Poster Child for Housing Crisis: 'They Were Building Mortgages' in Arizona Town

MARICOPA, Ariz., May 7, 2008— -- In just eight years, this city sprang from the desert almost spontaneously. Where once there was a railroad crossing, a Dairy Queen and about 1,000 people, there are now 33,000 residents in what has become a bedroom community for Phoenix, a 40-minute drive northeast across the desert.

Maricopa was built so quickly that it does not have a hospital or a movie theater. It has nice new schools, but the only restaurants are chains such as Taco Bell and Panda Express.

Still, this was the place where young people and first-timers could live the dream of owning a home. In Phoenix they used to say "drive until you can afford it," and Maricopa is where buyers ended up.

Built on low-interest, interest-only and adjustable-rate mortgages, Maricopa inflated along with the real estate market across the country. But, today, with many front yards overgrown by weeds, decorated with "Short Sale" and "Bank Owned" real estate signs, Maricopa has been described by some real estate analysts as the poster child for excess in the housing market.

Back in 2005, "If I listed a home, I would have two or three offers on it within the same day," real estate broker Susan Abdallah said.

But on a recent day she showed a home, which originally sold for $225,000, that had been re-possessed by the bank. After reducing the price to $105,000, she still had no offers and was preparing to put the house up for auction. Abdallah has 60 bank-owned properties to sell.

As many as one in 10 houses in Maricopa are for sale, even while new houses continue to be built. Homeowners, banks and builders all are competing to sell at ever-lower prices.

Many people blame the bubble and bust on investors — both amateur and professional — who speculated in new homes. "I think that was part of the mistake that the builders made, was that they allowed investors to come in and buy," Abdullah said. "Allowed them to buy tracts of homes, you know, five, six, 10 houses, and they bought them on speculation."