Tag Archives: housing

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.

Barack Obama

Obama faces tough road with improving economy

Here’s the assignment President Barack Obama has won with his re-election: Improve an economy burdened by high unemployment, stagnant pay, a European financial crisis, slowing global growth and U.S. companies still too anxious to expand much.

And, oh yes, an economy that risks sinking into another recession if Congress can’t reach a budget deal to avert tax increases and deep spending cuts starting in January.

Yet the outlook isn’t all grim. Signs suggest that the next four years will coincide with a vastly healthier economy than the previous four, which overlapped the Great Recession.

Obama has said he would help create jobs by preserving low income tax rates for all except high-income Americans, spending more on public works and giving targeted tax breaks to businesses.

He used his victory speech in Chicago to stress that the economy is recovering and promised action in the coming months to reduce the government’s budget deficit, overhaul the tax system and reform immigration laws.

“We can build on the progress we’ve made and continue to fight for new jobs and new opportunity and new security for the middle class,” Obama said.

The jobs picture has already been improving gradually. Employers added a solid 171,000 jobs in October. Hiring was also stronger in August and September than first thought.

Cheaper gas and rising home prices have given Americans the confidence to spend slightly more. Retailers, auto dealers and manufacturers have been benefiting.

That said, most economists predict the improvement will remain steady but slow. The unemployment rate is 7.9 percent. Obama was re-elected Tuesday night with the highest unemployment rate for any incumbent president since Franklin Roosevelt.

Few think the rate will return to a normal level of 6 percent within the next two years. The Federal Reserve expects unemployment to be 7.6 percent or higher throughout 2013.

Economists surveyed last month by The Associated Press said they expected the economy to grow a lackluster 2.3 percent next year, too slight to generate strong job growth. From July through September, the economy grew at a meager 2 percent annual rate.

Part of the reason is that much of Europe has sunk into recession. Leaders there are struggling to defuse a debt crisis and save the euro currency. Europe buys 22 percent of America’s exports, and U.S. companies have invested heavily there. Any slowdown in Europe dents U.S. exports and corporate profits.

And China’s powerhouse economy is decelerating, slowing growth across Asia and beyond.

Most urgently, the U.S. economy will fall over a “fiscal cliff” without a budget deal by year’s end. Spending cuts and tax increases of about $1.2 trillion will start to kick in. The combination of those measures would likely trigger a recession and drive unemployment up to 9 percent next year, according to estimates by the Congressional Budget Office.

Many U.S. employers are wary of expanding or hiring until that potential crisis is averted. That’s why analysts have said resolving, or at least delaying, the fiscal cliff should be the most urgent economic priority for the White House.

In the longer run, analysts are more optimistic. Americans are feeling generally better about the economy. Measures of consumer confidence are at or near five-year highs.

And the main reason unemployment rose from 7.8 percent in September to 7.9 percent in October was that more people felt it was a good time to look for work. Most found jobs. Those who didn’t were counted as unemployed. (The government counts people without jobs as unemployed only if they’re looking for one.)

A brighter outlook among consumers is due, in part, to a steady increase in home prices after a painful six-year slump. Higher home prices can help create a “wealth effect,” making homeowners feel richer and spurring more spending.

Banks are also more likely to lend freely when home prices rise because homes are more likely to hold their value.

Americans have also been shrinking debts and saving slightly more. Household debt as a percentage of after-tax income dropped from about 125 percent before the recession to 103 percent in the April-June quarter, according to the Federal Reserve’s latest data. That ratio was roughly 90 percent in the 1990s.

But thanks to record-low interest rates, the cost of repaying those debts has dropped sharply. That, in turn, will free up more money for consumers to spend on cars, appliances and other goods.

Americans paid 10.7 percent of their after-tax income in interest on mortgages, credit cards and other consumer debt in this year’s April-June quarter, according to the Fed. That was down from 14 percent at the end of 2007. And it’s the lowest proportion since 1993.

“That’s 3 percentage points of disposable income that I am no longer using to pay for stuff that I bought earlier but I can instead use to buy stuff now,” noted Alan Levenson, chief economist at T. Rowe Price.

Economists note that economic recoveries after financial crises tend to be painfully slow. In part, that’s because time is needed for consumers to reduce debts and for banks to recover and lend again.

Paul Ashworth, an economist at Capital Economics, noted that banks have boosted lending for the past 18 months — another sign that the passage of time is helping the economy rebound.

