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Lillian Wong
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 Forecast still gloomy for Valley housing market By Catherine Reagor The Arizona Republic 11.07.09 

SAN FRANCISCO - The rapid rise and fall of Phoenix 's real-estate market has become a cautionary tale for national experts in growth and housing gathered here at the annual Urban Land Institute conference.

Many said they see tough times ahead, but also opportunities for the Valley where potential growth is still strong.

Among many speakers this week, Phoenix has been referred to as the "poster child" for the housing downturn and bad mortgages.

In the conference's influential "Emerging Trends" forecast presented Thursday, one passage read: "So much building and suddenly so little demand - Phoenix is the poster child for run-amok housing development hitting the wall when cheap mortgage financing evaporated."

The Emerging Trends report is a highlight of the conference, which draws thousands of the nation's top growth experts, analysts and developers. The report is compiled by PricewaterhouseCoopers and the Urban Land Institute from nearly 1,000 interviews with prominent real-estate executives and analysts and is considered one of the most accurate forecasts in the nation.

ULI is a non-profit research and education organization based in Washington , D.C. , focused on land use and real-estate development.

Forecasts from this conference influence how many municipalities, builders and investors plan for growth in 2010 and beyond.

Patrick Phillips, ULI chief executive officer, said Phoenix 's real-estate market will eventually come back. "In some aspects, Phoenix has become the poster child for what went wrong" with the past real-estate cycle, he said. "But, clearly Phoenix has a long-term future for growth, and there's great confidence that the area will come back.

"Unfortunately, it might be a bit rocky in Phoenix for a while."

The feeling among many experts is the immediate real-estate investment outlook for Phoenix isn't good, except possibly for buying foreclosure homes from lenders and land.

In a competitive forecast session, RREEF Chief Economist Asieh Mansour was asked for her worst pick for real-estate investment. "Anything in Phoenix ," she said. RREEF is an investment firm and one of the nation's biggest real-estate investors.

Gadi Kaufmann, chief executive of the national real-estate consulting firm Robert Charles Lesser & Co., has been following Arizona closely for the past few decades and is more optimistic.

" Arizona has solid fundamentals," he said. "The overhang of housing and other effects of downturn will wash away." Kaufmann moderated a session called "Is That a Light I See at the End of the Tunnel?"

Many experts say the real-estate outlook for Phoenix is better than it was six months ago when the Emerging Trends report was compiled, particularly for purchasing foreclosure homes from lenders and vacant land zoned for new homes. Valley home prices have been slowly climbing after bottoming in April.

Nationally, according to Stephen Blank, a senior fellow with ULI who researched the report, "Housing hit bottom in 2009. The commercial market will hit bottom in 2010. It will be a poor year."

Blank's statement didn't surprise many in the packed convention hall. Despite the downbeat forecast for next year, the Emerging Trends report did name 10 metro areas that will fare better than others: Washington, D.C.; San Francisco; Boston; New York; Houston; Seattle; Denver; Dallas; Los Angeles; and San Diego.

Overall, experts at the conference don't expect the nation's real-estate market to recover before 2012-13. Many say the government's economic stimulus and the homebuyer tax credit are giving the market a boost now, but there's likely more slowing after this "bounce" wears off.

"Recovery is going to be slow," said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California-Berkeley.

This year's ULI conference also focused on key issues among Western states, including transportation, revitalizing suburbs and downtowns, water, energy and overall sustainability.

Phoenix was mentioned as a key area for developing more sustainable communities because the area has so much available land and a growing population.

Analysts said metropolitan Phoenix will fare better if it can adapt its current housing projects and land-use planning quickly for the next wave of growth.

Some of the Valley's top developers and growth analysts also spoke at the conference and talked about the area's potential for a more sustainable real-estate future.

"I am not sure we have balanced development strategy," said Ioanna Morfessis, an economic-development consultant, founding chief executive of the Greater Phoenix Economic Council. She spoke as a panelist on the "Balanced Development in the West" session.

"Everyone is waiting with bated breath for population growth and the value chain of homebuilding, retail sales, etc., to recover and resume," she said. "This 'strategy' will confine us to a boom-and-bust economy. We need to diversify."

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