Horizon, Host: Ted Simons

September 21, 2010


Host: Ted Simons

Housing Prices

  |   Video
  • ASU Real Estate Professor Jay Butler has the latest data on prices and foreclosures in the Phoenix area housing market.
Guests:
  • Jay Butler - ASU Real Estate Professor
Category: Business/Economy

View Transcript
Ted Simons:
Good evening, and well come to "Horizon." I'm Ted Simons. A new report from ASU's W.P. Carey School of Business shows that foreclosures are still a large part of the valley's housing activity, and that's not a good sign for home prices. Here with the latest numbers and friends is the author of the report, ASU real estate professor Jay Butler. Thank for joining us. Median price in the valley, three straight months now?

Jay Butler:
Continues to drop. Again, what it is, it's the price of what is being sold. And what people are looking for are the deal, the inexpensive home that they can flip or rent out is the dominant force. So -- and the move-up market, people would buy the more expensive markets is basically nonexistent. So what is happening, the price is reflective of what people are willing to pay for right at the moment.

Ted Simons:
So three straight months of decline, do you foresee more of this here in the next few months?

Jay Butler:
Historically the end of the year we see declines because the market shuts down because of the holidays. The new home market picks up somewhat, so, yeah, we'll probably see some decline in this situation. And hopefully what we thought would happen this year would happen in 2011, the economy really becomes solid jobs begin to improve, and the housing market begins to take off.

Ted Simons:
I was going to ask, people don't seem to be interested in buying homes. Are they waiting out the recession, are they staying put in their own home for the long haul? What's happening?

Jay Butler:
Yes. To everything. Some people in order to buy new have to set one they're in, which is difficult to do. Others are happy in the home they're in because it's -- because of the mortgages and availability, they weren't able to -- they were able to buy a home in a better location than they thought they ever would. Others are scared of buying a home. They are convinced things are going to get worse or maybe their jobs aren't as secure as they would like to be, so they don't want to make the commitment to these sorts of things. So there's really a lack of motivation on the part of the owner occupant to buy a home at the current time.

Ted Simons:
Is the concept of a house being a home to live in as opposed to an ATM machine or some sort of far flung investment, is that concept of, hey, this is what we're supposed to be living in as opposed to worrying about the numbers, is that back in fashion a little bit?

Jay Butler:
Well, it is, and except for the two years we were in the hyper market, it's always been in fashion. That's why we see some recovery. People are look at the school districts, the neighborhoods, freeways, job access, and everything else. So that has become extremely important and really was except for the two years of the hyper market.

Ted Simons:
Stricter underwriting guidelines. We hear this is going on. Is it going on, and how much a factor?

Jay Butler:
It is. FICA Scores for many of the low interest rates are 720 or higher. If you're 670 or lower you're probably going to have difficulty getting financing. You need greater down payment, more points, more fees. There's simply looking at a tighter schedule right now. If you have a foreclosure bankruptcy, it's not going to happen right now. Maybe in the future it probably will, but not right now. So, yeah, we're in a tighter underwriting guideline situation. Refinancing homes and renovation loans seem to be OK. They're more willing to do these if you are improving your home and increasing its value.

Ted Simons:
And that's provided of course that you have a job. I guess underlying all of this is the jobless picture and the jobless rate.

Jay Butler:
It's really the income. A lot of the jobs created were part-time jobs. Or like an education, which was a big gross secretary -- growth secretary nor August, those are bus drivers, aides, so it's the income that is the key issue.

Ted Simons:
I know you mentioned foreclosure, 45% of the existing market. It sounds as if most of the real estate activity in one way, shape, or form, deals with foreclosure.

Jay Butler:
It is, because that's where the deals are. Low-priced homes, you can buy them for $50,000. Turnaround, we see about half of the traditional market is really homes being sold that were foreclosed being either rented out or sold. But that's where the action is right at the moment. The investor who’s looking for the deal, that's what they're looking for.

Ted Simons:
So investor as opposed to first-time buyer, that's who is buying right now?

Jay Butler:
There are some first-time home buyer, but we sort of used up that market with the first him time home credit. A lot of these are the people with the low FICA scores and income issues and job issues.