Obama “is going to have an easier time of it … because we’re further along the road to recovery after the financial crisis,” Ashworth said.

housing.prices

Home prices jump 22.1 percent in Phoenix

A measure of U.S. home prices jumped 5 percent in September compared with a year ago, the largest year-over-year increase since July 2006. The gain reported by CoreLogic offered more evidence of a sustainable housing recovery.

The real estate data provider also said Tuesday that prices declined 0.3 percent in September from August, the first drop after six straight increases. The monthly figures are not seasonally adjusted. CoreLogic says the monthly decline reflects the end of the summer home-buying season and not a softening in the housing recovery.

Some of the biggest increases were in states that suffered the worst from the housing bust. Home prices in Arizona jumped 18.7 percent in the past year, the most of any state. Home prices in Idaho rose 13.1 percent, the second largest. Nevada’s home values rose 11 percent.

Home prices jumped 22.1 percent in Phoenix, the metro area with the biggest gain. Prices in Houston rose 6.6 percent, the second-highest increase.

The states with the biggest drops were Rhode Island (3.5 percent) and Illinois (2.3 percent).

Steady price increases should give the housing market more momentum when home sales pick up in the spring. Rising prices encourage more homeowners to sell their homes and entice would-be buyers to purchase homes before prices rise further.

Other measures have also shown healthy gains in home prices over the past year. The Standard & Poor’s/Case Shiller 20-city index rose 2 percent in August compared with a year ago, a faster pace than the previous month.

The price gains in the past year reported by CoreLogic were widespread. Prices have risen in all but seven states. And they declined in only 18 out of 100 large cities that are tracked by the index.

CoreLogic’s price index is based on repeat sales of the same homes and tracks their price changes over time.

Several reports last month showed that the housing market is improving, though from depressed levels.

Home builders started construction on new homes and apartments at the fastest pace in more than four years in September. They also requested the most building permits in four years, a sign that many are confident that home sales gains will continue.

New home sales jumped last month to the highest annual pace in the past two and a half years. Sales of previously occupied homes dipped in September but have risen steadily in the past year.

Sales of both new and previously occupied homes are still below levels that are consistent with a healthy housing market. That’s partly because the supply of available homes for sale remains low. And many prospective home buyers are struggling to qualify for a mortgage or scrape together the bigger down payments that many banks are requiring.

139701875

Housing and transportation costs outpace incomes

The combined costs of housing and transportation in the nation’s largest 25 metro areas have swelled by 44 percent since 2000 while incomes have failed to keep pace, according to a new report from the Center for Housing Policy—the research affiliate of the National Housing Conference—and the Center for Neighborhood Technology. The report, Losing Ground: The Struggle of Moderate-Income Households to Afford the Rising Costs of Housing and Transportation, details the challenges that American households face as the combined costs of housing and transportation consume an ever-larger share of household incomes.

The report includes a special focus on moderate-income households, defined as those earning between 50 and 100 percent of the median household income in their area. In the 25 largest metro areas, the report finds that moderate-income households spend an average of 59 percent of their income on housing and transportation. The report finds cost burdens to be highest in the Miami area, where moderate-income households spend 72 percent of their income on housing and transportation.  The next highest burdens are in the Riverside-San Bernardino, Calif., area (69 percent), the Tampa area (66 percent), and the Los Angeles area (65 percent)

“If we really want to understand whether housing is affordable, we need to consider housing and transportation costs together,” explains Center for Housing Policy Executive Director Jeffrey Lubell. “Along with utilities, which we include within housing costs, these are the true ‘costs of place,’ and our report shows they have grown much faster than incomes since 2000.”

The report finds that housing and transportations costs have increased 44 percent over this period while household incomes have risen only 25 percent. As a result, Americans are now substantially less able to afford their costs of place, undermining their ability to meet other critical household expenses, such as food, clothing, health insurance and child care.

Cost burdens have increased despite reductions in home sale prices caused by the major housing downturn that began in 2006. “Increased demand for rental housing combined with insufficient new production has raised rents,” continued Lubell, “while households with blemished credit and existing homeowners with underwater mortgages have been unable to take advantage of lower home prices. Add in the higher transportation costs associated with higher gas prices, stagnant or slowly growing wages and the loss of income associated with layoffs and it’s easy to see how Americans have lost ground.”

