The state’s tallest building sold this month for the highest price ever paid for an office building in metropolitan Phoenix.

Chase Tower at 201 N. Central Ave. sold for $166.93 million to Crystal River Capital, a New York real estate investment trust. It drew 16 offers.

“This signifies a couple of things,” said Bob Young of CB Richard Ellis and one of the brokers who represented the seller. “It shows the health of downtown as a vibrant market and how Phoenix has grown on the world stage for institutional investors.”

Brookfield Asset Management of Toronto was the seller. Brookfield and Crystal River are separate companies but Crystal River is managed by an affiliate of the seller. Chase will remain in the building.

The biggest Phoenix office deal was $155 million for two buildings in the Camelback Esplanade in 2005. The record for a single building sale was $107 million for the Hines building at 24th Street and Camelback Road. Glen Creno

Manny Caballero
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Turns out, folks there have finally decided to acknowledge what we here have known, oh, for about eight months: Phoenix is now the nation’s fifth-largest city based on census population counts.

In a story published in Thursday’s Philadelphia Daily News, everyone from a Temple University professor to the Philadelphia Mayor’s Office took potshots at us.

Among the choice comments? That we “cheated” by swallowing our suburbs and that we have air- and water-quality problems.

That’s not sitting too well with Phoenix Mayor Phil Gordon, who touted the area’s cultural history, abundant sunshine and job growth in a blunt response to the newspaper.

He also makes it clear that we have something that Philly doesn’t: a winning basketball team.

“If you haven’t been to Phoenix in the last five years, you simply need to see it for yourself,” Gordon said.

“And you might want to come during the NBA Finals.” Ginger D. Richardson

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A coalition of housing groups and advocates for the poor today said tougher laws are needed to protect consumers from lenders pushing high-interest home loans. They warned of a growing “mortgage tsunami” affecting millions of Americans, particularly minorities.

The National Community Reinvestment Coalition, a network of 640 groups nationwide, said federal bank regulators and members of Congress had ignored warnings for several years about a potential wave of defaults in risky loans.

Some lawmakers are already considering tougher standards for risky, higher-interest mortgages made to people with blemished credit records as defaults surge and lenders to the so-called subprime market see their own financing dry up.

The U.S. Securities and Exchange Commission, meanwhile, is examining accounting errors at New Century Financial, the second-largest subprime lender, which is facing possible bankruptcy. Its bank lenders have cut off funding or informed the Irvine, Calif., company of their intent to do so because of its failure to make payments.

Members of the housing coalition said today that the Federal Housing Administration should work with banks to refinance risky loans with high interest rates in order to help consumers avoid foreclosure.

“We have for many years urged Congress and urged those who are responsible to take action,” said John Taylor, the president of the coalition. “Frankly, it’s appalling what they haven’t done. . . . Today we call on the (Bush) administration and the Congress to take back the reins.”

Taylor blasted “exotic nontraditional mortgages that are designed to strip wealth” rather than allow homeowners to build up equity in their properties.Associated Press

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The Barrs moved to the Valley because Thuynga was transferred here from Oregon for work. Her new job started in January.

She and Paul didn’t use an agent to shop for houses. They began the search last May, checking prices and neighborhoods on various Web sites. When they found a prospect, they researched further.

“If we liked something, we would go on Zillow (a valuation site) to compare their price with the asking prices, then compare the same house with what the neighbor houses sold for in the last month or year,” Thuynga said.

They also looked at things like homeowners’ fees, age of the house and commute times. They calculated how much they could bargain on each house. They looked at neighborhoods around the Valley during visits to the area and finally settled on a house in Cave Creek. They declined to say what they paid but bargained the price down $65,000.

Their tips: Use the Internet to get the most information. Stick to your budget and don’t give in. “You need to know what you can afford,” Thuynga said. “Don’t just buy anything.”

Worth it? They’re still amazed by the Valley’s prices and aren’t fond of their higher mortgage payments. But they like the house. They declined to say what their Oregon house sold for, but it had 24 acres of land. They paid more than $100,000 more for their Valley home. Glen Creno

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Despite the recent slowdown in the Valley’s housing market, prices haven’t dipped enough to make it easier for first-time home buyers to find houses they can afford.

But low mortgage rates and programs to aid fledgling buyers are helping some.

The current market is a great one for first-time and low- to moderate-income home buyers, said Teri Whiting, a loan officer with Bank of America in Chandler.

“If people have fairly decent credit and stable employment, they should be able to get into a home,” she said.

One of the biggest programs to help first-time buyers is from the Federal Housing Administration. FHA loans have been around for a while. They are backed by the government so lenders are more willing to take a potential bigger risk funding a loan to a first-time home buyer.

FHA loans do not require a credit score, said Patrick Ritchie, a loan officer with Advisors Mortgage in Tempe and author of The Credit Road Map.

“They’re (the FHA) more concerned about have you paid your bills on time for the past 12 months and not having any open collections,” he said.