Ted Simons:
So what happens to the future market if right now everything is being snatched up by investors?

Jay Butler:
Well, there's a lot of growing concern they're going to have issues, because a lot of times renting them, one of the big things that's going to come up later this year, early next year is what is the population of the Phoenix metro area? Is it growing, it is losing people, because a lot of strategies are based on, we're growing. And if we're not, you're going to have a heavy vacancy rate. 10% of all single family homes in the valley are vacant. Over 12% of the apartment units are vacant. We have areas that are over 20% vacant in the apartment areas. We have a lot of vacancies sitting out there. But you have a lot of investors and others looking at rental or flipping these particular homes.

Ted Simons:
I was going to ask, the rental market, what's happening with that?

Jay Butler:
Well, in a sense it's having its serious issues. The apartment market, rents -- they simply dropped rents. There's a lot of sale activity in apartments right now. A lot of the converted projects which didn't convert are being sold at very low unit prices, which can be rented out very nicely. There's a belief that if Phoenix grows, they may not want to live in a home. They may not want to own a home for a while, so they're going to rent. And a high-end apartment may be the sound alternative. So there's a lot of investor interest in some of the apartment complexes.

Ted Simons:
I'm sure the investor interest is there as well for condos and town homes, although is there much interest at all there from anyone?

Jay Butler:
To live in? No.

Ted Simons:
Yeah.

Jay Butler:
To rent out, yeah, because again, they're bigger, so if you have three bedrooms you can rent out each bedroom to an individual, so you can cut the cost, they have a lot of nice amenity features, they're well located.

Ted Simons:
Any signs that things in general will get appreciably better any time soon?

Jay Butler:
Well, yes. You got a lot of communities where values are beginning to stabilize and edge up, especially in the East Valley. Because they have the freeways, the jobs, the schools and everything else. In the areas that were under heavy development in the hyper market, no. They don't have those. If you were looking to buy a home, you know where you're going to move into. The census data came up today looking at some construction schedule, there's issue that shows a little activity going on. So there are vestiges of an early Spring.

Ted Simons:
Last question, if you bought in the year 2000, or 2001, or something along those lines, and you bought for X, are you above or below that X line right now?

Jay Butler:
You're below it. That was beginning to peak up. You're probably not heavy under water unless you refinanced. But you're sort of marginal in this sort of situation. There have been a bunch of studies come out recently as to the underwater condition of Phoenix and depending on which one you look at, that run from 50% of all owner occupied homes to 70% are under water. It's really a question of what you paid for the home, where it is and if you're in the east valley you may not be under water. In other areas you may well be.

Ted Simons:
Wow. All right. Good to have you here. Thanks for joining us.

New GPEC Chairman

  |   Video
  • University of Phoenix President Bill Pepicello discusses his new role as chairman of the Greater Phoenix Economic Council.
Guests:
  • Bill Pepicello - Chairman, Greater Phoenix Economic Council
Category: Business/Economy

View Transcript
Ted Simons:
The greater Phoenix economic council works to attract high-quality businesses and jobs to Arizona. And now it has new leadership to help guide those activities. University of Phoenix president Bill Pepicello has been appointed chairman of GPEC's board of directors for fiscal year 2011. He takes over for Arizona cardinals' president Michael Bidwill, who served as chairman for the last two years. Here to talk about his new responsibilities, and his vision for economic developments in the valley is GPEC chair Bill Pepicello. Thanks for being here. Nice to meet you.

Bill Pepicello:
Same here. My pleasure.

Ted Simons:
We touched on a little bit in the intro, talk about GPEC. What is GPEC's role in the community?

Bill Pepicello:
I think GPEC has a couple of very central roles in the community. One, of course, is to help to recruit new business, and to retain those businesses we have. But it's also to bring the business community together as a force to help develop not just Phoenix, but the whole state.

Ted Simons:
And your role as chair, define that for us if you could.

Bill Pepicello:
Well, I hope that I'll be someone who can continue the good work that Michael Bidwell has done with the GPEC staff, Barry Broome and his folks have done marvelous work here in the past several years. Looking at diversifying the business base, looking at what kinds of new businesses we can bring in, how we can help retain those businesses that are here. And so what I'd like to do is build on the momentum that they have started over the past couple years, and continue that as we bring Arizona back.

