July 27, 2009
Host: Ted Simons
- The housing industry is showing signs of life. Jay Butler, an ASU real estate professor, explains what those signs are saying about Arizona’s real estate market.
Category: Mortgage Crisis
- Jay Butler - Real Estate professor, Arizona State University
| Keywords: housing
Ted Simons: Housing starts are up. 1183 housing permits were issued in June, an increase of 57% over May. That's the highest level in six months. Are we seeing a trend? Here to talk about those and other housing numbers is Arizona State University economist Jay Butler. Good to see you again. Are we seeing a trend?
Jay Butler: It's a trend. Every month this year has gotten better but if you look at the total it barely meets a month during the hypermarket. Much of the driving force they believe is the tax credit. And so the question may be in the next couple months, because got to have the home closed by November, December, that permit activity will drop off.
Ted Simons: That's an $8,000 tax credit for first time buyers?
Jay Butler: First time buyers but anybody who has not owned a home in the last three years including both husband or wife or all borrowers.
Ted Simons: The country as a whole new home sales up 11% in June. Arizona?
Jay Butler: 0Basically flat. Well, the metro area has been fairly flat. Again, they have been working off inventory. The problem is it's to some degree what new home builders have been advertising about is it's better to buy a new home because of all the warranties. Problem is it's cheap tore buy a foreclosed home so it's sort of been this sort of battle between the foreclosed home versus the new home.
Ted Simons: I want to get to those foreclosed homes in a second but are you surprised to see increasing unemployment rates and increasing home sales?
Jay Butler: Well, again, a lot of it, home sales are being driven by investors. To some degree the struck you are of this market is no different than we saw in the hypermarket. The market is dominated by foreclosed property, about 35%. And another 30 to 35% are investor-driven. And that's very argumentative number. It is not driven by the owner occupant which is the historical market. So, no, it isn't surprising because again the owner occupant is not the main force that's moving this market up.
Ted Simons: It sounds like you have just described what we just went through. Are you saying investors are out there artificially increasing some of these sale prices?
Jay Butler: They're not increasing sales price but taking advantage of low prices. For example, in Maryvale, you can buy a home for $40,000. And many of these deals are paid for in cash. These are as much as 50% off the foreclosed value. If you go into areas like Gilbert, you are probably are in a very competitive market, an owner occupied market because mark down is only 10%.
Ted Simons: So it doesn't sound good for traditional buyers. It sounds like investors are once again roaming the landscapes.
Jay Butler: In many areas. In some of the areas where you see more like Gilbert and Chandler, it's very competitive against owner occupants. And other areas the investors, you got to sort of look at the submarkets. Each market is a little bit different and that's really the key thing to look at.
Ted Simons: The, there's a new law out there. And again, we are kind of staying with the investor speculator line of discussion here. A new law in Arizona protecting banks from speculators, investors who don't live in a house for, what, six months something along these lines and have a foreclosure and walk away. What banks want to say and you can't do that if it's a second home or investor home.
Jay Butler: Well, that is a very argumentative. I've been looking at different web pages explaining the laws and it seems to be very confusing. I think the intent was that. Basically, dealing with deeds of trust and power of sale, nonjudicial foreclosures. It would be, there is no deficiency judgment. There is but it's a very limited case. You would have to prove that you lived in this home as an owner occupant for six months. That's not that difficult to do, but it's like trying to prove you are an American citizen immediately. It may be more difficult than it really is. It was aimed at the investor speculator. But that's not appears to be the way the law is. I would suspect they are going to have to do some amending of that law before it comes into effect sometime in September.
Ted Simons: Because it sounds like you could be a second, you could own a home in Flagstaff or Prescott or Payson, you don't live there for six months, you get in trouble and have to foreclosure, all of a sudden the remainder of that loan is on you.
Jay Butler: It is. What they were really look at was the investor who invested in a home and lost the investment home that they then could go after their other assets. And that is fairly common in a mortgages and it's very common in the commercial sector. It isn't common in the deeds of trust. But it appears that's not the way the law is written or at least the way some people are interpreting it.
Ted Simons: I would imagine a lot of folks would think this is not necessarily a bad idea, you just have to figure out how to define fine an investor.
Jay Butler: It is very difficult to do because the time, and, in fact, it's very unclear how many investors we really have buying these homes because the designation of the investor is not clear.
