Author: Odysseus (page 5 of 6)

by Odysseus

Big, Beautiful Bloodhound

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The idea of a Downtown in Phoenix is cursed by the most pernicious force of hell. Not the devil, just the heat. A Downtown is a place where virtually all transportation takes place on foot, and you cannot walk outdoors in Phoenix in the summer. Not far, not for long and not without ruining your clothes with sweat stains.

There are two fairly obvious conclusions to be drawn from this datum. Either: Phoenix cannot have a true Downtown–which explains why it doesn’t–no matter how much money is wasted on cargo cult projects devised to mimic a Downtown. Or: Downtown Phoenix, wherever it emerges, must be entirely indoors. I wrote about this a while ago.

Today comes news of a yet another city-within-the-city that is just ambitious enough to succeed as a project, but nowhere near ambitious enough to work as a city:

Phoenix’s largest mall developer says it will build a cosmopolitan city within a city in the northeast Valley that will feature the state’s most upscale shopping, restaurants, nightclubs and spas, plus a boutique hotel.

Going after the Valley’s most deep-pocketed residents and tourists, Phoenix-based Westcor and its partner, Landmark Land Co., said they will turn 2,200 acres of desert into a giant urban hub with buildings reaching 17 stories high, piercing the northeast Valley’s low-slung skyline.

Here’s the kick in the teeth, though:

Plans are most firm for Westcor’s 72-acre regional, outdoor shopping center, which will include 1 million square feet of high-end retail and restaurants.

I added the emphasis. So how do you suppose people are going to get around this huge parcel of land?

But wait. There’s more:

Creating upscale, outdoor shopping centers where people also live and work has been a hot trend among developers who want to renovate their old centers or build new ones.

The souped-up shopping centers are meant to look like minidowntowns or Main Streets but often feature high-end shops instead of dentists and dry cleaners.

That is in part due to the strength of the luxury retail market, said Patrice Duker, spokeswoman for the International Council of Shopping Centers.

“(Mixed-use) is what’s in the air in regard to development trends,” Duker said. “It’s Read more

by Odysseus

Big, Beautiful Bloodhound

Author website

Jon Talton is the Arizona’s Republic’s house Socialist. He hates just about everything associated with free enterprise, but he makes up for it by waxing rhapsodic over any stray government boondoggle. He is convinced that Phoenix will continue to go down the toilet by growing and prospering until it dares to mimic all the idiotic urban policies people move here to escape. The Republic runs his column on the business page for the same reason they run articles by effete anti-athletic esthetes on the sports pages. Oh, wait–they don’t do that…

In any event, Talton suffers from a rabid moondacity, a desperate need to tell mooney, transparent lies in support of unsupportable stupidities. From the Latin moondax, moondacis, moondacity denotes an incurable condition in which the sufferer’s brain has turned into green cheese. It is epidemic in certain circles of Phoenix, particularly in the city government, where the afflicted affect to believe–and attempt to persuade others to believe–that Downtown will be revitalized by the erection of skyscrapers made exclusively from huge stacks of tax-dollars.

Here is a sampling of Moondacity, Talton style:

Maroney’s is closing at Central Avenue and Camelback Road, taking away a landmark that has stood since the 1940s. There’s a back story, of course: the dry cleaner sits atop contaminated groundwater.

“Closing”–what a failed business does–and “taking away a landmark”–what a tornado does–are not the same thing. This kind of corrupt conflation is constant among the moondacious, so learn to watch out for it. But this is the bigger lie: “the dry cleaner sits atop contaminated groundwater.” In fact, Maroney’s sits atop groundwater that it contaminated by dumping dry-cleaning chemicals into the ground-table for decades. Even so, the “contaminated groundwater” didn’t cause the business to fail. Want to know what did? You can figure it out by inverting the next bout of moondacity:

Viacom, which owns the property and its lucrative billboards, is working with the Arizona Department of Environmental Quality to clean up the site. So this is hardly a business closing that can be blamed on the coming of light rail.

