Mortgage And Real Estate News

Thursday, September 30, 2010

America's Most Expensive ZIP Codes 2010 - Yahoo! Real Estate

In these neighborhoods $4 million homes are the norm.

Los Angeles has always been home to some of the world's most expensive real estate. But forgetBeverly Hills, 90210: The new hot spot for multimillion-dollar mansions is Duarte, 91008.

Bradbury, Calif.
Bradbury, Calif. (91008)

Duarte, Calif., home to the 91008 ZIP code, is a small suburb northeast of downtown LA, near the Los Angeles national forest. The median cost of a house in this tony town is a whopping $4,276,462, making it the most expensive housing market in the country. It ranks No. 1 on Forbes' annual ranking of America's Most Expensive ZIP Codes.

A scant 1,391 people live in 91008 ZIP code, and only 12 homes are currently on the market. So a single high-priced listing (like the mammoth nine-bedroom, built this year, that's selling for $19.8 million) is enough to skew the median price skyward.

In Pictures: America's Most Expensive ZIP CodesAmerica's Most Expensive Zip Codes

The ascent of Duarte--for which the 91008 ZIP was created since 2000, to accommodate a growing population--shows that wealth is still drawn to big cities, even if their postbubble housing prices have dropped.

Beverly Hills, Calif.
Beverly Hills, Calif. (90210)

"In the big California markets there is essentially a chronic shortage of homes," says Mike Simonsen, CEO of Altos Research, a Mountain View, Calif., firm that tracks housing market data. "For the number of people that might want homes, there's always an order of magnitude fewer homes available than there are in Midwest, for example." More than half the locations in our ranking of America's 500 most expensive ZIP codes are in California.

High-End Slump Slows

Alpine, New Jersey
Alpine, New Jersey (07620)

The median price of America's high-end homes continues to slide, but not as fast as it did last year. Our index of 500 high-end ZIP codes saw the average home price fall 5%, to $1.2 million, from the same time last year. In 2009 the markets on our list saw a 7% price drop.

About 35% of the ZIP codes in our index saw median prices increase or stay flat, but that's likely because more high-priced homes are coming on the market, while more affordable housing continues to falter.

"The year-over-year price changes we're seeing here aren't necessarily the change in price for your house, if you have a house in this area," says Simonsen. "It's a change in the mix of homes on the active market."

Behind The Numbers

Atherton, Calif.
Atherton, Calif. (94027)

Real estate trends are highly localized. Most cities are a collection of dozens of mini housing markets, so we bore down to the granular level to find out what neighborhoods are really on the rise.

Altos Research collects data on more than 20,000 ZIP codes; we asked it to rank them all to find the 500 most expensive in the country. Altos ranked each ZIP on the median asking price for single-family homes and condominiums, weighting the price based on the mix of homes in the market.

Priciest ZIPs In Devastated Markets

New York, New York
New York, New York (10014)

On the ZIP code level some housing markets contrast dramatically with their surroundings.Miami, for example, where housing prices have plummeted and foreclosures continue to mount, still contains some of the most expensive homes in the country, with four ZIPs on the list, including 33109, in the No. 37 spot. This ZIP code, for celebrity enclave Fisher Island, boasts a median home sale price of $2,295,291.

Santa Barbara, Calif.
Montecito, Calif. (93108)

In Nevada, a state with 14% unemployment and the highest level of foreclosures in the country, there's still one ZIP on the list: Lake Tahoe's 89451, which takes the No. 389 spot.

Our index points to a slowing slide in the high-end market, but if a wave of foreclosures hits homes at the luxury level, as some experts predict it will, that slide could accelerate.

"We have yet to see mortgage defaults climb aggressively into higher-priced homes, but there are some signs that those could hit in next twelve months," says Simonsen. "If those mortgage resets drive inventory at the higher end, that would cause major problems."

America’s Top 10 Most Expensive ZIP Codes

No. 1: 91008
Duarte/Bradbury, Calif.
Median Home Price: $4,276,462
This newly-built nine-bedroom, nine-bathroom, 10,486-square-foot mansion with two swimming pools, a spa, gym, screening room, library and wine cellar, is on the market for $4,680,000. It’s just across the city limits from Duarte, but still in the 91008 ZIP. Sheng Development has the listing.

No. 2: 94027
Atherton, Calif.
Median Home Price: $4,010,200
This remodeled mid-century four-bedroom, four-bathroom, 4,010-square-foot ranch with a cathedral ceiling, fireplace, media room, 2-car garage and gardens sells for $4,488,000. It is listedwith Alain Pinel.

Rolling Hills, Calif.
Rolling Hills, Calif. (90274)

No. 3: 90274
Rolling Hills, Calif.
Median Home Price: $3,892,456
This sprawling five-bedroom, four-bathroom, 4,320-square-foot compound atop a hill with two fireplaces and a panoramic view of the Pacific Ocean is selling for $3,999,000. Shorewood Realtors has the listing.

