Monday, January 17, 2011

Arizona reels after '80s `binge

PHOENIX, Ariz. - Promoters of this desert city like to say it is located in the Valley of the Sun, but what is more apparent than the sunshine these days is the real estate and banking collapse of 1989 that has left its ugly mark all over town.
Once the embodiment of Sun Belt growth and prosperity, Phoenix, along with the entire state, has returned to a painful sobriety in recent months following an extended spree of development and speculation that extended all through the mid-1980s.
``Arizona has been on a binge,'' said Denver-based banking regulator Anthony Scalzi, ``a long one.' The binge has caused some nasty hangovers:
Property repossessions on defaulted loans are running into the billions of dollars and office buildings are begging for tenants. Real estate values have plunged on many properties, particularly on vacant land acquired for development.
Foreclosures have affected some of the state's best-known residents, including former Gov. Evan Mecham and former U.S. Senate candidate Keith DeGreen. Fallen business tycoon Gordon Hall just had his former mansion in suburban Phoenix, which has 53,000 square feet of room, sold at auction for less than $4 million, about 20 percent of its estimated replacement cost.
Middle-income homeowners have seen the value of single-family houses fall up to 10 percent in some Phoenix neighborhoods. Residential foreclosures in the Phoenix area have already surpassed 14,000 this year, up sharply over 1988.
Major lenders are flailing around in seas of red ink. Arizona financial institutions lost $741 million in value from July through September alone, according to state banking regulators.
``The fact is that bad decisions were made by everyone and all the lenders got into trouble,'' said James P. Simmons, chief executive of Valley National Bank, Arizona's largest independently owned financial institution.
Arizona represents a severe example of a real estate slowdown that is hopscotching around the country, touching down in places like New England, New Jersey and some coastal parts of California.

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