Ted Simons:
How do you do that? The best approach, let's start with economic development and then work to diversification. Economic development, best approach of doing that? Of handling that…

Bill Pepicello:
I think one of the things that I have talked about with the staff is that as we bring the economy back, we need not to rely on the same things that we always have. We've been heavily reliant on construction, on retail, and real estate. And I think one of the great benefits of having Barry Broome here has been he has looked at that diversification, and he has had the foresight to say, as we rebuild, this is an opportunity for us to build a stronger base for our economy.

Ted Simons:
How do you do that, though, when the economy for so long has said, stick with construction, because construction is bringing in the bucks.

Bill Pepicello:
I think a large part of it goes to telling the story of Arizona. And it goes to rebranding efforts. It's letting businesses know why Arizona is a good place to come. We of course have always sold our climate, but the climate is just part of a much better quality of life issue that we really need to get out there to public and to businesses in general so they know this is a place that you do want to bring your business, you do you want to bring the families of the people who will be in those businesses, because it's a place where you do want to settle and prosper.

Ted Simons:
I want top get to rebranding, but let's say I'm a -- I own Ted's high-tech company back in Wisconsin or something along these lines. And I'm thinking of Arizona, I'm thinking of New Mexico, I'm thinking of other areas as well. What do you tell me? What's the pitch?

Bill Pepicello:
One of the things we need to look at are incentives for people to come here. Of course we know we have had the renewable energy incentive this year, and that has helped us to bring six new businesses into Arizona so far this year. And we probably have close to that many in the pipeline right now. So I think it's that and it's working with the legislature on perhaps restructuring our free enterprise zones, so that we can increase the incentives for those kinds of businesses who might want to come here.

Ted Simons:
There are critics of incentives, and they say it's not fair to focus on what industry, it's not economically sound to focus on one industry. How do you respond?

Bill Pepicello:
Well, I think the focus for us is not necessarily in one industry, but on any industry who's interested in coming here and providing high-quality jobs, health care for their employees, so we can build a broader base, not necessarily focusing on one particular industry.

Ted Simons:
So the job aspect, the income level would be a factor, you'd like that idea as a factor as far as incentives are concerned?

Bill Pepicello:
I think yes, we would like to see the companies bring what we call quality jobs, which is jobs that come in at the median salary in Arizona, which is in the mid 30s. And I think that's a part of rebuilding the base.

Ted Simons:
Let's go back to Ted's high-tech company, wherever it is, back East somewhere. I'm asking you, what's going on with this immigration issue, with 1070? I'm hearing a lot of stuff, I'm not -- I don't know if I want to go out there. How much are you hearing that, and how much is that a factor in attracting business?

Bill Pepicello:
Well, 1070 is on everyone's mind, and GPEC officially has a neutral stance on that. We're concerned with economic development as opposed to the political aspects of that, and of course that's now for the courts to decide. But as what we have seen so far is that any effect the 1070 has had has been primarily in the tourist and convention side, and as I said, we have already brought six new companies here who have not been deterred by 1070 this year.

Ted Simons:
So the governor says that rebranding, rebranding of Arizona is necessary. And obviously part of that is because of something like 1070, and other issues as well. Is a rebranding -- you touched on it earlier, is it necessary, and if so, what's the new brand?

Bill Pepicello:
Well, I think the new brand is telling the story of Arizona. The story that may have been lost in some of the noise recently, that we are a great place to live. And with the diversity that we can offer here, of lifestyle, we have arts, we have sports, in addition to the recreation, I think that that's how we want to rebrand. We want to rebrand it as the place where businesses and families want to come. And I really think since I came here myself in the mid 90s, and don't intend to leave any time soon, that I want to tell the story that drew me here, and that has drawn these six companies this year, and make that the story.

Ted Simons:
What did draw you here? What drew you to GPEC and being president of the University of Phoenix, how does that play into what you plan to do as chair of GPEC?

