Scottsdale Airport at Dawn - Courtesy Scottsdale Airport

One of the nation’s

busiest single runway airports, the Scottsdale Airport has long been a Northeast Valley landmark. Within minutes of some of metro Phoenix’s most prominent businesses, nearby resorts, restaurants and recreation amenities, there’s no reason that the next time you fly, it can’t be for
both business and pleasure.

Scottsdale Airport - Courtesy Scottsdale Historical Society

But it wasn’t always such an idyllic place. Rapidly constructed as an Army Air Corps training facility within months of the attack on Pearl Harbor, the school trained over 5,500 pilots before being shut down shortly before the Allied victory in Europe in 1945. By the time their graduates had finished winning the war, they had flown 26.5 million miles – more than 1,000 times around the Earth at the Equator. In today’s miles, that works out to 265 Chairman’s Club memberships with Phoenix-based U.S. Airways.

Planning a Flight - Courtesy the Scottsdale Historical Society

Since World War II, this dusty patch of undeveloped desert has transformed into one of the region’s vital economic rengines. Last year, the overwhelming majority of their approximately 130,000 “operations” (control tower-speak for takeoff or landing) were privately owned aircraft. Less than one percent were related to military operations. And while flight schools still operate with great appeal to enthusiasts and weekend warriors, dogfighting is unfortunately no longer a part of the curriculum.

If you’d rather leave your Piliot Wings at home, you can easily charter a private flight without the overhead of owning your own plane. While commercial airline travel is increasingly fraught with complications, fees, and security hassle, the sheer simplicity of flying private can be well worth the money spent. A weekend getaway to popular destinations like San Diego, Los Angeles or Las Vegas will start around $10,000 in a jet large enough for seven. Chicago and New York start closer to $40,000. Seasonal residents can enjoy a one way trip into town for considerably less. While flying first class on a big commercial airliner is certainly less costly, the overall experience is anything but first class when compared to flying privately. For the executive on a tight schedule, jets are available at your schedule and are able to land at thousands of smaller airports, potentially saving time by putting you closer to your final destination. No waiting at the airport to board or deplane, no intrusive security checks and no crying children (unless they’re yours!). Your comfort and safety are the primary goals of the flight crew. You are free to be as productive or as relaxed as you like, without all the distractions and inconveniences caused by government regulation and other passengers.

As expected, the economic downturn has clearly had an impact on Scottsdale’s private air traffic. Compared to a recent high of 212,474 in 2005, the number of operations have dropped nearly 40% according to the Federal Aviation Administration. However, that decline hasn’t stopped it from being a key revenue sector for Scottsdale, with estimates placing the economic boost of the airport and surrounding airpark at over $2.5 billion annually.

In 1936, with the country mired in the depths of the Great Depression, an ambitious young hotel manager persuaded a group of investors to fund construction of a resort in the Sonoran Desert.

Arizona had been a state for less than 30 years when hotel manager Jack Stewart proposed the idea of a resort destination in the desert.  His investor?  An Ohio businessman with a name familiar to modern Phoenicians, John C. Lincoln.

Stewart and Lincoln’s partnership created a legacy.  The Inn was originally constructed with 75 rooms and for a cost of about $1.2 million in today’s dollars.  Removed from the hustle of city life, the Camelback Inn’s namesake view and relaxing atmosphere quickly gained a following, particularly among wealthy vacationers from Eastern states.  It was hardly a weekend getaway, however.  Guests endured a lengthy journey by train to Phoenix, followed by a rough and dusty 12-mile trip through open desert to reach the resort.

After arrival, the rugged beauty, mild winters and wide open spaces were a kind reward for a travelers travails, much as they are today.  Guests, often city dwellers, could enjoy rustic activities like horseback riding, exploring the surrounding desert and special events put on by the hotel.  Stewart’s wife, Mabel Louise Shoemaker, was known for hosting elaborate costume parties and her ability to make guests feel at home – as if a part of one big Camelback Inn family.

Mabel also developed Hopalong College, one of the hospitality industry’s first programs for children.  Named for the legendary silver-screen cowboy Hopalong Cassidy, those who earned their diploma had “demonstrated those qualities of courage and resourcefulness which are a tradition of Western ranch life.”