Ted Simons: And critics will say basically what the law is just lenders trying to cover their own --
Jay Butler: Yeah. To some degree it is because they probably should have caught it up front. But also you sort of wonder, this is pretty late in the game. We are sort of in a recovery mode. And most of the foreclosures you are probably going to see in the coming mosses are the classical job loss reasons, not the investment driven. So it seems late in doing that kind of reasoning. But we have the law, and it's going to be interesting dealing with it.
Ted Simons: Something else that's going to be interesting is something that seems like it's been coming like a train, the light is getting closer, the rumble is getting louder, adjustable rate mortgages. What are we looking at as far as these things hitting folks?
Jay Butler: There appears to be two periods. One year from now, in 2010 and a following one in 2011. The big argument is how many of those mortgages will actually be in existent when time comes? Either the homes have been foreclosed on or people have been able to refinance and are out of them. A lot of lenders appear to be willing to more refinance than they are to go through loan modification programs. So much of this impact is going to be questionable. Some contracts were written with a set interest rate and those could be a little more difficult to handle. But there's a lot of argument over exactly what that impact is going to be especially the 2011 impact. That most people should be able to work their ways out of it by then.
Ted Simons: So basically if the mortgage rates can stay low, the impact won't be quite as hard?
Jay Butler: Right.
Ted Simons: The last question here. With all this information and the fact that, I know unemployment is still increasing but are we slowly making our way out of a recession?
Jay Butler: Economically we are making it out of the recession. We basically have an economy, earnings are improving but the average individual is going to find an issue. Can they get a job? Can they feel comfortable in the job they have? No.
Ted Simons: There's also a general belief the Arizona economy will lag behind the national recovery. But from the average individual, the real question is, do I feel more comfortable in the job I have or want? That's way down the line. And do we feel comfortable with this housing information knowing again so much in the way of investors and speculation is involved?
Jay Butler: Hopefully we're going to work our way through it and we'll see what happens. But there's still a lot of unknowns sitting out there.
Ted Simons: All right. Jay, thanks so much for joining us. We appreciate it.
Jay Butler: Glad to be here.
Valley News Helicopter Crash
- Pat McGroder, a lawyer who brokered a settlement for the families of two local journalists killed in a helicopter crash two years ago is calling for tougher restrictions on covering news from the air.
Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. A lawyer who brokered a settlement for the families of two local journalists killed in a helicopter crash two years ago is calling for tougher restrictions on covering news from the air. Pat McGroder represented the families of the journalists on the channel 3 helicopter, which crashed with a channel 15 helicopter, a crash that killed four local journalists in all. Joining me now is Pat McGroder. And thank you so much for joining us tonight on "Horizon."
Pat McGroder: Good to see you, Ted.
Ted Simons: You have got a tape now, an animated recreation of what happened. Talk to us, we will show it here in a second but talk to us about what we will see.
Pat McGroder: During the course of the litigation, Ted, it was important for us to understand what happened and how it happened. Of course, now it's equally important in terms of deciding what to do about what occurred. So the animation that you will see was created as a result of interviews and analysis of the radar tracking, analysis of the videotapes from the respective stations, satellite imagery, and voice over controls from our experts. So I think what you will see now is that aspect of the animation relative to channel 15.
Ted Simons: All right. Let's go ahead and watch now this animated recreation of the helicopter crash two years ago.
Chopper: Right now this is all northbound along Central just south of Indian School. Now he's heading eastbound and he hit some more barricades. This guy doesn't care what he hits.
Reporter: Do we know that this truck is stolen?
Chopper: We have no idea. All I know is what Firebird reported to me that apparently the police pulled this vehicle over, and the vehicle then backed into the cruiser. There were no injuries to the police. Just simply took off and that's how this all ensued.
Reporter: It looks like they are probably --
Chopper: Now he's going into a parking lot. Now he's stopped. We will see what happened. He's stopped. This may be the end of this thing.
Reporter: He's taking off running.
Chopper: Now it's a foot chase.
Chopper: Now he's jumped in another vehicle.
Chopper: Now he's in another vehicle. Door is open. Oh! [crashing]
Ted Simons: Again, an animated recreation. I know how you got the information. That's startling to see. Even animation. That's troubling to watch. Real quickly how often is that kind of high tech stuff used in litigation?
Pat McGroder: It depends on the case. At this level of case we used this type of technology routinely. We've used it in a number of cases and in this case it was particularly important. Somewhat gruesome unfortunately and obviously dramatic. But this animation was used to allow the jury to put themselves in a position where they could determine exactly what occurred by seeing the animation based on all of the scientific evidence that we were able to glean.