Did you catch it? When Talton says, “this is hardly a Read more

by Odysseus

Big, Beautiful Bloodhound

Author website

“My father wasn’t one to stand in the way of progress,” said Robert Tang, who now lives in Apache Junction. “I just think the Chinese community really wants something preserved of our history.”

Here’s a solution, Mr. Tang: Pay your own way.

The quote is taken from an Arizona Republic article on attempts to dictate to a group of private investors the terms on which they can build a brand-new barely-taxpayer-subsidized hotel in Downtown Phoenix. Mr. Tang and the Chinese community are joined by the Historic Preservationists, who by fiat of law create compulsory museums without compensation to the owners of the affected properties.

For all the hoopla regarding Downtown, it’s important to understand that almost everything that is being planned will be paid for by the taxpayers. There is almost no entrepreneurial investment Downtown, and almost no privately-owned land upon wich to build entrepreneurial investments.

Still worse, for anyone foolish enough to put a nickel into Downtown, there stands Mr. Tang and other so-called ‘stakeholders’–called this because they have zero financial stake in the investment–and all the busy-bodies at City Hall.

Just now a group of Luddities is trying to prevent vertical development in the Biltmore area–where, thankfully, there is no history to be preserved. If they succeed, the Downtown in Phoenix won’t emerge in Phoenix at all. It will happen in Tempe.

Nice going…

by Odysseus

Big, Beautiful Bloodhound

Author website

Being who we are, we settle for nothing less than the best we can do. We’ve been persisently dissatisfied with the way that market values have been reported for Valley homes, so we’ve come up with our own Market-Basket of Homes. If you pursue that link, you’ll see our thinking, but if you want you can skip ahead to the actual numbers.

This is a moving target, for now at least. As we get a better idea of what we’re aiming for, we may revise the search criteria. If we do, we’ll revise all the numbers to reflect our changes. But even now, at the beginning, we have a better lens for understanding what is really happening with the real estate market than the one provided by ASU.

by Odysseus

Big, Beautiful Bloodhound

Author website

The West Valley sections of the Arizona Republic ran this story on the expected surge in apartment-to-condominium conversions on the same day they ran my column predicting just that outcome.

They said:

Condominium conversions are happening all over the Valley, with new projects in Glendale, Phoenix, Chandler and Scottsdale.

Real-estate brokerage firm CB Richard Ellis predicts about 6,000 apartments in the Phoenix metro area will be converted to condos by the end of the year.

What makes them appealing to potential homeowners is that they are relatively cheaper than single-family homes and a better investment than renting an apartment, experts say.

October figures for home sales in the Glendale and West Valley areas list the median condo sales price at $159,900, compared with $299,900 for a single-family home, according to the Arizona Regional Multiple Listing Service.

“It will offer an affordable alternative to someone who can’t qualify for a new home,” said Greg Burger of RL Brown Housing Reports. “It’s a much better alternative than renting.”

I said:

If there are suddenly a great number of qualified home buyers with no homes to buy, it’s not difficult to figure out what will happen over the coming months. Here’s the prognosis:

We will see more apartment-to-condominium conversions, especially at the low end of the price scale. There are qualified buyers with zero available inventory at the same time that older apartment communities suffer huge vacancies. This is an entrepreneurial opportunity.

My columns are written well in advance, so the two articles running on the same day is purely serendipity. But I think the conclusion I draw stands as a stout rejoinder to all the Chicken Little rhetoric we hear from allegedly-informed sources:

Finally, expect the unforeseen. Where there is increased unmet demand, there will be increasingly creative solutions to meeting that demand.

This is the dynamism of the free market, and this is why the sky so rarely falls, despite persistent predictions to the contrary.

For every ten people wailing, “What will we dooooo?!?”, there is one entrepreneur wondering, “How can I make this work to my advantage?” Chicken Little grabs the headlines, but it is the entrepreneurs who have given us all the wealth Read more

by Odysseus

Big, Beautiful Bloodhound

Author website

Today comes the news that the City of Phoenix, in its desperate need to pretend to be a city of the East instead of a city of the West, is paying street performers, who are normally mendicants, to infest downtown:

A stretch of Adams Street in the center city is now known as “Performance Street,” and over the next month, and possibly longer, performers will be entertaining workers over the lunch hour twice a week as they walk to and from restaurants and dine at outdoor tables.

