Housing

Feb. 9, 2009

Transcript:

Ted Simons:
Hello and welcome to horizon, I'm Ted Simons. Home sales nationwide were down 45 percent from December of â€˜07 to December of â€˜08. Here in Arizona, it's worse. For the same period, new home sales were down 60 percent, resale home sales were down 72 percent. I spoke with Arizona republic real estate reporter Catherine Reagor---to look at these numbers.

Ted Simons:
Good to have you on the program. Thanks for joining us.

Catherine Reagor:
Thank you. It's good to be here.

Ted Simons:
Let's start with an overview. The state of housing in the Valley right now.

Catherine Reagor:
It's tough. It's tough. Home building is also down. Home building is down 60% from last year. Home building is one of our top industries. The real problem are foreclosures. And through January it looks like foreclosures are going to climb again. We had some dips in November and December, which were great. But those were because of lender moratoriums on foreclosures. Those are pretty much off. And foreclosures are hurting the entire market. New home sales are off because they're competing against foreclosure homes that are reselling. Regular home prices down because foreclosure homes are reselling for very low prices. There are great deals out there.

Ted Simons:
You mentioned lender moratoriums are over. Are lenders in other ways working with folks, struggling homeowners right now?

Catherine Reagor:
Actually some numbers just came out today from Hope Now, an alliance of lenders and housing advocate groups and they say in December, they helped more than 200,000 people nationally stay in their home. The problem is, it can't just be a quick fix. It has to be a long-term fix, because also more than 50% of the loans that were fixed and adjusted to keep out of foreclosure in the first half of last year are now back into closure. So there has to be a long-term solution.

Ted Simons:
I know foreclosures are a major problem, but inventory is kind of overriding that as well. We still have way too many homes out there, don't we?

Catherine Reagor:
Yeah. There are a lot of homes for sale. There are a lot of spec new homes that are still for sale. Elliot Pollack, the economist, just said the other day we have to absorb 20,000 to 40,000. That's from the boom in 2005 when we built 68,000 new homes, compared to 12,000 last year, but, of course, we've already started to absorb some of those and that has to happen. But these foreclosures are just blowing up the inventory. Of all the resales in December, I believe 60% were these foreclosure resales. The good thing is, they're selling, because if they weren't it would be terrible. But if you're just a regular homeowner and you need to sell your house, or are trying to sell your house it's really a tough time.

Ted Simons:
Well, not only that -- if you're a regular home owner and your neighborhood has been stable and there are homes for sale and all of a sudden there's a bank-owned sign out front that means your value, your neighborhood, is going to get hit one way or the other.

Catherine Reagor:
It happened to me. Home right across the street sold for about one-third that it had sold for during the peak. But very happy to have a homeowner in there. They are doing work on it. It had been gutted. This is another problem -- we kind of have to change our mind-set a little bit about it and maybe not look at our comps for a couple years. Like our 401(k) s and just think: okay, great, if someone's buying those homes and it's not an investor, and someone's living in it, and that's a good neighbor, and they are having work done that brings money into the economy and makes the neighborhood better.

Ted Simons:
Like Zillow. Just stay away at all costs. As far as significant increases in prices, are we looking at 2011? Are we looking at 2012?

Catherine Reagor:
For significant increase in prices they are saying 2012. The word is that this year is going to be as bad as last year. Now, we have already felt the pain. We will not see another huge drop in prices or huge drop in sales. We will hold steady, so if we can just get through this and we will start to see it pick up in 2010. But again, as soon as foreclosures slow and more people have their loans modified and work that out -- and we'll see what the economic stimulus plan has for that -- it will help expedite...well, that may be too strong of a term...it will help speed up the recovery.

Ted Simons:
It would seem, though, that it stands to reason if you've got folks who have three and five-year mortgages, these ARMs things, and three years ago, things were gangbusters, five years ago things weren't all that bad. Some of these folks, they're coming due and I've got a funny feeling they're not going to be able to handle this.

Catherine Reagor:
Yeah, and be able to refinance. A lot of the wave of the first foreclosures were subprime loans. It's people losing jobs now and that's a problem but there is this wave of Alt-A, which are slightly better than subprime, but they're bigger loans, the more expensive homes. That is set to readjust late this year. I've talked to lenders, and they are expecting foreclosures to jump again in 2010 because of that. We have a lot of Alt-A loans. Not as many as California, but we're third or fourth in the nation for those types of loans.

Ted Simons:
I don't think there's any hot spot out there, but how about a warm spot? And what are the ones that are just dead cold?

Catherine Reagor:
The fringes. It's a tough time for the edge communities, partly because so many new homes went up, so many during the boom, so many of the buyers, so many people bought at the peak and unfortunately some of the amenities that they needed out there, didn't come because things slowed. Gas prices, you know, a year ago made it very tough. Areas closer in seem to be faring better, and the thing is, this is a huge valley and we are a neighborhood by neighborhood area. We have had, you know, 40% overall drop in home prices in the past year. But some neighborhoods have done better. Some neighborhoods of central Phoenix, some neighborhoods in Tempe, some neighborhoods of Scottsdale, Ahwatukee, are doing better because of schools and pockets and they didn't have at lot of speculators or investors during the boom to lose the homes to foreclosure.

Ted Simons:
Last question. We have home builders now filing for protection. Is that something that affects the housing industry? Or is the housing industry just basically affecting them?

Catherine Reagor:
I think it goes both ways. I think it goes both ways. We are going to see more consolidation definitely. And more bankruptcies. Fulton Homes was a surprise because that's a builder that's been around since the '70s. They have done very well. Ira's a huge contributor to the community. But private builders are in a tough spot. It's their names on the bank note. Unlike the public builders who get their money from shareholders and the public. Banks are calling loans. Right and left. And they call your loan, and you don't have the cash and you can't sell the homes --

Ted Simons:
Again, we depend so much on housing and construction and finance and those three things are so involved in everything that's going south right now. We're just going to have to tough it out for a while.

Catherine Reagor:
Yeah. But the outlook is good a few years out. If we can get the job market coming back that will help.

Ted Simons:
Catherine, thank you so much for joining us on "Horizon."

Catherine Reagor:
Thank you.