Catherine Reagor Burrough
The Arizona Republic
Mar. 28, 2005 12:00 AM

To outrace metropolitan Phoenix’s soaring home prices, home buyers are getting in their cars and driving farther and farther out.

Developers wait in the fringe areas, sitting on relatively cheap land and building less pricey homes.

The trends have led builders and buyers straight to Pinal County.

Pinal areas like Casa Grande, Maricopa and the stretch of Hunt Highway leading to Florence now offer the most affordable new houses in metro Phoenix. Considered too remote only a decade ago, the fast-growing Pinal suburbs are sprouting new homes that are selling for at least $50,000 less than similar houses in Gilbert, Peoria and Goodyear.

And now home builders are going deeper into Pinal to create the Valley’s next wave of affordable housing in Eloy and Coolidge.

“Home buyers will drive until they qualify,” said land broker Dave Lords of Scottsdale-based Arizona Land Advisors.

The demand has started to drive up the low land and home prices that made Pinal so attractive in the first place.

The price of a new home in Casa Grande, for example, climbed almost 16 percent last year to reach $144,000, according to The Arizona Republic’s annual Valley Home Values survey.

Five years ago new homes in the city, between Phoenix and Tucson, were selling for less than $75,000.

But the city remains affordable by Valley standards because the median price of a new home in the metro area hit $200,000 last year.

Nolita and Larry Squires recently paid $225,000 for a new 2,200-square-foot house in Maricopa, about 12 miles west of Interstate 10 and Queen Creek Road. The couple moved here from Ohio last year and were outbid on several homes closer in before finding a new KB Home. The original cost of their house was $169,000, but they added a swimming pool and several upgrades.

Home prices climbed 10 percent in Maricopa last year, and sales nearly doubled in the area.

“Our neighborhood is really starting to grow,” Nolita Squires said.

Pinal phenomenon

It’s a phenomenon being felt in most of Pinal County. The county has about 250,000 residents now and is expected to grow to 1 million people in less than 20 years.

The rapid growth in Maricopa County began spilling into Pinal in the late 1990s, and the tempo has quickened every year. As land prices rose in the southeast Valley, builders headed south on Interstate 10 to Casa Grande, where they could buy lots for less than half of what they were paying in Chandler.

The opening of the 2,000-acre Johnson Ranch along Hunt Highway quickly followed. Houses in the golf course community started selling for $90,000. It has been one of the country’s top-selling housing projects during the past few years. Rancho El Dorado launched Maricopa as a growing Valley suburb shortly after Johnson Ranch began selling homes.

Last year, almost 17 percent of the 60,872 new houses to go up in metro Phoenix were in Pinal County, according to R.L. Brown’s Phoenix Housing Market Letter. That compares with less than 10 percent in 2002.

Pinal’s share of metro Phoenix’s new-home market will continue to grow during the next decade if these new developments draw buyers:

• Pulte Homes’ Del Webb division recently paid $87 million for 3,200 acres along the Hunt Highway, where it’s planning an Anthem development that could sprout 9,000 homes.

• D.R. Horton is developing as many as 25,000 homes on 7,000 acres between the communities of Casa Grande and Maricopa in Pinal County.

• In Eloy, construction recently started on Esperanza, a 1,000-acre development that could sprout 4,000 homes.

• Coolidge began drawing its first major home builders late last year and several subdivisions are under way.

Most of Pinal’s newest residents work in Valley suburbs such as Mesa and Chandler and have traded long commutes for a bigger home.

Nolita Squire works for Bank of America in Chandler, and Larry Squires drives a FedEx truck out of a Tempe facility. The couple aren’t unhappy with their half-hour commutes each way to work, but it could get worse as Pinal attracts more residents.

A study developed in 2003 by the Maricopa Association of Governments, Central Arizona Association of Governments and Arizona Department of Transportation recommended developing our new transportation corridors in Pinal County to ease traffic congestion.

At the same time communities in the area are working to bring in more jobs and amenities like shopping centers so residents don’t have to drive as much.