In the years that followed, the Inn’s reputation grew along with its size.  Visiting celebrities like Clark Gable, Jimmy Stewart and Bette Davis added to its allure.  Then came the only guest who’s name is still on the welcome sign – hotelier J.W. Marriott.  His company made it their first of many resorts after purchasing the Inn in 1967.  Two years later, his investment lead to the Inn being awarded its first Five-Star rating from the respected Mobil Travel Guide.  Since then, countless awards and commendations have been granted including the coveted AAA Five Diamond Award.

Continuing his father’s development of the Inn has become the charge of J.W. Marriott, Jr.  In 1989, the resort unveiled The Spa at Camelback Inn and by 2000 it had been ranked as one of the finest spas in the world.  And guests today increasingly prefer their Sonoran adventures to beone of the two  18-hole golf courses instead of a horseback ride down a dusty arroyo.

(Though the concierge can arrange just about anything.  Hi ho Silver!)  Other recent additions include pool restructuring with fountains and fire features as well as two new restaurants.

After all these upgrades and thousands of visitors, the Camelback Inn is still a place, “Where Time Stands Still.”  The words remain emblazoned above the main entry way, reminding guests of their connection to the original 75-room resort, secluded on a dusty patch of desert where even seasoned travelers are known to declare, “In all the world, only one…”

His Stadium Course at the TPC embodies just such a philosophy as it makes the Phoenix Open one of the most exciting tournaments on the PGA Tour. As the TPC gears up for the 76th Open, held this January 30th through February 5th, Tom took a break from designing courses in Asia and Argentina to share some stories about the original design of the Course, why he loves the Phoenix Open and his hopes for its future.

For a little perspective, the Phoenix Open’s first rounds were played in the early 1930s.  After alternating between the Phoenix Country Club and the Arizona Country Club, the PGA obtained the land where the Course currently exists, and requested a course be designed especially for this popular event.

Tom, himself a pro golfer with 16 PGA Tour titles to his name, was tapped to lead the design of the new course in the mid 1980s. The TPC Scottsdale debuted with the 1987 Phoenix Open.
“The easiest thing to do is to make it the hardest course in the world,” Tom said. “The challenge is to design a course where the average player has a chance, while still challenging the best in the world.”
It’s that challenge that regularly brings out over half a million fans, making it the largest spectator golf event in the world. Some of the game’s most memorable moments happened here, from Andrew Magee’s magical ace on a par-4 in 2001 and Tiger’s recruitment of a few fans in 1999 to move a “loose impediment” (see: boulder).

Fortunately, engineering an attractive, lush course in the midst of an arid desert didn’t prove to be the hydrological marvel one might expect. In fact, as some regulars will likely know, the problem here (and for other nearby courses) is actually too much water – the entire region is in the heart of a giant floodplain. Those elevated gallery views the fans love? Purely flood control. The miles-long berm to the south of the course performs the exact same function on a grand scale – keeping the Airpark and other nearby areas from flooding.

Having resolved the City of Scottsdale’s water management concerns, Tom explained that he was able to concentrate on designing a course suitable for the Open’s rapidly growing fan base that would incorporate his risk-and-reward philosophy. The finishing holes deliver loads of both, Tom says, and many of the tournaments have been decided in front of thousands of fans packing the stadium seats around hole 16, the site of Tiger’s famous hole-in-one, which energized a rowdy (by European soccer standards) audience that has become an unofficial trademark of the Open.

While some players may claim the fans gets in the way of “proper” golf, Tom embraces fan enthusiasm. “Where else are you going to play in front of that many people,” he asks. Tom explains that the real issues with the course, and the Open, are related to its design.

Technological improvements in golf ball and club design, as well as increased athleticism amongst the players, have dramatically outpaced the difficulty of the course, changing it from a challenging 71-par design in 1987 to a relatively short design by current standards.

