Sunday, April 3, 2011

Empty houses taking toll on Valley

On a typical block in metro Phoenix, there's at least one empty home, often several.

Overbuilding during the housing boom, record foreclosures during the subsequent crash and a significant drop in population growth have led to more than 100,000 vacant homes across the region, five times what was once considered normal.

With an average of three people per residence, the swath of vacant homes is equivalent to a city bigger than Chandler sitting empty.

An empty house - or a row of them - changes the character of a neighborhood and the way residents feel about where they live.

Vacancy even has a direct effect on the house itself. Without someone living in a home, weeds grow, dust collects, pipes freeze in winter, wood dries and splits in summer. Houses left vacant are easy targets for vandals, thieves and squatters. Many are eyesores with broken windows, swamplike pools and driveways littered with fliers.

On a larger scale, vacant homes can drive the entire housing market and the Arizona economy. With more houses than there are families to fill them, prices stay low. For the market to change, something has to change about the vacant homes. Until they are sold to new buyers, fixed up for new renters or even torn down, home prices won't rebound.

Census data released in early March show Arizona's housing vacancy rate is more than 15 percent. Many cities in metro Phoenix have much higher vacancy rates, particularly newer suburbs on the fringe where homebuilders flocked to construct the least-expensive new houses. Buckeye has a housing vacancy rate of almost 21 percent, according to the Census Bureau. A study last year by a realty-studies group at Arizona State University showed similar housing vacancy rates for metro Phoenix and found nearly 140,000 total vacant houses and condominiums.

"We can't overestimate the impact of vacant homes on everyone who is part of the Valley's housing equation," said Jay Butler, the group's director. "Buyers aren't drawn to the blocks with too many run-down, empty homes. Homeowners surrounded by empty homes often feel trapped and even depressed about their situation."

There are a few bright sides. Vacant homes, when they are listed for sale, often sell fast to investors for bargain prices. And in some neighborhoods, homeowners near empty houses are uniting to take care of the properties. Still, Butler said, many people in the Valley love their homes, but they don't love the empty houses they have to drive by now to get to them.

The neighborhoods

In a central Phoenix historic neighborhood, a house on a cul-de-sac has been vacant for nearly a year.

The home, which sold for $500,000 in 2005, was designed by renowned Valley architect Ralph Haver. It has a 1,000-square-foot living room, slate floors and a guesthouse. It had a kitchen with stainless-steel cabinets and a towering limestone backsplash. The home's last owners gave it back to the lender in July. Since then, many of its unique fixtures, including its kitchen cabinets, have been stolen.

Neighbors used to smile at the distinction of the noted architecture on their block. After the house went vacant, they watched it warily. Some mowed its yard, pulled weeds, cleaned up after stray dogs. They watched for break-ins and anxiously waited for a new owner.

"That house was the pride of our neighborhood," said John Beshears, who lives on the same block. "We want to see it back to its former glory."

Vacant houses tend to lower home values in a neighborhood, even if they aren't foreclosures. Homebuyers shy away from areas with too many empty houses, particularly if many are on the market at the same time.

A foreclosure auction for the central Phoenix historic house was pushed back several times. Some neighbors considered bidding.

"There are too many examples of vacant homes in Phoenix neighborhoods not being maintained. Neighbors are stuck next to these houses and can't do anything about it," said Phoenix City Councilman Tom Simplot, who owned the house in the late 1990s. He is also president of the Arizona Multi-Family Association, an industry group for rental properties. "Unfortunately, one of my former homes is now a prime example of a neglected vacant house."

The home sold at a foreclosure auction last week for $215,000. The house's new owner plans to fix it up and move in.

The houses

In northwest Phoenix, a house on a quarter-acre lot is surrounded by huge shade trees. The large front porch would be ideal for a swing. A picture window looks out over the yard.

But the house sits empty. A look through the window reveals no furniture, only dust. The roof is missing shingles. The paint around the front window is chipping. And the view of the front yard now includes a broken, mildew-stained couch, abandoned there weeks ago.