Bill Pepicello:
Very good question. I was -- I came here to work for University of Phoenix in the mid '90s. I believe in their mission I think they -- they're serving a real crucial part in attaining Obama's -- the Obama administration's 2020 education goals. And so in addition to that, I love the desert, I grew up in the snow belt, so I am enjoying the weather here right now. But what drew me to GPEC is that I think a crucial part of economic development is education, and by that I mean the -- we have a great education base here in the state. We have a great community college system, one of the best in the country, we have ASU, and UofA, and NAU, we have a variety of private institutions. And I think working together, we can help educate people who will populate some of those jobs that we want people to have here. So it's a cycle where we can educate people who then will stay here and share that expertise.

Ted Simons:
Last question -- maybe you just answered it with that response. But legislative session coming up, what would you like to see the legislature focus on, what should they address next session?

Bill Pepicello:
Well, I think from wearing my GPEC hat, certainly I'd like to see a jobs bill, a job training bill, certainly we'd like to see a restructuring of the free enterprise zone here that would provide some of those incentives that we talked about. Those would be major things we'd like to look at.

Ted Simons:
All right. Very good. Good to have you here.

Bill Pepicello:
My pleasure. Thank you.

Proposition 112: Initiative Petitions

  |   Video
  • Proposition 112 would amend the Arizona Constitution to require that initiative petitions be filed at least six months before the date of the election. Right now, the deadline is at least four months before the date of the election. State Representative Chad Campbell will explain Proposition 112.
Guests:
  • Chad Campbell - State Representative
Category: Vote 2010

View Transcript
Ted Simons:
According to the Arizona constitution, initiative petitions must be filed with the secretary of state at least four months before the date of the election. Proposition 112 looks to change that deadline to six months. Tonight we continue our vote 2010 election coverage with proposition 112. Proponents say moving back the deadline allows more time to verify signatures, and it gives the courts time to deal with legal challenges that may arise. We were unable to find any organized opposition to the measure, but here in support of proposition 112 is state representative Chad Campbell. Good to see you again.

Chad Campbell:
Good to see you. Thanks for having me.

Ted Simons:
Why is it important to change this filing date from four to six months?

Chad Campbell:
I think you nailed it on the head. Baically what we're trying to allow county recorders and election officials to have more time to actually get down, verify the signatures and make sure they're legal. And then that in turn offers the ability for citizens and other groups to file any potential lawsuits any challenges to the language or the measure itself and I think one other thing that's not discussed is it also gives voters more time to look at the ballot measure, think about its ramification and make a more, I think, informed vote.

Ted Simons:
It is implicit in that response that voters sometimes don't have either the time or they just don't think about the ramifications?

Chad Campbell:
I think we have a very compressed time frame in Arizona. That four-month window we have is a very short time frame, and when you combine that with our late primaries for candidates, and the sheer number of ballot measures we get on the ballot now in Arizona, it's a lot of information. So I think if you give voters more time they're better served.

Ted Simons:
Is it safe to say this proposition is designed to make it harder to get measures on the ballot?

Chad Campbell:
I don't think so. I've heard that argument from some people, you still have a year and a half basically, to get your signatures turned in and get on the ballot. That is a lot of time. And I think if you're looking at weighing the additional two months you would have as the law stands now, versus more transparency, more effective accountability for the election officials, and more time for the voters to debate the issues, I'm going to side with transparency and the voters every day of the week.

Ted Simons:
So for critics who say it's an attack on the initiative process, you say -- .

Chad Campbell:
It's reforming the process to make it better. And it's providing more transparency, and again, actually will save the taxpayers money because hopefully it will reduce the legal challenges and it gives the county recorder's offices more time to do their job.

Ted Simons:
Are you hearing from county recorder offices? And if, so what are you hearing?

Chad Campbell:
We worked with them and many election officials in crafting this language. I was cosponsor of the bill at the legislature and we worked with many election officials across the state. The secretary of state's office, and other people to make sure this language addressed any potential concerns out there. And I think we came up with the perfect language, it was a bipartisan bill, came out I think unanimously. From both the house and senate.

