early 16 years after Hurricane Andrew devastated the city of Homestead, the town in South Miami-Dade is in the path of another potential storm: A deluge of residential foreclosures and accompanying economic turbulence.

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It took Homestead more than a decade to overcome the economic devastation the Category 5 hurricane inflicted on the area in 1992. Homes and businesses were destroyed, crops were ruined, and thousands of residents moved away.

Civic and business leaders worked hard to rebuild the town. They touted the largely agricultural area to commercial and residential developers as an affordable alternative to pricier areas to the north. Three years after the hurricane, they celebrated the opening of Homestead Miami Speedway, which lures auto racing fans to NASCAR events.

Thousands of new homes replaced tomato fields during the housing boom in the early part of this decade. Homestead’s population swelled from about 32,000 in 1999 to more than 50,000, according to city officials. In the era of $2 dollar per gallon gas, the town had reinvented itself as a bedroom community of Miami and other Miami-Dade business centers.

But the residential construction binge — coupled with the nation’s subprime mortgage crisis, the related credit crunch and a stagnant jobs picture — has created a storm of foreclosures that could devastate Homestead again.

One Homestead ZIP code — 33033 — leads Miami-Dade County with 263 homes in different stages of foreclosure. And 109 homes in that ZIP code have already been taken back by lenders, according to foreclosure.com.

“In Homestead, 30 to 40 percent of the sales are distressed,” said David Dabby, president of the Dabby Group, a real estate advisory and valuation company in Coral Gables. “Homestead cannot recover until most of the foreclosure activity works its way through the system. At this point, we are in the middle of it.”

Since 2002, almost 10,000 single-family homes, townhouses and condo units have been built, and 3,500 more are in the pipeline, including hundreds already under construction. Many are in cookie-cutter subdivisions that grew from agricultural fields east of Florida’s Turnpike near Campbell Drive.

“Homestead grew too quick, too soon,” said real estate broker Rick Suarez, who represents lenders trying to sell their inventory of repossessed houses in South Miami-Dade. “When you have that kind of growth, you are going to get hit the hardest.”

Unemployment claims are soaring in the Homestead area, according to the Florida Agency for Workforce Innovation. Unemployment claims in the 33033 zip code jumped almost 64 percent in the first half of this year, compared to the same period last year. Claims in the 33032 zip code, immediately north of the city, jumped almost 76 percent.

Homestead’s foreclosure crisis is made worse by the increasing cost of gas, now above $4 a gallon, and stagnant employment in South Miami-Dade County.

Despite the daunting statistics, Homestead officials and area real estate brokers claim the city isn’t suffering an economic backlash from its foreclosures — yet.

On the contrary, they said, the tremendous amount of residential building spurred nearly 1.5 million square feet of retail space, of which some was recently built, some is under construction, and some is in the planning stages.

Retailers like Home Depot, Lowe’s Home Improvement and BJ’s Wholesale opened shop there in the last two years. Yet, many of the retail centers have yet to open or find tenants to fill the space around the anchor tenants. Retail rents have softened in the past year, but that’s happening in many suburban markets in South Florida, said real estate broker Matt Rotolante, owner of South Investment Property. He specializes in Homestead retail.

Homestead homeowners — many facing foreclosure or watching the value of their houses crater— are well aware of the crisis.

Ten repossessed houses sit vacant on Alex Hernandez’s tree-lined street in a new gated subdivision 31 miles south of downtown Miami.

“When those houses sell, the value of my house will drop, no doubt about it,” said Hernandez, standing in the driveway of his home looking out on the for-sale signs dotting his block in Pebblebrook II.

Three months ago, an independent real estate appraiser valued his five-bedroom home at $390,000, up from the $327,000 it cost him in December 2005, he said. But he fears the foreclosed properties will wipe out the equity he had in his home, Hernandez said.

Foreclosures are pushing prices down more than 50 percent of what they sold at during the height of the housing boom, said real estate broker Hagen Hendrix. He markets repossessed homes in Homestead for lenders. One of his lender clients dropped the price of a two-bedroom town house from $189,000 to $60,000, he said.

