ARI SHAPIRO, HOST:
Most disasters in the U.S. hit a specific place. Wildfires burn through Southern California. A hurricane floods Texas. Ten years ago a slow-moving disaster swamped the entire country, and it did not leave a single state untouched. The disaster had its own sounds and smells.
How often do you still think about those days?
SEAN HAHN: You know, I tell you; I - every time I hear a smoke detector beeping like the battery's dead, I have a flashback of the crash. (Laughter) So in my house, when the smoke detector starts beeping, I am up. And I get on a ladder, and I'm changing that thing because all's I have is visions of the past.
SHAPIRO: The past meaning the financial crisis. Sean Hahn is a realtor born and raised in Phoenix, Ariz. That beeping takes him right back to those vacant homes.
HAHN: There's a - usually a smell associated with it as well. It's the smell of mold because there's a dripping drain somewhere. And nobody's going to fix it because they've walked away from it. So there's a smell of mold. And it makes my throat burn and my eyes itch.
SHAPIRO: Sean Hahn is sitting on the patio of a Phoenix bar as the desert heat quickly cools into night. He's been selling houses here for almost 30 years. Through the boom...
HAHN: We'd put a house on the market, and by noon we'd have 12 offers.
SHAPIRO: ...And the bust.
HAHN: People were stealing the copper pipes from the home.
SHAPIRO: All year we're going to explore ripples from the financial collapse. Today, memories from people who lived through the housing crisis in Phoenix. On average, homes here lost 56 percent of their value. Foreclosures swept across the city. We talked with people in different parts of the real estate system - homeowners, buyers, locksmiths and realtors like Sean Hahn. He flashes back to the one abandoned house that stood out from the rest. The investor he was with didn't want to go in.
HAHN: I go, I need to see this house. And he says, why do you want to see it? I said, 'cause that was my first house. That's the first house I ever purchased. I said, I'm going in.
SHAPIRO: He and his wife bought the house in the 1980s and lived there for a few years. In 2012 he let himself in using the lockbox, and the smell of urine hit him.
HAHN: They destroyed the house. It was really sad. My wife and I had so much pride in that little home. And we kept it great and painted and planted, you know, flowers and stuff. All that stuff was gone. And there was paint on the walls, like, almost like graffiti and stuff. And they just tore up the house.
SHAPIRO: In some of the houses, the vandalism was an expression of rage by homeowners angry at banks that refused to modify interest rates, even drove them into bankruptcy before foreclosure. Fred Decker saw a lot of those kinds of houses. He started work as a locksmith in 2007. Soon he was spending his days changing the locks on vacant homes.
FRED DECKER: You would go up to the front door, and you'd put your ear up to the door. And if you heard the beeping of the smoke alarms with low batteries, you could tell nobody lives here.
SHAPIRO: He calls the sound of those smoke alarms the heartbeat. Some houses still had clothes in the closets. Some had empty beer bottles in the kitchen.
DECKER: There's always Q-tips on the floor. Like, in every foreclosed house that's one thing that there's always on the ground somewhere, usually in the restrooms. But you can find Q-tips everywhere.
SHAPIRO: Why? Why Q-tips?
DECKER: I have no idea. I think it's just something that whenever you're leaving a house that you don't have to clean, it drops on the floor and who cares?
SHAPIRO: Fred Decker had to change the locks on almost two-thirds of the houses in his own neighborhood. But he and his wife stayed in their house even though they bought in 2006 at the peak of the bubble.
DECKER: I would sometimes say that if I didn't have bad luck, I would have none.
DECKER: But, yeah, it really felt like if you could have picked the worst time to buy, we picked it, which still to this day it's making me very nervous about pursuing our next home. You think, OK, I'm finally above water. I can sell. But what if tomorrow it nosedives again and I buy a house at exactly the wrong time?
SHAPIRO: Actually, Decker and his wife are still underwater. They hope to be in the black next year. Every time he walked into a foreclosed home during the bust, he thought about his own decision to stay.
DECKER: It was strange honestly because I felt kind of like a sucker. Like, here I am paying my bills, and everyone else - I don't know.
