Holiday shopping season

Transcript:

Michael Grant: Tonight on "Horizon," we're about to head into the holiday shopping season. We'll talk with an expert to see what to expect here in our state. What do you do if you want a brand-new home but don't want to live on the fringes of the city? Tonight we look at infill housing. Those stories next on "Horizon." Good evening. Welcome to "Horizon." I'm Michael Grant.

>>> Long-time Arizona congressman Jim Kolbe has announced he is stepping down. He has served more than 20 years in the U.S. House of Representatives. The 63-year-old republican says he looks around the chamber and sees members in their 80's, and says he doesn't want to be there at that age. Kolbe serves a district covering much of southeastern Arizona. Consumer confidence is plummeting, and the latest KAET-ASU poll shows the majority of people will spend about the same or perhaps less Christmas shopping this year. In the poll, 12% of registered Arizona voters we surveyed said they would spend more on gifts this holiday season. 28% said they would spend less, 57% plan to spend about the same. Here now to talk about holiday shopping is Arizona State University economist and center for business research associate director, Tracy Clark. Happy Thanksgiving to you.

Tracy Clark:
You too.

Michael Grant:
Thanksgiving is traditionally the kickoff for the big shopping season.

Tracy Clark:
Yes. This time, though, I think the retailers have been trying to get people into the stores a little bit early, kind of on the theory at least nationally that get them into the stores before they find out how big their home heating bill is going to be for the winter.

Michael Grant:
It's not a bad idea. Put it in some context for us. What is the holiday season mean, and let's start with the smaller universe, to retailers?

Tracy Clark:
Well, for retailers -- I mean, for many of them, it's 25 to 40% of their sales. Their annual sales.

Michael Grant:
Compressed in a roughly one-month period.

Tracy Clark:
One or two-month period. Oddly enough, because of the popularity of gift cards and things like that, the holiday shopping season is now actually spilling over into January.

Michael Grant:
Oh, that's true. And that has been a more popular phenomenon over the past I'll take a guess, five or 10 years.

Tracy Clark:
Yes, about five to 10 years. And it's been really very popular.

Michael Grant:
Now, from a broader standpoint, what does the holiday shopping season mean more to the economy as a whole? Good or bad?

Tracy Clark:
Good or bad means -- it gives us a really fairly good read on how consumers are actually feeling going into the new year. Consumers often say one thing and do another thing, and so the holiday shopping season is often looked at as a way of figuring out how people are feeling going into the new year, and how that's going to probably be an indication of how they're their spending is going to go into 2006.

Michael Grant:
In other words, businesses will look at that as some sort of precursor or indicator, it looks like a pretty good time for me to make capital investment, or maybe not, or build the inventory, or not, those kinds of things?

Tracy Clark:
Precisely.

Michael Grant:
Ok. Speaking of what people say, actually there was a national survey that pretty much paralleled our result, indicating about two-thirds of people either indicated they were going to spend about the same or perhaps more. Is that the general indication nationwide, as well as here in Arizona?

Tracy Clark:
I think the picture is a little bit different nationwide than it is here, because most of the surveys and suggestions say that of course the people in the gulf coast areas will probably spend a fair amount less, people in colder parts of the united states where the heating bills are anticipated might be quite a bit more. They may spend less, depends on how cold the winter is. Here, year to date our retail sales are going at about 12% above last year. And so we're seeing maybe that the holiday shopping itself might be ok, somewhere in the 5% range, which is in the good to moderate range for once.

Michael Grant:
Is that the primary, I don't know, leading economic indicator, that goes into trying to take a shot at whether or not it's going to be a good or a bad holiday season, what's leading up to it? I mean, how consumer spending has been moving into the period?

Tracy Clark:
Right, how it's been moving up to it, is there a killer must-have for the season, how are the retailers feeling, do they do early sales? And it's looking like it could be a fairly good season, at least in Arizona, because we don't have to worry quite as much about the heating issue.

Michael Grant:
Any other things that sort of go into the predictions on what kind of season it's going to be, for example, interest rate levels, debt levels, you know, those kinds of things?

Tracy Clark:
Interest rates, debt levels, people's general outlook on the economy and the world in general. And also we try to look at, you know, what are they going to spend the money on, because for the last several years, a fair amount of the holiday spending has actually been in autos, which you don't think of as holiday spending, but people have said, well, instead of getting, you know, 12 sweaters and three toasters, we're going to go out and get an S.U.V.

Michael Grant:
Wow! That's a gift shift!

Tracy Clark:
That's a gift shift. And there's also been a shift too; a lot of people have shifted to getting services, vacation, a spa holiday, and things like that.

Michael Grant:
Right.

Tracy Clark:
That don't normally show up in what we think of as, quote, the holiday spending retail spending.

Michael Grant:
Speaking of S.U.V.'s, do the higher gas prices impact holiday spending? I'm sure they do at some level.