The town house is in move-in condition on a man-made lake and still isn’t selling, he said.

So far this year, 107 single-family homes sold in Homestead, including 32 owned by lenders. Some 58 condominiums and town houses changed hands, including 25 repossessed by lenders, said Tony Garcia, who heads the Keyes Co. office in Homestead.

The average price of a home in Homestead in the first half of the year was $225,312, down from $266,245 during the same period last year, Dabby said.

Worse, Garcia said the inventory of homes for sale — distressed or not — keeps growing. There are 1,808 single-family homes, town houses and condos on the market, he said.

Developers have been especially hard hit. In the first half of 2008, 143 new homes were sold, compared with 392 during the same period in 2007 and 813 in the first half of 2006.

Sales of existing homes did better with 204 sold, down from 415 in the first half of 2007 and 745 in the first half of 2006, Dabby said.

‘Wonderful future?’

Not surprisingly, real estate brokers say blue skies will follow the storm.

Broker Tony Diaz said falling prices will attract buyers who were priced out of the market during the housing boom.

“This is the beginning of something wonderful,” he said, adding sales picked up in the last quarter after months of inactivity.

Robert Bishopric said: “Deals in Homestead are amazing.”

Four months ago, the Esslinger Wooten Maxwell broker began marketing Homestead houses repossessed by lenders. One of his listings is a three-bedroom, two-story town house in Floridian Isles South. The 1,595-square-foot home is listed at $139,900, or $87.70 a square foot, he said. In March 2006, a previous owner paid twice that much — $281,611 — to developer Lennar Homes.

“Prices have come down so much that young people with good credit can buy a home for the first time, instead of renting,” Bishopric said.

Homes in Homestead are bargains, said broker Suarez, whose company, Castle Realty Kendall, markets foreclosed properties for Fannie Mae, the beleaguered mortgage finance company.

Yet, many of his properties — repossessed homes in good condition — aren’t selling as fast as his listings in urban areas, said Suarez, who has more than 100 foreclosed listings in Homestead, up from about 10 a year ago. He said the demand for houses in South Miami Dade is weak.

One contributor no doubt is the price of gas. With no end in sight to rising gas prices, living far away from job centers is a frightening proposition.

And even investors, who typically would pounce on such deals, are avoiding the city, said Avatar Real Estate Services’ Hendrix.

“If you are an investor, why buy in an area with a lot of inventory, little demand and a high turn over?” said Hendrix. “You can find better deals in downtown Miami, a market that will come back much faster than Homestead.”

Multiple problems

The city was on a roll until the worst residential real estate downturn in three decades hit, aggravated by a deepening credit crisis that has prevented many homeowners and investors from refinancing their way out of trouble.

Making matters worse for many suburban communities is the skyrocketing cost of gas. Some suburban residents have to choose between paying the mortgage or filling up their gas tanks.

Homeowner Antonio Sueiras, who is slowly packing his belongings, is an example of how easy it is to fall behind. His lender, AmTrust Bank, recently began foreclosing on his three-bedroom house near the Homestead Air Reserve Base, one of the few neighborhoods he could afford when he purchased it in 2003.

Sueiras paid $140,000 for the 1,564-square-foot house and put down $42,000. He comfortably paid close to $1,000 a month in mortgage and property taxes. But as property values began to rise, he made ends meet by refinancing his home several times, more than doubling his monthly housing expenses.

Suddenly, his mortgage payments became too expensive. Property values stopped rising, and his fuel expense shot up.

He said his monthly mortgage payment is $2,200, but he makes only about $600 every two weeks as a courier for a private company.

“About $275 goes to pay gas,” said Sueiras, a single man. “The rest goes to pay the electrical bill, the water and to buy food.”

After the price of gas jumped above $2.50 a gallon, the number of his deliveries dropped significantly, as fewer customers can afford the rising courier fees, Sueiras said.

He plans to abandon the house by September. Sueiras said he owes close to $285,000, and the house is worth less than $250,000 so he won’t even try to sell it.