“Both housing and transportation costs need to be made more affordable,” notes Center for Neighborhood Technology President and Co-Founder Scott Bernstein. “Letting the public know that the full cost of a location includes both housing and transportation is a first step; targeting resources that lower the cost of transportation, such as improved public transportation, to areas where it will help America’s working families, is also essential.”

The report notes that there are many policies that local and state governments can adopt to help reduce housing costs in places where transportation costs are low or where public investments will make transportation more affordable in the future. Policy options include taking measures to preserve existing affordable housing, reforming restrictive regulations to lower the cost of creating new housing in such areas, and instituting requirements or incentives to include affordable housing as part of new development.

“Given the substantial increases that we expect in coming years in the demand for housing within walking distance of public transit,” explains Bernstein, “it will be essential to act proactively to ensure that affordable housing is preserved and included within new development in these areas.”

Key findings:

· Housing and transportation costs have gone up faster than incomes for American households. Since 2000, combined housing and transportation costs have risen 44 percent in the 25 largest U.S. metros, while household incomes have risen only 25 percent. That means that for every dollar household incomes have gone up, housing and transportation costs have risen about $1.75, cutting into wealth, savings and even budgets for essentials.

· Moderate-income households spend a disproportionate share of income for housing and transportation.  For households earning 50 to 100 percent of the median income of their metropolitan area, nearly three-fifths (59 percent) of income goes to housing and transportation costs. For these households, the growing “costs of place” are particularly burdensome, leaving little for necessary expenses such as food, education and health care.

· Places where the combined housing and transportation cost burden is greatest are not always the places with the highest absolute costs.  In some metro areas, such as Washington, D.C., Boston and San Francisco, high costs are matched by relatively high incomes, helping moderate-income households better afford their housing and transportation costs.  But other regions, such as Riverside-San Bernardino (CA), Los Angeles and San Diego, have high housing and transportation costs despite moderate to low median incomes, with average combined cost burdens for moderate-income households ranging from 63 to 69 percent of household income.

· Moderate-income households in the Miami metro area have the highest combined cost burdens, spending an average of 72 percent of income on housing and transportation.  A second Florida metro area— Tampa— also has very high cost burdens, with moderate-income households spending an average of 66 percent of income on housing and transportation.  To a large extent, the high cost burdens in both of these metro areas are driven by low incomes.

· Housing costs alone do not paint a complete picture of the total “cost of place.” The inclusion of transportation costs shifts the relative affordability of many metro areas.  For example, housing costs in the Houston region are comparatively affordable for moderate-income households, ranking eighth out of the 25 regions examined, but adding in transportation costs drops Houston into 17th place in overall affordability.  In contrast, metro areas such as San Francisco, Boston, and New York are some of the least affordable regions for moderate-income households when housing alone is considered, but are among the most affordable when housing and transportation costs are considered together.

· For moderate-income households, homeowners carry heavier cost burdens than renters.  For the typical moderate-income renter in the 25 metro areas studied, housing and transportation costs consume an average of 55 percent of income.  Moderate-income homeowners carrying a mortgage, however, face average costs of nearly 72 percent of income.

· Despite lower burdens than homeowners, moderate-income renters are still barely making ends meet in many metro areas. In the LA metro area, where average housing + transportation costs consume 61 percent of income for moderate-income renters, a typical renter household would not have enough left over at the end of the month to pay the minimum costs of food, health care, and other basic necessities.  This would suggest these households are either cutting corners on essentials, or accruing debt.

· Cost burdens for moderate-income households vary substantially within metro areas.  Even in metro areas where average cost burdens are relatively affordable, there are many neighborhoods that are out of reach for moderate-income households.  In the Philadelphia region, for example, moderate-income households are faced with average housing and transportation costs exceeding 90 percent of income in some neighborhoods.

Graph 1

GPEC: Plans To Revive The Economy

Look past the Valley’s long, slow climb out of a difficult recession to the next 10, 20, even 100 years and you see a potential hotbed of wealth and productivity: a regional economy that has diversified from its traditional reliance on growth and housing. That’s the vision painted by board members and financial supporters of the Greater Phoenix Economic Council ( GPEC ), which has been working since 1989 to leverage the many strengths of the entire metro area.

In the 22 years since its inception, GPEC already has assisted 488 companies in their moves to the Valley, which by its own count translates into 88,610 jobs, $9.96 billion
in capital investment and $3.1 billion in payroll.