SHAPIRO: But people who walked away are conflicted, too, like Kristin and Justin Hege.
KRISTIN HEGE: I grew up in a small town in Ohio, so the forever home thing was, like, a legit thing. You stayed in your house till, you know, your kids away went to school and that kind of thing.
SHAPIRO: The Heges bought the place they thought would be their forever home in 2006. And after the crash, they had a choice - stay underwater for the foreseeable future or get out. The bank agreed to a short sale for less than half of what the Heges originally paid. Justin says it felt like much more than a financial decision.
JUSTIN HEGE: I thought that we were doing something wrong personally. Just - that's just how my brain worked.
SHAPIRO: Do you mean, like, morally you thought you should have stayed?
J. HEGE: Yeah.
J. HEGE: We signed a contract. And so, you know, we felt like we were going back on our word.
SHAPIRO: His father had helped them buy the home.
J. HEGE: I think of all the things that bothered me was walking away and knowing that he helped us financially get into that house with a down payment. That actually grinded my gears.
SHAPIRO: What did he say to you when you told him that?
J. HEGE: He was a proponent of getting out. You know, he...
K. HEGE: It wasn't until he said it I decided it was OK.
J. HEGE: Exactly, because I was holding onto some guilt there.
SHAPIRO: Today we are at a key moment in the recovery. A short sale or a foreclosure can stay on someone's credit report for seven years. So now waves of people who walked away from their homes are getting back into the housing market.
K. HEGE: We have the area big enough for the pingpong table to come down...
K. HEGE: ...And then the kids.
SHAPIRO: And also a whole lawn over here.
K. HEGE: Right. Yeah.
SHAPIRO: The Heges bought their new house in Phoenix last year. This one is well within their means. Justin says they learned a lot during their seven years in credit limbo.
J. HEGE: You know, anyone can make a mistake. We made a mistake. We made a dumb choice. So now we'll be able to make another choice. And we're much more fiscally responsible now.
SHAPIRO: The crash created a lot of losers but also some winners. When foreclosures started rolling through the city, buyers began to gather on the steps of the Maricopa County Courthouse downtown. They bid on houses selling for a fraction of their former worth. Some of those buyers are still there today.
JOHN RAY: I'm John Ray.
TONY THOMAS: And I'm Tony Thomas.
SHAPIRO: John started doing this in the late '90s. And Tony...
THOMAS: And I got into it right around the boom, so probably around 2009.
SHAPIRO: Now, you might be thinking 2009 wasn't the boom. That was the crash. But for people who buy and resell foreclosed houses...
THOMAS: Yeah, it was our boom in the foreclosure industry.
RAY: Yeah, it was good for us, bad for the housing industry (laughter).
SHAPIRO: Back then the auctions were a zoo. Hundreds, sometimes thousands of properties were sold each day.
RAY: There was probably 200 people down here, at least three or four auctioneers selling properties at the same time.
THOMAS: John was making fun of me back then, calling me Spider-Man 'cause I was jumping over a fence, bidding over there, jumping back over to bid over here.
RAY: Everything I bought in 2008 to 2010 within four years doubled in value.
SHAPIRO: Did you ever feel, like, a psychological conflict of the fact that you are basically pulling in money hand over fist, and you walk in these houses and it's like, this was someone's life that they had to abandon?
RAY: Yes and no because the way we have to look at it is even if we didn't bid and it went, you know, it's still going to sell at foreclosure auction. It's still going back to the bank. So the homeowner is not going to be able to keep the property. They're going to lose the house whether we bid or not.
SHAPIRO: Many people we spoke to told us they try not to think about that time in their lives. John Ray has a different take.
John, having been here through the boom and seen the crash, do you have any, like, flashback, any post-traumatic stress, any, like, oh, God, is this going to happen again?
RAY: I'm actually waiting for it to happen again (laughter).
SHAPIRO: He says, that's when we make money.
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SHAPIRO: So will this happen again? In parts of Phoenix right now home prices are growing 30 percent a year. And some old habits are coming back. House flipping is at an 11-year high. Tomorrow we'll ask whether that should make people worry. Transcript provided by NPR, Copyright NPR.