Paradise Valley homeowners also feeling pain of foreclosures

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PARADISE VALLEY -- It's a problem we've been hearing about in neighborhoods all around the country, but now one of Arizona's most affluent communities has found itself feeling the pain, as well.

You might say it's "the sign of the times," especially in Arizona -- the foreclosure notice hanging in front of a house. It's a sorry chapter in the state's real estate market.

But now there's a new kid on the block, or a new zip code, and it is one a lot of people never expected to see.

The town of Paradise Valley is having some foreclosure problems of its own. Of course, it's being called trouble in paradise.

"We had 25 homes foreclosed on in the first quarter of 2010," according to Dr. Jay Butler with Arizona State University's Morrison School of Management, Realty Studies. "In 2009, there were only 10."

And while this tony town may have trailed in foreclosures in the first quarter of 2009, by the end of the year it had the dubious distinction of having a sizable number of homes lost.

Last year, there were 429 foreclosures if trustee sales are added to the total. In all, there are only 6,500 homes in Paradise Valley.

"When you talk luxury homes, you're talking high-end paying jobs, you're paying fairly sophisticated individuals and other things, so there's a little bit different image in this particular standpoint," Butler said.

Image aside, a lot of people in Paradise Valley have been suffering just like those in the rest of the country. According to Butler, failed businesses, lost bonuses and money woes have caught up with the town.

And as unique as Paradise Valley is, it also has a unique problem when it comes to failed properties.

"There was a very active market in PV where people would buy a million-dollar home, tear it down and maybe join the lots together and build an upper-end type of home that just simply could not be sold," Butler said.

One of those spec homes was something real estate agent Sandra Wilken showed to Jennifer and Todd Patterson in April.

"So they're pricing the home when they are starting construction and all of a sudden you've got a $7 million home that by the time it's done, now the market's turned and they couldn't give it away," Wilken said.

Wilken said the prices in Paradise Valley were indeed out of sight, but now the house, which still has its for sale sign in front, is in escrow for $3.5 million.

It's deals like that which have prompted people who might normally not have looked in Paradise Valley to see if they couldn't be happy there.

"We just think the deals we are seeing are fantastic and we just want to kind of take advantage of it, be part of it if we can," the Pattersons explained.

Wilken sees that attitude and a change in how banks are pricing foreclosures as the reasons Paradise Valley might start to recover.

"So the market is shifting, the market is turning, and the main reason is people are finally getting smart on how to price their homes," Wilken said. "You've got to price them aggressively so they will move in a short period of time."