In the next century, look for GPEC to shape the following sectors and services:

Municipalities

The greatest influence GPEC will have on Valley cities will be to help leaders think of themselves as a unified economy, says Mayor Scott Smith of Mesa, which is one of the 19 cities and towns that contribute financially to GPEC.

“That sounds like a simple thing, but it’s actually been a very challenging task,” Smith says, with the East Valley vying against the West Valley, city fighting city, and “Phoenix fighting everyone else” for economic development opportunities.

In the coming decades, economic activity will continue to consolidate in cities, Smith says. Already, about 85 percent of the nation’s gross domestic product is generated in cities and it is estimated that 90 percent of the new jobs created will be in metro areas. GPEC will continue to play a major role in helping cities get beyond parochialism and work together to create a regional economic powerhouse.

“The Sun Corridor is not some figment of someone’s imagination,” says Smith, referring to the corridor stretching from the middle of Yavapai County south to Tucson that is expected in the next century to merge into one integrated metro area. “We see it growing every day.”

“GPEC plays a central role in that,” he says. “We are learning how to work better together.”

Technology

The Arizona of the future will do a better job developing a culture of innovation for small, high-tech companies, says Steve Shope, president of Sandia Research Corporation and a
GPEC board member.

A short-term goal that may reap long-term benefits would be to help companies attain funding through the U.S. government’s Small Business Innovation Research program, which awards funds for research and development that has the potential to be commercialized.

“In Arizona, we’re not doing a very good job of bringing that money into the state,” says Shope, who would like to see the figure double to $50 million.

The state needs a better representation of venture capital in general, he says, and thus needs to nurture venturecapital-ready companies.

Shope is a member of GPEC’s new Innovation Council, which he says is developing a framework for how it will operate and hopes to have a master plan this year.

Another way GPEC will shape the future of the technology industry is by continuing to focus on clean tech companies, particularly renewable energy companies and those involved in residential construction and high-efficiency housing.

Unmanned aerial vehicles, a subset of Arizona’s already mature aerospace and defense industry, is a sector that “is in the Model T stage, but has potential for gigantic growth,” Shope says.

Housing

Looking back, one can see how homebuilding and construction became primary drivers of the state’s economy, says Andy Warren, president of Maracay Homes and a GPEC board member.

Looking forward to the next century, GPEC will play a major role in helping to diversify the Valley’s economy so housing plays a less dominant role in it. If GPEC can do that, Arizonans won’t be held hostage to vicious boom-and-bust cycles inherent in the real estate industry.

“If GPEC is successful, the housing industry will be a less significant player in our economy over the next century and that will be a wonderful thing,” Warren says. “The amplitude of those cycles can be pretty extreme.”

It has been estimated that Arizona has lost 300,000 jobs in the recession, with the bulk of those coming from the construction and retail sectors.

GPEC’s efforts to lure high-wage, high-quality jobs in the clean technology, healthcare and aerospace sectors and its efforts to strengthen manufacturing will be instrumental in diversifying the economy of the future, he says.

A key to that strategy is GPEC’s commitment to supporting competitive tax incentives and policies that promote growth, and its work bringing together officials and policy makers throughout the region. “It’s a great collaborative effort,” he says.

Law

When GPEC reaches out to businesses considering a site in the Valley, one of the first things business leaders ask is, “‘Do you have the legal talent in Arizona and in Phoenix to do the things we want done?’” says Barry Halpern, a GPEC board member and partner at Snell & Wilmer.

In that respect, GPEC and the legal community have a symbiotic relationship that will only deepen in the next century as GPEC brings more sophisticated and diverse industries to the Valley, Halpern says.

The legal profession in the Valley — already a diverse community — will have to rise to the needs of emergent industries.

Almost all aspects of economic development require legal representation, including the demand for capital financing or the need for representation in emerging niches like the solar industry, agrees Scott Henderson, a shareholder at Polsinelli Shughart and a GPEC board member.

“GPEC will shape the legal practice as it attracts more businesses and more industry and those businesses will require a greater depth of legal talent,” Henderson says. “To that extent, local law firms will want to play a greater role in the growth of the state. The growth of the economy helps everybody—lawyers are no exception.”

Banking

The near future for banking in Arizona is brightening as lending activity has increased and most banks’ biggest problems are behind them, says Jim Lundy, GPEC vice chairman and president and CEO of Alliance Bank of Arizona.

