Monday, July 21, 2008

It was the best of times

At the end of the Great Housing Bubble it really seemed that house prices only went one way. Prices were rising so fast. New developments were springing up overnight. The smart investors were buying properties up then raking in the dough when a development was finished. It seemed like a safe bet - actually even better than a bet - a sure thing!

That was about three years ago. And boy have things changed. Prices have plummeted. The new developments seem to be getting hit worse than most other places. Foreclosure after foreclosure lining the streets. The Orlando Sentinel has an article on Foreclosures shuttering a Sorrento Springs Development. Let's take a look -

This is Terragona Drive in Sorrento Springs, an upscale development amid the lush, rolling pastureland of rural Lake County. It has an 18-hole golf course, a resortlike clubhouse, tennis courts, walking trails and neat rows of two-story, earth-toned homes with architectural flourishes.

But like dozens of developments throughout Central Florida, Sorrento Springs blossomed circa 2005, just as the housing market began to wither. Now it is rife with foreclosures.

There are investors who gambled on ever-rising housing prices -- and lost. There are families whose breadwinners lost their jobs -- and now face losing their homes. There are kids who have lost friends; moms who've lost support networks; renters who have been booted out because the banks are foreclosing on their landlords.

A perfect storm of liberal lending policies, inflated home values, aggressive developers and investors and a faltering economy has fueled a foreclosure rate in Florida more than twice the national average. Last month alone, lenders foreclosed on 40,351 homes throughout the state -- one for every 211 households.

Terragona Drive is just a microcosm of the problem. And without a major interstate or expressway running through the area, it faces a particularly tough time competing in the rental market, given the current cost of gas.

"When we bought, there was this rumor going around that there was going to be a highway through there that would connect to Interstate 4," says Raza Dhanji, a 38-year-old Lake Mary businessman who bought four homes in the subdivision as investments. "We were told two years -- max."

Promises of great wealth made illusions seem real. The article profiles several people from the development. Some are able to stay but have seen their equity disappear. Another invested at the peak and is now losing $10,000 per month. Another family bought at the peak - but a job move with a house that would not sell eventually led them to foreclosure. Sorrento Springs sounded like it would be paradise, but things did not turned out as planned.

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