August 6, 2006

‘This Is Just The Beginning’ For Phoenix Area Defaults

One reader from Arizona had this comment. “My sister (roommate) told me the other day that our complex in Ahwatukee (off of Ray Road) is going to reduce rents. There are more apartments in our complex available now. This is a reversal of the notice we got 2 weeks ago which said our rents are going up.”

“Perhaps in the Chandler/Ahwatukee/Tempe area the glut of speculator houses that are now being rented out is having an effect on existing apartments. It may be too early to tell. But it’s good news. A friend of ours moved from her two bedroom apartment to a 3 bedroom house (she is renting) about 3 miles from us. She pays just about $100 more per month.”

The Arizona Republic. “More Valley homeowners are in danger of losing their homes than at any point in more than a year. Last month, 837 homeowners got notices that they were at least three months behind on their mortgage payments. Those notices mean their mortgage firms are getting ready to evict them and auction off their houses on the courthouse steps.”

“This is just the beginning. Tom Ruff of Phoenix-based data firm Information Market, which tracks the foreclosures, said that by year-end trustee sales could be climbing by 100 a month. In June, there were 776.”

“Why the increase? Thousands of people used the non-traditional mortgages last year to afford a house in the Valley, where home prices jumped nearly 50 percent. On many adjustable-rate mortgages, the monthly payment on a $250,000 loan could easily climb by more than $100 every six months.”

“Arizona incomes aren’t climbing at the same rate, and Valley housing appreciation is pretty flat. So unless homeowners win the lottery or take a second job, they don’t have a big chance of catching up on their mortgage payments.”

“Troubled metro Phoenix homeowners had been able to quickly sell, usually for a profit, until recently. The number of homes for sale across the Valley has tripled in the past year.”

“At the same time that trustee notices are climbing, canceled trustee sales, properties that are sold or mortgages that are caught up to stop the foreclosure auction, fell to their lowest level since 2001. Tim Rocho, CEO of Scottsdale-based Real Estate Fortune, said many of the homeowners in trouble are too highly leveraged to sell or refinance and get out from under their debt.”

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Comment by Ben Jones
2006-08-06 10:11:29

The problem is all over the state. Nobody knows how bad it will get, because the overbuilding is so prevalent. 800 distressed properties in one month? And climbing.

Comment by pismobear
2006-08-06 12:36:09

The just caught ‘The Serial Shooter(s)’ have the ‘Baseline Killer’ to go. As soon as that happens, the sfh and condo rush will began anew. hehehehehehe

Comment by phucktheflippers
2006-08-06 14:48:14

Just looked at that site… and a house on Marconi in 85254….. they were 200k in 2003… now recent sales are 470k+… that dude with a NOD paid about 470k.

Comment by SidneyPrice
2006-08-06 18:32:37

The point is that the dude with the NOD didnt pay 470k, some careless fool lent the money to him, and now wants it back.

Comment by Jim Lippard
2006-08-07 09:46:27

“This is just the beginning. Tom Ruff of Phoenix-based data firm Information Market, which tracks the foreclosures, said that by year-end trustee sales could be climbing by 100 a month. In June, there were 776.”

It was around 1700 in mid-2002. It’s got a long way to go to match that.

Comment by jp
2006-08-06 10:14:26

So much for the supposed rents-going-up theory.

My recommendation is that anyone who gets notice of a rent increase should threaten to move. And follow through on your threat if the rent increases.

Comment by Ben Jones
2006-08-06 10:47:47

That’s very true, in Arizona at least. I haven’t heard of anyones rent being increased the entire time I’ve been in Arizona. I know people who negotiated rents down by paying a year at a time.

Comment by Catherine
2006-08-06 12:20:50

This is true…in my area, there are out-of-state phone numbers at the bottom of MANY of the rental ads…most are offering incentives to rent….of course, these are the flippers who over bought last year, and are most…anxious…to get any level of return on their depreciating properties.
There will be no rent increases here, for sure. Too many houses, apartments, condos, duplexes that aren’t getting bought.

Comment by Faster Pussycat, Sell Sell
2006-08-06 12:30:01

Same in New York.

Upper West Side, to be precise (and a “tony” neighborhood not some marginal shithole.)

Those who have “rising” rents have no clue. Offer your landlords a year’s rent in cash, and see how they bend over backwards.

(Reduction = more than the cost of capital, for the financial types.)

Comment by Chip
2006-08-06 18:34:53

I like my landlord and that keeps me from moving to a snazzier place at the same rent, but I was hoping he’d try to entice me with a % discount deal if I paid yearly in advance.

Comment by cactus
2006-08-06 10:43:45

I rent in Ahwatukee. Moved here in May from Ventura Ca. One reason I didn’t stay and rent in Ventura is because of a rental shortage. Everyone wants to live there right? I have no fear of finding a rental around here, there are signs all over for SFH for rent. Or for sale if you prefere.
So different from were I used to live.

