A Different Time, A Different Era
The Las Cruces Sun News reports from New Mexico. “Verde Realty has scrapped plans for a city-size residential and commercial development on almost 24,000 acres it owns in Santa Teresa. In 2005, Verde announced plans for the 25,000-home master-planned community on mostly vacant desert at the edge of West El Paso. ‘We previously developed a small portion of the Santa Teresa property, but we no longer intend to pursue large-scale development of this land,’ Verde stated in documents filed last week with the SEC.”
“Other developers may be interested in that land, but ‘I don’t see a demand for it now - maybe in five to 10 years,’ said Charles de Wetter, president of one of El Paso’s largest real estate companies.”
“Randy O’Leary, president of El Paso’s largest homebuilder, and president of the El Paso Association of Builders, said he did expect El Paso-area developers to show interest in that land. ‘Everyone has enough land’ to develop for several years, he said. ‘We (Desert View) have as much land as we need for the next five to seven years.’”
“This is the second big proposed master-planned community project to collapse in this area in recent years. In 2008, Hunt Communities of El Paso decided not to buy 4,833 acres in Northeast El Paso from the El Paso Public Service Board to build a master-planned community with more than 14,000 homes. Hunt said the nation’s financial crisis prevented it from getting financing for the project.”
The Denver Post in Colorado. “The state’s chief regulators sought to defend their oversight of New Frontier Bank during a legislative hearing Wednesday, saying its $1 billion failure last year had nothing to do with poor regulation. Asked by state Rep. Joe Rice, chairman of the House Business Affairs and Labor Committee, what lessons are evident from New Frontier’s failure, acting banking Commissioner Fred Joseph suggested that the state could improve its monitoring of rapid growth.”
“The bank quadrupled its assets in less than three years, surging from $500 million in 2005 to $2 billion in 2007. ‘If that happens, we should require them to put more capital in the bank,’ Joseph said.”
“Greeley-based New Frontier was shut down in April by the state Banking Division because it was bleeding cash. The bank failure caused havoc in the agriculture and real-estate communities of northern Colorado. A Denver Post investigation published in December found that the state Banking Division under DORA failed to detect or punish potentially fraudulent accounting maneuvers by New Frontier managers.”
The Post Independent in Colorado. “The developer of a stalled condominium-hotel project in Basalt wants to overhaul the plan and build something more likely to secure financing in the current economic climate. A Chicago-based firm called Snow River Lodge Inc. wants to convert the condo-hotel project into a traditional hotel, representative Jim Richmond told Basalt officials in a recent meeting.”
“His company has approval to build 54 lodge rooms and two affordable housing units on vacant land. The project stalled 18 months ago after the concrete foundation was poured. The owners ‘lost financing’ during the recession, according to Basalt Assistant Planning Director James Lindt. Financing to build fractional ownership projects has nearly dried up, and loans for buyers of the units are virtually non-existent, according to sources in the real estate development industry.”
“The town planning department supports the change. ‘Staff feels that the request to convert the approved condominium hotel to a standard hotel will further the Town’s goal of creating a balanced economy and sustainable economic growth,’ a memo to the council said. ‘A standard hotel will better promote ‘hot beds’ and tourism than will a condominium hotel.’”
The Arizona Republic. “Arizona State University professor Karl Guntermann said preliminary data for December show the median price for a foreclosed home was down just 2 percent from December 2008. The index for non-foreclosed homes showed a very different trend in December, indicating that the Valley housing market continues to follow two distinct paths: one for bank-owned home sales and the other for more traditional sales.”
“The median sale price for non-foreclosures continued on a steady decline that barely has budged in more than a year. ‘By October 2008, non-foreclosures were declining at an annual rate of 20 percent, and they still are,’ Guntermann said.”
The East Valley Tribune in Arizona. “For the year, Phoenix-Mesa-Scottsdale ranked as the eighth-worst metropolitan area nationally in terms of foreclosure filings - default notices, auction sale notices and bank repossessions. In 2009, foreclosure filings were reported on 133,809 houses, or more than 8 percent of all houses, up 39 percent from 2008 and 343 percent from 2007.”