No. 4: 07620
Alpine, N.J.
Median Home Price: $3,814,885
This seven-bedroom, five-bathroom colonial-style home with a double-height foyer, expansive lawn and three-car garage is on the market for $3,950,000. It is listed with Plawker Real Estate.

No. 5: 10014
New York, N.Y.
Median Home Price: $3,785,445
This one-bedroom, two-bathroom, 1,500-square-foot loft in a full-service building with views of the city is on the market in Manhattan’s West Village for $2,049,000. Clickit Realty has the listing.

New York, New York
New York, New York (10065)

No. 6: 90210
Beverly Hills, Calif.
Median Home Price: $3,684,150
This five-bedroom, four-bathroom 4,700-square-foot Mediterranean-style home features a pool, large deck and views of the surrounding mountains costs $3,695,000. It is listed with Coldwell Banker Residential Brokerage Beverly Hills.

No. 7: 10065
New York, N.Y.
Median HomePrice: $3,626,001
This two-bedroom, two-bathroom condominium on Manhattan’s Upper East Side, occupying a full floor and featuring access to a private garden, gym and garage is selling for $975,000. Fenwick Keats Goodstein has the listing.

Belvedere, Calif.
Tiburon, Calif. (94920)

No. 8: 94920
Belvedere/Tiburon, Calif.
Median Home Price: $3,283,269
This three-bedroom, 4-bathroom 4347-square-foot Spanish-style stucco home in the section of 94920 that’s in neighboring Tiburon offers views and a fireplace and sells for $3,195,000. William J. Smith has the listing.

No. 9: 10012
New York, N.Y.
Median Home Price: $3,221,371
This downtown three-bedroom, two-bathroom with two terraces and a washer/dryer goes for $1,500,000. It is listed with Eychner Associates.

No. 10: 93108
Santa Barbara/Montecito, Calif.
Median Home Price: $3,151,220
This four-bedroom, four-bathroom stucco home in Montecito with cathedral ceilings, two fireplaces and a pool is on sale at $3,250,000. It is listed with Prudential California Realty.

Click here to see the full list of America’s Most Expensive ZIP Codes

By Francesca Levy Sep 27, 2010

America's Most Expensive ZIP Codes 2010 - Yahoo! Real Estate

Monday, September 27, 2010

Market Recap - Week Ending September 24, 2010

The chance for additional Treasury purchases by the Fed helped mortgage rates improve early this week. Stronger than expected economic growth data trimmed the gains later in the week. The net result was that mortgage rates ended the week a little lower.

As expected, the Fed made no change in the fed funds rate at Tuesday's meeting. Its statement was very similar to the last one, but investors focused on one important difference. Fed officials stated that they are "prepared to provide additional accommodation if needed to support the economic recovery." Investors interpreted this to mean that additional bond purchases by the Fed could take place in coming months. While the Fed is expected to purchase Treasury securities rather than mortgage-backed securities (MBS), increased demand for Treasuries would be favorable mortgage rates. As usual, investors immediately priced in this information, and mortgage rates improved. Of course, if this action by the Fed never becomes necessary, then mortgage rates could give back this week's gains.

The housing data released during the week generally matched expectations. While there are differences in regional performance, overall the housing market is holding steady above the lows reached during the recent financial crisis or improving modestly. August Existing Home Sales rose 8% from July. Inventories of unsold existing homes declined 1% to an 11.6-month supply. August New Home Sales were unchanged from July. August Housing Starts rose 11%, and Building Permits, a leading indicator, rose 2%. The September NAHB home builder confidence index was unchanged from August.

Next week, Consumer Confidence will be released on Tuesday. The final revision to second quarter GDP will come out on Thursday, along with the Chicago PMI national manufacturing index. GDP is the broadest measure of economic activity. Friday will be the big day with Personal Income, PCE inflation, Construction Spending, ISM manufacturing, and Consumer Sentiment. There will be Treasury auctions on Monday, Tuesday, and Wednesday.
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Saturday, September 25, 2010

Cave Creek council holds off development in key acreage

Cave Creek residents packed Town Hall on Monday night to fight an agenda item that could have allowed big-box retailers near the future Walmart site.

They left pleased as the Town Council sided with the residents in a 6-1 vote.

An amendment to the General Plan land-use map would have affected the area north of Carefree Highway and west of Cave Creek Road between 48th and 54th streets.

The amendment, recommended by the Planning Department, would have changed the land designation from desert rural to mixed use, allowing the properties to be considered for rezoning to any combination of commercial or multifamily or single-family residential designations.

Most of the opposition to the change of the 50-acre area came from residents of Estado de Cholla, a subdivision near 48th Street and Carefree Highway.

Residents of the development, which has about 60 homes, said a General Plan amendment from desert rural to mixed use would have brought in more traffic and light pollution, blocked views and decreased property values.

