long recession. Nationwide, the longest recession has been 16 months.

“It’s been a very long time in this country since we have encountered a very severe recession. The recessions of 2001 and 1991 were both very short and shallow. They barely qualified as recessions, rather than a growth slowdown. It’s only the gray hairs that remember what a severe recession is like,” Vest adds. “This is scary. This is messy. But we’ve been through this before. If you are a business and you can hang on and remain solvent and get through this, there will be plenty of opportunities on the other side. I would also say that it’s during times like this that the seeds are sown for fortunes to be made. Savvy investors will take positions in markets where assets are cheap and will benefit handsomely as the economy recovers —as surely it will. And the deep pockets know that and there is a lot of money on the sidelines waiting for the right opportunity.”

Snell agrees, adding that now is the time for Southern Arizona to stake a claim in future growth and prosperity.

“We’re not going to ride out the recession. I’m a big believer that now is the time to get aggressive,” he says. “I think we have a good head of steam. At this point, I would say Tucson is as competitive as any major city in the country, including Phoenix. That’s a first for us. Are we going to get cooled off by the national economy? Yes, absolutely. But I think we’re in as good a position as anyone coming out of this recession to capitalize, and maybe within this recession to capitalize.”

www.arizona.edu
www.treoaz.org
www.azcommerce.com

Wall Street Rescue 2010

Wall Street’s Rescue Package Is Changing Tax Laws For Businesses

The recent financial rescue package signed into law by President Bush on Oct. 3 contains not just $700 billion in federal assistance, but also a number of tax measures that are significant for Arizona businesses.

Renewable energy tax incentives
The renewable energy tax incentives extension was widely anticipated by the industry. Many states, including Arizona, are adopting or expanding their renewable energy standards, and these provisions are designed to make the conversion to renewable energy more tax-efficient.

The 30 percent investment tax credit, particularly the eight-year extension of the Section 48 credit for solar energy, is especially important given Arizona’s potential for solar and alternative energy-related businesses. These incentives are expected to not only continue current investment levels, but also to attract new business investment in Arizona’s alternative energy efforts.

It’s key to note that the energy tax incentives apply to businesses that use them — not to solar energy manufacturers. For example, mixed-use developments adding solar panels to parking garages, construction firms building LEED (Leadership in Energy Efficient Design)-certified structures, and retail centers adding solar roof panels will benefit from the incentive.

Another aspect of the energy credit changes is the elimination of the public utility exception. Two years ago, the Arizona Corporation Commission ruled that regulated electric utilities must generate 15 percent of their energy from renewable resources by 2025. However, utilities have been unable to benefit from this incentive. Regulated utilities may now obtain a 30 percent investment tax credit from their investment in qualifying property.

For instance, if APS purchases solar panels and installs them on your property to provide your electricity, APS will be allowed to take the credit. This provision allows public utilities to own and operate solar and other energy tax credit facilities and include them in their rate base for rate-making purposes.

Research and development credit
The bill extends the research and development tax credit through the end of 2009, increases the alternative simplified research credit from 12 percent to 14 percent for the 2009 tax year, and repeals the alternative incremental research credit for the 2009 tax year.

Given the current economic conditions, this retroactive extension potentially creates both cash benefits and earnings-per-share benefits. Businesses will need to consider the financial statement effect of the research credit now available for 2008, as well as the effect of the retroactive extension on their estimated tax payments for the 2008 tax year. Fiscal-year taxpayers who have already filed their 2007 tax year returns should consider filing amended returns to claim research credits for the period for which the credit had expired. In light of increasing IRS scrutiny, consider your approach and your documentation for the research credits you take. This retroactive extension also provides the opportunity to consider a pre-filing agreement with the IRS for the research credit for the 2008 tax year and beyond.

Alternative minimum tax (AMT)
The AMT is a separately computed tax that eliminates many deductions and credits that are allowed in computing regular tax liability for individuals, estates and trusts. In recent years, Congress has repeatedly enacted a temporary “patch” that significantly raised the applicable AMT exemption amounts. The AMT exemption amounts are phased out for higher-income taxpayers.

