Boom, Bust in Area Beset by Foreclosures

Greg Giniel sits out in front of his home which is in foreclosure in the Villages of Queen Creek housing development Thursday, Sept. 27, 2007 in Queen Creek, Ariz. Giniel says he will try to buy his home back at the foreclosure auction in November. (AP Photo/Ross D. Franklin) (Ross D. Franklin - AP)

Dave and his wife Maryann liked what they saw.

Back in California, they had contented themselves with less than 1,100 square feet. But salesmen here showed them floor plans that would give them 2 1/2 times the space for half the price.

The place they liked the best was a subdivision called the Villages, a crescent-shaped warren of streets cradling a golf course, quickly filling with sand-colored stucco homes. The local schools had a good reputation. It was affordable. There was an extra-big lot on a cul-de-sac, with enough room in back for a pool.

"The sales person was saying that they (homes) were going up $1,000 a week," Dave Gustafson recalls. "So when we came to look, we signed right away."

Builders made it easy. A downpayment of $2,000 to $5,000 was all it took to get started. Buyers could borrow at low teaser rates, requiring payments of nothing more than interest.

As promised, home prices were going up faster than the houses themselves.

By the time the family's new home _ a two-story model called The Starling with a cathedral ceiling in the living room _ was completed the next spring, the $179,000 base price had climbed to $220,000.

"We were making money while we were waiting," Dave says.

The Gustafsons picked out Corian counters and maple licorice-finished cabinets at the builder's design center, and opted for a pool and a whirlpool bath, adding more than $50,000 to their loan. The interest rate was fixed for only two years, but they didn't worry. With prices rising so fast, they could always refinance. And in five or six years, the Gustafsons figured, they'd sell for $500,000 and downsize.

They hung a plaque over the dining table: "Home is Where Your Story Begins."

They were hardly the only ones feeling optimistic.

Kris Rowberry was ecstatic when the value of his home in nearby Gilbert started to take off. So he bought a second one in the Villages as an investment.