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What the housing turnaround will look like

Cape Coral, Fla., not long ago one of the foreclosure capitals of America, is now seeing a rebound as home prices hit once-in-a-generation lows.

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As much as anyplace, Cape Coral offers a keyhole into what the nation’s housing turnaround may look like.

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LEE COUNTY, with its location along the sun-dappled Gulf Coast and low cost of living, has long been a magnet for retiring blue-collar workers. Housing is far less expensive than in tonier areas like Naples and Collier County, just to the south. There, it is Neiman Marcus or Nordstrom. Here, it is JCPenney and Sam’s Club.

Three years ago, Lee County was steeped in the housing boom the way the rest of the country was – only more so. Between 2002 and 2006, prices in Florida’s Miami-Dade County rose 129 percent. In Palm Beach County, they climbed 189 percent. In Lee County, they soared 280 percent.

Grimes jokes that it was a time when money was so easy to get and people were so eager to cash in on the seemingly endless boom, that they could run out during the half time of a football game and buy a house.

But then someone blew a whistle: The housing market collapsed. As in other parts of the country, homeowners became wildly overextended. Credit lines seized up. In Florida, the market imploded even more than elsewhere. In most states, 10 percent of employment is real estate-based – contractors, salespeople, lenders. In Florida, it is 24 percent.

Compounding the problem, the state, much like California, Nevada, and Arizona, also began to experience a slowdown in population growth. In the past, the influx of new faces helped buoy the real estate market.

But many people have been leaving the area. As evidence, Charlie Green, the clerk of Lee County, cites a decline in fees obtained from such things as traffic tickets. He estimates the school system has lost 3,000 students.

A significant part of the outflow is because of the lack of jobs. The unemployment rate now stands at 12 percent. All this has helped contribute to a foreclosure rate that until recently was among the worst in the nation.

“We had an influx of people, skilled laborers who came in after hurricane Charley in 2004,” says Mr. Green. “But they all moved at once to Galveston, to North Carolina, to anywhere there was a job.”

Yet in the housing business, there is very little that a big enough price drop won’t cure. And that is now happening in Lee County. Grimes notes that at the peak of the market in 2006, only 12 homes in the entire county were selling for under $100,000. Now there are 3,554 listed. At least 50 homes are selling for under $25,000.