The AMT patch for 2008, without which more than 20 million taxpayers would have been hit with AMT liability early next year when filing their 2008 returns, was included in the financial rescue legislation. The legislation also increases the AMT refundable credit amount for individuals with long-term unused credits for prior year minimum tax liability, eliminates the income phase-out, and abates any underpayment of tax (including interest) outstanding on Oct. 3 related to AMT that was generated from the exercise of incentive stock options.

Changing tax law, increased IRS audits and the direct negative ramifications that follow from financial statement restatements mean that achieving certainty in tax positions is more important than ever. Many taxpayers are planning upfront and substantiating all their positions. As companies experience flat or negative results, tax considerations become more important to the bottom line. Tax departments are being asked to find efficient ways to maximize cash and strengthen balance sheets. The new legislation can benefit businesses in this challenging time.

Wayne Hoeing is a partner with Ernst & Young LLP in the firm’s Phoenix office.

luxuryrealestate

Housing Crash is Hurting The Valley’s Luxury Real Estate Market

A meticulous five-bedroom, remodeled home sits nestled in one of Paradise Valley’s most beautiful neighborhoods. But the most remarkable thing about this home is not its one-acre lot, new flooring or up-to-date kitchen. It’s the “For Sale” sign that has graced the front yard for two years.

Two years, two different realty companies and several price reductions later, the home finally is generating some energy and a contract is in the works. But, according to information from Coldwell Banker’s luxury home experts with The Walt Danley Group, that never would have happened if the price hadn’t dropped 20 percent in one year and 40 percent from the time it first went on the market.

This scenario is playing out to varying degrees throughout the Valley’s high-end home submarkets, from the Biltmore area to Paradise Valley to North Scottsdale. Real estate professionals say that while wealthy clients clearly are insulated from some of the economic hardships that face production-home buyers, they are not completely immune from them.

Inventory is high, homes are sitting on the market longer and Realtors must convince sellers to lower their expectations on price.

“What’s happening in the marketplace,” says Sandra Wilken of Sandra Wilken Luxury Properties, “is we are trying to get our sellers to be extremely realistic on their list price. The ridiculous prices of three years ago are not going to happen.”

In 2007, Wilken says buyers in Paradise Valley purchased 133 properties worth $2 million or more. The most expensive home sold for $8.8 million. This year, 62 homes have been sold in that range, with the highest fetching $7.62 million.

Information from the Arizona Regional Multiple Listing Service in two high-end zip codes, Paradise Valley’s 85253 and North Scottsdale’s 85256, shows inventory climbing through 2007 and the first half of 2008 compared to accepted offers. The average price for a property sold in Paradise Valley in September 2006 was $2.328 million. This past August it was $1.606 million.

Break it down
It is important to understand that in the luxury home market, different segments are performing in different ways.

Buyers who can afford a $2 million to $4 million home, or higher, are more insulated from current market conditions.

Tom Fisher calls them “program buyers,” successful and affluent business people who are on track to build homes that some call “family resorts.”

Fisher, owner of Fisher Custom Homes, builds houses that start at $2 million. His clients’ income or cash flow often is tied to the stock market, and while that has bred caution in their spending, in his experience it hasn’t derailed many building plans.

Walt Danley agrees there still is activity in the high-end market, but poor economic conditions fostered by sub-prime lending have, in a sense, trickled up.

Credit crunch
Credit in the form of jumbo loans, or loans for more than $417,000, has dried up as well. Several years ago, buyers could purchase a $1 million home with as little as 5 percent down, says Dean Bloxom, president of iMortgage Services in Phoenix. Some banks asked for 10 percent on $2 million.

Today, loans are available but banks want at least 20 percent down, and clear, documented evidence of someone’s assets and income — a correction that should have happened earlier, Bloxom says.

There are indications the market may pick up some velocity, says Cionne McCarthy, an agent with Russ Lyon Sotheby’s International Realty.

The Luxury Home Tour, which showcases homes in Paradise Valley and the Arcadia and Biltmore districts, recently released figures that show homes in August spent less time on the market.

From Aug. 8 to Sept. 6, homes spent an average of 151 days on the market, compared to an average of 223 days between August 2007 and August 2008.