“(A pro golfer) doesn’t want to have to shoot 30-under par to win a championship,” Tom says. Looking back over the last decade, all but two winners were 20-under par or better. In 2001, Mark Calcavecchia won with a 256 – 28 under par. Sure signs that the course is giving up its rewards a little too easily.

Making the course more exciting “wouldn’t take much,” Tom said. “A little rebunkering and length would make it that much better. But I wouldn’t change the last four at all, except for 18, where I’d move the tee up on the back of the dike for just a little more length. That would make for a perfect finish.”

None of these changes, he said, would diminish the excitement for the gallery at all. Talking with Tom, you feel his enthusiasm for the fans similar to their enthusiasm for the game and his course. “Tourism is #1 in Arizona. People come here because they want to play where the pros play. Because of the weather. Because of the restaurants. Because of the cities and what they have offered for the past 25 years.”

“It’s my selfish opinion that the Phoenix Open should be more significant than it is. You’ve got 500,000 people on the ground to watch golf. It should be the Western swing of the World Golf Championships before heading over to Florida. The audience deserves it.”

Setting aside the general (and often incorrect) assumption that wines improve with age, industry experts are appreciating the youthful beauty and flavor of our products.  Respected wine reviewers with The Wall Street Journal, The Wine Advocate, Bon Appetit and Food & Wine have all toasted praises to Arizona’s wines.  The discriminating palates at Wine Spectator have also enjoyed a hearty taste, ranking more than 20 wines from eight Arizona wineries at an ‘88’ or better.  These ratings are a coveted point of pride amongst winemakers, but a good wine is all in the tongue of the taster.  Perhaps the most enjoyable way to find a favorite Arizona wine is to make a leisurely weekend getaway to one of Arizona’s wine region.

Though individual tasting rooms tend to be located in tourist areas with higher amounts of traffic, much of the wine is produced in vineyards found down State Routes less traveled.  Arizona’s prime grape growing occurs in the Verde River Valley and in Southeastern Arizona, where the elevations of the Chiricahua Mountains create an ideal growing environment a mile above the hot sands at sea level.

Located in Southeastern Arizona, Kief-Joshua Vineyards was established just outside Elgin in 2003. Already with 16 acres “under vine”, 28-year-old winemaker and Australian trained viticulturalist Kief Manning says their 5,000-foot elevation places them among the highest vineyards in the United States.

“The altitude itself probably doesn’t affect the grapes, but the elevation’s effect on the climate allows for a longer hang-time and added complexity.  The grapes don’t ripen all night,” says Mr. Manning.  “Plenty of sun and cool nights helps us retain acidity and achieve a good balance.”

Kief-Joshua Vineyards produces around 2,000 cases per year, and is one of the rare Arizona winemakers producing wines from single varietals such as Mourèvdre and Tempranillo, Mediterranean grapes which adapt well to the hot and dry summer climate.

About 60 miles from Elgin, outside Wilcox, Fountain Hills residents and longtime wine collectors Peggy Fiandaca and Curt Dunham own and operate Lawrence Dunham Vineyards.  After falling in love with the area and its wines during numerous tasting trips, they began looking for a small plot of land to try their hand at making their own wine and further explore their passion for collecting.  Before long, five acres became 40 and with eight acres currently under production, Peggy says their Rhone varietals are doing extremely well.  Familiar favorites include Syrah and Petite Sirah, Grenache and Viognier grapes, which are ideal for the Chiricahua climate and soil, Peggy says.  “They’re selling well and getting great reviews,” she adds.

Although Southern Arizona’s climate at 5,000 feet is strikingly similar to Napa Valley – both get about 25” of rainfall annually and blend warm, dry summers with cool, wet winters – producing Estate wines has proven to be more of a challenge.  The “Estate” designation, essentially meaning a wine produced completely by a single winery, is rare amongst Arizona wines.  This is partly due to the occasionally tricky climate and partly due to the relatively young age of the vineyards and wineries.  However, considering the industry’s phenomenal growth, odds are good this seemingly elusive recognition will become a part of Arizona wine culture in the near future.