Estado de Cholla resident Paul Teixeira said it would have affected the character of the town. "We have to be sensitive to the surrounding areas and make sure the land use is appropriate to the town," he said.

The agenda item came a couple of months before the Walmart is scheduled to be built on the southeastern corner of Cave Creek Road and Carefree Highway. It is part of a number of town-generated initiatives to facilitate the development of land in the area of the superstore.

Planning director Ian Cordwell said when Walmart comes to town, development will come with it.

"Eventually there will be development in the area," he said. "We don't know when, but it's better to be prepared and be in a position to deal with it."

Councilman James Bruce voted against the amendment because the sense of urgency wasn't high and any number of types of properties could be built there with a mixed-use designation.

"With Walmart, we knew what was going to go there," Bruce said. "With this amendment, we don't know what will go there. Now is not the time for this."

Councilman Steven LaMar said the vote signified the council's and residents' desire to keep Cave Creek unique. The differences between the town and the sprawl of Phoenix must remain, he said.

"There is very little Sonoran Desert left in the area. We are more valuable if we protect it," he said. "The more unique we remain, the more attractive we are."

Next week, the town will begin meeting with neighbors to discuss the area's land use.

by Philip Haldiman The Arizona Republic Sept. 22, 2010 08:45 AM

Cave Creek council holds off development in key acreage

Scottsdale seeks development proposals for 80 acres near WestWorld

Scottsdale is looking for developers interested in an 80-acre site north of WestWorld that will cost the city $81 million in bond payments over the next 25 years.

The Scottsdale City Council on Tuesday, with little discussion, voted unanimously to issue a request for proposals for the former state trust land at 94th Street and Bell Road.

The city bought the site at auction five years ago.

"We want to determine the level of interest to develop this site," said Harold Stewart, economic development director. A background report from Scottsdale's Economic Vitality Office recognizes the challenge of unloading the property.

"The City Council may want to determine whether committing the land for development in the current marketplace would be the correct step to take because of financial or other reasons," the report said.

But council member Bob Littlefield, a longtime advocate for selling the site, expressed public optimism.

"I think we're going to get more than one proposal," Littlefield said.

Councilman Ron McCullagh convinced the council to extend the submission deadline from 60 to 90 days because of the size of the site.

The city is offering all or part of the 80 acres for sale or lease.

McCullagh said he did not want the city to be accused of having rigged a deal with a preselected developer by having a short response time.

Scottsdale bought the 80 acres in September 2005 for $47.2 million to protect its interests at WestWorld and make sure it would have adequate parking for WestWorld events and the Waste Management Phoenix Open nearby.

The land was appraised for $27.6 million, but state land auction bidding involving homebuilders pushed the price up by about $20 million more.

Scottsdale financed the land deal with municipal property corporation bonds that will nearly double the cost to $92 million.

Scottsdale already has paid $10.5 million on that debt, leaving a balance of about $81 million.

In December 2005, the city also bought another two parcels of state trust land totaling 69 acres for $31.4 million.

The larger of the two sites, nearly 52 acres, is immediately adjacent to WestWorld and is well suited for parking and expansion of the events center.

The bond financing for the 52-acre site will cost Scottsdale $46.7 million.

That purchase made the 80-acre site expendable in a vibrant commercial real estate market.

But city leaders chose to hold onto the land, which is split by 94th Street north of Bell Road.

At the time, Littlefield argued that the city should sell the land because it got the other site closer to WestWorld.

"Now we're stuck," he said last week. "There may not be a buyer for it."

A hotel company talked to the city two years ago about the developing the site, Littlefield said.

"We'll run it up the flagpole and see what salutes," he said about seeking developer bids for the land.

There is no shortage of vacant land along Bell Road.

The developer of the Scottsdale Epicenter project on 125 acres northeast of Pima and Bell roads defaulted earlier this summer on its lease payments for the site.

Scottsdale Vistella LLC was the winning bidder three years ago to lease the land from the Arizona State Land Department for $68.5 million.

That site has gone back to the department.

In other matters, the City Council:

• Asked for more details on the potential cost savings of reducing or eliminating an after-school program serving about 1,100 children.

• Voted to discuss at a future meeting a citizen petition challenging the Scottsdale Cultural Council to disclose its financial-performance information as required in its city contract.

by Peter Corbett The Arizona Republic Sept. 23, 2010 11:23 AM

Scottsdale seeks development proposals for 80 acres near WestWorld

Unusual worry for economy: Is inflation in U.S. too low?

WASHINGTON - It might seem like prices are rising wherever you look, from medical care to college tuition. Yet to the Federal Reserve, they might not be going up fast enough.

The Fed says a little more inflation might be just the thing to start a chain reaction that would ultimately create jobs - and avoid a spiral of falling prices that could damage the economy.

In a statement Tuesday, the Fed avoided directly mentioning the dreaded word "deflation." But it signaled its concern that today's very low inflation might lead to actual price drops.