In new areas such as these, the first jobs to sprout are usually low-paying service ones, as stores, supermarkets and restaurants chase home buyers.

For Casa Grande, a bright spot was when Wal-Mart Stores opened a large food-distribution center there in late 2003 that brought 500 jobs. Pinal is expected to attract more distribution centers because of the junction of Interstates 10 and 8 between Casa Grande and Eloy.

But warehouse jobs are not the ultimate goal.

New downtown

Maricopa, for example, is building a brand new downtown and has hired Ioanna Morfessis, former director of the Greater Phoenix Economic Council, to help it attract jobs.

“A lot of home buyers in Maricopa are young professionals working in the high-tech industry,” said Morfessis, who has a consulting firm. “We have the workforce to draw biotech and capital-intensive manufacturing operations.”

There is little high-end office space in Pinal County. But in the development cycle, offices are typically the last projects to go in a new fringe community. They often house the highest-paying jobs.

In retail itself, the aim is to move upstream into higher-end concepts. And that’s starting to happen: Valley developers recently announced plans for malls in both Casa Grande and Coolidge.

Pederson Group and WDP Partners are planning a $100 million outdoor shopping center in Casa Grande that would be the size of Biltmore Fashion Park in Phoenix. Westcor intends to build a regional mall in Coolidge next to where a new freeway is planned.

During the next two decades, Pinal’s growing communities could become one seamless flow of new homes and businesses between Maricopa and Pima counties.

Land broker Nate Nathan of Scottsdale-based Nathan & Associates negotiated many of the deals for housing developments in Pinal and is already working on the next wave of projects heading toward Tucson.

“It may not be too long before the Phoenix/Tucson corridor is one big metro area,” he said.

Meghan E. Moravcik
The Arizona Republic
Mar. 16, 2005 12:00 AM

The value of Victoria Stickney’s northeast Phoenix home has gone up substantially since she and her husband bought it 11 years ago. The sticker price is even larger now than it would have been eight months ago.

The couple are buying a slightly larger house in Seattle – for nearly twice the price.

This is indicative of a phenomenon often seen in Phoenix. Residents in cheaper homes are making money as values go up, but when they start looking to buy a more expensive place, they realize that those prices also have skyrocketed. This can wipe out their profit or end up costing them even more.

Stickney has encountered a lot of this while trying to sell her house, which is listed at $620,000.

“People will say, “I bought my house in May, and it’s already worth $50,000 more,’ ” Stickney said. “Sure. But you’re still going backwards” when trying to buy a bigger or better home.

One couple came to look at her house several times. Finally, the husband told her he never thought he’d consider spending that much on a home.

“Well, you’d better get used to it in Phoenix,” Stickney laughed.

Part of the problem might be that people want to move into more high-demand areas, like the Camelback Corridor, but are moving out of lower-demand areas, local real estate agent Tom Bryant said.

“If they’re selling in a high-demand area, yes, they’ll pull in a lot of cash,” said Bryant, who works for Realty Executives mainly in north central Phoenix. “But if they’re buying in a high-demand area, then they’re spending more.”

A report released Monday showed that the median price for a Valley home reached $200,000 for the first time, sparking more concern about the affordability of homes in the Valley.

The median price for homes in the Camelback Corridor went up more than 36 percent from 2003 to 2004. That means the median price jumped from about $278,000 to nearly $380,000.

Bryant said this could be attributed to the corridor’s location and what it has to offer residents.

The corridor “is close to two big business hubs – downtown and the Camelback Corridor,” he said. “It’s also close to the airport, but not too close. And it has great mountain views.”

Meanwhile, the cheaper homes in Phoenix, many of which are in west Phoenix and around the airport, have gone up less significantly in median price – about 4 to 12 percent.

“These are homes that were built a long time ago, in areas sometimes perceived as those that you don’t want to invest in,” said Jay Butler, director of the Arizona Real Estate Center at ASU East.

And west Phoenix is a very different market from homes in the corridor, he said.

“In the west side, you have the same style of houses that improve at a more uniform rate,” Butler said. “But in Camelback, those are going to significantly jump up in price because of their popularity.”