Ritchie said the current cap on an FHA loan in Maricopa County is $263,150. It varies by market because home prices vary by city. The median price of an existing house in the Valley is $260,000.

Young veterans should consider looking into Veteran Administration loans that can also be a safer and easier way to get a mortgage.

First-time buyers eager to get into a home of their own shouldn’t try to buy more than they can afford.

Ritchie advises them to carefully calculate the difference between the rent they are currently paying and their potential mortgage payments.

“Nobody should ever get into a mortgage that’s going to be painful each month,” he said.

Many mortgage people are advising first-timers to take advantage of fixed-rates since they are almost as low as adjustable rate mortgages now.

For the week that ended March 1, the interest rate on a 30-year mortgage was 6.18 percent, compared with rates ranging from 5.93 percent for a five-year adjustable mortgage.

Some homeowners, who went for adjustable rate mortgages during the past few years so they could afford metropolitan Phoenix’s higher home prices, are feeling the squeeze now and may be in danger of losing their homes.

“I see the refis coming from the adjustable rate mortgages that are going to take a significant jump, and (from) the people who have tapped into their equity and want to combine their first and second into one mortgage,” Whiting said.

Rising foreclosures and delinquency rates have some lenders pulling back from doing more risky loans, which often go to first-time home buyers or buyers with less solid credit.

At least 14 subprime nationwide lenders have gone out of business since January 2006, with most of that occurring toward the end of last year, Ritchie said David van den Berg

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The slowdown in metropolitan Phoenix’s housing market has opened the door for a wave of mortgage fraud as people look for ways to make money on homes.

What to look out for:

• Inflated appraisals.

• The buyer or buyer’s agent claims the extra money financed above the house’s selling price will be used for home repairs.

• Neither the buyer nor the buyer’s agent visits the home.

• The buyer wants to use a different title company from the one the seller’s agent has chosen.

• Buyers make informal handwritten offers or are hesitant to put details in a contract.

How to avoid scams

• Understand what you agree to and sign.

• Check licenses of mortgage brokers, real estate agents and appraisers with state regulators.

• Be suspicious of huge profits in today’s housing market.

• Check out sales in the area and other public records to verify property values.

• If a home sale looks like it involves fraud, call the lender’s underwriting office and ask if it’s legitimate.

How to report it
If you become aware of mortgage fraud, including cash-back deals, you can file a complaint with the Arizona Department of Financial Institutions at www.azdfi.gov; the Arizona Department of Real Estate at www.re.state.az.us; or the State Board of Appraisals at www.appraisal.state.az.us Catherine Reagor

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2007 looks to be a year of continuing the readjustment toward a balancing of supply and demand in the housing market.

The resale market is adjusting gradually as seller’s reduce their expectations from the price levels of last year. As buyers and sellers psychologically adjust to the new reality, we believe the market will normalize in an evolutionary way over the year.

Have we hit bottom?

The “bottom” of the market really looks much more like a long and relatively flat period rather than any sharp “bottoming” with any

short-term noticeable “recovery.” Rather, we believe the market will gradually digest the oversupply and then return to a modest

strengthening with historic growth trends moving the market methodically.

Is there a market wild card?

One, if there were a big change in interest rates, which we do not

expect, our market could be impacted along with the balance of the country. Second, if the national home builders were to even more

significantly cut production, it could shorten the normalization process considerably.

How does the Valley’s housing market compare to the national market?

Nationally, there are significantly weaker markets than the Valley. We enjoy strong job growth, a strong local economy, and a history of growth throughout the years, giving people an inherent optimism about the future. Arizona will lead the way in the “recovery” period, although this will be a gradual change rather than anything dramatic.

Has metro Phoenix lost its affordable edge for housing?

Phoenix is less affordable than in the past, when price increases, interest rates, and median income are considered; however, we are still one of the more affordable markets in the nation, and compare especially favorably with neighboring California. Many of the most affordable markets in the country are less desirable places to live; therefore, we don’t see the change in the affordability index to be more than a small factor in the local market. Entry-level housing seems to have gravitated toward some mix of smaller, more remote single family homes as well as significant condo conversions.

What advice/tips do you have for home buyers and sellers?

Our advice for Home Sellers is to consider they will have the look for the home to replace their current

home for sale. Price the home to sell aggressively and pay particular attention to the condition of the property. It must be sharp. Then, enjoy the Buyer’s market as a purchaser. The savings over last year’s prices witll more than offset the perceived reduction in sales price of the home they sold. Buyer’s and Seller should relax, take their time, and concentrate on moving to a home that is beautifully located an attractively priced so as to have the best home possible for their family.Arizona Republic

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Median home prices hit the high-water mark in 2006 in many parts of the Valley, but they began to slide midyear, a clear sign the market was retreating.

In 59percent of 112 Valley ZIP codes, combined new and resale median prices were lower at the end of 2006 than they were four months earlier, according to The Arizona Republic’s Valley Home Values report. But the big price gains continued between 2005 and 2006, with only two communities showing a year-over-year decline.