The Fed, meeting for the last time before the midterm elections, said its measures show inflation is "somewhat below" desirable levels for the economy. That may sound strange, because inflation is often made out to be an economic evil.

And it can be, when it gets out of control. But its opposite can be even worse.

Once deflation takes hold, it can wreck an economy. Workers suffer pay cuts. Corporate profits shrivel. Stock values fall. People, businesses and the government find it costlier to pare debt. Foreclosures and bankruptcies rise.

And people spend less, convinced that prices will fall even further if they just wait. That trend has already emerged in the housing market. Many would-be buyers are standing on the sidelines, waiting for home prices to fall further.

Spending by shoppers accounts for about 70 percent of economic activity in the United States. A further drop in their spending could potentially throw the economy back into recession.

It's true that the costs of items like health care, education and transportation have surged. But the Fed studies a wide range of prices across the economy. Overall consumer prices - excluding food and energy prices, which are volatile - inched up just 0.9 percent for the 12 months that ended in August. That matched a 44-year low, according to the government.

And it's well below the Fed's comfort zone for inflation, which ranges between 1.5 percent and 2 percent over a year. The Fed would like to see inflation at least that high because it would show the economy is making a solid recovery. It would mean shoppers are confident enough to spend and businesses confident enough in customer demand to raise prices. Confident employers are more likely to create jobs.

Right now, prices are relatively low because the economy is still so weak. Companies can't raise prices because high unemployment and scant pay gains are making shoppers cautious. Companies have to resort to discounts and promotions to entice them.

The Fed's statement Tuesday made clear that it's prepared to intervene to prevent deflation. One way would be to make big purchases of government bonds to drive down long-term interest rates. That could help stimulate borrowing and spending.

"The average person may be bewildered by the Fed's concern about deflation," said Allen Sinai, chief economist at Decision Economics. "But part of its job is to be educational. The Fed wants people to know it is not going to let this rare disease happen."

And spreading more confidence among consumers and businesses would reduce the likelihood of a deflationary spiral, Sinai said.

by Jeannine Aversa Associated Press Sept. 23, 2010 12:00 AM

Unusual worry for economy: Is inflation in U.S. too low?

Geithner: U.S. banks are well-positioned

WASHINGTON - Treasury Secretary Timothy Geithner said Wednesday that U.S. banks are in a good position to meet new global capital standards because of the stress tests conducted in the United States last year.

In testimony to the House Financial Services Committee, Geithner praised the new global rules on capital adopted at a meeting earlier this month in Basel, Switzerland.

He said that stress tests conducted in spring 2009 in the U.S. forced banks to raise needed capital, the cushion that banks have to hold against losses.

Because of those tests, Geithner said U.S. banks are in a strong position internationally and will be able to meet the new requirements.

Geithner said that most banks will be able to increase their capital cushions through their projected future earnings.

That means that they will not have to cut back on their lending as they build up their capital reserves.

The new capital standards, Geithner said, "will significantly lower the probability and severity of future financial crises and it will help protect taxpayers by limited excessive risk-taking by financial institutions."

The so-called Basel III rules will gradually require banks to keep more capital on hand to absorb potential losses.

Some critics have voiced concerns that the standards may be raised so high that they will limit the amount of money banks will have available to make loans.

The rules were adopted earlier this month by banking regulators, including Federal Reserve Chairman Ben Bernanke, from major countries.

Geithner said they will be reviewed by leaders of the Group of 20 major countries at their November summit in South Korea.

Geithner told the panel the administration will be pushing to get the G-20 leaders to endorse the measures so that implementation can begin. The United States has the authority to impose the tougher capital standards through provisions in the sweeping financial regulatory law that was approved this summer.

Another key part of that legislation was creation of a new Consumer Financial Protection Bureau.

Last week, Obama selected Harvard law professor Elizabeth Warren to serve as a special adviser to help set up the new agency.

In that job, she will not require Senate confirmation, bypassing a potentially confirmation fight.

by Martin Crutsinger Associated Press Sept. 23, 2010 12:00 AM

Geithner: U.S. banks are well-positioned

Fed concerned with weak recovery

WASHINGTON - The Federal Reserve signaled Tuesday that it's worried about the weakness of the recovery and is ready to take further steps to boost the economy if needed.

Fed officials said they also are concerned that sluggish economic growth could prevent prices from rising at a healthy rate.

But at the end of its meeting, the Fed announced no new steps to rejuvenate the economy and drive down unemployment. Instead, it hinted that it's prepared to see if the economy can heal on its own.

The meeting is the last for the Fed's chief policymaking group before the Nov. 2 midterm elections. It comes as voters are focused on the economy and the jobs crisis. Polls show they are likely to punish Democrats in Washington for the sluggish economy.

In its statement, the Fed used the same language it did in August to sketch a downbeat view of the economy. It concluded that economic activity has slowed in recent months. And it warned that the pace of growth is likely to be "modest in the near term" - almost identical to the assessment it made a month ago.

