Friday, March 28, 2008

Wells Fargo exec optimistic about economy

Wells Fargo exec optimistic about economy
By Russ Wiles The Arizona Republic

Short, if not necessarily sweet.

Wells Fargo Executive Richard Kovacevich said he expects the economy and financial system will recover in good shape provided that a recession, if one materializes, doesn't linger.

"The best thing that could happen would be to get all the bad news out fast," he told a Phoenix audience Thursday. "The biggest risk is a prolonged slowdown."

Kovacevich, 64, Wells Fargo's chairman who recently resigned as chief executive officer, said he felt the economy is fundamentally solid, with rising exports, modest unemployment, high levels of corporate cash and an expanding money supply helped by recent interest-rate cuts.

Excluding beleaguered sectors such as housing and automobiles, roughly 90 percent of the economy is growing. "Given all that . . . I'm an optimist long term," he said.

Kovacevich spoke to business leaders and Arizona State University faculty and students during a lunch where he was honored as executive of the year by ASU's W.P. Carey School of Business.

Dean Robert Mittelstaedt praised Kovacevich for his overall leadership and the firm's ability to sidestep the worst of the credit crunch and subprime-mortgage writedowns.

"We looked hard at the fact we haven't been seeing Wells Fargo's name in the news," Mittelstaedt said.

Kovacevich admitted that Wells Fargo made mistakes in not pricing certain risks accurately but also noted the company steered clear of most bad practices that afflicted competitors. He predicted the biggest 15 or so U.S. financial firms, which already have written down about $180 billion in assets, could face further writedowns of $200 billion or so.

Still, he said he doesn't worry about a spike in the number of bank failures or the overall strength of the system. The industry "had an amazing five-year run of record earnings" before the downturn, he said. "Mainstream banks, even with their problems, have very high capital levels."

Kovacevich also expressed confidence in Wells Fargo. "We believe as a company we're going to come out of this stronger than our competitors."

The company is one of the state's largest employers, with an Arizona workforce of nearly 15,000 people.

The firm regards Arizona as a promising growth state and an increasingly important center for some of its operations, he said.

Kovacevich took exception to the notion that credit standards have tightened appreciably, arguing that they've really returned to realistic levels.

"Things have tightened compared to the stupidity of nine months ago," he said. "But we were way too loose then."

He expressed confidence that the current financial slump will end when pessimism reaches extreme levels, as shown by the widening spread on fixed-income investments and other indicators.

Bloomindale's coming to CityNorth development

Bloomindale's coming to CityNorth development
By Cathryn Creno The Arizona Republic

The announcement Thursday that Bloomingdale's would open its first department store in Phoenix, Arizona is not just about having another place to buy Burberry, Fendi or Michael Kors.

The deal speaks volumes about the faith that developers and retailers have placed in the future of Arizona 's luxury-goods market — even as the current downturn has cut consumer spending dramatically.

The store is set to open in fall 2009. It will be an anchor at the CityNorth project, which will feature department stores, luxury condos and offices.

By then, officials are banking on an economic recovery being under way along with a continuation of the population boom and the insatiable shopping appetite of well-heeled consumers.

That appears to be a relatively safe bet.

Local and national experts say the Desert Ridge section of northeast Phoenix surrounding CityNorth and nearby north Scottsdale are among the most desirable places in the nation for retail.

“In the Southwest and California , retailers are not in peril of overexpanding even in the down market because of immigration to those areas,” said Steven Hoch, who heads the retailing department at the University of Pennsylvania 's Wharton School .

“And it may be that the economy is slowed down, but Phoenix is a place where visitors who arrive every winter bring in a whole bunch of money.”

Mark Winkleman, commissioner of the Arizona State Land Department, predicts that retail development in northeast Phoenix will surpass that at 24th Street and Camelback Road in both offerings and tax revenue.

CityNorth is expected to generate $1 billion in sales-tax revenue over its lifetime.

“It's very exciting,” said Phoenix Vice Mayor Peggy Neely, who represents the council district containing CityNorth. “It is good to have a variety of options. That just brings a bigger draw.”

In the eyes of developers, Bloomingdale's will sit atop the apex of a luxury-shopping triangle.

Biltmore Fashion Park at 24th Street and Camelback Road in Phoenix and Scottsdale Fashion Square at 70th Street and Camelback will be the base.

CityNorth also has signed Nordstrom, which is expected to open at the same time as Bloomingdale's.

And Macy's is said to be the third department store in the development.