Phoenix real-estate agent Brett Barry summed up the way vacancy eats away at a house. Where there's roof damage outside, there's water damage inside.

"The priciest fix for a home sitting empty is water damage," said Barry, who works with mortgage giants Fannie Mae and Freddie Mac on fixing up and selling foreclosure homes. "I have walked into homes and seen bathroom ceilings covered with black mold."

The prices on most foreclosure homes in metro Phoenix are discounted significantly because they are sold "as is."

About $340,000 was owed on the northwest Phoenix house when the lender foreclosed on it last July. The house didn't sell at a foreclosure auction and now is listed for $240,000.

The house is better off in one way because it doesn't have a swimming pool.

Barry said one of the first things he does when he gets a listing on a foreclosure home is drain the swimming pool. Fannie Mae, the government-owned mortgage agency that now holds more than 10,000 foreclosed homes in the Valley, will pay to have it refilled and maintained to try to sell it.

The physical effects on a vacant home with no utilities are the worst. There's no water for yards or pools. No air-conditioning when temperatures soar past 100 means floors and walls can crack. With no lights on, the homes are targets for vandals and thieves. Houses not closed up properly can quickly be taken over by insects and even small animals.

Still, even when it is maintained, one vacant home can be dragged down by others around it.

Recently, Barry was hired to manage a foreclosure home in Phoenix near Bell Road and Interstate 17. He drained the pool and hired a firm to take care of it.

"I started receiving calls from neighbors of the house complaining its pool was swarming with mosquitoes. They even called Fannie Mae to complain about me," he said. "It wasn't the pool at the house I was taking care of. There were several other foreclosure homes on the same block vacant with pools drawing mosquitoes."

Barry advises neighbors of vacant foreclosure homes unhappy about their upkeep to call the company servicing the foreclosure for the lender.

"It may be hard to find who is responsible for the home," Barry said. "But it's the servicer who can fix the problems."

Neighbors of neglected foreclosure homes can contact the real-estate agent maintaining the property or look up the house's owner on the Maricopa County assessor's website.

The market

Some metro Phoenix neighborhoods have more vacant homes than others.

In the San Tan Valley area, southeast of Phoenix across the Pinal County line, the housing vacancy rate is 16 percent, according to census data. Most of the area's houses were built from 2003 through 2007. Many homeowners unsuccessfully tried to sell them to avoid foreclosures.

One three-bedroom, two-story house in San Tan Valley's Johnson Ranch has been empty for a year. On the same block, there are at least five other homes that are empty or will be soon - the owners are in foreclosure.

A couple bought the three-bedroom beige stucco home from a builder in 2005 for $220,000 and lost it to foreclosure late last year. The home isn't currently listed for sale. But the house next to it is larger, a four-bedroom, and is listed for a $60,000 short sale.

Across the Valley in Tolleson, the housing scene is similar. A taupe stucco home has sat empty since last summer when the lender foreclosed. The house, bought from a builder in 2002 for $110,000, isn't listed for sale. A home two doors down from it is also vacant; its asking price is $65,000. At least eight other homes on the block have been foreclosed on during the past two years. A couple of them are rentals now. A few others are for sale. The scenario is the same for almost every block in the neighborhood.

Metro Phoenix's oversupply of homes for sale has been dragging down prices since 2008. Many more homes remain vacant and aren't on the market. Either lenders have yet to resell them, or owners are holding them without a tenant, waiting to rent or resell.

Tracking the number of empty homes in metro Phoenix has been a priority for local governments and the real-estate industry during the past few years. Population projections for the region were overblown during the boom, which led to overbuilding and botched budget planning for government and business. Now the census has provided more accurate population and housing vacancy counts for the area.

While vacancies undermine the market, some housing advocates are concerned about their effect on people.

"We don't take into account enough what empty homes do to a neighborhood. We talk about having too much inventory or homes for sale," said John Smith, president of the Mesa-based non-profit Housing Our Communities. "If 15 to 25 percent of a neighborhood is empty, there are social risks for the people who are living there."

by Catherine Reagor The Arizona Republic Apr. 3, 2011 12:00 AM

Empty houses taking toll on Valley

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