But the Fed delivered a stronger signal that it would take new steps to lift the economy. The Fed said it is "prepared to provide additional accommodation." In its previous policy statements, the Fed didn't go that far. Instead, it had said it would "employ its policy tools as necessary."

The Fed made clear that given the economy's weakness, it's more concerned about prices falling than rising. It didn't use the word deflation. But some economists have raised fears about the country sliding into a deflationary spiral. That's a widespread drop in wages, prices of goods and services and the value of stocks and homes.

"They are more worried about the economy and deflation than I thought they would be," said Sung Won Sohn, an economist at the Martin Smith School of Business at California State University.

For the sixth consecutive meeting, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, was the sole dissenter.

At Tuesday's meeting, the Fed once again left a key short-term rate near zero, where it has been since December 2008. It also repeated a pledge to hold rates at those ultralow levels for an "extended period."

If the economy keeps losing momentum, the Fed will be likelier to provide relief at its meeting on Nov. 2-3 or at its last scheduled session of the year on Dec. 14.

Chairman Ben Bernanke last month indicated a preference to launch a new program to buy large amounts of government debt. Such a move would be intended to lower already low rates on mortgages, corporate loans and other debt. The goal is to entice people and businesses to spend more, and thereby strengthen the economy and lower unemployment.

In economic circles, it's known as "quantitative easing." That's when the Fed takes unconventional steps, as it did during the financial crisis, to inject money into the economy.

by Jeannine Aversa Associated Press Sept. 22, 2010 12:00 AM

Fed concerned with weak recovery

Phoenix-area home-price forecast mixed

Home prices in the Phoenix area could hold steady and even tick up slightly during September, according to the latest research from the Arizona Regional Multiple Listing Service.

The group's pending-price index shows the region's median home-sale price this month will be $120,000, compared with $119,000 in August. Then, prices could tick up to $126,000 in October, only to fall back to $120,000 in November and drop to $110,000 in December.

But ARMLS pending-sales price predictions for November and December are the most likely to change because of new sales expected to close during those months that haven't been negotiated yet.

The group's home-sales database, set up for the state's real-estate industry, began tracking home prices in pending-sales agreements earlier this year. If metropolitan Phoenix home prices fall below $119,000, it will be a new post-boom low for the housing market.

Metro Phoenix home sales climbed 3.6 percent, to 7,358, in August and pending sales for September show another slight increase.

Home permits flat

New-home construction across metro Phoenix also was flat in August, according to the "Phoenix Housing Market Letter." There were 504 single-family permits issued, compared with 548 in July. The August figure doesn't include Buckeye's permits because those data weren't available yet.

Valley home construction for the year peaked in March, when 908 permits were issued as homebuilders rushed to complete houses for buyers trying to tap the federal homebuyer tax credit before it expired June 30.

"Phoenix Housing Market" publishers RL Brown and Greg Burger don't expect a significant increase in homebuilding for at least the next year.

Mortgage-fraud funds

Arizona is receiving $1.7 million to help prosecutors fight mortgage fraud. The money will go to creating a six-person division in the Arizona Attorney General's Office that will exclusively investigate mortgage-related crimes. The U.S. Office of Justice Programs awarded the funds.

Arizona Attorney General Terry Goddard said the new unit will go after more mortgage "rescue" firms that take advantage of people struggling to keep their homes. The new division should be operational in three months.

by Catherine Reagor The Arizona Republic September 22, 2010

Phoenix-area home-price forecast mixed

Foreclosures still driving region's home prices down

The median sale price of existing Phoenix-area homes declined in August for the third consecutive month, according to an Arizona State University report.

Reasons for the downward trend include a combination of the expected and the unexpected, according to the report's author, Jay Butler, an associate professor of real estate at ASU's W.P. Carey School of Business.

Butler said it's typical for median home prices to decline in the latter months of the year, as homebuying activity takes a backseat to preparations for school and holidays.

Still, he detects an unusual lack of motivation on the part of potential homebuyers, which he said is likely the result of pessimism about future economic stability and employment opportunities.

The median home-resale price in August for Maricopa County was $135,000, down from $137,500 in July and $138,000 in August 2009, according to the report, which was released Monday.

About two-thirds of all home-resale activity continued to be driven by home foreclosures, the report said.

There were 3,990 single-family, detached-home foreclosures in August, up from 3,865 foreclosures in July and 3,085 foreclosures in August 2009.

There were 4,800 existing-home sales in August, Butler said, down slightly from 5,080 sales in July, and a 25 percent drop from the August 2009 total of 5,995 sales.

It is possible that the area's three-year-long home-price downturn is being prolonged by the desire of some financially distressed homeowners to stay put and ride out the recession, he said.

