Rural Arizona strains to deal with mounting foreclosures
KINGMAN – For Roxanne Knoche, losing the ranch home that she had custom-built for her retirement would be devastating.
A 53-year-old former office manager for a Costa Mesa, Calif., plumbing company, she moved here in 2007, living off disability payments she received for heart failure, diabetes and kidney failure.
Her disability payments ran out in 2008, reducing her monthly income to $1,345 and making it impossible to afford her $1,242 mortgage payments and basic needs like utilities and groceries.
After more than a year of trying to negotiate a modified loan with Bank of America, having her house in Golden Valley advertised as a foreclosure and shooing away people dropping by to see the corner-lot property, Knoche was preparing for another move.
"I would have had to pack up what I could and just go," she said. "I don't know where I would have went. I don't know. Try to rent a room somewhere? I probably would have tried to go back to California to find a room to rent."
While Knoche finally fended off foreclosure in November, getting her monthly payments lowered by more than half, she was very close to joining hundreds of Kingman-area residents forced to give up their homes since the real estate boom went bust.
As the Phoenix area's crush of foreclosures has drawn national attention, routinely ranking that area among the most severely hit markets in the U.S., rural communities here have been quietly grappling with their own crisis.
And it's a crisis with no end in sight for smaller towns. Many homeowners faced with escalating mortgage payments and job losses have been giving up on modifying mortgages and abandoning homes.
With neither strong rental markets to absorb displaced homeowners nor ample job opportunities, leaders in some rural communities fear they are losing longtime residents due to foreclosures.
Cronkite News Service visited communities in Coconino, Mohave, and Santa Cruz counties to learn how residents, businesses leaders and community groups have been affected. In those three counties combined, roughly 5,360 homes have faced foreclosure this year through October, according to RealtyTrac, an Irvine, Calif.,-based company that tracks foreclosures.
Gathering specific data on rural foreclosures and the effects on the established communities, which have more seasonal residents and mobile and manufactured housing, is difficult, said Jay Butler, director of the Arizona Real Estate Center at Arizona State University.
"There's not a lot of data on the rural areas," Butler said. "It's a different mix of things that are ongoing there. The economies are much smaller."
Real estate experts originally predicted that housing market recovery would begin this year, Butler said, but now the consensus is that a recovery won't begin until at least next year.
"We've got a long ways to go before that segment of the market recovers," he said.
Mohave County: Kingman
Kingman, a community of 27,521 in northwestern Arizona, boasts tourism and manufacturing industries along a busy railroad and interstate. People here say they enjoy the more relaxed pace of life over the metropolitan bustle of Las Vegas or Phoenix.
As Kingman promoted its ties to Historic Route 66 to attract tourists in recent years, it also encouraged new home construction during the housing boom, with several large developments rising here and in nearby Golden Valley. Then the housing bubble burst, sending the area's economy into a tailspin.
Like Phoenix, Kingman's foreclosure rates have been unprecedented in the past few years, with 124 foreclosures in the town in October alone, according to RealtyTrac. In all of Mohave County, where more than 502 homes were in some stage of foreclosure in October, 3,745 homes faced foreclosure this year.
Kingman had the second-highest number of foreclosures in Mohave County in October after Lake Havasu City, which had 165. Bullhead City, with 110 foreclosures, ranked third. All three municipalities had foreclosure rates higher than both the state and national rates.
Jim Wells, the lone HUD-approved housing counselor in Mohave County, is regularly booked with appointments at Western Arizona Council of Governments with homeowners wanting to stave off foreclosure.
While he tries to negotiate with the bank for these homeowners, he said many of Kingman's other homeowners give up on the process and are ultimately forced to leave to larger cities.
"You see people that move out of the area simply because there's no jobs here," Wells said. "What's going to motivate them to stay?"
After meeting with several homeowners one recent weekday, Wells thumbed through a thick packet of upcoming foreclosure sales dominating his desktop – at least 624 in Mohave County in the next three months – and called the wave of foreclosures "staggering."
"For a community like Kingman here, it's had a pretty big impact," Wells said. "It's a lot of people losing their homes. In a small town, there's not a whole lot of resiliency – there's less people to give it that."
At the St. Vincent De Paul Society in Kingman, demand for assistance is up 15 percent from last year, with more middle-class families joining the ranks of homeless, said Paulette Dollarhide, the group's president. The charity has been relying on extra volunteers, and she said she expects greater need in the months ahead.
"The sad part is the people lining up for help: a box of food, blankets, sleeping bags for the homeless, kids just wanting food. Heartbreaking stories," Dollarhide said. "We're busy keeping them alive – literally."
Kingman Mayor John Salem, who's optimistic the wave of foreclosures here will recede in the next year or so as the overall economy rebounds, said the city government has been fairly helpless in dealing with the foreclosure crisis.
"These are issues that even if we could get involved with them, we don't have the resources or the manpower," Salem said. "Flagstaff … has some county-sponsored, some state-sponsored and some federally sponsored programs to help keep people in homes. Unfortunately, Kingman doesn't have much of that."