“I am done with it,” he said. “I just want this nightmare to end. The bank can take the house at once. I work and I work, but it never gets better.”

More trouble ahead

Foreclosures are expected to jump as adjustable subprime mortgages reset to higher interest rates over the coming months, pushing more over-extended homeowners into mortgage default.

Carmen Miranda worries he could be one of them. Miranda said he can barely afford the two mortgages he has on his five-bedroom, 6,062-square-foot home he shares with his wife, Monica, and their 2-year-old daughter in the new Portofino Lakes subdivision.

His second mortgage has an interest rate that adjusts periodically. In the last year, the payments jumped from $300 a month to $700 and soon it will reset at a higher rate. His combined mortgage payments top $2,000 a month, he said.

When Miranda bought the house for $272,844 in 2004, he could easily afford it. As the housing market boomed, so did home prices, and he easily refinanced the house. Now, however, he’s had to tap into his savings to cover the second mortgage, he said.

“I will be able to hang on for six to eight months,” said Miranda, an American Airlines pilot who flies four days a week and is a Homestead police officer two days a week.

Despite his troubles, Miranda is still betting on Homestead’s real estate market. In May, he purchased a bank-owned house in Portofino Estates, a subdivision hear his home. The seller was HSBC Bank USA, as trustee for Nomura Asset Acceptance Corp.

Miranda paid $212,000 for the four-bedroom home, a deep discount from the $285,000 the prior owner paid for it in March 2005. Miranda financed the deal with a $169,000 loan from Sky Investments in Deerfield Beach, according to public records.

He plans to rent out his investment property.

“If I end up losing my home, at least I’ll have the house I just bought,” said Miranda, taking a break from working in his garage during a recent hot morning, a police scanner blaring in the background.

Taking in boarders

Unlike Miranda, U.S. Coast Guard member Rony Chinchilla doesn’t have a Plan B to fall back on. To pay his mortgage, he intends to continue sharing his three-bedroom, single-family home with two roommates.

“If I did not have roommates, I would lose my house to foreclosure,” he said.

Chinchilla, who works in Islamorada in the Florida Keys, said the cost of gas, insurance and property taxes on top of sinking property values has become overwhelming.

He regrets having bought in Homestead. For a long while after he moved into his new home in December 2006, he would check recent sales in his community. But he stopped doing it early this year.

“I know prices are going down so I don’t do it anymore,” he said. “It is too depressing.”

The 1,456-square-foot home he bought for $321,940 is now assessed at $215,260, according to Miami-Dade property records.

Chinchilla is using an increasingly common strategy to avoid foreclosure.

Tom Roses, president of the Continental Group, one of Florida’s largest property management companies, said his managers have found eight to nine people sharing homes in Homestead to help pay for housing expenses. Tenants with government-subsidized rental vouchers are becoming a favorite among investors hungry for income.

Many newer communities in Homestead don’t require tenants to be screened, and few are turned down by desperate owners, Roses said. He said many communities are subject to homeowner association documents drafted by developers who wanted to attract investors to their properties.

Chinchilla said many of the homes around him are owned by investors and he has seen a parade of tenants in and out of the homes.

Miranda said he has had to call police more than once after tenants filling nearby houses caused disturbances.

“If it affects the quality of life, it affects the value of our homes,” Miranda said.

Real estate analyst Michael Cannon predicts Homestead’s foreclosure crisis will linger longer than other badly affected residential areas, including downtown Miami, which is dealing with a glut of condos.

“The problem is there is no major nearby employment centers,” Cannon said of Homestead. “People have to drive 37 miles to their jobs in Miami, and it costs them $100 a week.”

Homestead worked well as a bedroom community while gas was cheap and people couldn’t afford to buy anywhere else. But with the growing number of foreclosed homes across South Florida, buyers looking for bargains have choices, he said.

“Absorption will be difficult unless people bring jobs to the region,” Continental Group’s Roses said.

Paola Iuspa-Abbott can be reached at (305) 347-6657.