An update on the status of Arizona’s housing market with Arizona Republic Real Estate reporter Catherine Reagor.
Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. In today's headlines, the nation's housing starts were up 2.8% in January but building permits were down. Here to tell us what that means and what's happening in Arizona's housing market is Catherine Reagor, real estate reporter for "The Arizona Republic" good to have you here. Thanks for joining us.
Catherine Reagor: Thank you.
Ted Simons: What does it mean?
Catherine Reagor: Our building permits are not up. Same thing. Last year we had 8500 building permits in the valley after a record of 6200 in 2006. So, we are way off and they're suggesting the market will stay around that level this year because we have so many extra homes, speculative homes. We're still absorbing that. That will put pressure on price and foreclosures.
Ted Simons: I want to stay with foreclosures. The nation says it's seeing a resurgence and we're still waiting for the good news.
Catherine Reagor: Yes, and we'll probably wait another two years.
Ted Simons: Interesting. Let's get to foreclosures. It's still the major factor as far as home concerns?
Catherine Reagor: Yes. Definitely the biggest percentage of homes for sale are foreclosures. The good news is, in January, we saw a significant drop in preforeclosures and foreclosures in metro Phoenix. That could be for a number of reasons.
Ted Simons: Let's talk about some of the reasons.
Catherine Reagor: It could be that loan modifications are working. It could be lenders are being more proactive. It could be that lenders are overwhelmed or it could be that people can afford their mortgages. Whatever the reason now, it looks like a good ending.
Ted Simons: Obama administration coming out with the loan modification numbers. In general, what are they telling us?
Catherine Reagor: 12% of the people that applied and I believe that were eligible have received some type of loan modification. That is a low number but it's a big jump from December. The Obama administration really went out and put pressure on lenders. Of course we need to see a lot more. Foreclosure numbers, though, have dropped and could easily, you know, jump back again and, you know, 60,000 in 2009 for metro Phoenix is tough. We're going to feel that for a long time.
Ted Simons: Is the townhouse and condo market still especially bad?
Catherine Reagor: hit hard. What's really hard is because of all these condos that have H.O.A.s that are in trouble and because of not enough homeowners to pay. They get in the quagmire. We have so many condo projects under construction. Some half completed, some going into the foreclosure and there are some of the high-rises downtown that are for sale and the rest are foreclosures. We'll have to work through that. We know from national real estate consultants, there are no plans to build or buy any condo projects here for a few years.
Ted Simons: Interesting. Mortgage applications are down as well. Demand obviously still slow. As far as the overall market, though, is concerned, what are we hearing? What are we seeing here? Double dip, are we going to see the five-year arms when things were so hot and heavy, some of that stuff will come home to roost.
Catherine Reagor: That is a concern. On the good news front, which lots of people want to hear right now, home prices have hopefully hit bottom and have been leveled off since last March. The report called it last April and looked at median home prices, and we are not falling anymore. The concern is, what happens to the foreclosures? And if lenders take another step back because of the negative am mortgages at adjustable rates and sell them for bargain prices, we could go along, dip, recover, dip. If homeowners get frustrated and walk away, that's another part of the foreclosure market that we can't hit.
Ted Simons: I can't let you go with the concern about the property taxes and what people are paying and what municipalities are having to deal with.
Catherine Reagor: We have very low property taxes. It's a complex convoluted system. Nobody complains because they're so low and they lag. Now people this September are going to get property tax bills on their valuations from last year that showed a 23% decrease. And the school districts, the word is out, that it gets the money to offset the budget shortfall, now is the time to raise property taxes. It won't be a one-year thing but a three-year thing because of the lag.
Ted Simons: Basically because of the lag, what we're seeing right now, that doesn't come home to roost for another year.
Catherine Reagor: Yes, yes.
Ted Simons: And we're talking overrides and all sorts of cities are trying to do something to raise the money that they would have gotten through property value.
Catherine Reagor: I thought the Maricopa County assessor put it well. How many potholes do you want? Do you want the music class your daughter lost back? It's what you're willing to pay for.
Ted Simons: How do Arizona's property taxes compare to the rest of the country?
Catherine Reagor: We're the 39th lowest. Other states that do, you know, have similar, are much higher. We traditionally have been so low, you don't really raise an eyebrow when you notice. We've never had the kind of price spikes or price declines in the past four years.
Ted Simons: Good information. Thanks so much for joining us. We appreciate it.
Catherine Reagor: Thank you.
Catherine Reagor:Arizona Republic;