Housing crisis hits exurbs hard

Home values have fallen 43 percent in Victorville, Calif., but the city has rebounded from previous slumps.

Realtor Jackie Harvey hadn't seen a single customer by 4 p.m. Sunday in her Arbor Lane sales office. None came Saturday, either, to see the modest Spanish-style homes she was selling, one of many such new developments in Victorville, Calif. These days she anxiously awaits even the slightest nibble from a potential buyer as she frets about how she'll ride out the nationwide housing crisis.

"We're starving," says Ms. Harvey, who recently filed for unemployment compensation. "I'm basically working for free."

Victorville and other exurbs like it lie at the core of America's mortgage meltdown. A year ago, it was America's second-fastest-growing city (behind New Orleans) with a 9.5 percent surge between July 2006 and July 2007. Now, foreclosures have more than doubled in the county. New home prices in the city have plunged 43 percent.

But while new exurbs – those once fast-growing communities at the fringe of major metropolitan areas – will rebound much more slowly than traditional suburban and urban communities, housing experts say, city leaders here are more upbeat. They have one advantage: They've learned how to handle downturns, offering one model of survival for other exurbs reeling from the housing crisis.

"Places like Victorville that are on the edge of growth have seen boom and busts before," says Hans Johnson, a housing expert at the Public Policy Institute of California, a nonprofit think tank. "There will be a recovery there."

Growth built on vacationers, then pilots

A desert vacation spot in the 1920s, Victorville drew the Hollywood set with its clean desert air. Historic Route 66, which runs through its Old Town district, made the city a natural stopover for motorists driving to California before the interstate system carved more modern routes. George Air Force Base, originally built as a flight-training school for World War II pilots, brought jobs and people to the area.

But when the base was deactivated in December 1992, the city fell on hard times.

"We lost about 10,000 jobs," says Mayor Terry Caldwell. "It was the most troublesome time. The state economy was in trouble and the regional economy was in trouble."

After the closure, he says, members of the city council turned their attention to redeveloping the airbase and touting the benefits of its long runway in California's desert region to commercial interests. It was renamed the Southern California Logistics Airport and has attracted Pratt & Whitney, ConAgra Foods, and General Electric Aircraft Engines, among others. So far, the redevelopment project has created at least 3,500 new jobs.

"While the loss of 10,000 jobs [at the airbase] was a huge loss to the economy, those jobs are being replaced with higher-paying jobs," Mr. Caldwell says.

Some signs of a bottom in the market

There are signs that the city's stock of bank-owned homes is dwindling, says city council member Mike Rothschild. Indeed, across southern California, 41 percent of sales of existing homes last month were foreclosure resales, according to DataQuick, a sign that buyers are snapping up foreclosed homes.

But for Victorville to quickly fill the houses left vacant in undersold developments, it will have to find even more ways to bring jobs to the city, say experts. That's because long-distance commuters to metro Los Angeles, who once flocked here, are now put off by high gas prices.

"One of the challenges for Victorville will be to generate those jobs that will allow residents to stay there," says Mr. Johnson.

Inside Arbor Lane, Ms. Harvey says she can't even move houses by offering incentives worth $20,000 and cutting prices to $259,900 for four-bedroom homes that would have sold for $370,000 less than two years ago.

But it remains to be seen if the city's aggressive economic development plans will help propel it from the slump more quickly than surrounding communities.

Mr. Rothschild is confident. "Within the next year and a half or so, the excess housing stock will go away," he says. "The rooftops will be built again."