Butler thinks Valley housing prices will start to stabilize soon.

“We have an income issue, and that has to be taken into account,” he said.

Private plan eases rules of affordability

Jonathan J. Higuera
The Arizona Republic
Mar. 1, 2005 12:00 AM

It’s being billed as the largest affordable-housing lending program in the state’s history.

The $300 million program, unveiled at a news conference Monday, could help 20,000 Arizona families buy $150,000 homes, or 15,000 families buy $200,000 homes. And it could steer them away from predatory lenders, its creators say.

The program, called Arizona Homebuyer Solutions, targets low- and middle-income families who may qualify for other home loans yet are hard-pressed to come up with the down payment and closing costs. The program is the result of a partnership between Family Housing Resources, a non-profit agency with offices in Phoenix and Tucson, and CitiMortgage, one of the country’s largest mortgage lenders.

It’s intended to help attack the growing problem of housing affordability in the Phoenix area, where prices of used and new homes have soared by more than 20 percent over the past year. The increases have far outpaced wage gains among workers.

So far, about 30 lending institutions around the state have been working with the program, and more are expected to join. Because the program uses private funds and does not involve government entities, it steers clear of restrictions found in many affordable-housing programs. In this case, the program is open to prospective homeowners who earn up to 140 percent of the area’s median household income. In Maricopa County, that means qualifying participants could make as much as $82,000 a year.

Homebuyer Solutions addresses the down-payment problem by providing a second loan to cover those costs. The second loan is given at a fixed interest rate, currently at 7 percent.

“One of the biggest barriers to homeownership is coming up with the funds for a down payment and closing costs,” said Jim Feltham, president of Family Housing Resources. “This program provides that.”

Conceivably, a participant could move into a home with just $500 to cover the loan paperwork.

Homebuyer Solutions is patterned after a similar program in California that lent $4.5 billion in three years. Now, affordable-housing advocates are bringing the program to Arizona’s red-hot housing market.

At a news conference at the Pearl Harbor Memorial at the state Capitol, local housing, banking and lending officials joined U.S. Rep. Ed Pastor, an advocate of affordable housing, to unveil the program.

Supporters said it stands out from traditional mortgage loans in several ways.

For example, home buyers can participate even if they have lower credit scores than those normally accepted by mainline lenders. Often, consumers with low scores can secure only high-interest “subprime” loans. Borrowers with FICO credit scores as low as 600 are still eligible for favorable loan terms.

“Sometimes the only difference between someone with a 600 score and a 700 score is a late credit-card payment or an outstanding medical collection,” said Carlos Alcazar, director of housing at Family Housing Resources. “But they are still a good risk for a home loan.”

The program also combines private mortgage insurance with the loan to help lower the buyer’s overall monthly payment.

“When you have homeownership, you have more ownership in your neighborhood, your community, your state and your country,” Pastor said.

Alcazar added, “This is the future of these types of assistance programs: Getting rid of government restrictions.”

“This will really open it up to a broader universe of potential owners,” said C. Scott Riffle, senior vice president of George K. Baum & Co., a consultant banker that helped structure the program and was involved in the California program.

Dawn Saxman, an assistant vice president at BankUSA, one of the lenders in the program, said interest rates for the second loan should be especially attractive to prospective homeowners.

“Typically, the second loan is a variable rate,” she said. “With this fixed-rate second loan, they have the security and stability of knowing what the rate will be.”

The program already has opened doors for Bryce Button, a 23-year-old registered nurse at the Mayo Clinic. She was approved for a loan under the program and plans to buy a $95,000 condominium.

“It’s almost impossible to put 10 or 20 percent down when you have school debt or other debt,” she said.

Alcazar said another lender in the program made a $230,000 home loan to a client making $42,000 a year.

“The person had excellent credit and didn’t have any other debt,” he said.

The program will even be attractive for buyers who could get a conventional loan, he added.

“We encourage all borrowers,” Alcazar said. “We’re not excluding anybody. This would allow people to keep their down payment in their pocket and use it for their homes.”