"I think there's a group of people who thought they were going to hang on," Butler said. "They may have maxed out their credit cards waiting for the job market to come back, and that hasn't happened."

by J. Craig Anderson The Arizona Republic Sept. 21, 2010 12:00 AM

Foreclosures still driving region's home prices down

Economists: Arizona recession is finally over

The longest recession since the Great Depression is officially over - across the United States and, by many economists' accounts, in Arizona.

With unemployment at a 27-year high and poverty on the rise in the state, an announcement from Cambridge, Mass., that the recession officially ended 15 months ago was greeted by many with eye-rolling skepticism.

But Arizona economists agree: Despite job shortages, declining home values and a distressingly high foreclosure rate, the recession is history.

The National Bureau of Economic Research's determination that the recession officially started in December 2007 and ended in June 2009 is mainly an academic one. The panel of seven experts from universities such as Harvard, Princeton and Stanford determined after looking at a variety of indicators, such as the Gross Domestic Product and Gross Domestic Income, that the recession ended and the economy began expanding last summer.

The panel, however, made it clear that it knows the economy has not been favorable and that it has not been operating normally since then.

It's common for recession starts and stops to be declared up to a year or more after the fact because it can take that long to get the most accurate data. The panel didn't declare that the latest recession began until December 2008, long after it was obvious to most Americans.

And the statistics are grim. Since the recession began in December 2007, 7.3 million jobs have disappeared, and nearly 2.5 million homes have been repossessed nationwide. Arizona has lost about one-tenth of its jobs since the recession began. More than 125,000 Maricopa County homes have been foreclosed on since January 2007.

Arizona lagging

Most Arizona-based economists believe the recession also has ended in the Grand Canyon State, but they disagree on the timing. Some say fall 2009, some say spring 2010, and some say even this month. They generally agree the downturn lasted longer in Arizona than nationally and that the recovery continues to be slow.

That's obvious to Amy McMullen, 51, of Gold Canyon, who was one of many who commented about the news on The Arizona Republic's azcen site on Facebook. McMullen said that, personally, she is doing OK because her husband is working. A resident since 2002, McMullen has seen firsthand the real-estate boom and bust that brought the economy down. She had been buying homes and fixing them up to rent or sell, but the economy wiped out that market.

"I am frightened by the number of empty storefronts I see when I go into town," she said. "And it's a little scary to see how quiet things are getting, even more so than normal for this time of year, I think.

"So, yeah, parts of the Phoenix area are starting to look like ghost towns for me. And I think that is a result of our economy."

It is typical for unemployment to rise after a recession ends as discouraged job seekers try to re-enter the workforce. And after the past few recessions, it has taken even longer for unemployment to peak. After the end of the 2001 recession, it took 19 months.

Scott Ruecker, 39, of Phoenix, who has been trying to find steady work all year, said, "Anyone who thinks the recession is over lives in a different reality.

"It's been impossible to find a job that pays me more than I get in unemployment. A lot of sales jobs want you to work for free for three months. Anyone who wants a job like that doesn't need one."

He is seeking a job in tech support, but it seems to him that everyone who has those jobs is keeping them.

Job outlook better

Arizona doesn't have an organization like the economic research bureau to establish when the economy expands or contracts, and regional economists vary in the measures they use. The one indicator they seem to favor at the state level is employment. The data are reported monthly and considered reliable.

Job losses show how deeply the recession has hurt Arizona. The state has shed about 271,400 jobs since the recession began through July, according to the U.S. Department of Labor's seasonally adjusted numbers.

Even though the Arizona Department of Commerce last week said the August unemployment rate rose to 9.7 percent, its highest in 27 years, economists say that the job market actually reached a bottom last year and that job losses have been slowing.

The number of jobs in metro Phoenix in August already is greater than the number of jobs in the metro area in August 2009, according to the state Commerce Department. When statewide job data for September is reported next month, Arizona may finally begin to see jobs grow compared with the number of jobs a year earlier. If that occurs, it will be the first year-over-year job increase after 31 months of declines.

Arizona State University economist Lee McPheters said the contraction in employment and the recession in Arizona ended a year ago, in fall 2009. "But, in my opinion, we are still bumping along the bottom. This is a long, drawn-out trough for Arizona," he said.

Marshall Vest, a University of Arizona economist, said that in April he determined the national recession ended in June 2009. He contends that the recession in Arizona ended around the end of 2009 or the beginning of 2010 but that it will take several months for the recovery to become evident.

Economist Nathan Topper, who follows Arizona for Moody's Economy .com, believes Arizona came out of its recession in the first quarter of 2010 and was one of the last states to do so.

"Slow population growth and the weak housing market are the primary reasons Arizona has lagged the nation during the recovery," he said. "The oversupply of homes, including the shadow inventory of homes on the verge of foreclosure, presents the greatest risk to what has proven to be a weak recovery thus far. Home prices are expected to decline later this year, which will dampen consumer confidence."

Jim Rounds, a Scottsdale economist, was even more conservative. He said the recession is probably just ending now because the state is on the verge of adding jobs.

