Queen Creek and Maple Heights are typical of communities built with easy credit before the real estate market went belly up. Neither place is in Florida, but many Floridians understand what people in those communities are going through.

Queen Creek, a suburb of Phoenix, is the subject of an Associated Press story published Oct 5 in the Arizona Republic.
http://www.azcentral.com/business/articles/1005biz-homes05-ON.html

"Not long ago builders were raising home prices here thousands of dollars week after week," writes Associated Press reporter Adam Geller. "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."

Geller focuses on a subdivision called the Villages of Queen Creek, but he could just as easily have picked other communities in Florida, California or Nevada.

Or Maple Heights, Ohio, the community The Economist magazine chooses in telling essentially the same story in its Oct. 4 issue.
http://www.economist.com/world/na/displaystory.cfm?story_id=9905451

The story in the London-based Economist is headlined "The hammer drops: America's property crisis."

In Maple Heights, a suburb of Cleveland, "Every twelfth house stands empty, repossessed after its owner defaulted on a mortgage. There are no boarded windows (a local ordinance forbids them) and the city council cuts the grass around vacant homes. But the cracked panes, crumbling paint and rotting porches are hard to hide. Countless more homes sport “For Sale” signs as the remaining owners try to flee to better areas. With so many houses vacant, the property tax base has crumbled."

Recovery eventually will arrive, The Economist says. In the meantime, Maple Heights isn't the only place starting to look bedraggled.

"As America's housing bust grows ever deeper, the big question is how far Maple Heights is a harbinger of things to come. Nationally, people are defaulting on mortgages at a faster pace than at any point in recent decades. According to the Mortgage Bankers Association, some 5% of all mortgages are delinquent and the share rises to almost 15% for “subprime” mortgages—those lent to people with shaky credit histories.

"The pain will probably be concentrated in two main areas. One, typified by Maple Heights, is the Midwest—states such as Ohio and Michigan, where the subprime bust is battering an industrial economy already in long-term decline. The other is quite different: booming states, such as Florida and California, where the subprime bonanza fuelled the biggest housing bubbles. Until recently, the highest default rates were in the industrial heartland. But that is changing fast. More than a third of all adjustable subprime loans are in California, Nevada, Arizona and Florida."

So when will it end?

The Economist article says "the biggest unknown about America's subprime bust is how quickly, and how far, house prices will have to sink. Nationally, house prices have fallen by some 3%, while the glut of unsold homes has risen to ten months' supply. In the areas hardest-hit by defaults, the glut is far bigger."

In the Associated Press article, Geller writes, "The problems become self-perpetuating. Researchers say that each foreclosure chips away at neighbors' property values."

And the foreclosures in Queens Creek "compound a larger problem."

"Builders continue adding homes to the market at reduced prices," Geller writes. "Investors are trying to sell. Lenders are seeking buyers for foreclosures. Homeowners whose financial troubles might be solved by selling can't compete, real estate agents say."

The situation is somber in places far from Florida, but that is little comfort to Floridians caught up in the same downward spiral as people in Queen Creek and Maple Heights.

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