Tracy Clark:
At some level they do. Online shippers aren't going to be charging any more for their shipping. They're eating that cost themselves. Most people have seen gasoline prices come down quite a bit. The retailers have already eaten the cost of the higher shipping costs to get the stuff to the stores, that's already a done deal. But for your normal consumer, I think right now they're seeing fairly low gas prices, and that's going to make them feel fairly good.

Michael Grant:
We're focusing on level of sales activities, but before we went on the air you were pointing out to me, but what's the profit? Because more and more retailers go into not the old after-Christmas sales, they go into pre-Christmas sales.

Tracy Clark:
And there's some worry that because of worries about the heating bills and other things, and just general competitiveness, that the retailers are going to be a lot more aggressive in their sales, and that could mean that we have a real good retail sales number, but nobody made any money selling it.

Michael Grant:
Yeah, right. What about online shopping, Tracy? Is it -- I know it's occupying a larger portion just of the general market, I would assume the same thing is happening in terms of it occupying a larger portion of the Christmas season market?

Tracy Clark:
Yes, and usually the way it works out is, for that you have to wait until next Monday. The day after thanksgiving is when you go out and do your bricks and mortar shopping, and next Monday is when you get back to work where you have a broad band connection and you go all your online shopping.

Michael Grant:
Oh, really? Nobody has broadband at their house, huh?

Tracy Clark:
The tendency is for people to wait until they get a really fast connection, and then they -- on their lunch hour or whatever.

Michael Grant:
I got you. Ok. So recap, you thought maybe Arizona seeing a 5% --

Tracy Clark:
-- 5%, maybe 6%, relatively good, probably going to be less spending on autos, just because people have been kind of spooked by the gasoline prices, and even though the gasoline prices have come down, that's because we're in a low demand time of year, they're probably going to go back up next summer. And I think overall people are not going to feel too bad about this season.

Michael Grant:
All right. Tracy Clark, happy holidays. Thanks for being here.

Tracy Clark:
You too.

Michael Grant:
Tonight we wrap up our three-part series "growing pains" with another look at how home building is moving away from the fringes of the valley. It is called infill housing. It's where vacant lots checker boarded throughout the valley are being filled in with homes. I'll talk to a city of phoenix official and a state official about infill housing. But first Mike Sauceda tells us about one valley homebuilder who specializes in building homes in the core of the city.

Mike Sauceda:
It's a catch phrase for many seeking to qualify to buy a new house. But not everyone likes that approach. That's why you'll see new single-family housing being built in the shadow of downtown Phoenix. It's called infill housing, where empty lots or lots with old buildings on them are in filled with new housing. Richard Zacher has been building infill housing since he started his company in 1994.

Richard Zacher:
I elected to go into the infill housing market for a lot of reasons. I wanted to do smaller communities, I wanted to insulate myself from a downturn in the market, which actually really never happened. Although it is starting to happen now. I wanted to do unique product instead of designing what I would call production housing plans. I wanted to start with the infill and actually grow and 8 start doing larger projects, which I'm currently doing now.

Mike Sauceda:
Zacher takes small acreages and splits the lots into subdivision up to 20 to 30 homes. They're located mostly north of Bethany Home road from 15th avenue to 16th street. Although he currently has property at 37th and Lincoln, and the old Motorola factory at 56th and Earl. Many of his homes are higher end, some starting in the mid $300,000's to over $500,000. Zacher says a similar home built in the central part of the city will cost more than a home built on the outskirts of the valley.

Richard Zacher:
Yes, most definitely, because when you're doing a small number of units, let's say compared -- 20-lot subdivision compared to 200 lots, you're still going to get -- have the same engineering costs, it's harder to attract major subcontractors, drywallers, stucco, framers to come in town where there's not a lot of other subdivisions or other builders doing work where they would mainly have, you know, they could get some economies of scale on their management of gas and having their foremen run around to different subdivision that's are close together. So that drives your cost, your hard costs for your house use up. The land costs are typically higher.

Mike Sauceda:
Though an infill house might cost the homebuyer more, there are some advantages to living in the city.

Richard Zacher:
First of all, it's close to the work, your work center. Mainly downtown Phoenix, you're closer to the shopping facilities closer to the main entertainment venues, whether it's sports or the arts, or symphony, or what have you. The freeway system that they've been trying to put in place for the last, whatever, 10 years, is now will allow you to get out to the perimeter when you want to get out there. But you can still live in town. The -- the schools, there's a lot of -- the north central Phoenix school district and Tempe school district, you got great schools. So there's a lot of benefit.

Mike Sauceda:
Cities and the state have an interest in seeing more infill housing, and offer incentives to builders.

