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In Cape Coral, a boom gone sour

America's 'Little Venice' saw home prices double on speculation. Now, that trend has reversed.

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In the face of a local housing crash, Leigh Strand is defiant.

The founder of Grill it Yourself Inc., she had a booming business a year ago helping Florida homeowners create outdoor kitchens and a barbecue lifestyle to match. Now, her shop is as quiet as the hundreds of nearby homes that stand empty with "for sale" signs planted out front. There are customers – including some who have laid out big plans – but hardly any are moving ahead with a major purchase.

Recently, "I had the choice between paying my mortgage or paying my employees," Mrs. Strand says. "I paid my employees.... I'm not giving up. I'm not going down."

Welcome to Cape Coral, where residents are banking on a combination of grit and the lure of local amenities to see them through a housing recession that's as bad as any in the US.

During four boom years, this sprawling waterfront community, known locally as America's "Little Venice" for its grid of man-made canals, saw home prices double. Much of the momentum came from speculators, who banked on a continued surge. Now, that trend has reversed.

Housing prices for Cape Coral and nearby Fort Myers have fallen 7.3 percent in a year, the seventh-worst decline in the nation, according to the National Association of Realtors. The area leads the nation in the pace of foreclosures: More than 1 in 20 mortgages here are now in the process of being taken over by a lender, according to First American's LoanPerformance in San Francisco.

If Cape Coral today shows the housing crisis near its worst, just how bad is it?

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