“The majority of foreclosures are not homeowners who can no longer afford their mortgages, but instead are unhappy because their mortgages are higher than the value of their homes, said Eric Bowlby, president of Amerifirst Financial in Mesa. ‘It may be their (mortgage interest) rate is adjusting and they can’t refinance and get on a fixed rate because they’re upside-down on the house, and that causes frustration and they get mad, and they just walk away,’ he said.”
Inside Tucson Business in Arizona. “Until jobs return and “we put people in foreclosed homes,” recovery of Southern Arizona’s real estate, home building and overall economy will lag behind most of the rest of the nation. The process will be slow and steady, with a full recovery not expected until late 2013 or early 2014. That was the sobering message from economist Marshall Vest of the University of Arizona speaking to about 300 otherwise upbeat attendees at the Tucson Association of Realtors Annual Forecast.”
“Vest said he could make a case that Arizona ‘is the nation’s hardest hit state.’ Arizona ranks last in job growth, 43rd in revenue growth, fourth in home foreclosures, and second in homeowners with negative equity. ‘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.”
“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.”
“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.”
The Verde Independent in Arizona. “The latest version of Cottonwood’s proposed annexation master plan for 10-square miles of Arizona State Trust Land is starting to draw more compliments then the previous hail of ‘boos.’ The re-designed plan, according to Curt Johnson of consultant Coe and Van Loo, provides more open space and trails, a larger wildlife corridor and responds to local interests to give the entire development more variety and flexibility. The number of potential homes that might be built has been reduced from 23,000 identified in the last plan to a range of from 12,000 to 19,000.”
The Salt Lake Tribune in Utah. ” Home sales are up, but prices are still going down. That’s the focus of the Salt Lake Board of Realtors’ newest report out covering the housing market along the Wasatch Front. ‘It’s a tough time to be a seller,’ said Realtor Scott Colemere. ‘But with prices down and rates down and the government giving you money to buy, I don’t think there’s a better time to buy.’”
“Justin Lloret and wife Kristi have qualified for a federal home-buying incentive of $6,500, locked in at a mortgage rate of 5.5 percent and got a great deal on a 3,100-square-foot home on nearly one acre in Taylorsville they plan to close on within days. The couple had been looking for a for about a year and a half. ‘Compared to a couple of years ago, we got a really great price,’ Justin Lloret said.”
“Kelly and Elizabeth Callister plan to claim the $6,500 incentive. The Callisters sold their previous home in January 2009 and settled in the fall on their new home in Davis County, where they were able to buy at $15,000 below the already-low asking price for a newer house on a large lot. Kelly Callister said the home-buying incentive, lower prices and his 4.75 percent mortgage rate vastly outweighed the specter of more price declines.”
“‘It’s in the back of my mind, but this is our long-term home, this is where we want to be, so I’m OK with it. We’re thrilled.’”
“Home Savings Bank has until the end of March to increase its capital to at least 11 percent of assets, according to the Federal Deposit Insurance Corp. The order is part of a broader consent agreement between state and federal regulators and the bank requiring Home Savings to also cleanse its books of bad loans.”
“‘The FDIC and the Utah Department of Financial Institutions desires to have all banks increase their capital, reduce nonperforming loans and reduce their concentrations in commercial real estate loans,’ said John Sorensen, Home Savings president and chairman. ‘Recognizing the economic downturn, we took action.’”
“Right now, commercial real estate loans are 529 percent of the bank’s capital. The peak was 1,150 percent in 2006, when the housing slump began. Sorensen said the bank expects to reach its goal of 450 percent within six months. Because Home Federal would lend no more than 75 percent of a project’s value, the bank was comfortable with loan-to-value ratios that exceeded 1,000 percent of its capital. Other banks were willing to lend as much as 110 percent, Sorensen said.”
“With the collapse of real estate, that thinking has gone out the window, he said. ‘I would say I wouldn’t feel comfortable with that level now. It was a different environment,’ he said ‘So that 1,150 percent, that’s a different time. That’s a different era.’”