Sealing the deal

“No matter how good your master plan or architecture is, there is nothing more important than a Nordstrom or a Bloomingdale's brand in a project,” said Kenneth Himmel, president and chief executive officer of New York-based Related Urban Development, which is co-developing CityNorth.

“It seals it.”

Still, longtime Valley leasing agent John Corritore, president of the Corritore Co. in Scottsdale , is skeptical that CityNorth will ever really rival Scottsdale Fashion Square , which is home to a Neiman Marcus and has a Barneys of New York under construction.

“When you look at Tiffany, Gucci, Ferragamo and kate spade, they are going to have one store in the entire market and it is going to be at Fashion Square,” said Corritore, who signs tenants for Tempe Marketplace, Dana Park Village Square in Mesa and several other Valley developments.

“The true elite shopper in north Scottsdale will still go to Fashion Square for the full selection of international shopping that is there.”

Nevertheless, CityNorth and not Fashion Square signed Bloomingdale's, which is one of the few luxury department stores without a presence in the market.

Macy's Inc., which owns the upscale store founded in 1872, says this Bloomingdale's is its 10th in the western United States .

“We are going to bring some of the buzz of New York to the Valley,” Michael Gould, Bloomingdale's chairman and chief executive officer, told The Arizona Republic.

Gould said his store recently began to compete with luxury department stores at the level of Neiman Marcus and Saks Fifth Avenue by selling higher-end merchandise and providing more one-on-one customer service.

One result, he said, was a “spectacular holiday season that ran counter to the market.”

Bloomingdale's will have three floors and a contemporary, Frank Lloyd Wright-inspired décor, Related Urban's CEO Himmel said.

There also will be an elegant, open-air restaurant on the top floor that will allow diners to look out over CityNorth's tree-lined High Street, he said.

Lawsuit not an issue

Although CityNorth is engaged in a lawsuit against the city of Phoenix , Himmel said the suit would not affect Bloomingdale's or other retailers.

“The first 70 acres of the development are being done without public funding,” Himmel said. “There is nothing, absolutely nothing, that is going to stop Bloomingdale's from going forward.”

The lawsuit, filed by the Goldwater Institute, argues that a $97.4 million agreement between the city and the developer is illegal.

The agreement allows the developer to retain half of all sales taxes CityNorth generates for 11 years or until the $97.4million mark is reached.

In exchange, it will build parking garages, allowing more of CityNorth's land to be used for tax-generating purposes.

Phoenix officials say the deal is not a gift to the developer but an economic-development deal, aimed at boosting sales-tax revenues to the city.

FHA loan limit in Phoenix climbs to $346,250

FHA loan limit in Phoenix climbs to $346,250

By Catherine Reagor The Arizona Republic

Metropolitan Phoenix 's housing market received some good news last week. The new FHA loan limit for Maricopa is out. It's now $346,250, about $80,000 higher than before.

This means first-time borrowers can now use government-backed Federal Housing Administration loans to buy homes priced at nearly $350,000. And the higher limit will also help some struggling homeowners refinance adjustable-rate mortgages into fixed-rate FHA loans.

“A lot of people have been waiting for this,” said Amy Swaney, a mortgage banker with Scottsdale-based Premier Financial. “It will help many first-time buyers because only a 3 percent down payment is required, and it will help homeowners struggling to refinance because their values are down.”

The new limit is based on 125 percent of the metro Phoenix 's median home price, and that median home price is what was released by HUD last week. Allowing FHA to raise its loan limits was approved as part of Washington 's economic stimulus plan last month.

Other areas with higher median home prices and now higher FHA loan limits could see mortgage giants Fannie Mae and Freddie Mac raise their nonconforming loan limit above the current $417,000 threshold. But since 125 percent of metro Phoenix 's median price is still below $417,000, it's not likely to happen here.

The Valley's old limit was $263,150, and the higher lending limit will expire at the end of the year and revert back to that, unless real estate groups can lobby to have it made permanent.

Let Laura Boyajian with DPR Realty, LLC help guide you to and through an FHA loan. Contact her today at 602.400.0008.

Surprise condos planned for gay retirees

Surprise condos planned for gay retirees
By Tony Lombardo The Arizona Republic

Like a lot of baby boomers, gay and lesbian retirees are looking for a safe, fun place to live out their autumn years.

But Arizona's retirement offerings might not cut it, be it for lack of like-minded residents or a fear of coming out to the neighbors.