How far prices will fall and when the market will hit bottom remain questions of debate.

Some observers think the market is at or near bottom. Others say several months of uncertain times lie ahead. Still others have split opinions about the health of the new and resale markets.

“The prices have to pull back,” said Debbie Nichols, a Realty Executives agent in the northeast Valley. “There’s so much supply and not near the demand.”

Single-family resale inventory stood at more than 43,000 in January, according to the Arizona Regional Multiple Listing Service. The total includes cities outside the Phoenix area but the listings are dominated by Valley homes. Analysts say the traditional level for listings is 25,000 to 30,000. Before the market can recover, excess inventory must be sold off, experts say.

The outlying areas of Phoenix, traditional housing growth markets, could have problems into next year as resale sellers compete with builders trying to unload spec-home inventory, Nichols said.

Todd Herzog and his wife, Karen, hope that’s not the case.

They’ve been trying for months to sell their house in Pinal County near Queen Creek. The house has been on market for more than 200 days, and they’ve had to cut the price to $209,000. They paid $236,000 for it in June.

Pinal County is new-home territory, so there are plenty of spec houses and builder deals competing with resale listings, in addition to empty investor homes. The Herzogs think their house, with its mountain views, should have sold three months ago.

“It’s disappointing for us,” Todd said. “It was very much a surprise to us that no one has looked at it.”

Frontier areas hardest hit
The most obvious price softness has hit in the boomtown ZIPs on the frontiers of the urban area. For example, Queen Creek’s median fell 4.1percent between August and the end of 2006 and a small Buckeye area ZIP, 85396, dropped 12.8percent.

Some closer-in spots, parts of Mesa and Glendale, also showed softening between midyear and the close of 2006.

“You’ll never again see the week-to-week price increases we saw in 2005,” said Ben Sage of Metrostudy, a housing-market analysis and consulting company.

Sage thinks the resale market is approaching the bottom and will improve slowly through the rest of the year. As evidence, he said the rate of the decline in sales is slowing.

The outlook is tougher for new homes, though. Builders are trying to get rid of the homes that buyers walked away from when they couldn’t sell their existing houses. Sage said the inventory stands at 2.9 months of supply. He said it was one month of supply at the peak of the boom in the second quarter of 2005. Healthy supply falls midway between the two figures, he said.

Once supply falls into balance, he said builders will be able to make modest price increases, because the Valley’s economy still is producing jobs and the housing demand that goes with them.

Some real estate experts argue that metropolitan Phoenix prices are still attractive compared with California. The median price for a single-family resale home in California was $567,690 in December, according to the California Association of Realtors. The Valley’s median resale price was $260,600 for all of 2006. It stood at $155,000 at the end of 2003, around the time the housing boom began.

Still, Valley resale homes sell for higher than the national median price, which is expected to rise 1.9percent to $226,200 this year, according to the National Association of Realtors.

The manic buying during the housing frenzy may have pushed Valley home prices too far, too fast.

Jay Butler, head of realty studies at Arizona State University, said the boom-time euphoria carried away everyone from buyers and sellers to building professionals and clouded judgment. Builders put up too many homes. Homeowners drained equity from their houses and spent it, thinking bigger price and equity gains were inevitable. Amateur investors jumped in and wished they hadn’t when the market changed.

People forgot, or didn’t know, that real estate is an up and down business.

“Nobody believes in cycles when you’re at the top of a cycle,” Butler said.

Butler is among the optimistic analysts. He thinks the market is in pretty good shape.

“I think we’re where we should be,” he said. “I don’t think there’s a big turn where we go back to the hyper market or we fall off the edge.”

Challenges ahead
The market faces many challenges, including too many unsold spec homes, too many resale homes and rising prices that are undermining the area’s longtime claim of affordability. Also, investigators are just beginning to determine the extent of mortgage-fraud schemes that can damage a neighborhood’s prices.

New-home analyst RL Brown says 2007 should be the low point and expects gradual recovery to start next year as builders jettison inventory.

“They’re finally getting the message, and there’s some serious repositioning and price changing going on,” said Brown of Home Builders Marketing.

Some agents who have been skeptical of the market are seeing encouraging signs. They say buyers are coming back, the kind who want a house to live in, not a fast-money investment vehicle.

Maryella and Roger Scharnhorst have their fingers crossed. They’re counting on buyers returning since a new job in Sedona for Roger made it necessary for them to list their house in Scottsdale’s McCormick Ranch.

They spent about $60,000 upgrading everything - kitchen, bedrooms, carpet, tile and lighting - to get the house in shape for showings.

They hope that helps it hold its own in comparisons with other new and resale homes. And they hope to sell it in a month and say they priced the house aggressively at $619,000. They bought it in 2001 for $250,000.

It can be nerve-racking wondering whether the soft market will produce the right buyer.

“It’s kind of scary,” Maryella said. “Subconsciously, it’s been kind of stressful with the market cold and kind of dead. It’s a little risky and worrisome.” Glen Creno and Ryan Konig

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