“We’re going to turn Adams Street into a stage of creativity and vitality,” said Brian Kearney, president and CEO of the Downtown Phoenix Partnership, which is coordinating the program with the help of funding from businesses.

The idea came from Mayor Phil Gordon, who was impressed with the street performers he saw during a visit to Santa Monica, Calif. “A community isn’t a community without artists and performers,” Gordon said during a ceremony kicking off the program.

Because Kearney didn’t know how to find street performers, he turned to Stephen Strange, a Phoenix vaudeville/circus performer who said he tapped into the “loose network of street performers” in the Valley. They will be paid a nominal fee, plus tips, to perform along Adams on Tuesdays and Thursdays and at various downtown spots on nights when there are major events.

“It was important to get paid something because there is no real culture of tipping down here yet,” Strange said. “Hopefully that will pick up.”

In the cities of the East, the picking up is done by the police, who roust street-performing vagrants because they block pedestrian traffic. This is something the City of Phoenix could discover if there were any pedestrian traffic downtown.

by Odysseus

Big, Beautiful Bloodhound

Author website

Note this from the Arizona Republic:

Mortgage rates around the country, which have been trending upward, dropped this week, offering a dose of good news for prospective home buyers.

Mortgage giant Freddie Mac reported Wednesday in its weekly survey that rates on 30-year, fixed-rate mortgages averaged 6.28 percent. That’s down sharply from last week’s rate of 6.37 percent, which was the highest in more than two years.

Newspapers are all about bad news reported on the shortest possible range of vision, so I suppose we should rejoice that the paper actually took note of some good short-term news. But the news of interest rates–and of real estate in general–is always about the long-term. The news of securities issues might matter day-to-day, but nobody buys a house one day and sells it the next.

So: What’s the real news on interest rates?

Take a look at this graph:

All of these charts come from BankRate.com. What we’re looking at is the average rates for a 30-year fixed rate amortizing mortgage from Arizona lenders over the last 30 days. We hover between 5.70% and 5.96%, and the recent trend is decidedly downward. Good news, huh? Maybe not:

That’s the three-month trend for a 30-tear fixed. The real trend is fairly steadily upward, right? But wait. There’s more:

The same loan product over the last year. Down. Then up. Then back down. Then up a little. Then down a little. Then way up. Could it be that the sky really is falling?

Phew! The three-year trend looks like a Drunkard’s Walk, a random stochastic hovering right around 5.40%. Interestingly, the trend seems to be flattening. But: If you read anything into that, you’re making an error. Mortgage rates aren’t caused by trends, trends are a coincidental artifact of changes in rates.

But here’s the real news:

That’s the five-year history of 30-year fixed rate mortgages in Arizona. Does that look like bad news to you? Does it look like bad news is lurking just around the corner, poised to strike?

Things can change. Disasters can befall us. Governments can inflict grievous errors on the national or international economy. But for now, at least, there is an Read more

by Odysseus

Big, Beautiful Bloodhound

Author website

In the midst of the appreciation boom in Phoenix, one of the regular Chicken Little complaints was that investors would cause a glut of rental housing, which would then sit vacant until they sold the homes in desperation. This is the static-market fallacy: This change will cause a problem, after which no change will ever occur again. That kind of thinking is epidemic in economic analysis. What I said at the time is this: Would-be home buyers are going to have to live somewhere if they’re priced out of the market. And, of course, by early fall all that vacancy had been absorbed.

Here’s further notice from the Arizona Republic:

According to Pierce Eislen, a Scottsdale market-research firm for the apartment industry, metro Phoenix apartment rental rates were up 4.3 percent in October over the same period a year ago. The average base rent was $697, up from $670 the previous October.

Rents had not risen significantly since 2001, said Ron Brock, Jr., vice president at Pierce Eislen.

Moreover, the number of apartments offering rental incentives dropped from 80 percent in 2004 to 43 percent this year through October, Pierce Eislen reported.

Several factors are converging to put the rental market in a better position to raise rents and drop concessions.

