W. P. Carey expert: looser lending standards could benefit Phoenix-area housing market

October 23, 2014

Will banks start to drop their standards and let people with slightly lower credit scores and much lower down payments buy homes? That’s the big question, after the Federal Deposit Insurance Corporation (FDIC) and other agencies voted to approve new, looser lending rules this week. A well-known expert from the W. P. Carey School of Business at Arizona State University says if the change happens, and the adjustments are reasonable, then it could be good for the Phoenix-area housing market, stimulating growth.

Here are the highlights of the school’s monthly housing-market report on Maricopa and Pinal counties, as of August: Mike Orr Download Full Image

• The median single-family-home sales price went up 11 percent from last August, but that’s largely just due to having fewer sales clustered at the bottom end of the market.
• Both supply and demand in the market remain relatively low.
• Lenders have been reluctant to expand the number of people eligible for home loans, which is helping to stunt market growth.

After the housing crash, the Phoenix area had a fast boost in home prices from September 2011 to last summer. This year, prices leveled off and then rose somewhat. The median single-family-home price went up 11 percent – from $192,000 to $213,500 – from last August to this August. The average price per square foot jumped 7 percent. The median townhouse/condominium price went up 10 percent. However, the report’s author explains the median gains are not reflective of higher home values across the board.

“The median went up largely just because we saw a big drop in sales clustered at the low end of the market,” explains Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business. “The average price per square foot actually dropped last month. I expect prices to move sideways to slightly down over the next few months until supply and demand get back into balance."

Both supply and demand are relatively low in the Phoenix-area housing market right now. Single-family-home sales activity dropped 15 percent from last August to this August. Investor interest, in particular, has dramatically fallen over the last year. The percentage of homes bought by investors in August was 14.4 percent, way down from the peak of 39.7 percent in July 2012. There aren’t a lot of cheap “distressed” homes to buy, with completed Phoenix-area foreclosures down 43 percent from last August to this August.

“Better bargains for investors can be found in other parts of the country,” says Orr. “Over the last three months, the percentages of homes bought by investors have been lower than we have seen for many years, confirming investors are no longer driving the market the way they did between early 2009 and mid-2013.”

Rental homes remain popular for those who don’t want to buy a house or who can’t qualify for a home loan. Fast turnover and low vacancy rates have already pushed rents up 5.8 percent over the last year in the Phoenix area.

Meantime, we’re seeing a lot of speculation about whether banks will lower their standards and start letting people with good – but not great – credit scores qualify for home loans. Also, conventional loan down payments could be dropped from 10 percent to as little as 3 percent. The chairman of the Federal Housing Finance Agency spoke in Las Vegas this week and indicated that Fannie Mae and Freddie Mac would likely still purchase and retain those loans, if the banks make them.

“Right now, funds are flowing only to a small proportion of potential buyers, who have excellent credit, which is contributing to weaker-than-normal demand for homes to purchase,” explains Orr. “Lenders are reluctant to take any unusual risks in an environment when Fannie Mae and Freddie Mac might take negative, profit-damaging action against the banks on loans sold to them. It appears it will take a major move by Fannie and Freddie to limit those risks before mortgage availability can get back to a normal level and support the next stage in the housing recovery.”

Orr adds, “Banks have to walk the line on their lending standards. They went from the porridge being too hot (standards too lax) to the porridge being too cold (standards too tight). It’s still a while until we get to ‘just right,’ but striking the right balance could move the Phoenix-area housing market toward more sales and more demand.”

Those wanting more Phoenix-area housing data can subscribe to Orr’s monthly reports at www.wpcarey.asu.edu/realtyreports. The premium site includes statistics, charts, graphs and the ability to focus in on specific aspects of the market. More analysis is also available at the W. P. Carey School of Business “Research and Ideas” website, at http://research.wpcarey.asu.edu.

New model of support gives transfer students a leg up

October 23, 2014

ASU lauded for transfer pathways program

For an increasing number of students in the United States, the journey to a bachelor's degree often begins at a community college. But how successfully these students find their way to a four-year institution is highly dependent on a culture of support – one that is thriving at Arizona State University.   portrait of four women holding an award Download Full Image

Recognized as a leader in improving the success of transfer students, ASU has received the Inaugural Institutional Excellence for Students in Transition Award, given by the National Resource Center for the First Year Experience and Students in Transition.

“ASU is truly honored to be acknowledged for the work done on behalf of transfer students and our community college partners,” said Kelly Robles, senior director of Community College Relations. “To be the first recipient of such an award solidifies the fact that ASU is leading the way for transfer student success.”

To be presented annually to institutions that have designed and implemented outstanding collaborative initiatives that enhance significant transitions during the undergraduate experience, the award recognizes successful initiatives, such as ASU’s transfer pathways program, that support student learning and development at a variety of transition points beyond the first college year.  

Creating a 'culture of transfer'

Better connecting transfer students to a host of support services – and, ultimately, a four-year degree – ASU undertook a broad-reaching and comprehensive plan for reform and improvement, says Maria Hesse, vice provost for academic partnerships at ASU.

“The goal put forth by ASU’s President Michael Crow was straightforward, but not simple,” Hesse said. “To increase the numbers of students who are 1) transferring from Arizona community colleges to ASU, 2) preparing for success in their desired majors and 3) completing their associate’s and bachelor’s degrees, while reducing time and costs.”

Hesse started by visiting every community college president in the state and asking for their ideas about how to improve transfer student success. With the stated purpose to “create a culture of transfer,” ASU and the colleges began a partnership.

Transfer specialists were hired and deployed; transfer orientations and peer mentoring programs were created; and faculty conversations series, newsletters and publications were developed – all to create a transfer process that was clear and seamless.

The university employed the very successful ASU eAdvisor concepts as the basis for the transfer pathways program, with terms such as “major map” to describe the sequenced curricular pathway to degree completion. Playing off of that theme, Hesse says, ASU developed MAPP (Maricopa to ASU Pathways Program) with the Maricopa Community Colleges, in addition to the TAG (Transfer Admission Guarantee) program, which is offered at other community colleges throughout the state.

The Guided Pathways to Success (GPS) program, which includes MAPP and TAG, has benefits for all parties involved, Hesse says. It helps the community colleges with their degree completion initiatives because the pathways build in a completed associate’s degree. It helps the university because the program incents students to come academically prepared for success in their major and thus students are more likely to persist to bachelor’s degree completion.

Most of all, it helps students because the program is designed around student success data and provides incentives for completing major milestones along the route to success.

Pathways to success

All pathways are available on the ASU transfer student website – transfer.asu.edu.

Interested students sign up for a pathway with their community college adviser. The names and other information about those students who sign up are transmitted to ASU each week, and that starts a flow of communication from the university to the student.

To encourage student participation in the pathways, benefits for students are tied into the program, including guaranteed admission to a specific ASU degree program, reduced tuition for Arizona residents, and access to ASU transfer advising and other pre-enrollment services while students are at the community college.

ASU has also built a number of online, self-service tools to help students and community college advisers with the transfer process. The goal was to provide forward-facing, self-service tools to guide and personalize the transfer experience.

“There are no easy fixes to the challenges of supporting transfer students before, during and after their transition from the community college to the university,” Hesse says. “But I am proud to say that ASU, in collaboration with our community college partners, has made significant progress in Arizona’s ongoing reform and improvement initiative.”

Leona Morales
Office of Academic Partnerships