Every year, the Arizona Wine Growers Association hosts The Festival At The Farm giving winemakers a chance to share their wines with the public and each other.  This year, the event is on November 18th and 19th at The Farms at South Mountain.  James Beard House recognized Executive Chef Greg LaPrad is preparing gastronomical delights to complement this year’s wines.  Other events include meeting the men and women behind Arizona wines, live seminars and, of course, wine tastings.  www.azwinefestivalatthefarm.com

Building on spec is a risky proposition for anyone, especially someone not accustomed to all the little details that can make or break a luxury home project.  Fortunately, Rusty’s spec referenced in the article hits the sweet spot and he knows the residential real estate industry inside and out.  I suspect his home will sell quickly.  It’s a manageable 5,000 SqFt. and will be priced right around $2m.

However, since you asked, if I were going to build a home I knew my clients would buy in an instant, here’s a list of what I would include.  Santa Barbara style architecture has always been an easy sell.  Its white walls and Spanish tiled roofs have broad appeal and have a casual, upscale charm.

1-  List for around $2 million and sell near that price.  Vacation home buyers can still enjoy all the benefits of a home here without the higher initial expense and overhead required by a larger estate.  Full-time residents tell me they rarely use the “luxuries” like home gyms and dedicated theater rooms.

2-  Approximately 5,000 square feet.  Less maintenance and overhead, but with space for guests or growing family.

3-  Four ensuite bedrooms.  His-and-hers amenities in the master bath.

4-  Second family room.  This versatile space can easily serve as a play area for children, entertaining area for visitors or just another place to relax and unwind.

5-  Mud room.  I’ve been hearing more and more buyers look for these small rooms off of the garage.  A room designed for practicality and often doubling as the laundry room, where one can drop jackets, shoes/boots and bags from a day’s adventure.  They’re extremely common in homes back east and in the cooler Northern states.

6-  Home office.  Whether the economic downturn has us working longer hours for our day job, or firing up our entrepreneurial spirit, the home office is vital to a new build.  I would design it so two people could use it, or design two smaller rooms to be offices for each spouse.  If only one works, the second room could easily become a dedicated space for homework, a small exercise room or art studio.

7-  Four car garage.  Enough space for the daily driver and a weekender or two.  Storage spaces neatly integrated into the garage.

The jumbo loan limit climbed to $729,750 as part of the 2008 economic stimulus package.  However it is restricted to specific high-cost areas, most of which are bigger cities along the coasts.  In Maricopa County (the limit is determined by a county’s average home values) the jumbo loan maximum has remained at $417,000 since 2006.

Although the reality of these changes won’t affect our market, the uncertainty doesn’t help end perceptions of “I want to buy but it’s impossible to get a loan,” or “I want to sell but nobody can get a loan so why bother?”  How many buyers or sellers-soon-to-be-buyers want to capitalize on values in today’s market but, perhaps incorrectly, believe they would be ineligible for a loan?

The Wall Street Journal reported that in 2010, 27.4 percent of all mortgage applications made in Arizona to the top 10 lending institutions were denied, a number right around the national average of 26.8 percent.  Denial rates were much higher in Texas, Mississippi, and Vermont, where denials numbered near 40 percent of applicants.  While it is not quite the “no-doc” days of 2005, there are still plenty of Arizonans able to buy a home at historically low rates, with or without jumbo loan guarantees.

As a seller, I’d want to know how many buyers are dependent on financing and how many are using cash, so I looked it up.  In metro Phoenix, about a third of all buyers pay cash; most of these sales are to investors.  In our luxury market, the number of investors is lower but the percentage of cash buyers is actually higher.  Approximately half of my buyers, or buyers brought to my sellers, have paid cash.  Looking at this from a seller’s point of view, if half of the luxury home buyers are paying cash and 72.6 percent of the financed half can get a loan, that tells us that about 13.7 percent of potential buyers would be unable to purchase your home.  In fact, that number is probably a little too high because I used the statewide average of mortgage denials as reported by the WSJ, when luxury home buyers are often able to secure financing from a variety of sources.

But of course it isn’t always about the numbers.  Buying and selling a home is loaded with personal opinions, emotion, and tastes, but by accounting for what we can quantify, I hope this sheds some light on an important topic.