Ted Simons:
Why now? I hear some saying the voter protection act and so much stuff by way of the initiative process is protected, the legislature can't get their hands on it by initiative, you can't do that, and so this is just a legislature's way of saying we need to get a hold of that money, and let's go ahead and give it a shot.

Chad Campbell:
I think that's a separate issue. I it this reason why this came up is twofold. First, there was an initiative called the O'Connor house project that was started by Sandra Day O'Connor, many of us got involved with that and that is a organization or group of people looking at how to reform Arizona's government, make it more effective, and really modernize our system and make it better for the 21st century. That was one. This is one of the measures that came out of that process. And secondly, we've had a lot of legal challenges to ballot measures over the past several years. The time initiative when governor Napolitano was here was a great example of one, we've had several of them where the signature verification took a long time, came down to the last minute, and people had to get to court because the time line that's in the statutes now, and they didn't have enough time to make sure they were doing the right thing or the wrong thing. And so we really seemed to clear it up and that’s what this bill does.

Ted Simons:
I mentioned the voter protection act because -- and you mentioned it earlier on in a different way in the sense of sometimes folks don't understand the ramifications of what they're voting on. There's a lot of stuff you guys can't handle, can't do much with because it is voter protected.

Chad Campbell:
Yes. And that is something that I will always fight for. I believe in voter protection. We as a legislature should never be overturning the vote of the citizens, and again, I think what this does is actually it make those votes stronger, because this gives the citizens more time to think about what they're voting on. So if you're saying, I'm going to vote yes on a measure now, you've had six solid months to think about it, I think you've had time to make your decision.

Ted Simons:
For the sake of argument, we're going from four to six, why not go to eight?

Chad Campbell:
We went back and forth on how long to get -- how long to push this back for. We were at five months, seven months, six months seemed like the right time for the county recorder's offices to verify the signatures. They told us that would give them the extra time. And again, it's still providing enough time for the citizen groups collecting the signatures to do so and gives them a fair chance to get on the ballot.

Ted Simons:
Six months was actually rejected back in 1984, I know seven months was rejected just five, six years ago. It sounds like voters rejected it pretty soundly both times. Voters don't seem all that hot to this. Why are we doing it again?

Chad Campbell:
I think when those were rejected it what's -- we had a lot less initiatives on the ballot. A lot less efforts out there. We didn't have some of the legal problems we've seen with the court challenges and the ramifications we've had with late verifications of the signatures. So I think we have a very different climate. And I think people know that we have to modernize the system. And I do want to point out, too, one other thing. The way of collecting signatures nowadays, is much more advanced than it was even 10 years ago. And, you know, 2 years, 10 years ago is not the same thing as it is today. We can do a lot of things quicker now in terms of collecting signatures.

Ted Simons:
So for the- and again it sounded like you wanted to keep the initiative process sacred. You want to keep it there, it’s an important part of Arizona’s heritage. And yet at the same time I’m hearing that there are more initiatives on the ballot than there used to be, more measures on the ballot. And we need to watch the ramifications, there’s so many people may not know what they’re voting for. And yet so many times, these are examples of the public saying, you guys aren’t doing the job. And if you’re going to do it, we’re gonna do it for you. Fewer initiatives, is that necessarily a bad thing, a good thing I should say?

Chad Campbell:
It depends. Again, I’m in the minority party I want to point out, down at the capitol. So I don’t really dictate what comes out of the capitol, what doesn’t come out of the capitol a lot of times. This was a bipartisan effort and I was proud to be a part of it. But, you know, I think voters do initiatives, because they see a lack of action on many things that are important to them down at the legislature. Be it education funding, healthcare funding, whatever it may be. And I applaud the citizens when they take this on themselves to go out there and get the job done when the legislature fails. And I hope with other election changes we’ll see a more responsive legislature. Including new districts in 2012.

Ted Simons:
Real quickly are for those who say this is a solution in search of a problem, you say --

Chad Campbell:
No, this is a problem, a real problem, we've seen it over the last few election cycles, we've got to clean this process up. This will do it no cost to the taxpayers, it's clean and simple, a no-brainer, bipartisan solution.

Ted Simons:
Good to have you here. Thanks for joining us.

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