First, condo conversions are diminishing the stock of conventional apartment units faster than new stock is being built.

Second, the high median price of homes in the Valley is keeping many from owning their own home. And third, high land and construction costs are keeping apartment developers from building as many units as they traditionally have.

Rents have been flat in the Phoenix market for a long time, but the same dyanmic–not static–market comes into play: If a 900sf three-bedroom apartment rents for $1,050 a month, how much more is a 1,400sf three-bedroom home worth? It’s the competitive marketplace that ‘decides,’ ultimately, supply and demand. But through all of this, the supply of would-have-been home-buyers, tenants-for-now, is steadily increasing.

by Odysseus

Big, Beautiful Bloodhound

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From the Arizona Republic:

After months of negotiations, the Sundome Center for the Performing Arts will soon be under new ownership.

The Maricopa County Board of Supervisors voted this week to approve the purchase of the 7,000-seat performing arts center.

The board agreed to pay $10 to the Arizona Board of Regents, the owner.

The Sundome is a failed arts venue, a failure even before newer and better free-market competition came on line. This “sale” simply moves its losses from one cadre of taxpayers to another.

But there are three little ironies here: If the property had been “sold” for $10 to a private party, we would all understand that the taxpayers had been robbed by a sweetheart deal. But if ASU had sold the property at market value to a private developer, it would have received a huge sum of money for turning a vast parcel of land to a higher and better use. But, best of all, ASU will campaign next spring for the lion’s share of a City of Phoenix bond issue to build a new campus for itself in Downtown Phoenix. If the taxpayers are willing to kick in yet another $855 million, ASU will be happy to donate the ten bucks it got from this “sale.”

Actually, there is potential for a fourth and crowning irony:

Del E. Webb Corp. gave the Sundome to Arizona State University for $1 in 1984, with the university promising to keep it an arts venue.

That reads like the grant to ASU may have been a qualified fee estate subject to condition subsequent, meaning that title would revert to Del Webb (now a division of Pulte Homes) if the property is not maintained as “an arts venue.” But a common-enough provision in such a qualified fee estate would be that title would also have to vest in ASU, no other parties. In other words, it’s possible that the original deed says that if ASU does not wish to retain the property, it automaticaly reverts back to Del Webb. The fallout from that would be an entertaining spectacle, worth ten bucks at least…

by Odysseus

Big, Beautiful Bloodhound

Author website

Business Week, asking where are the affordable homes?:

The cheapest metro area in the Realtors’ report was Danville, Ill., where the median price in the third quarter was $72,800 — a level that’s scarcely imaginable to people house-hunting in, say, San Diego, Miami, or Boston.

I grew up in Danville, IL. It’s a grimy little industrial town in the middle of the corn belt. We’re buying there, not because I think it’s a good investment but because I want to be able to provide for my mother, who won’t leave the place. You can buy a decent rental house for $40,000-$50,000 that will throw off cash with nothing down. The market is about one-third rentals, so the tenant pool is no problem. The only trouble is that appreciation is negligible in the good years, negative in the bad.

Rain, snow, grime and cheap houses. Funny how they go together…

by Odysseus

Big, Beautiful Bloodhound

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From the Phoenix Business Journal:

Parking fees will be higher next year at Phoenix Sky Harbor International Airport.

Under the plan approved by the Phoenix City Council, daily parking fees in the economy surface lots will rise from $5 to $8.

Parking in the economy garages will go up from $7 a day to $10.

And terminal garage rates will rise from $16 to $20.

The new fees take effect Jan. 9.

Airport officials had requested the parking increases, citing too many cars, and too few parking spaces. The idea is that the higher rates may encourage more people to take public transportation when traveling to the airport or to park at private parking lots, outside of the airport.

This is not completely bone-headed. In a free market, price is an indicator of relative demand, and as prices rise, prudent buyers seek alternatives.

Here’s the bone-headed part, though. In the short-term lots, the lots most in need of turnover, you will pay $1 per half-hour, an impressively high price. If you stay for 23.5 hours, you will pay $47. Ouch! But stay just a half-hour longer and the charge drops to $20.

