Arizona’s housing crisis fueled by many factors; end not yet in sight

Posted By Mike Padgett

Nov. 21, 2008

Arizona’s housing crisis is a complex issue sparked by a long list of factors, ranging from the current national economic crisis, to inadequate state regulations, to families who accepted mortgages they cannot afford, according to Arizona Town Hall’s newest report.

Other key influences include speculative investing in new and resale houses and the higher costs of fuel, which cut into family budgets, according to the “Housing Arizona” report posted today on the Town Hall Web site,

Other sections of the report focus on the growing need for housing in rural areas and in Native American communities as well as the need in metro regions for better housing for lower-income families.

 One major factor fueling the state’s housing crisis, however, is the national economy, which “has had a dramatic negative impact on Arizona’s housing industry and its overall economy,” the report says.

“During the housing bubble, Arizona developed the perfect storm – many builders ready to build homes, cheap land, lots of homes and a lack of regulation of home loans,” it says.

The 34-page report is the result of the 93rd Arizona Town Hall, which was convened Nov. 2-5 at the Grand Canyon. The participants, numbering about 130, included representatives of city councils, counties, development and contracting companies and Native American communities. Other participants included educators, attorneys, local housing officials, real estate agents, retirees and community volunteers.

Complex problem, complex solution

Answers to the ongoing mortgage crisis should include the many players involved, from mortgage borrowers to banks and other lenders as well as title companies and the state, the report says.

“The general lack of overall mortgage industry regulation in Arizona contributed to this problem,” according to the report. “During the housing bubble, there was an international infusion of capital into Wall Street and unregulated mortgage products, which caused some problems, given Arizona’s relatively unregulated conditions,” it says.

It goes on to say that Arizona’s regulations “must be enhanced to prevent mortgage fraud and lending abuses and increase penalties for such violations.”

It says those new regulations “should be aimed at mortgage brokers, real estate agents, appraisers and others involved in the home-purchase process.”

More control over lending is needed, the report says, “to discourage predatory lending and encourage other alternatives to the payday loan industry.”

Home sales have plummeted, sending a ripple effect throughout the jobs market. Builders have laid off workers, as have suppliers of furniture, appliances and other consumer goods.

“Building permits are down, and there is a glut of foreclosed houses on the market,” the report says. “There are too many single-family houses available for rent, or vacant and abandoned.”

Worsening the housing and employment picture is the change in immigration laws, which the report says has “adversely affected the rental housing market and contributed to the oversupply of single-family homes.”

One of the keys to resolving the issue of workers living in one city and driving to jobs in another, contributing to traffic congestion and pollution along the way, is establishing more high-density, mixed-use developments that offer housing and jobs in one area, says Town Hall President Tara Jackson.

Jobs, tax revenues dropping

For the near future, the state’s housing picture looks grim. The report says “a significant number of Arizona homeowners now have little or no equity in their homes.”

It says that as people’s “net worth has declined, some have lost access to credit, and others must delay retirement.” These homeowners have cut back on discretionary spending, which – as any economist will confirm – means less sales tax income for local governments.

“Sales tax revenues have declined, and property tax revenues will decline in the future,” the report says.

Owners of vacant homes are converting them into rentals, which are attracting tenants of multifamily developments. As a result, “apartment rental vacancies have skyrocketed,” forcing owners of apartment buildings to lower their rental rates, the report says.

Real estate analysts and developers expect the Arizona market to reach bottom and begin rebounding in mid- to late 2009.

Realtor Tim Mullan was one of the Town Hall participants. In an interview broadcast Nov. 18 on KAET-TV Channel 8’s “Horizon” program, Mullan said homeowners from many income levels in Arizona “are dealing with situations where they are unable to afford the houses they are living in.”

“And they have to make a decision whether they can stay in their house and provide for their family, or do they go and give it back to the bank, and rent or find an inexpensive home,” Mullan said.

Also on the program was another Town Hall participant, Patricia Garcia-Duarte, executive director of Neighborhood Housing Services of Phoenix. Garcia-Duarte says part of the problem of families facing foreclosure is poor family budgeting.

“One of the things that we discussed at the town hall as well was the whole need for financial literacy,” she said. “Too much debt, that’s a fundamental problem. We’re a society that wants everything now, and we want to charge it. And that is a big problem. We need to do more financial education at the schools, from K to 12. And then hopefully, as adults, better financial decisions are made. That’s the root of the problem.”

Copies of the report released today will be sent to public officials, community and business leaders and others across Arizona, said Arizona Town Hall Board Chair James Condo, attorney and partner at Snell & Wilmer.

A summary report will be prepared for use in public outreach programs across Arizona before the end of January. The full report, its recommendations and a background report will be published and distributed for public review by February, Jackson says.

A 170-page background report for the Town Hall members was prepared by the Drachman Institute in the College of Architecture and Landscape Architecture at the University of Arizona.

The Arizona Town Hall, founded in 1962, is an independent, nonprofit membership organization. It “identifies critical issues facing Arizona, creates the forum for education and exploration of topics, and fosters leadership development,” according to the organization’s mission statement.

The 94th Town Hall is set for April 19-22 in Tucson. The topic is transportation in Arizona. Jackson says it will be the first time a Town Hall will be held in an urban area. Historically, the Town Hall has been held at the Grand Canyon to encourage participants “to step away from their professional and day-to-day work and concentrate completely on the issue at hand,” Jackson says.

Holding a Town Hall event in an urban area should encourage greater participation by residents and guest speakers, along with greater interest from the media, she says.

The keynote speaker for the 94th Town Hall is Mary Peters, a long-time Arizona resident and the current U.S. Secretary of Transportation. She was nominated by President George W. Bush in 2006. She was with the Arizona Department of Transportation from 1985-2001, serving as ADOT director from 1998-2001.

Full disclosure: Journalist Mike Padgett was a participant in the 93rd Arizona Town Hall. He was a member of Panel Yucca, one of four groups assembled for the three-day discussion. To read the complete report, please visit

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Nov 21st, 2008

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