Out Properties LLC, a St. Louis development firm, hopes to change that by marketing a unique lifestyle to this niche group it calls "gayby boomers," or gay baby boomers. It plans to build a resort community, Marigold Creek, in Surprise catering to gay retirees.

"For some people, this might be the very first time in their entire life they've been able to live somewhere where they can be themselves," said Debi Purvis, principal with Out Properties.

The group is a division of Aventurs Development, and Marigold Creek is its first gay and lesbian retirement development.

Such communities already exist or are in the works in Florida , California and New Mexico . But Marigold Creek is considered the first community of its kind in Arizona .

It will sit on 32 acres northeast of Grand Avenue and will feature 190 condos and homes ranging in price from $249,000 to $850,000. The first units are expected to open by fall 2009.

No pretending

Although anyone will be able to buy there, it is designed with gay retirees in mind.

Tucson resident Frances Coleman, 53, understands the need.

"The really big advantage is you don't have to go back into the closet and squish yourself," she said. "You can live with your partner and not have to pretend you're roommates."

Coleman launched a senior group four years ago for Wingspan, a Tucson-based outreach center for the gay, lesbian, bisexual and transgender community.

Coleman said she has encountered many retirees who chose to settle down in gated communities but kept their sexuality a secret.

"As a gay person, you're constantly coming out to people in every single venue or constantly hiding, if that's how you live," she said.

Doug Beckwith, 56, lives in Chandler 's Sun Lakes . While he enjoys the community, he sees the advantages of a place like Marigold Creek.

"We spent our whole lives always being different and being outcasts," he said. "It would be kind of nice to live in a place where everyone else had gone through the same experience."

Marigold Creek's sales pitch hits on that very point.

"Imagine a place where your neighbors are just like you. They share your interests and have similar lifestyles," an online statement reads. "Everyone is welcome, accepted and safe."

Lifestyle is key

In many ways, Marigold Creek mirrors other upscale retirement communities like Surprise's Sun City Grand. The gated development will have a fitness center, a spa, pools, a poolside bar and grill, a travel club and walking trails. It will also feature a theater and cabaret and a spiritual center.

But existing communities don't always work for gays, said Steve Donovan, a local Realtor and member of the Arizona Gay Realtor Alliance.

Donovan said he has known many members of the gay community who moved into existing Valley retirement developments, only to be disappointed and move away.

"They realized that wasn't the best choice because it was not really geared toward that lifestyle," Donovan said.

Beckwith, dean and executive director of Axia College of the University of Phoenix , said he has talked for years with friends about the benefits of a gay retirement project.

"It would be nice to have neighbors who you wouldn't have to explain to why you weren't married or didn't have grandkids," he said.

'Buzz' is building

The "buzz" has been building about Marigold Creek, said Scott Jeffery, chairman of the Greater Phoenix Gay & Lesbian Chamber of Commerce.

"We'll see how the market responds, to see if there is a specific need for it," he said.

Purvis said the company is ahead of projections, securing commitments on 40 units.

And while Donovan said many of his past clients tended to gravitate to homes near downtown Phoenix , he could see Surprise as a viable place for more mature clients.

"Surprise is a great area, and it's up-and-coming," Donovan said. "I think it's going to have a huge impact on that area."

Like all retirement communities, however, it won't be for everyone.

Commercial real-estate broker Tom Snyder, 64, said he will remain in central Phoenix .

"I could never live in a Sun City or anything . . . it's just too far out for me," said Snyder, treasurer of the gay and lesbian chamber.

Out Properties is only in the early planning stages with the city, Surprise Senior Planner Janice See said. The City Council eventually must sign off on zoning and land-use changes to allow a higher density, she said. But based on preliminary talks, the project sounds favorable, See said.

Mayor supports concept

Surprise Mayor Lyn Truitt is a fan of the concept.

"We're not a community that puts up barriers," he said. "Rather, we take them down."

Purvis said her company searched the entire Valley, but Surprise had the best combination of location and community.

"We knew it was an emerging, vibrant community and got such great feedback from people that said the community was growing and interested in the arts, and lots of different types of people living in the community," she said.

Similar gay and lesbian retirement communities are in the works elsewhere.

Veronica St. Claire, chief executive of the Gay & Lesbian Association of Retiring Persons Inc., is pushing for a similar development in Palm Springs , Calif.

RainbowVision Properties Inc. is nearing the second anniversary of its community in Santa Fe . Similar to Marigold Creek, it features mixed housing options and assisted living. Roughly 70 percent of residents are from the gay and lesbian community, the rest "allies," said Jane Steinberg, its national director of marketing and sales.

