Oops! There goes the neighborhood

Phoenix's dead real estate market and slowed freeway-construction schedule are, taken separately, bad enough for anyone directly affected. But when the two converge, as residents of one small north-central Phoenix neighborhood are finding out, the effect is like a hurricane sweeping in at high tide.

The focal point of these twin curses is an area of tidy brick homes and tree- lined streets located between Camelback Road and Highland Avenue, from Central to Third Avenue. Beset first by blockbusters, the homeowners found themselves in double jeopardy when their wealthier neighbors to the north succeeded in shoving the path of the planned Paradise Parkway into their backyards.

Now, says long-time resident Peg Hogan, both the commercial boosters and the freeway builders have disappeared, leaving nothing but wreckage in their wake. "The whole area is in limbo," says Hogan, who grew up in the neighborhood and whose elderly mother still lives there. "The properties bought by the developer are in foreclosure, and plans for the freeway are on indefinite hold. No one can sell their home and, at the same time, the character of the area is changing."

"My mom used to know all of her neighbors," Hogan says. "Now she is surrounded by rental units and the faces change constantly. She no longer feels secure there."

Worse yet, Hogan says, residents have gotten cold comfort from city leaders, including Phoenix City Councilmember Howard Adams, who represents the area. "He promised, when the freeway alignment was moved south of Camelback, that the city would protect us," she recalls.

But when remaining homeowners contacted Adams recently to appeal for help, Hogan says, "All he said was that the freeway won't come under council review until sometime in the 1990s."

Adams says he's as frustrated as the neighborhood. "You don't know how many times we've contacted [state transportation officials] and asked them to at least purchase the hardship cases, but ADOT says they don't have any money and we can't get them to budge."

Adams claims that the same problem--a shortage of funds to acquire right-of-way land--is happening along the entire route of the Paradise Parkway, which is supposed to connect 99th Avenue to the Squaw Peak Parkway.

But people living in the Central Corridor say it's worse in their area because developers had already targeted their homes for future commercial development.

Tom Carmody, who heads commercial development for Terra Marketing in Phoenix, confirms that his company has abandoned nearly half of its acquisitions in the area. "We couldn't keep up the payments," he explains. "We went into the area with the intention of assembling land for commercial development because of its proximity to Central and Camelback. We can't follow through because of uncertainties concerning where the freeway will go, and their value as rentals doesn't cover our interest payments because we paid more than their worth on the residential market on the assumption they could be rezoned as commercial."

The neighborhood's problems began in 1985. Phoenix was at the pinnacle of a boom, and the intersection of Camelback Road and Central Avenue was one of the hottest commercial sites in town. The southwest corner, lined with a motley collection of aging commercial buildings, was particularly alluring to high rollers.

Terra's agents began roaming the area with cash in their pockets and fine-sounding offers. Eventually, they acquired 45 homes, all but a few financed through bank loans or promissory notes to the former owners. In order to pay off those debts, Carmody explains, Terra converted the properties to rental housing while working to complete assembly of parcels.

The company's plans were thrown off by the city's subsequent decision to designate the area a freeway corridor, but Terra officials quickly recovered their balance, figuring to adapt their plans around the oncoming Paradise Parkway. The freeway even brought a modest public-relations windfall, he says.

"Originally we were perceived as speculators disrupting the neighborhood, then as saviors because we were buying property where the freeway was going to go," Carmody says. "Now, we're all in the same boat."

Carmody agrees with residents that uncertainty is killing the neighborhood but says his company has no choice but to default. Rents, ranging from $250 to $550 a month, aren't enough to cover the debt payments, and Terra's partners in the deal are unwilling to keep shoveling their own money into the breach when there's no end in sight, he says.

"What would make it okay is to have some definition of when and where the freeway is going to go, and when the state Department of Transportation is going to start buying right of way," he says. Otherwise, the company, which has already forfeited ownership of twenty parcels, "probably will lose some more."

The foreclosures have hit hardest among older homeowners who agreed to carry Terra's notes, Hogan says. "Most had owned their home outright but had to take out mortgages when they moved," she says. "They were counting on those monthly payments from Terra to cover their new mortgages. Now they are stuck with a property they can't sell and no income to make their own mortgage payments."


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Kathleen Stanton