When Leslie Black purchased her first home in December in the Rutledge Landing subdivision outside Knightdale, she didn't expect her opinion of the neighborhood to change so quickly.
But shortly after Black moved in, foreclosure signs popped up in front of four houses across the street. The owner of the never-occupied homes, Perry Builders, had gone out of business, and the properties had been taken over by the lender, Branch Banking & Trust.
"They were for sale and then boom," said Black, 35, who took advantage of the government tax credit for first-time homeowners to leave her apartment in Raleigh. "If I would have known, I wouldn't have moved in here."
Perry Builders' troubles were just the latest foreclosures to hit Rutledge Landing.
Twenty-five properties in the subdivision had foreclosure filings issued against themover the past 13 months, according to the research firm RealtyTrac. That makes the 300-home Rutledge Landing one of the hardest hit in the Triangle.
Rutledge Landing exemplifies the excesses of the housing boom - from the easy credit to the speculative buying - and the hangover it leaves: homeowners in default, yards overgrown, windows boarded up, home values depressed and subdivisions half-finished.
Although the foreclosure rates in the region are low compared with communities in Florida, Nevada and California, there are Rutledge Landings scattered throughout the Triangle. Foreclosures have spread to many communities over the past year. What started as a subprime lending crisis has spread, fueled largely by rising unemployment, to traditional mortgages.
Foreclosure filings in North Carolina are projected to increase 20 percent this year. In the Triangle, foreclosure filings in Wake, Durham and Johnston counties over the first four months of this year were 35 percent higher than the same period last year.
Filings mark the start of the foreclosure process. Some homeowners will work out repayment plans with their lenders.
Most people associate foreclosures with depressed home values, but communities with high foreclosure rates also strain local governments and often become magnets for crime. Declining property values diminish a government's property-tax base, and vacant homes force police to step up patrols in those neighborhoods.
"I think people don't understand how significant the ripple effects of foreclosure are," said Mark Pearce, the state's chief deputy commissioner of banks.
Although few believe rising foreclosures will derail the Triangle housing market's recovery, the worry is that more communities will become like Rutledge Landing.
"The foreclosures are unfortunately not random," said Roberto Quercia, director of UNC-Chapel Hill's Center for Community Capital, which has done research into foreclosures. "They are concentrated typically in neighborhoods. If you have homeowners failing in a concentrated way, they can bring a community down. Institutions, churches and community groups all weaken with it."
Then came speculators
Rutledge Landing was developed by Don and Ryan Perry, a father-and-son team who started out as homebuilders and then turned to real estate development.
At the peak of the housing boom, Perry Builders was constructing hundreds of homes each year, many of them in eastern Wake County.
Rutledge Landing, off Poole Road in a largely undeveloped area, was popular with first-time homebuyers. Single-family homes started at $100,000.
It also attracted people with plans to speculate in residential real estate.
Among them was John T. Dunn.
Dunn, 63, lives in suburban Washington but grew up near Knightdale. He bought 10 houses in Rutledge Landing in 2003 and 2004.
The mortgages had adjustable rate riders, meaning the interest rates reset after a period of time and could spike as high as 13 percent.
"My intention was to be able to refinance and get a better rate," Dunn said.
That didn't happen, and lenders foreclosed on all of his Rutledge Landing homes in 2007.
Dunn, who now runs the Self-Sufficient Living Education Institute, a fledgling nonprofit, said he regrets having had to give up the properties.
"When you don't have no choice, there's no alternative," he said.
One of Dunn's foreclosed homes on Tellis Drive is next to property owned by Jim Shallal, a personal trainer and masseur who lives in New York City.
Shallal, 47, bought nine homes in Rutledge Landing in 2004 after learning about the development from a friend who was a mortgage broker.
"I was thinking, God, this is just like buying a small apartment building, and it's better because they're houses, and the property value of a house goes up higher than an apartment building," Shallal said.
Shallal's optimism at that point is best exemplified by the creatively spelled name he chose for his North Carolina real estate company: Furocious Muscle LLC.
Like Dunn, Shallal got caught when the interest rates on his loans spiked. After much effort, he was able to refinance the loans and now uses a management company to rent the properties, mostly to people who qualify for the government's Section 8 housing subsidy program.
A fire broke out in one of his houses and did $25,000 damage.
Shallal wishes the mortgage companies had never lent him the money, which he says he should never have qualified for. He wanted to sell his Rutledge Landing homes long ago, but the foreclosures have made that impossible.
"How am I going to compete with someone selling their house for $100,000 and I'm trying to sell mine for $123,000?" he lamented.
'In for the duration'
Joe and Connie MaGaro are in the same predicament, but they live in Rutledge Landing on Limewood Street, next door to one of Shallal's rentals.
The MaGaros moved to Rutledge Landing from Florida in 2004 to be closer to their daughter and grandchildren.
Joe MaGaro, 67, said the foreclosures and the high turnover rate in the neighborhood have made it difficult to get people involved in the community.
MaGaro joined the neighborhood's Community Watch program but became frustrated when just four people showed up for a meeting last year.
"There's nothing going on to encourage people to take care of their properties," he said.
MaGaro would like to move, but that isn't an option.
"We're kind of locked in for the duration," MaGaro said. "I could sell the home, but where would I move and get a home of equal value? I'm not going to get my money out of this house."
The collapse of Perry Builders has made the future of Rutledge Landing more uncertain. Three of the subdivision's planned four stages have been completed.
The fourth was to include higher-priced houses on land behind Leslie Black's home on Sweetgrass Street.
Trapped where they are
In addition to the foreclosed homes and empty lots on Sweetgrass, Perry Builders has left behind a partially built shell of a house that has been untouched for more than a year.
Black's neighbor Brian Morrill knows all too well what the foreclosures across the street are likely to mean.
Morrill and his wife paid $152,000 for their house in late 2007, or $12,000 more than Black paid for a home that is 200 square feet bigger.
Morrill, 30, is getting a divorce and would like to sell his house. But he doesn't dare list it.
"I'm not even going to bother," he said. "I'm too upside down on it."
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