RainbowVision is nearing construction on a condominium project in Palm Springs and is working on developments in San Francisco and Vancouver .

Let Laura B. represent you in your retirement purchase.

Under $200,000 market gives home sales a push

Under $200,000 market gives home sales a push
By Kerry Fehr-Snyder The Arizona Republic

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

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

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

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

But those who want to get the deals face:

• Competition from investors.

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

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

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

The Kauffmans found their dream home relatively quickly by limiting how far out they were willing to look. They also disregarded short-sale and foreclosure homes, said Audrey Hickman, the Kauffman's real-estate agent at WestUSA Realty.

Wendy Kauffman described their house hunt as "a wonderful experience."

"But the key was having people on your side, from Audrey to our mortgage broker," she said.

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

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

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

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

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

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

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

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

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

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

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

"It was in the (price) range of what I was looking for, but it was my top end and I was only willing to pay that if I could be closer," Crutchfield, 23, said. "I've been looking for about two years now when the market was really high, and I had the urge to buy. Then the market went down, and I seriously wanted to buy."

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

"The sub-$200,000 market is superhot," Carver said.

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

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

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

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

Click here to find a home in the Phoenix Metro area.

Monday, March 24, 2008

Home sales rise on biggest-ever price drop

March 24th, 2008

Realtors' group sees record 8.2% decline in year-over-year prices in February.

A record plunge in prices of existing homes produced only a modest increase in sales in February, according to the latest reading on the battered housing market by an industry trade group released Monday.

The National Association of Realtors reported that sales by homeowners rose 2.9% in February to a seasonally adjusted annual pace of 5.03 million, up from January's reading of 4.89 million. It was the first month-over-month rise of the annualized pace since July.

"These are signs that housing's problems are being addressed, but I wouldn't break out the champagne yet," said Northern Trust chief economist Paul Kasriel. "We still have a ways to go."

Though February's pace beat economists' expectations, sales last month were still down 23.8% from a year earlier. Economists surveyed by expected the report to show existing home sales slowed to an annual pace of 4.86 million.

The median price of a home sold during the month fell 8.2% to $195,900 from $213,500 a year earlier - the largest year-over-year price drop on record. Before the start of the current housing slump, it had been 11 years since prices declined, when compared with the same period a year earlier.

"That's a huge drop in prices, which is how you move the merchandise," said Kasriel.

Sale prices have now fallen 15% from their peak in July 2006, and are down 14% from June 2007, when the most recent steady downturn began. That brings the median price of existing homes sold down to May 2004 levels.

The median price of a single-family home dropped significantly as well, falling 8.7% to $193,900. That was the largest drop in prices since the trade group began tracking them in 1989.

The report is a sign that the price environment is weaker than the Realtors' most recent forecasts. Though NAR chief economist Lawrence Yun said in a release that a "notable gain" in existing home sales is not expected until the second half of 2008, the Realtors' March forecast called for only a 6.3% decline in housing prices in the first quarter, compared to a year ago. NAR also forecast a median price of $200,500 for the first quarter. Given the current environment, March sales would need a very strong showing, both in median prices and the pace of sales, to reach the Realtors' forecast.

And though the drop in existing home prices helped bolster the average sales pace, the numbers were mostly boosted by an 11.3% rise in sales in the Northeast, which actually saw a 0.4% rise in median price. But even as the median home price fell 13.4% in the western part of the nation, home sales still dropped 1.1% in that region.

The report, however, showed encouraging news regarding housing inventories, as the excess supply of homes on the market fell in January. The Realtors estimated that there were 4 million homes available for sale, which represents a nearly 9.6-month supply. That was down from the 10.2-month supply in December.

"There is a huge oversupply on housing, so builders have been cutting back dramatically in production of new houses," said Kasriel. "That's exactly what has to happen to bring supply and demand back into the balance."

Solution is part of a larger problem. But the downturn in home building has hammered the results of the nation's largest builders and has taken its toll on the economy as well.

Employment in the construction sector fell by 30,000 jobs in February, according to the most recent ADP National Employment Report. The sector has shown a decline in every month since August 2006, and has lost a total of 236,000 jobs since then.

Furthermore, plummeting home prices affect homeowners' wealth, leading to lower consumer spending. Sinking home value could also send some mortgage borrowers into foreclosure.

"As house prices fall sharply, that can force more people into default, especially those who bought late in the cycle who owe more on their houses than their homes are worth," noted Kasriel.

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