“The recovery is slow, it’s bumping along the bottom, but it is there,” says Lundy, who also serves as chairman of the Arizona Bankers Association.

The long-term prognosis for banks is a bit harder to predict, but Lundy says he is sure of one thing: it is inextricably linked with a diversified Arizona economy that is not dependent on population growth.

In that sense, GPEC’s goal of fostering cooperation between cities and creating a diversified economy will directly shape the industry.

“Our success and our growth depends on companies that actually produce something,” Lundy says. All the important emerging industries — like healthcare, clean tech and aerospace — create spin-offs in the economy that are good business for the banking sector.

“We need successful enterprises to make those loans to,” he says. “At the end of the day, if the banking sector is going to grow successfully it needs GPEC and its role in helping get Arizona’s economy growing again.”

Education

It’s not hard to figure out why leaders in the field of education sit on GPEC’s board of directors: education is essential to economic development, and vice versa.

“As we look to the future, we see that growing the right talent for the new markets that will be out there is imperative,” says GPEC chairman Bill Pepicello, president of the University of Phoenix.

That may require more coordination between Arizona’s “robust” array of higher education institutions—statefunded universities, community colleges and private institutions. “I envision campuses as multi-functional areas that are working cooperatively on the ground and online to serve Arizona,” he says.

Arizona’s education of the future will also need to be “efficient and effective,” says Rufus Glasper, chancellor of the Maricopa County Community College District.

In the next 30 years, he says more than 1.8 million new jobs will be created in Arizona and these jobs will require students who are competent in what is know as the STEM fields: science, technology, engineering and math.

Educational delivery systems will include more online, hybrid and fast-track training, he says, and willuse mobile devices and social media to create more access to new ideas, networks and educational exchanges.

Like Pepicello, Glasper envisions closer relationships between secondary schools, post-secondary colleges and universities.

Manufacturing

The Midwest has always been known as the heavy industry manufacturing hub of the United States. But Arizona in the next century could attract more technology manufacturing, says Steven Zylstra, president and CEO of the Arizona Technology Council, which has worked alongside GPEC in the past to nurture the tech industry here.

“To the surprise of a lot of people, manufacturing is actually coming back to the United States,” he says. Wages and manufacturing costs in China are rising, so companies that sent manufacturing overseas are finding that once they pay for shipping, it’s cheaper at home.

Areas of promise include the manufacturing of medical devices, bioscience-related products, renewable-energy equipment and the semiconductor industry.

When it comes to the semiconductor industry, that optimism is warranted, agrees Jason Bagley, a government affairs manager at Intel in Arizona.

Intel has always manufactured most of its leading-edge products in the United States, he says, and plans to continue doing so. Since 1996, it has invested $12 billion in manufacturing in Arizona, not including two projects currently under construction in Chandler.

For more information about GPEC visit, gpec.org

Arizona Business Magazine January/February 2012

Arizona Sunset - Future of West Valley

Valley Leaders Join Forces To Envision The Future West Valley

Leadership West LogoOver 100 Valley leaders convened on November 31, 2010 to develop a future vision for the West Valley in an exercise led by Leadership West.  Leadership West is a volunteer-led, non-profit organization that convenes, educates and activates proven leaders in business, non-profits and government to leverage their time, talents and treasures to enhance the quality of life in the West Valley.

Moving AZOne LogoThe “West Valley Reality Check” was free for its participants, thanks to the collaborative effort and partnership between Leadership West and the Urban Land Institute (ULI). The program’s goal was to bring together leaders in government, business, non-profits, environmentalists, educators, neighborhood activists, interfaith groups, tribal and elected officials to focus on a regional approach to shaping our built environment. The event was a continuation of Leadership West’s annual West Valley Summit which was held in March.

By 2050, the Central Arizona region will have an additional 6 million people and 3 million new jobs, many of which will be in the West Valley. This exercise presented the opportunity for Valley stakeholders to influence how the region plans land-use, transportation and infrastructure while sustaining our economy and quality of life.

Leadership West Executive Director, Kathy Knecht kicked off the event by describing the organization as a catalyst for long-term planning in the West Valley.  The Reality Check model was designed by ULI, but this event was the first time where such an exercise was conducted with West Valley stakeholders.  What emerged from the exercise was an overarching theme of municipal and regional cooperation that looks beyond the current economic cycle in preparation for the next wave.

