Beyond the Great Recession

When the sprawl stopped

  • Article by: RICHARD MERYHEW , Star Tribune
  • Updated: April 13, 2011 - 10:42 AM

Once booming symbols of possibility, the Twin Cities exurbs are scarred by foreclosures, battered by gas prices and uncertain when recovery might come.


Large swaths of land remain barren in an Isanti subdivision.

Photo: Elizabeth Flores, Star Tribune

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The carts at the grocery get filled with macaroni and cheese, and the lines at the food shelf are often just as long. Shoppers leaving both stops frequently make their way home along streets scarred by abandoned homes or lined with empty lots.

A floral shop on Main Street sits empty now, weeks after its owner moved out because she could no longer afford the rent. A few blocks away, the Hardware Hank is dark, too. After years of slumping sales, its owner called it quits, leaving this working-class community without a hardware store for the first time in 96 years.

"We're in a big hurt," said Mark Rojas, a long-time local bookstore owner.

Times are tough in the Twin Cities exurbs. Five years ago, they were among the fastest-growing cities in the nation, offering cheap land and acres of new homes at affordable prices. But the stunning collapse in the housing market and the devastating recession that accompanied it have turned the boom into a memory. The exurban communities, scarred by foreclosures, are still reeling from plummeting home values and the loss of business.

From Isanti County south to Scott County, new roads lead to phantom neighborhoods. Many homes sit empty, their owners long gone, foreclosed. Now, with $4-a-gallon gas a possibility by summer, the prospect for recovery is bleak in these neighborhoods full of long-distance commuters.

"I don't believe we've bottomed out yet," said Greg Owens, president of Community Pride Bank in Isanti. "The question is: When will it stop going down?"

The downward momentum is a sharp contrast to that of a decade ago, when communities from Cambridge to Belle Plaine exploded with growth as young families looked beyond the suburbs to buy a piece of the American dream. Land and gasoline were cheap, and the tradeoff for a 45-minute or longer commute was a bigger, more affordable home compared to those closer in.

Since 2000, the population in exurban Twin Cities counties has grown by 25 percent. Some -- Chisago, Sherburne, Scott and Wright -- saw gains of 30 percent or more.

In the city of Isanti, the population nearly tripled, from 2,300 residents to more than 6,000 late in the decade.

Anticipating continued growth and demand, developers and contractors built neighborhoods and homes faster than they could fill them.

"Everybody was going nutso," said Rojas, the bookstore owner.

Then came the crash. Thousands went into foreclosure. Others were stuck in houses worth far less than what they paid. Acres cleared for construction stayed empty.

And it's not yet over.

Statewide, foreclosures rose 11 percent -- nearly 26,000 total -- in 2010, with the greatest number in Hennepin and Ramsey counties. But the rate of foreclosure was greatest in the northern exurban counties of Sherburne, Isanti, Mille Lacs and Kanabec.

"We've got some areas that are now getting worse, dramatically worse, because of the recession and the continued loss of jobs," said Warren Hanson, president of the Greater Minnesota Housing Fund. "That's the trend that is troublesome."

Survival mode

Ed Nelson, a spokesman for the Minnesota Home Ownership Center in St. Paul, said some 12,000 families statewide sought counseling services from the agency in 2010. One third were from the former boom areas.

"They are already in rough shape when they get to us," Nelson said. Add another $150, $250 or more in relatively inflexible monthly gas expenses, and "it's only going to make the situation worse,'' he said.

In Isanti, where the population has fallen to 5,300 from its 6,000 peak, distress is widespread.

The broken windows of abandoned homes define some neighborhoods.

Dozens of "For Sale'' signs dot undeveloped lots, some sagging in evidence of how long they've been silently begging for a buyer. In one new retail development, seven of eight storefronts are empty.

Nearly 300 properties -- a mix of undeveloped lots and vacant or rented homes -- are in foreclosure. Hundreds more have been resold, and more foreclosures are anticipated.