Housing woes

The recession has been especially deep in Arizona because of its real-estate crisis, which, despite occasional signs of improvement, is still growing.

In its monthly housing report, ASU's W.P. Carey School of Business reported Monday that August marked the third straight month that the median existing-home price dropped in the Phoenix area and that foreclosures made up the highest percentage of the month's home sales since January.

Tom Rex, another ASU economist, said the latest recessions, going back to the early 1990s, have been unusually long because the imbalances that caused them were not corrected. "Certainly in the current cycle, the real estate and financial markets were a significant cause of the recent recession and remain a real problem to the economy," he said.

by Betty Beard The Arizona Republic Sept. 21, 2010 12:00 AM

Economists: Arizona recession is finally over

New Basel rules may drive mergers and acquisitions in U.S. banking. -

Basel III, the latest update to the international banking accord, will make it clearer which banks have sufficient capital and liquidity. That, in turn, could drive renewed mergers and acquisitions in the U.S. banking industry.

THE CHAOS IN THE BANKING industry in the past two years brought mergers and acquisitions to a near-standstill. But new regulations that will bring greater clarity to banks' balance sheets, combined with a tough environment for earnings growth, suggest deal activity is likely to increase sharply in coming months.

With the recent announcement of Basel III rules on capital requirements and liquidity, which are intended to shore up the international banking system against further shocks, banks now will know how much capital, and of what sort, they need to retain in the future. Institutions with excess capital will know how much they have available to spend on buying other banks, while banks with insufficient capital might find it prudent, in many cases, to sell themselves to healthier competitors.

"The Basel III rules are game changers in the bank-industry model," says Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a financial-industry consultant primarily to large institutions. "The capital rules will increase [banks'] cost of capital and decrease returns on equity, and that will drive M&A.…They'll all re-evaluate their positions and decide if they want to buy or sell."

Christoph Hitz for Barron's

Mergers also could help the banking industry offset declining earnings or substandard profit growth. The increase in capital requirements is expected to restrain earnings gains, as compliant banks won't be able to employ as much leverage now as they did in the past.

Large banks that historically earned a 25% return on tangible common equity now can expect a 15% return, Christopher McGratty, a regional bank analyst at Keefe, Bruyette & Woods, says. The news is even worse for smaller banks, which could see returns shrink to 13% from a historic 19%.

Tepid loan growth and low interest rates won't help earnings either, and the Dodd-Frank financial-reform bill recently signed by Congress only adds to the banking industry's pain. Among other things, it limits their exposure to the private-equity business and reduces revenue from credit cards while increasing compliance costs. Bank mergers, on the other hand, afford an opportunity for the combined institution to boost earnings by cutting costs, at least for a year or two.

Bank-industry analysts expect well-capitalized, mid-tier banks such as U.S. Bancorp(ticker: USB), PNC Financial Services (PNC) and BB&T (BBT) to become buyers in the post-Basel III market. Large Canadian banks such as TD Bank Financial Group(TD), which weathered the financial crisis better than their U.S. counterparts, also could start shopping, as could Morgan Stanley (MS). Among smaller institutions,Huntington Bancshares (HBAN) and Iberiabank (IBKC) are thought to be on the prowl.

Sellers, on the other hand, could include banks such as SunTrust (STI), Fifth Third Bancorp (FITB) and KeyCorp (KEY), which still haven't repaid all the TARP (Troubled Asset Relief Program) funds they received from the federal government amid the crisis.Boston Private Financial Holdings (BPFH), Synovus Financial (SNV) andSterling Bancshares (SBIB) are even smaller players that analysts speculate could become targets. Ironically, banks that can raise capital quickly could evolve just as quickly into buyers, not sellers.

THE U.S. BANKING INDUSTRY already has shrunk through consolidation to about 8,000 banks from roughly 14,000 in 1980, and that trend will continue, says Toos Daruvala, head of the Americas Banking and Securities practice at McKinsey. Of the fifth- to 20th-largest banks by asset size today, only 10 or 12 will be independent in three years, he predicts.

So far this year there have been 119 bank and thrift deals announced, with a total value of $2.8 billion, according to Capital IQ. The year-end tally is likely to hit a four-year high in volume, if not in dollars, although it won't come close to the 232 mergers announced in 2000, or the $132 billion in dollar volume announced in 2004.

Recent deals have been much smaller, and most have occurred within the context of the cleanup from the Great Recession. Some resulted from the FDIC selling small banks that were deemed insolvent, while others involved banks selling non-core assets, such asCitigroup's (C) recent move to sell its 80% stake in Student Loan Corp. (STU).

One of the first opportunistic mergers of the year was announced in August when First Niagara Financial (FNFG) agreed to acquire NewAlliance Bancshares (NAL) for $1.5 billion. This is the biggest industry takeover since late 2008, although it pales when set alongside the largest deal done in the past decade: JPMorgan Chase's (JPM) buyout of Banc One in 2004, for $57.5 billion.