Deb Sydenham introduced the Reality Check model as a great opportunity to work collaboratively and cooperatively to help regions with visioning at least 20 years into the future. Don Keuth presented Valley growth trends and how this exercise will help establish the framework for future growth. Interestingly enough, only about 10 cities across the country have performed this activity but Phoenix is the only city that has done it twice. ULI Arizona’s efforts over the past 3 years have resulted in the “Connected Centers” strategy that promotes growth and prosperity.  These exercises represent a forward-thinking approach to identify a sustainable regional growth scenario and by doing so determine housing types, responsible land uses and a transportation framework.

MapJay Hicks presented the ground rules for the placemaking exercise in which participants use Legos© that represent various levels of housing and employment density and strands of yarn that represent major transportation corridors to identify the region’s growth patterns.  Participants used these tools in their groups to establish a 40-year vision with the understanding of the West Valley’s opportunities and challenges, including jobs, transportation, Luke AFB, higher education and the environment.

By keeping an open mind, being bold and creative and working together to find solutions, the participant groups completed their visioning exercise while maintaining AZOne Reality Check’s guiding principles of preserving open space, supporting current infrastructure by growing along existing corridors, connecting employment and housing with multi-modal transportation, creating new urban centers and infilling currently developed areas, and locating housing near jobs.

The collective group discussed barriers and challenges that might hinder the implementation of these future scenarios as well as policy changes that would be necessary to making the scenarios possible. However, the group clearly identified a need for the West Valley to stay relevant in conversations about regional issues by working collaboratively and speaking as one voice.  Leadership West did not intend this exercise to be the end, but rather the next step in moving this initiative forward by carrying the message back to each respective organization.  The Reality Check exercise provided a forum for West Valley representatives to use regional visioning and planning and discuss how we can promote economic development, plan comprehensive infrastructure, preserve natural resources, create a sense of place in the community, and engage the community and create political will to implement these visions.  Our common goal…leadership.

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.

FutureShock

State Leaders Prepare The Copper State For Explosive Growth

An official letter from the state’s Lawn and Pool Use Enforcement Division says you must choose between taking out your green lawn or draining your swimming pool. You can’t have both, as the state has been severely restricting outdoor water use ever since the population of Central and Southern Arizona swelled to 10 million people around 2040.

You opt to keep the pool because urban sprawl and the heat-island effect have caused Arizona to break yet another record — the number of summer days when the temperature fails to drop below 100 degrees.

But time in the pool is getting rarer. Your daily commute from Pinal County to Phoenix is a grinding two hours. You’d like to work closer to home, but job centers and transportation routes haven’t reached your relatively new subdivision.

Welcome to the Sun Corridor, circa 2050.

With foresight, unified planning and a significant investment in the state’s infrastructure, the above scenario need not play out.

Without it, according to the author of a recent report on Arizona’s future, a part of the state risks becoming, not the next Los Angeles, but its bland sister — the San Fernando Valley.

“You’ll essentially get existing urban development patterns spread all over the place in a seamless, homogenous, urban fabric of chain stores, fast food restaurants and red stucco houses,” says Grady Gammage Jr., a principle author of “Megapolitan — Arizona’s Sun Corridor,” published by Arizona State University’s Morrison Institute for Public Policy.

The report predicts that land stretching from the middle of Yavapai County to western Cochise County to the Mexican border will someday merge into one integrated super metropolitan area — a “megapolitan” dubbed the Sun Corridor.

That doesn’t mean there will be uninterrupted development between Prescott and Tucson — there is too much Indian and federal land in the way. Instead, the corridor’s economies and commuting patterns will merge.

Imagine a series of overlapping circles emanating from Pima, Pinal and Maricopa counties. According to a measurement developed by scholars at the Metropolitan Institute at Virginia Tech, if at least 15 percent of workers from one area commute to another, those commuting patterns have merged.

Already, Pinal County sends 40 percent of its workers into other regions, most likely north to Maricopa County.

“That means Maricopa and Pinal are already merged,” Gammage says.

Some time between 2010 and 2020, Pinal is expected to send more than 15 percent of its workers south to Pima County, Gammage adds, creating an economic bridge between Phoenix and Tucson.

The U.S. Census designates these areas with cross-region commuting patterns as “combined statistical areas,” something the “Megapolitan” report says may happen by the 2020 decennial census.

The Sun Corridor will be one of 10 megapolitan areas in the United States. By 2030, it could be home to 10 million people and 4.5 million jobs, making it a potential hotbed of wealth and productivity. According to the report, the nation’s office market and high-tech clusters are in megapolitans.