At the local grocery, Joel Ahlstrom sells fewer steaks, and more macaroni and cheese. At the thrift store, Jen Grady, a sales assistant, carries an extra $20 in her pocket for customers short on cash.

Demand for food at a local food pantry that serves all of Isanti County is now so great -- it has more than doubled in two years -- that last month, it expanded its hours to six days a week.

"There's just no end in sight," said Jay Southworth, coordinator for the Family Pathways Food Pantry in nearby Cambridge. "Everybody knows somebody who is touched by this and is suffering."

LaVerne Peter, an accountant who moved to Isanti from Bloomington 11 years ago, said some of her clients are so desperate that they've paid with loose change or by barter. One client gave her a gunnysack of squash.

"I've been around for a while and I don't ever remember it being this bad," she said. "People are in a survival mode."

'Bad choices'

Businesses feel it, too.

In December, the Chamber of Commerce, facing a sharp drop in members, laid off its only full-time employee.

Not long after, John Bettendorf, owner of the local Hardware Hank store, decided to close for good. Some blame big-box retailers in nearby Cambridge. Bettendorf blames the housing crisis and recession.

"It just got to the point where the heart of the business, hardware sales, just weren't enough to sustain it anymore," he said.

Sales dropped so dramatically at Rebecca Tiller's Main Street floral shop she was forced to lay off all three of her employees. Early last month, to save on rent, Tiller closed her store. She now sells flowers from a remodeled garage at her home, alone.

"I don't foresee things getting better soon," she said.

Mayor George Wimmer has pushed for cuts in city expenses to keep taxes in check. City officials have been reluctant to raise rates to make up for the drop in taxpayers and property values.

"We just can't do that to people," Wimmer said.

Still, council members plan to vote soon on whether to increase water and sewer utility rates to help pay for the infrastructure of a failed development on the east end of town. The fee for homeowners, based on average use? About $215 more per year.

"We're just left with a lot of bad choices," Wimmer said.

There are signs of hope.

Business at the historic Creamery Crossing Cafe is steady. Wintergreen's Golf and Grill, a local restaurant, is expanding. Warren Thunstrom, owner of Rendezvous Coffee, is doing OK, too.

"It seems like when people can't afford big pleasures, they value their little pleasures more," he said.

Still, many worry that rising gas prices will dash recovery hopes, especially for people who drive more than 2,000 miles a month -- common among exurban residents who work in the Twin Cities. About two-thirds of Isanti's working residents drive to the metro area each workday.

"It's just one more thing," Wimmer said. "They cut your job, your house is under water or your spouse is out of a job. It's just one more hurdle you have to get over, and at some point you just quit running."

'It's scary'

Joel Jablonski, 41, is among the thousands feeling the squeeze.

He and his wife bought the split-level home of their dreams on a new cul-de-sac in Isanti for $195,000 eight years ago. At the time, the big drawback -- 90 miles to and from work at a Rainbow Food store in Minneapolis -- seemed manageable.

Now gas prices are at levels he never foresaw. His house is worth nearly $50,000 less than he paid for it and several neighbors have lost homes to foreclosure. He's refinanced twice to take advantage of lower interest rates but is still upside down on his mortgage.

With his wife at home full-time with two toddlers, money is tight. Instead of spending $200 to $300 for groceries in one trip, he stops at the store several times a week and buys fewer items, trying to get by day to day. He recently changed cell phone plans and is eyeing his monthly bills looking for any trims.

"I'm not behind on my payments, but there's not a lot of extra money to spend," Jablonski said. "To me, it's scary."

Richard Meryhew • 612-673-4425

  • about this series

  • This occasional Star Tribune series focuses on how Minnesotans are adapting to a vastly changed economic landscape, even as the recession fades into the past.
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  • Beyond the Great Recession

    Wednesday May 25, 2011

    This occasional Star Tribune series focuses on how Minnesotans are adapting to a vastly changed economic landscape, even as the recession fades into the past.


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