That was the sobering message from economist Marshall Vest of the University of Arizona’s Eller College of Management speaking to about 300 otherwise upbeat attendees at the Tucson Association of Realtors Annual Forecast Jan. 22.
Financial experts and studies consistently rank the state’s economic performance during the recession as being one of the nation’s five worst. Vest said he could make a case that Arizona “is the nation’s hardest hit state.”
  
|
“Since the economy peaked in March 2007, Arizona has lost 275,000 jobs. Tucson has lost 26,000 jobs. The declines are just stunning,” he said.
On a percentage basis, Arizona’s job losses are actually worse than Michigan, notoriously hard-hit by what’s happened to the auto manufacturing industry. From January through October last year, Arizona’s job growth rate fell by 6.8 percent compared to a 6.3 percent drop in Michigan.
Outside “the crisis in state government,” Vest pinpointed some encouraging signs of a turnaround in Arizona.
Retail sales have bottomed out and a modest 5 percent increase is expected this year. Tucson’s unemployment rate will peak at about 8.1 percent during the first half of 2010, with full job recovery not returning until about 2014.
Improved labor and housing performance will lead our region’s recovery. “Weary consumers” will not, Vest said.
“Housing is beginning to stabilize, building permits have reached bottom,” he said. For 2009, the region recorded 2,077 new home permits.
“Housing prices also are approaching bottom,” he said. “They will decline further in 2010, but at a slower pace.”
Vest told the Realtors “we must put people in foreclosed homes before building more new ones.” According to U.S. Postal Service officials, there are currently 25,000 vacant homes in the Tucson region.
As this year’s president of the National Association of Realtors (NAR), Tucson Realtor Vicki Cox Golder’s “Washington Outlook” is focused on reform and preservation. Because Congress has approved so many new programs, “we’re going to have some heavy-duty tax reform to pay for them,” she said.
The national association is most concerned about preserving the mortgage interest deduction on homes. The Obama Administration views it as a new source of revenue for the government.
“The deduction is the Holy Grail to anybody with a mortgage. We are going to fight this tooth and nail,” Golder said. “It does not matter what your income level is, it will affect everyone.”
Under Golder, NAR also wants to reform Fannie Mae and Freddie Mac. In 2008, both fell into federal government receivership. The organizations purchase residential mortgages in the secondary market from mortgage bankers.
The Realtors want stronger regulatory oversight of the two agencies and eventually, want both of them to once again become independent of government control. NAR also is also working to reform and strengthen the Federal Housing Authority,
Regarding the federal home buyers tax credit that expires April 30, Golder said it will not be renewed. That presents a challenge, to come up with programs “that will keep our economy going,” she said.
Lawrence Yun, chief economist for the NAR, says the tax credit put about 2 million first-time buyers into homes across the country. By the end of the program, he estimates another 2.4 million buyers will take advantage of the incentive.
“Clearly, this was preservation of middle-class wealth of about $730 billion. Existing home sales got a 15 percent boost and home prices saw a boost of three to five percent,” Yun said.
After the credit ends, home sales are expected to stall this spring, then pick up again later in the year. Although prices have been falling in what he called the “sand states” — Arizona, Florida, Nevada and California — buyers are returning to the market.
“It’s just a matter of time before we get price stabilization or even a modest price increase,” he said. “In Arizona, there has been a clear overcorrection of prices. There is room for prices to move up a little, more quickly than in other markets.”
This “snap back” from the overcorrection will come from consumers who perceive that prices have hit bottom. Most transactions will continue to be foreclosures, and smaller, lower-priced homes. Consumer confidence will increase throughout 2010 because the “price fear factor” is gone from the market, he said.
For the past two years, buyers held back due to their fear that values would continue to fall after their purchase. People who bought homes last fall probably will see an increase in value a year later.
Yun expects mortgage interest rates will hit 5.5 percent this year.
“I don’t know if anyone can really forecast this economy,” Golder said. “With this Congress, how can you predict what is going to happen?”