Comment by Robert Cote
2006-08-06 11:25:30

The VenCo rental shortage is due to high prices that inhibit investment, stringent development regulations that prevented massive overbuilding, strong natural population growth and yes, the area is popular. People priced out of Santa Barbara, San Fernando Valley refugees, and others do prefer the deliberately chosen results you saw in Ventura.

Comment by cactus
2006-08-06 11:37:38

“strong natural population growth” I don’t know what that means, most of the newbies I saw were from other countries.

Comment by Robert Cote
2006-08-06 12:01:39

were from other countries.
…and their children.

The people I know have streets named after their grandparents. The community is in danger of becoming two separate societies of the haves and have nots with the added stress of so many of the have nots being Hispanic.

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Comment by glorgau
2006-08-06 13:00:31

> The people I know have streets named after their grandparents.

Those are the “landed class” families in California. Prop 13 and family trusts lock in ownership over generations and keep the playing field well tilted. It’s almost European with titled estates.

Comment by cactus
2006-08-06 12:43:54

I saw alot of very rich people from Europe, South America and the middle east moving in to the Agoura Hills Westlake Village and east Ventura county area. The poorer Hispanics usually were being forced out. In downtown Moorpark this Dr spine center ( I won’t use his name but you can see his building from the 101 in Newbury Park ) investor had bought up much of the older homes by Walnut Canyon school to build apartments. The peope who live there now, some of my sons friends who had chickens in thier yards. Good-bye you can’t afford the rent the new apartments will cost you. Off to the central valley.

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Comment by Krills
2006-08-06 13:26:18

Alot more homes and apartments for rent in Ventura. Also, was down at my parents house in the OC, Coto De Caza. Driving around some of the houses I grew up in Mission Viejo, where parents sill own there homes and there are For Sale and For Rent signs everywhere. This cycle is starting to change fast.

Comment by flat
2006-08-06 10:45:34

if you’re near new build condo/townhouses
rents will crash- squatting will be the big craze

Comment by Ben Jones
2006-08-06 10:51:33

There is a developer selling pre-construction townhomes in Flagstaff, even though the local paper is jammed full of flippers trying to sell and rent new homes. Here is the link. In todays paper their ad says. ‘The market may be cooling, but we’re still hot!’

I heard yesterday that a guy in Williams who had been offerred over $1 million for 40 acres, and turned it down, is now asking $800,000. It was rumored that an amusement park was coming in and he thought it was a good spot for a hotel.

Comment by cactus
2006-08-06 10:59:48

Williams Az gateway to the Grand Canyon. I remember stoping there one time, it looked like Indians ( from india ) owned many of the hotels. And these hotels were a wreck, busted windows, peeling ceilings in the bathrooms, could not believe it, and it was snowing out. I wonder if its still like that. This must have been 1994 maybe?

Comment by Brad
2006-08-06 11:06:49

Williams has been turned into a nice little Western themed tourist destination with a lot of downtown renovation, shops and restaurants.

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Comment by txchick57
2006-08-06 12:17:08

Those are ugly. Future ghettos.

Comment by Catherine
2006-08-06 12:23:47

What do you hear about that rumor, Ben? I’ve heard it dozens of times, and have a hard time believing it….just like the rumor that there was a Ritz Carlton coming in north of Chino Valley (south of Ash Fork).

Comment by AZ_Cowboy
2006-08-06 14:27:35

Here’s an old article about it:
Not sure what the current status is.

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Comment by AZ_Cowboy
2006-08-06 14:30:37

Found the proposed developer’s site:

Comment by Catherine
2006-08-06 17:26:20

ah…an “investment opportunity”!

oh brother.

Comment by Civil
2006-08-06 14:55:49

I saw Railroad Springs the last time in Flag. Absoutely aweful - and as the name says, right next to the railroad (just have to love those train whistles all night long.) I can just see future rentals to 4 or 5 NAU students per townhouse, with kegs thrown through the windows, etc.

Comment by Chip
2006-08-06 18:45:03

Recently I was on a look-see trip out of state and was in a neighborhood where the agent knew a property owner who was standing in her driveway. We stopped to B.S. Doing so is, in my opinion, one of the best things a prospective buyer can do and as much as possible. Anyway, during the course of a lot of give and take, the owner said something about the train whistles. I asked her to elaborate. Turns out there is a train track very close by that has trains coming through at all hours of the day and night. That single innocent comment saved me a lot of research time and possible awkwardness had I discovered it well into the buying process (which I think is a couple of years down the road, barring a lowball steal). Never understimate the value of shooting the breeze with the locals.

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Comment by flat
2006-08-06 11:04:23

any foreclosure comparisons to the 90’s anywhere ?

Comment by Sensible Lender
2006-08-06 11:07:00

What are the latest homes for sale listing numbers in the greater PHoenix areas?