The Pahrump Valley Times in Nevada. “Lenders last week assumed ownership through foreclosure of a 20-acre tract of land where Jerry Wang, CEO of the Forum Group Ltd., had plans for an ambitious resort complex. There were no buyers at the trustee sale on the courthouse steps in Tonopah.”
“Wang planned to begin construction in January 2000. When the project was completed in five to seven years, Wang predicted 18,000 jobs would be created. His project, The Oasis at Shangri-la, would include an Oriental-themed hotel, casino, retail shopping complex, recreational vehicle park, convenience store and the St. Thomas Place condominium project, for which a sign stood for many years at the site. In November 1999, Wang told an audience of 200 people, ‘At least every other household will have something to do with this project.’”
The Reno News & Review in Nevada. “The unemployment rate in California stayed the same—12.4 percent—only because it did not reflect thousands who have dropped out of the job market altogether, meaning the figures do not reflect their numbers. ‘It hurts us,’ said Nevada economist Glen Atkinson. ‘We’re connected, totally connected to the California economy. … Some of our major sectors, including gaming, tourism and warehousing [are dependent on California’s economy].’”
“‘A lot of the construction industry here in the housing boom was highly correlated with what was going on in California,’ said economist Thomas Cargill. ‘In fact, a great many construction workers were from California, and one of the reasons why the labor force has declined is those people have packed their bags and gone somewhere else.’”
“‘Of the 30 biggest occupational categories in Northern Nevada, only 15 percent require a baccalaureate degree,’ Atkinson said. ‘It means we have a low-skilled labor force here. And it means that the people who go to university here, most of them will have to go someplace else for a good job. … There are not a lot of high-paying, high-skilled jobs in the region. … One of our big growing sectors has been retail, for example—you know, cashiers and so forth.’”
“‘Even though tourism’s been declining, we’re not growing enough in other industries—manufacturing, whatever—to make up for that,’ Atkinson said.”
“Nevada has always been something of an adjunct of California. The wealth of the state’s early mining booms was shipped to California. A former California governor was president of the second Nevada constitutional convention, which drafted the new constitution by using a copy of the California Constitution as a model. Since the revival of legal Nevada gambling in 1931, Californians have been the largest customer base of Nevada casinos.”
“But even now, with Nevada casinos losing customers to California tribal casinos, Nevada—particularly the populous south and west that contain most of the population—shares overlapping trade and media markets with California. The dependence of Nevada on California has been so pronounced that the late scholar Hal Rothman suggested that Nevada is in a colonial relationship to California. He noted that at Hoover Dam, Los Angeles Municipal Utility District vehicles have Nevada license plates.”
“‘The fundamental relationship between Nevada and California is as clear as the insignia on the side of these cars: California runs Nevada, so completely and brazenly the most needed resource in the desert state, water, is stored there for consumption in the great economic engine to the west,’ Rothman wrote in 2002 in a book of essays about Las Vegas—published by the University of California. ‘The control is so complete that the relationship seems natural: California entities wear Nevada license plates and no one notices, proof positive of the vast power of the Golden State in the Silver State. Nevadans need look no farther to see where their bread is buttered. … [D]esolate Nevada has survived by catering to the needs of outsiders, in particular Californians.’”
“When Nevada economic development officials last year started running ads touting the benefits of Californians moving their businesses to Nevada, Fresno Bee writer Jim Boren warned, ‘So here’s what you won’t hear in those ads: Nevada had the nation’s highest home foreclosure rate for the 31st-straight month. U-Haul dealerships in Nevada can hardly keep moving trucks on their lots as residents fishtail out of the once-booming state. Nevada casino revenues report double-digit revenue declines because of the sour economy and the beating they are taking from California’s Indian casinos. Nevada’s unemployment rate of 12 percent was fifth-worse in the nation—even worse than California’s 11.6 percent rate. … Readers know that I don’t defend California very often. State government is a mess. Our infrastructure is falling apart. We’re taxed every time we turn around. But in this comparison, Nevada is the competition, and California wins hands down. In fact, I’d double down on California’s economic future compared with Nevada.’”