How it Applies:
The tax only applies to those with an income over $200,000, or $250,000 if married and filing jointly. The first $250,000 in profit is protected for single filers, as is the first $500,000 for those married and filing jointly. Further, the IRS has clarified that for the first $250,000 or $500,000 to be protected, it must be your primary residence, defined as where you have lived for at least two out of the last five years prior to the sale.

Also, this tax is not scheduled to take effect until 2013. If you’re so inclined, contact our representatives in Washington and pressure them to work for the removal of this tax before it even takes effect.

Examples:
A single attorney making $220,000 per year sells his home in Paradise Valley for $2,000,000. He bought it for $1.2 million a decade ago, and has lived there ever since. He would pay 3.8% on $550,000 ($2m – $1.2m – $250,000 exemption). This would amount to an additional $20,900, on top of capital gains taxes. Ouch.

A married couple with a joint income of $375,000 sells a home in Scottsdale which they bought in 2003 for $3 million. It’s a winter retreat for them, and they’re not using it as frequently as they once were. So it’s time to sell, and we find a buyer for $4.2 million. They will profi t $1.2 million over the past 7 years on the home, but because it isn’t their primary residence, they will not be granted the $500,000 exemption. So in this example, the couple will pay an additional $45,600.

In the second example, the couple could choose to spend more time at the property so that it can be their primary residence for tax reasons before they sell. If they do that, their tax burden would be reduced to $26,600, for a savings of $19,000.

The biggest one is a true hardship. A costly medical disaster is often given as an example, or a loss of a job. What lenders want to believe is that you would be just as happy staying in your home, but your inability to make the mortgage payments due to unforeseen circumstances is forcing you to sell. Normally, the housing market appreciation prevents unfortunate situations like these from becoming a short sale and it’s not a problem for the lenders. But with our difficult market, short sales are becoming more common.

Where people go wrong is when they attempt to short sale a second home or investment properties because “it’s no longer worth it.” From the lender’s perspective, they invested in you by loaning you money, which you invested in real estate. For you to walk away and short sale the home without feeling any of the risk is not something they take lightly, and are likely to deny a short sale if you still have assets you could use to cover some of the losses on your investment.

To make the case, we advise our clients to prepare a hardship letter that will explain why you can no longer make your payments and need to sell. Documents that accurately portray your financial status such as tax returns, pay stubs and bank statements, all work with the hardship letter to explain why the lender should allow you to short sell your home without penalty. Do not delay; by being proactive, the lender is aware of the situation and your willingness to resolve the problem as efficiently as possible. Lenders I’ve met with have all said that homeowners have a much better chance at saving their credit if they are working to tackle the problem rather than simply awaiting foreclosure.

We have been helping clients with hardship letters, financial statements and communicating with lenders to help convey our clients’ message and negotiate their short sale. If you’re considering a short sale or would like clarification on how they might relate to you, please call us today.

Put simply, a short sale is when a house sells for less than is owed to the lender. The seller can no longer afford the payments and thus, cannot afford to pay the difference between what they owe and a lesser sales price. The lender must agree to this loss, reports the loan as “satisfied” to the credit bureaus and releases its lien against the property.

Short sales are increasingly common when compared to a few years ago. As of this week, in Paradise Valley
13% of active listings are short sales. In Scottsdale, it’s nearly 23%. Also, while short sales do damage your credit, it is less harmful than a foreclosure. How much less harmful varies on an individual basis, but recently released FICO credit score averages reveal that 25% of Americans have a credit score of 599 or less.
Pre-recession it was closer to only 15%.

Like many others in this trying economic time, you may find yourself suffering financial hardships and are
considering every option, including selling your home. Many banks have established guidelines to help the
process, and our office is closing short sales faster than ever before. Our expertise in negotiating short sales and thorough understanding of what banks require can help free you from the financial burden of your home.

In part two of my series on short sales, I’m going to discuss pricing strategy for sellers and what banks like to see in order to approve a short sale. If you have any questions, please don’t hesitate to call my office today for a more in-depth explanation of the process and detailed analysis of your home’s market value.