Richard Zacher:
I think it prevents the hopscotch building, prevents a lot of leap frog development and where builders and land speculators and land developers are going way out to the fringes, where there is no infrastructure, and it becomes more expensive for the city and a developer to put in the sewer and water infrastructure, the utility, the power, gas, telephone, it -- it prevents the urban sprawl that everybody's been talking about for the last 10 years.

Mike Sauceda:
Single family infill housing may be played out in the valley, but Zacher still see as future for infill housing here.

Richard Zacher:
I see the trend moving away from single-family, moving into high-rise, true high-rise, 10, 15, 20-store development, which Phoenix has never really seen, or never really proven in this area. I think there's some pockets that that will succeed in, and there's some projects on the boards that are going to fail. The -- I think you're going to start seeing infill building in places like Gilbert, Chandler, Mesa, Apache Junction, Goodyear, Litchfield, you're going to see infill in areas that used to be the suburban or the bedroom communities to Phoenix.

Michael Grant:
Here to talk about infill housing is Sheila Harris, she is the Director of the Arizona Department of Housing. Also with me tonight is Joy Mee, she is an advisor to the city of Phoenix Planning Department. Welcome to you both and happy holidays.

Sheila Harris:
Likewise.

Michael Grant:
Sheila, you were saying that it's not infill housing is not going to come to some of the areas that he was talking about, it's already come to some of the areas he is talking about. Correct?

Sheila Harris:
That's correct, Michael. As we work throughout the state with a variety of communities to develop affordable housing throughout the state, we have already worked with communities in Chandler, Pima County, and Yuma, to develop infill developments for those areas right now.

Michael Grant:
Is this an infill boom?

Sheila Harris:
I would say there are more and more people that -- and more and more organization that's see the need for infill, because it also brings to communities the ability to do perhaps home ownership in certain areas that they want to stabilize the neighborhood. So infill is more than just developing single-family homes, it can also be used for multifamily development as well.

Michael Grant:
Joy, you were making the point that it's not just filling in vacant land, sometimes it's rebuilding what is there, and/or changing what is there.

Joy Mee:
Yes. Infill can involve redeveloping underutilized parcels or land that's partially vacant. Sometimes it includes reusing soils that were contaminated, land that nobody wanted to build on. And it isn't just housing, it's mixed use projects in which housing is the predominant use, but it may include some offices and retail as well. That's been the more recent innovation and challenge.

Michael Grant:
Now, we used to think of infill housing at more at the city's core in either one of those kinds of contexts, but I guess infill can really happen just about any place.

Joy Mee:
Infill can happen on any parcel that has been skipped over or that is being redeveloped. That can be in the center of the city, or it can be in -- at the edges of the city. It used to be common for developers to -- if they did a subdivision, to leave the corner for a future shopping center. Well, sometimes it isn't a shopping center, it becomes a multifamily complex, or a mixed use complex, and sometimes we're seeing in other areas that shopping centers can be redeveloped with a mix of uses, not just stores.

Michael Grant:
Sure. In fact, that's happened at a couple locations in Phoenix and in the valley. What about Richard Zacher's point, Sheila, that he thinks single-family infill may be reaching its end?

Sheila Harris:
When you try and do single-family on a small scale he was talking about with limited unit, your cost per unit becomes quite prohibitive after a while. And so you are going to probably be seeing more of the of smaller lots be used for multifamily or assemblage for multifamily, trying to do single-family developments where you're skipping, you know, one block here, or going there, that becomes very expensive. And then it becomes part of whether or not the community wants that type of unit in their community, and they can afford to purchase those kinds of units as well. So I think what his point is, is for him to get to economies of scale, he has to have certain segments of land that may not be available or would be very difficult to assemble.

Michael Grant:
So obviously he's talking about more townhouses, condominiums?

Sheila Harris:
Correct. I think we're also starting to see the emergence very much so of apartments going into condominiums, but also more detached housing, and different types of units. We used to be pretty much single-family homes and multifamily developments. And I think now with the cost of land increasing, you're seeing a much broader array of development.

Michael Grant:
Joy, city of Phoenix, the same?

Joy Mee:
Yes. I think an example in the past we saw one-story attached products. And sometimes two story. Now we're seeing three and even four-story townhouses. So that the unit gets narrower and it goes higher, and we're also seeing the use of tandem parking, that's where one car parks behind another car. And that allows you to do more narrow development. We're also seeing products that are alley loaded, which gives you a nicer front elevation when you don't have that double car garage taking up the whole front.

Michael Grant:
Last night we talked about verticality. You seem to be indicating, we were focusing more on the -- obviously the Trump complex at 140 feet, those kinds of things. Is the three and the four and the five-story project in the context of infill becoming more popular as well?

Joy Mee:
Yes. We're seeing all different heights. Frame construction pretty much ends at four or five stories, and then you go into a different more expensive form of construction. But the tapestry on central project is a good example of something that's more than four stories, but it's certainly less than the Trump project. We have a district, an urban residential district, which is 56 feet and goes up to 96 feet. So we have some projects in that range as well. I think we're seeing a much greater variety of product than ever before.