Ted Simons: And the settlement now was with U.S. helicopters. Why was the settlement with the helicopter company? I saw two pretty healthy helicopters up there in the skies.
Pat McGroder: We represented the families of Scott Bowerbank and Jim Cox who were in the channel 3 helicopter. The channel 15 helicopter was actually owned by U.S. helicopters, and Mr. Smith was an employee of U.S. helicopters. Channel 15 leased both the helicopter and Mr. Smith's services from U.S. helicopters.
Ted Simons: OK. With that in mind, what kind of changes are you and the folks that you have been working with looking to try to recommend and try to put upon new stations in general, helicopters, pilots in particular, so something like this never happens again?
Pat McGroder: It's been two years since this community was rocked with this tragedy. And we are still waiting for the F.A.A. to adopt some or all of the recommendations of the NTSB. We think it's too slow. The families are urging the F.A.A. to adopt mandatory requirements of mandatory restrictions eliminating the concept of the pilot reporter. In other words, what we are calling for is a clear dichotomy between the piloting activities, and the on-air broadcasting activities. The NTSB has made such a recommendation, although perhaps not as strongly as we would like to see it. The helicopter association international has now developed standards, policies, and practices which support those concepts. And our hope is that in major metropolitan areas, the F.A.A. will ban the use of the reporter-pilot and require, in many circumstances, the use of pool feeds, meaning one helicopter that feeds multiple stations in these metropolitan areas.
Ted Simons: Are we seeing that now? I know here in town some stations have pooled in terms of helicopter coverage. What are we seeing here in town and around the country?
Pat McGroder: Well, what we are seeing here in town is just what you have indicated. Now, we are not sure that the lack of a pilot-reporter helicoptering is a result of economic conditions or a decision made by the station ownership that they ought to put safety before ratings and safety before news. But nonetheless, we're pleased with the progress here. Nationally, we're not seeing the same type of move to eliminate the pilot-reporter position and ensure that if, in fact, there is E.N.G. news gathering those helicopters are piloted independently, and if, in fact, it requires on-air reporting that there is a separate reporter.
Ted Simons: Are you hearing this kind of recommendation from the videographers, the photographers themselves from the pilots? Or is it basically, they got a job to do, if this is what they are hired to do they are going to do what they are told?
Pat McGroder: I believe the two seminal organizations, the press paragraphers association and the helicopter international organization, have called for the type of changes that I have mentioned and alluded to. And hopefully, with the help of those organizations, and the responsibility, I think, of the stations and the television media, we will see more, more endeavors in terms of safety, and ensuring that not only, not only, Ted, that the pilots and the photo journalists are safe but the people on the ground are safe. You know, god spared a lot of people in this tragedy. This tragedy occurred, essentially downtown Phoenix, and, but for the grace of god we would have had a lot more injuries and deaths in this tragedy.
Ted Simons: Last question. The feds say that both pilots failed to see and failed to avoid each other. Obviously, you got a settlement going here that suggests otherwise. Feds dropped the ball on this?
Pat McGroder: We think they did. We think our evidence and the animation that in part you have seen and a part that you haven't seen clearly demonstrates and vindicates that Scott Bowerbank, the pilot of channel 3, acted responsibly, was in a safe position, and did nothing to cause or contribute to the cause of this horrific tragedy.
Ted Simons: Pat McGroder, thanks so much for joining us.
Pat McGroder: Nice to see you.
- Arizona Secretary of State Ken Bennett talks about the latest voter registration numbers that are showing an upward trend for Independent voters.
- Ken Bennett - Arizona Secretary of State
Ted Simons: New voter registration numbers are out and they show independents making the most gains. There are more than 3.1 million registered voters in Arizona, an increase of over 15,000 since April. More than 1.1 million of those voters are registered Republicans, a decrease of just over 2,000. A little over a million of Arizona's voters are registered Democrats, for a loss of just over 1,000. Libertarians gained a thousand voters for a total of more than 21,000, and the green party added 19 people. They're now just over 4200. But the big winners were independent voters, with an increase of over 17,000 since April for a total of nearly 900,000. Here now to talk about those voter registration numbers and other things is Arizona Secretary of State Ken Bennett. Good to see you again. Thanks for joining us.
Ken Bennett: Hi, Ted. How are you doing?
Ted Simons: I'm doing well. Independents are doing well, too. What's going on here?
Ken Bennett: We've been seeing this trend since probably the mid '70s, where independent voters have been increasing but it's just really picked up the pace in the last, especially decade. It's really almost doubled in the last 10 years. From just under 15% to almost 30% of the voters and independent are no -- or not affiliated with the two big parties.