A Decade and More of Deals

The volume of bank acquisitions peaked in 2000, while their dollar value hit a high in 2004. So far this year, both the number of transactions and their value surpassed last year's totals.


EARLIER THIS MONTH the Basel Committee on Banking Supervision, a group of regulators and central bankers from around the world, determined banks should hold Tier 1 common equity equal to 7% of their total risk-weighted assets. The banks have until 2019 to reach that target. The Basel committee still must decide how the industry should value, or risk-weigh, those assets.

In the U.S., regulators need to designate which banks must follow the Basel standard. It is expected to apply to banks with assets of more than $50 billion, which would encompass the nation's 20 largest banks. In addition, the government must decide how much capital the banks need to hold as part of the counter-cyclical buffer the Basel committee mandated that the banks have in good times. Regulators are expected to require an additional 1% or 2% of assets, which they most likely will announce between year end and mid-2011, says Kevin St. Pierre, an analyst at Sanford C. Bernstein.

In the first round of bank acquisitions, targets are expected to fetch modest premiums. "There are far more sellers today than there are willing and able buyers," says KBW's McGratty. "The economics will favor the buyers early on."

In the prior merger boom, from 2000 to 2007, the median buyout occurred at 24 times trailing earnings. McGratty expects multiples this time around to more closely resemble the 15.4 times earnings that prevailed in the early 1990s. Similarly, he expects buyers to pay about 1.5 times tangible book, as they did in the early 1990s, and not 2.2 times, as they did just before the financial crisis.

The biggest U.S. banks can't participate in the coming round of bank mergers because they are approaching or exceed regulators' 10% limit on the share of deposits a bank can hold nationwide when making an acquisition. Bank of America (BAC) controls 13% of deposits; Wells Fargo (WFC), 11%; and JPMorgan Chase, 9%. Mid-tier banks such as U.S. Bancorp, PNC and BB&T aren't close to that limit, however.

If markets remain fairly calm, Bernstein analyst Brad Hintz thinks Morgan Stanley also might try to acquire a bank. New regulations put limitations on proprietary trading and derivatives. They also curb private-equity investments. Thus, capital that would have been allocated to trading activities at the company instead could be used for lending.

Companies such as Morgan Stanley "have to be looking pretty aggressively at what they are going to do," says Hintz. While Morgan Stanley could buy a large bank, it is more likely to test the waters by buying a smaller, regional institution first.

AMONG POTENTIAL SELLERS, many banks still need to raise equity to repay TARP funds. SunTrust, for instance, owes the feds $4.85 billion. Fifth Third and KeyCorp have smaller bills, and all trade at discounts to book value. Potential acquirers like targets that trade at discounts to book because a buyer immediately can accrete the negative goodwill resulting from the deal, which causes a pop in earnings, says Dick Bove, an analyst with Rochdale Securities. Bove likes Zions Bancorp (ZION) and Regions Financial (RF), among others, in part because of their takeover potential.

The list of sale candidates is fluid, as sellers could become buyers if they raise enough equity or earn enough money to pay down TARP debt. But that probably won't happen until 2012. Until then, Wall Street can expect a major round of mergers.

Time to Start Shopping

Acquirers favor banks that trade at discounts to book value, because they can recognize negative goodwill when a deal closes, producing an instant increase in earnings. Stronger banks have money to spend.

Recent 12-Mo.Mkt AssetsTier 1Price/EPS
Company/TickerPriceChgVal (bil)(bil)Ratio* Book'10E'11E
Comerica/ CMA35.3119.96.2569.81130.852.14
CVB Financial/CVBF7.35-9.60.8713.31150.640.71
Huntington Bancshares/HBAN5.6328.84.0527.01130.150.44
Morgan Stanley/MS24.74-22.835.08099.4842.923.29
PNC Finl Services Group/PNC51.4311.927.02628.31035.135.87
TD Bank Financial Group/TD**71.3511.662.0604N/A1705.696.43
U.S. Bancorp/USB21.82-1.142.02837.41661.642.18
Boston Private Finl Holdings/BPFH$6.18-7.6%$0.5$68.7%102%0.090.42
Fifth Third Bancorp/FITB11.7219.09.31127.2960.370.98
Marshall & Ilsley/MI6.78-20.93.6547.072-1.030.03
Regions Financial/RF6.762.98.51357.762-0.650.33
Sterling Bancshares/SBIB5.19-31.60.5512.284-0.070.14
SunTrust Banks/STI24.866.112.01717.972-0.770.82
Synovus Financial/SNV2.44-36.81.9329.571-1.18-0.15
Zions Bancorp/ZION20.107.83.5527.978-2.170.46
*Tier 1 common equity divided by risk-weighted assets. **October fiscal year. E=Estimate. N/A=Not available.
Sources: SNL Financial; Thomson Reuters

by Jacqueline Doherty Barron's September 25, 2010

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