SPECIAL REPORT, Part III - The East Valley’s outlying communities are feeling sharp financial pains, wounded by a mortgage crisis that has slowed, if not stalled development.
The East Valley’s outlying communities are feeling sharp financial pains, wounded by a mortgage crisis that has slowed, if not stalled development.
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Regardless, the officials attempting to steer the southeasternmost part of the region through this difficult time argue that, despite the crisis’ severity, the economic damage will heal without leaving permanent scars.
“Everybody’s being cautious,” said Rayna Palmer, president of the Apache Junction Chamber of Commerce. “But there’s not the fear that is gripping.”
Parts of Mesa, Gilbert, Chandler and the subdivisions clustered around Queen Creek enjoyed the greatest benefit from rocketing home prices in 2005. New neighborhoods filled miles of empty farmland, swelling cities’ coffers with tax dollars, luring businesses to the freshly built rooftops.
The bedroom communities south of Queen Creek, like Johnson Ranch, experienced the most dramatic population boom, federal home mortgage data shows.
In 2003, banks gave 2,009 home loans in the northern Pinal County census tract that includes those subdivisions. That figure quadrupled to 8,843 in 2005, making it the busiest real estate market in Arizona.
That extreme prosperity has deepened its mortgage crisis.
“Anytime you’re on the urbanizing fringe, the peaks and the valleys are going to be accentuated for you,” said Jerrold Stabley, Pinal County’s planning director.
An increasing number of those loans have devolved into foreclosures or are at risk of doing so. The economy’s overall decline has cost remaining residents income, savings or, worse, jobs.
Homebuilding in Pinal County hasn’t halted altogether, said Stabley, whose office issued about 1,900 building permits last year.
“We expect growth to return after the recession is over,” Stabley said. “We expect it to return and be very robust because all the factors are still in place for the growth to occur. I think people still want to move to Arizona and there are still the resources to make that happen.”
County officials are crafting a new development plan that Stabley hopes will diversify the business community. “Not just jobs that are attached to retail,” he said.
In Apache Junction and the surrounding area, Palmer said foreclosures haven’t caused its business struggles.
“We have businesses that have gone out of business. But the reality of it is, if you look at the trends, the numbers are not any higher at this point than they have been traditionally,” Palmer said.
Likewise, Mesa officials said the stagnant credit market, with lenders more reluctant to provide funds, is creating far greater economic problems than the housing market.
“If you’re trying to do anything in the East Valley, anywhere in Phoenix, even anywhere in the country, what used to be a deal is no longer a deal,” said Shea Joachim, a Mesa economic development analyst.
Businesses and consumers must have near perfect credit or an “air tight” guarantee that the debt will be repaid to get a line of credit.
With the turmoil, William Jabjiniak, Mesa’s economic development director, said the city has shifted its primary focus away from future development.
“We’re trying to help our existing businesses not just survive, but remain strong and grow,” Jabjiniak said.
When prosperity returns to the Valley’s fringe, it is unlikely to be as generous as before.
“Will we ever get back to where we were three or four years ago?” Joachim said. “I don’t know.”