Coconino County: Flagstaff
One out of every 445 homes in Coconino County, or 136 homes, were in some stage of foreclosure in October, according to RealtyTrac. That's more than seven times the foreclosure rate of October 2006, when Coconino County had 19 foreclosures.
A surge of foreclosures in Flagstaff that began with high-end, luxury homes is now plaguing homes in all price ranges – from a $150,000 house in Kachina Village to a $750,000 mansion in the University Heights neighborhood, said Cher Ferry, a housing counselor with the nonprofit group BothHands, which helps connect residents with affordable housing.
In the past year, Ferry has been working longer days to help homeowners in Coconino, Mohave and Yavapai counties renegotiate mortgages as the foreclosure crisis has "just encompassed everything."
"If you take 10 people out of an area here, it's like taking 50 people out of a neighborhood in Phoenix," Ferry said. "It's almost like you have an abandoned area. Ten families leaving one small rural area in Flagstaff is huge. And they have nowhere to go. So a lot of them just pack up and move out of Flagstaff."
Ferry said many of Flagstaff's former homeowners follow the job market to Phoenix, where the unemployment rate was 8.5 percent in October, compared with the state's 9.5 percent unemployment rate, according to the Arizona Department of Commerce.
Flagstaff, with roughly 60,000 residents in 2008, according to the U.S. Census Bureau, had an unemployment rate of 7.9 percent in October, but nearly 60 percent of its workers were in lower-paying, service-related positions, as the town relies heavily on tourism.
"Jobs up here are very hard to get," Ferry said. "We have hotels, we have fast food. We don't have a lot of higher-paying jobs."
The Northern Arizona Food Bank in Flagstaff has been grappling with a greater demand for food and with fewer donations, a trend that office manager Amanda Pickering attributes in part to homeowners trying to stave off foreclosure.
Demand for food assistance increased so sharply between 2008 and 2009 that the food bank had to be more stringent about requiring proof of need and income, she said.
"It's a lot easier to get assistance on food than a mortgage," Pickering said. "People are choosing to pay their mortgage bill and then rely on the community for assistance on food."
Ferry said it's the homeowners who invested in "bad loans," or ones with adjustable rates, and those who bought at the peak of the market in 2005 and 2006 who have been the most affected by foreclosures in the Flagstaff area. Many of them were longtime residents who tried to get into "flipping," buying and reselling homes for profit, she said.
"Next year is going to be hard, it's going to be very hard," Ferry said. "It's getting worse. I'd figured that this year was going to be a lot worse than last year. We hadn't seen the end of it. We weren't even close."
Santa Cruz County: Nogales
The onslaught of foreclosures is only part of a complex economic struggle in Nogales and nearby Rio Rico.
Businesses that rely on traffic from Mexico have been struggling with effects of SB 1070, Arizona's law on illegal immigration that has made many Mexicans fearful of crossing the border, said Arnold Quijada, chairman of Nogales-Santa Cruz County Chamber of Commerce.
Further, recent media reports have highlighted the growing violence on the Mexican side of Nogalas and other border towns, giving the town a dangerous reputation and keeping even more visitors at bay, Quijada said. In response, the chamber is launching campaigns to reverse the effects of the immigration law, negative media portrayals and the foreclosure crisis.
"Nogales and Santa Cruz County are in a very unique situation due to the fact that we're so close to the border," Quijada said. "Definitely we want to continue prospering. A town with many difficulties, it's hard to continue progressing."
Like Kingman and Flagstaff, Nogales has been hit with the economic impact of foreclosures as small, mom-and-pop businesses have suffered first, followed by larger chain stores, Quijada said. Santa Cruz County, with 17,578 homes in 2009, according to U.S. Census Bureau, had roughly 67 foreclosures in October, including 14 in Nogales.
In a neighborhood that borders a park, West Anza Drive is lined with modest, single-family homes with manicured lawns. But along that street a foreclosure has left one property choked by weeds. A tricycle sits inside the fence on the front walkway. The home is set to go up for auction in the next two months at the Santa Cruz County Courthouse.
On any given weekday at the top of the courthouse steps, auctioneer Jamie Sainz may be announcing the latest home up for bid in Santa Cruz County.
While foreclosure auctions were rare several years ago, he said he now announces roughly 300 trustee sales per month.
Rio Rico, a growing community less than 10 miles north of Nogales, has been hit most severely by foreclosures, with 40 properties – or one out of every 110 homes – in the foreclosure process in October, according to RealtyTrac. That's 10 times higher than the foreclosure rate in October 2006, when four homes faced foreclosure.
"I've been hearing it's going to get a lot worse," Sainz said. "There's no jobs down here. No jobs to keep."
Alejandro Martinez, a housing counselor with Chicanos Por La Causa, expects the foreclosure crisis to continue five to seven years before abating.
"We try to keep people in homes as much as we can, but that's not always the case," Martinez said. "A lot of people are giving up. They think it's not worth it."