Boom, Bust in Area Beset by Foreclosures
By ADAM GELLER (AP National Writer)
From Associated Press
October 06, 2007 9:19 PM EDT
QUEEN CREEK, Ariz. - Out on Phoenix's suburban fringes, where cement mixers are fast colonizing what's left of the hay and cotton fields, the day is winding to a close. The home hour has arrived.
But sundown gives away a troubling secret: Behind dark windows and many unanswered doors, it's clear nobody is coming home.
The ranch home on Via del Palo where the newspaper in the driveway has been sitting unclaimed since April. The house at the corner of 223rd Court with faded fliers stuck in the door. The two-story on Via del Rancho with the phone book on the step.
They're all empty, left behind by a rising tide of foreclosures.
This neighborhood has a still-unfolding story to tell, and it is not always a comfortable one to hear.
Not long ago, builders were raising home prices here thousands of dollars week after week. Families pitched tents in front of sales offices and waited for Saturday morning lotteries to win the right to buy. Buyers - including more than a few speculators - gambled with loans whose risks were obscured by euphoria.
This is the tale of how America's real estate boom came to a seemingly ordinary subdivision called the Villages at Queen Creek, where the whipsaw of easy credit has led to some extraordinary times.
They were the best of times, for a while. The empty homes, though, raise serious doubts about what comes next.
As the nation confronts skyrocketing foreclosures, and policymakers try to contain a symptomatic credit crunch, what is happening here and in scores of similar neighborhoods is worth considering.
Because while the pressures at work in Queen Creek were extreme, the choices people made - and the consequences of those decisions - are not so different from those faced by thousands of other homeowners and their neighbors.
"Honestly," says Joy Kessler, a mother of three boys standing on the doorstep of the house she and her husband are surrendering to foreclosure, "if you were in this situation, what would you do?"
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In June of 2004, Dave Gustafson took time off from his job as a supermarket produce manager, and the family headed to Arizona to visit relatives. The buzz of construction - and word of low home prices - convinced them to have a look around.
Dave and his wife Maryann liked what they saw.
Back in California, they had contented themselves with less than 1,100 square feet. But salesmen here showed them floor plans that would give them 2 1/2 times the space for half the price.
The place they liked the best was a subdivision called the Villages, a crescent-shaped warren of streets cradling a golf course, quickly filling with sand-colored stucco homes. The local schools had a good reputation. It was affordable. There was an extra-big lot on a cul-de-sac, with enough room in back for a pool.
"The sales person was saying that they (homes) were going up $1,000 a week," Dave Gustafson recalls. "So when we came to look, we signed right away."
Builders made it easy. A downpayment of $2,000 to $5,000 was all it took to get started. Buyers could borrow at low teaser rates, requiring payments of nothing more than interest.
As promised, home prices were going up faster than the houses themselves.
By the time the family's new home - a two-story model called The Starling with a cathedral ceiling in the living room - was completed the next spring, the $179,000 base price had climbed to $220,000.
"We were making money while we were waiting," Dave says.
The Gustafsons picked out Corian counters and maple licorice-finished cabinets at the builder's design center, and opted for a pool and a whirlpool bath, adding more than $50,000 to their loan. The interest rate was fixed for only two years, but they didn't worry. With prices rising so fast, they could always refinance. And in five or six years, the Gustafsons figured, they'd sell for $500,000 and downsize.
They hung a plaque over the dining table: "Home is Where Your Story Begins."
They were hardly the only ones feeling optimistic.
Kris Rowberry was ecstatic when the value of his home in nearby Gilbert started to take off. So he bought a second one in the Villages as an investment.
"I was thinking, man, if I could have 10 properties, I could just kind of retire ... and kick back and live off the income," says Rowberry, a nuclear safety inspector.
But the speculative mind-set confounded buyers like retiree David Pickering. When Pickering and his wife left Pennsylvania in August of 2004 for a new home in the Villages, they'd never heard of interest-only loans and the idea of buying a home as an investment hadn't occurred to them.
They were simply buying a place to live, hopefully for a good, long time.
Around them, though, such notions began to look very old-fashioned.
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The American Dream is a myth overdue for revision.
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