The presentations by Golder, Yun and Vest are on the Realtors’ website at
https://tar.getlamps.net/Default.aspx
Downtown bargains Driven by bargain hunters and foreclosures, several downtown Tucson properties are starting to change owners. The parcels include abandoned buildings, excess state-owned land, and the historic Coronado Hotel, 402 E. Ninth St.
Glenn Lyons, chief executive of the Downtown Tucson Partnership, which is handling the sale of the Coronado Hotel for the Downtown Development Corporation, said, “Any day now, the successful bidder is expected to announce who they are and how much they paid. We have an arrangement with the high bidder and will let them say what they plan to do with the property.”
Bids were reviewed Dec. 17 and a decision made, but the due diligence process “has delayed the property from going into hard escrow,” Lyons explained. The asking price was $670,000. The 42-unit hotel, built in 1928, currently is used for low-income housing.
Elsewhere downtown, the Arizona Department of Transportation (ADOT) is reducing its 15-parcel inventory of excess property. The parcels were acquired in the 1980s as right-of-way for the last segment of the Barraza-Aviation Parkway, which has since been realigned and moved north of downtown.
On Jan. 25, ADOT sold off its fourth parcel in three months. For the minimum value of $161,000, the Industrial Development Authority (IDA) of Tucson purchased a vacant, 2,210 square-foot building at 450 N. Main St.
The rundown structure is surrounded by two-thirds of an acre of vacant land owned by the City of Tucson. According to Marilyn Robinson, president of the IDA, the authority bought the parcel based on the city council’s willingness to transfer its land to them to create some type of affordable housing.
Later this month, the authority will meet to discuss the site’s future. Robinson said they will seek proposals for “affordable housing, potentially combined with some mixed use.” Options include a renovation or a demolition/start-over.
The IDA provides assistance in affordable housing, business development and commercial development.
Along Stone Avenue, ADOT has begun marketing four more parcels. A tri-plex structure at 534-536-538 N. Stone Ave. totals 12,771 square feet and has a minimum bid of $561,000. A free-standing, 2,164 square-foot building at 546 N. Stone Ave. carries a minimum $195,000 bid. No offers have been made although all of the buildings have been shown to interested parties, said Teresa Welborn, public involvement director for ADOT.
The other state-owned properties sold at auction were on downtown’s northern edge in the Warehouse Arts District.
Last November, Peach Properties bought 1 E. Toole Ave. for $252,000 and businessman Steven Fenton paid $101,000 for 31 E. Toole Ave. On Dec. 11, Fenton also bought the 15-17-19 E. Toole Ave. parcel for $512,000. Escrow for that property closes Feb. 11.
Meanwhile, the 44 Broadway Building, owned by an investor group headed by James LeBeau, was sold Jan. 22 at a trustee’s sale. It was purchased by the property’s beneficiary, Bank of the West, for $3 million. The bank’s note on the property was for $2.8 million.
LeBeau’s group had bought the building in 2005 and had planned to renovate it into 34 luxury condominiums.
Sales and leases
• Freight Services Inc. leased 6,480 square feet at 5990 S. Country Club Road, Suite 120. Rob Glaser, Picor Commercial Real Estate Services, represented the landlord, EastGroup Properties. Rajan Lal, also with Picor, represented the tenant.
• El Charro Café leased 4,500 square feet of restaurant space within Rancho Sahuarita Marketplace, at the northeast corner of Interstate 19 and Sahuarita Road, from Rancho Sahuarita Commercial Ventures LLC. Aaron LaPrise and Brian Harpel of the Harpel Company handled the transaction.
• Wayland Baptist University leased 4,352 square feet at 6235 E. Broadway. Rajan Lal, of Picor Commercial Real Estate Services, represented the tenant. Dave Montijo, Bourn Partners, represented the landlord, Tucson Broadway Office Plaza.
E-mail news items for this column to ryohem@azbiz.com. Real Estate and Construction appears weekly.
Comments