Comment by the_economist
2006-08-06 11:31:53

52,969 from ziprealty today

Comment by Desmo
2006-08-06 12:23:40

Looks like they could fill the new stadium out there with a sellers convention.

Comment by MarknearSeattle
2006-08-06 11:52:15

Just a quick observation from the four people that sit near me at work. One keeps complaining everytime short term rates are raised. I suspect he has an recently refinanced into an adjustable rate mortgage. Same with another co-worker who has told me he has a large home equity loan. The third person is complaining bitterly about rate increases on his $29,000 home loan. He just bought a new home and I suspect he used the loan as a second loan to help finance the property. Finally, the lady across from me is very discouraged. She does not have the best of credit. Her adjustable rate mortgage has adjusted increasing her house payments from $1800 to $2600 per month (now at 10%). She has been working 6 or 7 days a week (mostly 10 hours a day) for months and is just hanging on to the house. I realize this is not a scientific study, but it may speak to the broad scope of debt, especially adjustable rate debt. If the fed continues to raise it will get more difficult for these people. They will cut their spending which will continue to slow our consumer driven economy.

Comment by Mozo Maz
2006-08-06 12:13:53

Imagine what people with six figure adjustable second mortgages + rising heating/cooling bills are facing.

Comment by implosion
2006-08-06 13:08:14

Pain, I would imagine.

Comment by Chip
2006-08-06 18:47:04

LOL - nice, succinct.

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Comment by Bill in Phoenix
2006-08-06 14:14:44

Yes, see one of Ben’s blogs he put up yesterday. There were several comments about the high costs in the Inland Empire (60 miles east of Los Angeles) homes, some of them 3,000 square feet with $900+ monthly energy bills lately. The’ve been having heat waves. I am not a tree hugger and am skeptical on the “global warming” issue, but a few months ago the LA newspapers were talking about anticipating this century regular long hot summers of 110 and greater in the areas that usually get 90s. in the LA basin.

Comment by ocbroker
2006-08-06 15:21:46

Same thing in La Drea Ranch, Ca. Wife’s friends son bought a McMansion there last fall, had his first summer there this year. Now bitching that his electric bill for the last two months has came in over $500 a month. Now bare in mind they have 2 cars one of which we know is an Escalade, not sure what the other is, but it is an SUV all the same.
So put that elec bill and gas bills together must be having some serious sleepless nights.
p.s. it is hotter than hell in La Dera, stuck in a little valley, between Coto and Mission Viejo, comute sucks too.

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Comment by Mort
2006-08-06 12:16:22

It sounds like “Office Space” up in there.

Comment by asuwest2
2006-08-06 15:01:41

Mark-mind if I ask what industry you are in? I’m in SoCal, make >100k, and the thought of a 40% increase in my rent would give me a stroke.

Comment by asuwest2
2006-08-06 15:12:30

Hey Ben, heard any more on that supposed mega-development that the guy was going to put into Golden Valley (I-40/kingman area)? As I recall, he was approved by Mohave county to build out 30,000 houses.

Comment by Ben Jones
2006-08-06 15:19:42

Not a word. The way things are going, it’s probably not gonna happen.

Comment by azrenter
2006-08-07 00:22:49

rhodes homes, they have 4 models built and are grading miles or roads and lots. the 4 i looked at were priced at 320,000 to 370,000. up to 4200 sq feet. the locals are making $9.00 per hour. he is waiting for the californians to show up. there is no water, sewer or electricty in yet. they using generators for power, septic tanks and water haul for water. i will keep you posted.

Comment by MTAZ
2006-08-06 21:27:55

Here’s a coupla links…

Jim Rhodes (the Vegas “Mega-Developer”) built 80 spec. homes in Kingman last fall, sold out in 4 hrs.–ALL to Vegas specuvestors, Rhodes employees, etc. The “neighborhood” was a complete ghost town with no residents and a sea of “for sale” signs when completed. Many of the houses are selling for a loss now, if at all. The market peaked about Sept. of ‘05, the market is pretty crappy now and could be hurt worse than Phx or LV b/c Kingman and Mohave County have virtually no real job growth-new Wal Mart distribution center\ and Circle K jobs don’t buy $250K houses-even on a suicide ARM.

Comment by dannll
2006-08-07 11:27:39

What the h*** does one do for work in Kingman? Just passed through on the way back from Vegas and there’s nothin’ goin’ on out there that I could see. Is it a mining town? Just living off the Route 66 mystique or what?

Comment by FL - Paradise Lost
2006-08-07 12:03:34

Kingman is famous for 2 things - a major stop on Route 66 (even mentioned in the song, right between “Winona” and “Barstow”), and as Timothy McVeigh’s training grounds - he blew up a lot of desert and nobody seemed to notice. Can’t seem to understand why they don’t use him as a selling point…. ;^)

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