Good thinking!

by Odysseus

Big, Beautiful Bloodhound

Author website

From the Arizona Republic:

Real estate investors who falsely claim their rental houses as ‘owner occupied’ are potentially draining millions from the state treasury and soon could face criminal charges.

Maricopa County Attorney Andrew Thomas launched an investigation this week after an inquiry from The Arizona Republic spurred him to question the accuracy of the county’s property records as well as the financial implications of errors.

Much more serious is that fibbing about a rental being owner-occupied is potentially loan fraud–subject to the note being called–and insurance fraud–leaving the landlord with no homeowner’s coverage. Time to come clean.

by Odysseus

Big, Beautiful Bloodhound

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The story is headlined “Valley’s home market No. 1.” The news is that median home prices in the Phoenix area are up 55.2% from the third quarter of 2004 to the third quarter of 2005. But, of course, the article immediately veers into doom and gloom, so it’s important to put all that despair into perspective:

Other housing markets that led the nation for home price increases in the past few years already have started to deflate. Las Vegas and San Diego both saw home price increases of only 10 percent in the past year.

That is to say, an owner of a $300,000 home in Las Vegas reaped only $30,000 in effort-free appreciation income over the last four quarters. The shame of it all!

(There’s a little bit of inside-baseball in the middle of all this. My expectation is that the numbers used in this article, provided by the National Association of Realtors, are based on MLS data. The numbers the Republic normally cites, provided by Dr. Jay Butler at ASU, are based on all recorded transactions. Both are medians, useless for understanding what’s going on with a particular floor-plan in a particular neighborhood. But the MLS figures will likely be higher, all things taken together, than the County Recorder’s numbers, for the simple reason that many unrepresented transactions go for far less than the fair market value of the property. I would love to have direct access to all the raw data, but the NAR’s approach is closer to what the average buyer or seller is going to encounter in real life. A better approach altogether would be a ‘market-basket’ of homes, like the Consumer Price Index, representing very common sorts of transactions.)

Read the whole article. It’s interesting. But remember that we’re spoiled. Ten percent appreciation is not low, it’s very high. And 6.36% interest for a 30-year fixed interest amortizing mortgage is not high, it’s very low.

by Odysseus

Big, Beautiful Bloodhound

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It turns out we’re only 12th on the list of sprawling cities, according to the Arizona Republic:

Metropolitan Phoenix isn’t the poster child for sprawl, but it’s a sibling.

A new study called “Sprawl Costs: Economic Impacts of Unchecked Development” ranked the Valley No. 12 among the nation’s top 20 most sprawling areas.

Los Angeles took the top spot, and the Washington-Baltimore area was No. 2.

The study is one of the get-a-headline-by-inventing-a-big-scary-imaginary-peril variety, but it’s hard to argue that the Valley is not a sprawling place.

There is a cure of course: Stop building freeways to promote development. Areas already overburdened by traffic need freeways, that’s understood. But freeways like the 101, 202, 303 (and you’d better know there will be a 404) are built to create traffic problems, not solve them. When you build a freeway through empty land, it won’t be empty for long. The purpose of those outlying freeways–and of all those still to come in Pinal County–is to open up land to the dreaded sprawl–to subsidize future development.

by Odysseus

Big, Beautiful Bloodhound

Author website

The rejection by California’s voters of the four ballot initiatives proposed by Governer Arnold Schwarzenegger is actually big news for Arizona. All four will tend to drive business out of California, and much of that business will come to Arizona. This is from the Las Vegas Review Journal:

Certainly, California’s high tax climate is a direct result of a state government that refuses to curb its insatiable appetite for expansion. In addition, the promises made to government employee unions — promises that will continue to be made, if Tuesday’s vote is any indication — will only hasten the state’s need to capture more and more of the private sector’s output.

High real estate prices? Why, that wouldn’t have anything to do with burdensome regulatory environment governing land use, would it?

When you create conditions hostile to business, entrepreneurialism and economic growth, yet favorable to the advancement of big government — and when you turn back any effort to implement even modest reforms — the long-term results are easy to predict.