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."
Mayor Kelly Anderson, who grew up in Maricopa, said, "You had builders and other development people that could not get permits fast enough. They wanted a permit turned around in 12 hours, because they couldn't sell the home fast enough. They had people lined up 100 deep on a Sunday morning for a lottery ticket."
Prices rocketed, promising quick profits for speculators and many individual buyers who really couldn't afford the house they bought.
By early 2004, the median re-sale price of a house was about $150,000. Two years later it was nearly $260,000. Then the mortgage crisis hit, and by the end of 2007 that re-sale price had plummeted to just more than $197,000, and brand new houses were even less — $180,000.
Many owners faced with increasing interest rates were unable to pay their mortgages, and unable to refinance because their houses were worth less than they paid for them. People started to lose homes or turn in their keys and walk away.
Jay Butler, who teaches real estate at Arizona State University, said of the builders, "They really weren't building homes. They were building mortgages that they could put into mortgage-backed securities in order to sell them to investors in China and France."
People are forced to leave nearly every day. Stuck in the middle are families like Brad and Sarah Milnes and their infant daughter Hannah. They recently bought a new house in Phoenix, but they have been unable to sell their home in Maricopa. And Brad, who used to sell houses here in the days when they sold themselves, has been laid off for lack of business.
"We don't want to give this house back for a hundred thousand less than we paid for it," Milnes said, but plenty of people have done just that. He has seen former customers and neighbors just disappear.
Civic leaders are worried that Maricopa will have the reputation of a ghost town with tumble weeds blowing down Main Street. Thousands of people still live there and go to schools. But Maricopa's promise has been delayed, possibly by years.
"Maricopa is still a great place to build," said mayor Anderson. "It's a great place to live, work, play, and learn."
And right now, houses are really, really cheap.