Ted Simons: There you go. Is Arizona a little bits of a bellwether here? Are we different than other states?
Ken Bennett: Well, of five or six comparable western states, most are showing the same trend we're showing where independents are increasing. There's actually a couple, Oregon and California, I think, where independents have actually decreased a little bit. But most western states are showing an increase in independent registration.
Ted Simons: So we have Republicans at 1.1 million, Democrats at 1 million, and independents not affiliates with 900,000.
Ken Bennett: Yeah.
Ted Simons: What does that do to the dynamic of the state here?
Ken Bennett: Well, it makes it very difficult for candidates, especially in need of party, when they are trying run a primary since we have open primaries in Arizona, it makes it more difficult for a candidate to narrow what their population of potential voters are because in Arizona, they can decide to vote in either of the primaries up to a certain point. And it makes it a little tougher to know who your target audience is.
Ted Simons: I was going to ask about the open primary system. Is that encouraging, you three-point think, pokes to register independent?
Ken Bennett: I have seen no definitive study so we can point to this many people are impacted by it but I think anecdotally you have two things going on. One is a general dissatisfaction of voters to both of the two main parties. And then especially in Arizona, you have the phenomenon that, because you are allowed to vote in the open primary except for the presidential preference primaries, which did catch a few voters off guard this year. A lot of independents who were used to being able to vote in statewide and legislative offices, were caught off guard and not allowed to vote in the presidential primary. That seems to be the one draw back to registering as an independent in Arizona. But other than that, it seems to be attractive to a lot of people.
Ted Simons: Speculation on your part but do you see this continuing? Because fit does at this rate, independents could very possibly be number one on the list in a few years.
Ken Bennett: Well, there certainly is no indication that it's slowing. And so, yeah, it would not take long at these rates for them to catch the Democrats and then the Republicans soon thereafter.
Ted Simons: More speculation. Last question on this. Why is it that folks are not affiliated as opposed to a ground swell out there for a third party? Does that mean that independents aren't necessarily in that nether region between Democrats and Republican, they are all over the map and don't want to be part of a party?
Ken Bennett: Yeah, I think there's quite a few indicators that would suggest that even people that register independent seem to kind of fall, usually, in the same proportions as the two main parties. We have seen, I think, the Obama election probably broke that trend a little bit. But usually the independents will break similar to the way the Republicans and Democrats are otherwise configured. And I don't think it's a group that are necessarily looking for a third party. It's just that they don't feel comfortable being identified solely with either Republican or Democrat and they are going to call themselves independent and vote one way or the other depending on who is there. I think it shows an interest in the candidates as being more important perhaps than the party which used to be maybe party first.
Ted Simons: Yeah. While we have you here, clean elections. I know statewide candidates are coming up. They can start collecting donations when?
Ken Bennett: Well, candidates for, that are running under that system for statewide office can start collecting their $5 contributions August 1st. The legislative candidates can start in January of next year.
Ted Simons: In general what kind of numbers are you looking at if you are considering running as a clean recollection candidate? How many of those contributions do you need? I know it's different.
Ken Bennett: Well, it starts at the top, the governor, you are up in the 4500 $5 contributions. My office and attorney general drops into the 2700's and it goes down. For a legislative office you are in about the 220 range. And essentially, that was part of the mechanism of this system that, instead of proving your worthiness to be on the ballot by collecting signatures, enough signatures to be the Republican or Democrat party nominee, part of proving your legitimacy, I guess, was could you get enough people to give you $5 each? And it goes from a couple hundred if you want to run for the legislature all wait up to 4500 if you want to run for the governor.
Ted Simons: I think we are going to talk about this in much more detail in the week but right now, as far as the suit regarding clean elections and matching funds, still in the courts but that has to make for a lot of uncertainty with a lot of candidates out there.
Ken Bennett: It is and we are hearing in our office where they file some of those people, that paperwork, that people are really hesitant to declare quite yet. Because one of the main features of that publicly funded system was that if you chose to be in the system, and you had a privately funded candidate, if they started raising tons of money you could get automatically matched. And keep up with them but that may go by the way house depending on what the courts do and many if not most are expecting they will eliminate that aspect.
Ted Simons: Of course, the question is when. That court case could drag out for quite a while.
Ken Bennett: Everyone is expecting it sometime this summer. We could have something hopefully very soon.
Ted Simons: Very good. Always a pleasure to see you.
Ken Bennett: My pleasure, Ted. Thanks.