However, as the Morrison Institute report asks, will Arizona be able to harness the staggering potential of such an area?

That would require a whole new level of dialogue and cooperation between the five councils of government, six counties, 57 municipalities and 300 other governmental units spanning the 30,000-square-mile area that would make up the Sun Corridor.

And the state is just at the beginning of that process, Gammage says, adding, “We’re behind the curve.”

Shannon Scutari, on the other hand, believes she sees progress every day.

As Gov. Janet Napolitano’s policy advisor for growth and infrastructure, Scutari is on the front lines of important growth initiatives, including the long-term planning exercise developed by the Urban Land Institute, AZ One – A Reality Check for Arizona, held last spring at the Phoenix Convention Center.

Statistics from the Morrison Institute

AZ One assembled more than 300 people from Maricopa and Pinal counties and guided them through alternative growth scenarios with the purpose of generating discussion and consensus.

“They’re talking to each other, there’s no doubt about it,” Scutari says of the disparate public and civic leaders she encounters in her job. “Some of them are actually even listening to each other.”

Scutari adds that the governor hopes to see the AZ One exercise duplicated in the Tucson and Flagstaff areas.

While her office is trying to bring several growth issues into sharp relief, Scutari says a pressing challenge is the state’s need to invest in transportation infrastructure.

That is why the Arizona Department of Transportation has begun a $7 million statewide study and is working with cities, tribal governments, land-use planners, regional transportation organizations and others to assess the state’s infrastructure.

One important feature of the Statewide Transportation Planning Framework, Scutari says, will be to connect land-use decisions with transportation infrastructure, some


thing that has never been done. The study already has outlined some of the most critical transportation needs.

Right now, the governor is backing an initiative campaign to put on the November ballot a one-cent increase in the state’s sales tax. The increase would raise $42 billion over 30 years to pay for transportation infrastructure.

The money is needed as Arizona’s roads and freeways are “only going to get worse in the next 25 years,” warns Tim James, director of research and consulting for ASU’s L. William Seidman Research Institute.

James headed a team that spent a year studying the state’s infrastructure and its ability to handle growth. The resulting report did not endorse the Napolitano-backed initiative, but it did say that without changes in funding mechanisms, the state cannot keep up with growth.

“There will be longer commutes, there will be more time spent in traffic, you’ll be traveling at lower speeds,” James says. “It’s going to be more congestion and less safe journeys. The road system is going to become unacceptably poor.”

The report, commissioned by the Arizona Investment Council, formerly known as the Arizona Utility Investors Association, concluded that accommodating growth is going to be “very, very costly” — probably $417 billion to $532 billion in the next 25 years.

In that time period:

  • Electricity demand will increase by about 85 percent, yet the state faces a funding gap in paying for new plants.
  • Just providing telecommunications services to the state’s current unserved population would cost up to $2 billion. Creating a state-of-the-art fiber network that would guarantee high quality telecommunications would cost about 10 times that.
  • Water delivery and treatment systems built decades ago will need to be replaced.

While it is impossible to predict exactly what the Sun Corridor will look like in 2040, planners do know generally where growth will occur.

Eric Anderson, transportation director for the Maricopa Association of Governments, says projections show most growth in Maricopa County will be in the West Valley as developable land in the east diminishes. Pinal County, where it meets the southeast corner of Maricopa County southeast of Queen Creek and the 275-acre state land parcel dubbed Superstition Vistas, will see a lot of growth as well. Finally, Anderson says, areas around Casa Grande and Maricopa will continue to expand.

According to MAG’s latest figures, there are about 1.8 million housing units already approved or entitled in various master-planned communities in Maricopa and Pinal counties.

Jay Hicks, co-chairman of the AZ One steering committee and a vice president at EDAW Inc., an architecture and environment consulting company, says people still can shape the character of future development, even in the face of all that entitled land.

Some parcels may need to be re-entitled as time passes and communities become more cognizant of the way land uses affect pollution levels and energy consumption.

Additionally, 40 to 50 percent of all commercial properties will need to be redeveloped in the next 15 to 20 years, Hick says.

Facing the challenges that come with growth seems daunting, but Scutari says there is “a sense ofoptimism” among the state’s stakeholders.

As Gammage put it: “There is an opportunity here, if we can seize it and get ahead of it, we can do something really special.”