Michael Grant:
Do you know, Sheila, how much of the housing market is infill? Do we have any good statistics on that?

Sheila Harris:
Well, as we were discussing, you know, previously, we were talking about this, you really don't know, because you know -- you could find out what vacant land is, but infill could also be redevelopment of a parcel that has existing housing on it, or is vacant, or is a parking lot. So it's really difficult to say that there is x amount of vacant land that could be used for infill. And really what it is -- from our perspective on the state, we rely on local communities to decide how they best want to plan their communities, what they want, how many types of units, where they want them, those kinds of things. And our incentive, what we bring to the table is financing to help them achieve those goals.

Michael Grant:
So the state really doesn't do much guiding it sounds to me, it does more facilitating, for lack of a better term.

Sheila Harris:
Yes. Particularly when money comes associated with it. People tend to gravitate to how you can use the funds, and so we're not in a prescriptive role, we're more in a supportive role in helping you achieve your goals.

Michael Grant:
Joy, does the city of Phoenix operate more of a guiding role, like, ok, we'd really like it if you go in?

Joy Mee:
The city has an infill incentives program, it's part of the growing smarter legislation when we update our general plan and the voters approved it, it included an infill program that includes 51 square miles of infill incentive areas. That may sound large, but that isn't even a 10th of the full city limits. Within those areas we have special processing, accelerated processing and more hands on for infill housing and mixed-use projects. We also have some changes in our ordinance to facilitate infill development that recognizes that people are building on smaller lots and that they can't do things exactly the way you'd do if you were building on a piece of desert. So we have a proactive program.

Michael Grant:
I think there's something of an impression that if you're doing infill, you're putting less of a strain on infrastructure than having to take the infrastructure out to the sprawl. But that's not always necessarily the case.

Joy Mee:
No. It depends on the size of your project and what the existing capacity is. For small projects that's probably true. Although if there were very old waterlines, old two-inch lines, you would be expected to upgrade those. Normally a small project wouldn't impact the street capacity, but if you're doing a really large project, you may have to upgrade water and sewer.

Michael Grant:
What sort of incentives does the state offer to builders in relation to infill?

Joy Mee:
Basically we have many financing tools, such as low-income housing tax credits, tax exempt bonding and state housing funds that can be used in our particular case to develop housing for low and moderate income families and individuals.

Michael Grant:
Ok. Sheila Harris, director of Arizona Department of Housing, thank you very much for joining us. Joy Mee, advisor to the Phoenix Planning Department, our thanks to you as well. And hope both of you have a great holiday weekend.

Joy Mee:
Thank you.

Michael Grant:
Humorist Dave Barry's column appears in more than 500 newspapers. He's written 25 books and he has won a Pulitzer prize for commentary. But now Barry has another award that is on par with the Pulitzer. Mike Philipsen explains.

Walter Cronkite:
Mother nature has treated Florida rather shabbily of course of late, and has left Dave Barry virtually nothing to be humorous about.

Mike Philipsen:
Each year legendary broadcaster Walter Cronkite honors one of the shining stars of journalism. With his award of excellence in journalism. This time humor took center stage as he gave the award to Miami Herald columnist Dave Barry.

Dave Barry: I'm here to talk about what an honor it is to receive this award from Walter Cronkite, and like Carl Hiaasen said, Walter Cronkite, some of you younger people might not remember, but the most amazing institution in this country, I grew up with Walter Cronkite. Fortunately he had a big house, so he didn't notice.

Mike Philipsen:
Barry says Cronkite was part of the reason he went into journalism, but he quickly found out at his first newspaper job out of college, straight reporting was not for him.

Dave Barry:
I did what you do, I wrote obituaries, went to fires, I covered unbelievably dull municipal meetings, some of which are still probably going on. But when I could, I would write humor. That's really what I wanted to do, was to be a humor writer, and I was able gradually over the years by continuing to do it, to get to the point where I didn't have to write facts at all anymore, I could sit around in my underwear and make things up. It's a lot like being a consultant.

Mike Philipsen:
Barry is on a hiatus from his column. He's still writing books, one of which will be out in January. In addition to that Cronkite Award, Barry says he's going to bring back a big extension cord with him to his home in Florida. That's because he's been without electricity for a few weeks now, because of hurricane Wilma. Mike Philips, for "Horizon."

Michael Grant:
Do you want more of Dave Barry? We're going to be featuring his entire award speech on a special edition of "Horizon." you can see that Friday at 7:00 here on Channel 8. Thank you very much for joining us on this Wednesday evening, Thanksgiving Eve. I hope you have a terrific holiday weekend. I'm Michael Grant. Have a great one. Good night.