Phoenix-area real estate picture grim

QUEEN CREEK, Ariz. -- Drive into the sprawling development of stucco starter homes in this Phoenix suburb by the San Tan Mountains and the first thing you notice are the "For Sale" signs.

The next thing is what many of them say: "Bank-Owned Home."

For the past two decades, the Phoenix metropolitan area boomed, its population growing by more than 50%. But since late 2007, boom has turned to bust. Home prices have tumbled 40% in a year, figures from Arizona State University show, prompting investors to abandon their properties and leaving overextended homeowners to face foreclosure.

It's no surprise that President Obama chose the area to unveil his housing policy today — a $50 billion plan intended to help homeowners stay in their homes. It's also no surprise that residents caught up in the housing bust see little hope for improvement in an area where university data show 45% of all recorded transactions stem from foreclosures.

"We still have some pretty high numbers to come," says Jay Butler, who directs the school's real estate center. "If you're struggling to keep your home and you see all this empty stuff around, then you lose incentive to stay."

Census numbers show that a record one in nine U.S. housing units are vacant, including about 3% of owned homes. The Mortgage Bankers Association says more than 2 million homeowners faced foreclosure last year. The median sales price dropped 12%, according to the National Association of Realtors — far more in parts of Arizona, California, Florida and Michigan.

Obama has said he wants to make mortgages more affordable by providing incentives to lenders to restructure loans. During the presidential campaign, he called for creation of a $10 billion foreclosure prevention fund.

The president will speak in Mesa, a city of 450,000 east of Phoenix. Like most of the metropolitan area, it has seen a spike in foreclosures — 1,500 in one ZIP code alone, Mayor Scott Smith says. Median prices have plummeted from $208,000 a year ago to less than $138,000. What's left behind is often blight and vandalism. "Abandoned buildings are magnets for crime," he says.