The new ghost towns (© Construction Photography/Corbis )

© Construction Photography/Corbis

The view from Mari Kunz's new house in Murrells Inlet, S.C., is far from what she pictured when she and her husband, Larry, bought into this Levitt and Sons retirement community last summer.

Instead of tropical landscaping, lush green lawns and a steady stream of other active seniors on bikes, she sees street after street of empty lots, framed unfinished houses and streetlights that don't work.

"We are the only house in Phase 2," Kunz says. "We are kind of out here by ourselves."

Levitt filed for Chapter 11 bankruptcy in November, putting the brakes on construction at the couple's development, Seasons at Prince Creek West. The move left them and the rest of the residents without the lifestyle, amenities or services promised them.

The posh Grand Clubhouse was never built, and the fitness center consists of little more than a gaping hole for the indoor pool and a couple of walls.

Homeowners like the Kunzes are just the latest victims of the tumbling housing market, which has forced a number of home builders into bankruptcy. In the past year, at least eight home builders have filed for bankruptcy protection, according to the National Association of Home Builders, including Levitt of Fort Lauderdale and regional builders such as New Jersey’s Kara Homes; Elliot Building Group in Pennsylvania; Neumann Homes in Illinois; and Turner-Dunn Homes in Arizona.

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A number of others are expected to follow suit in the next year, says James Wilson, senior housing analyst at JMP Securities in San Francisco. Others may simply wind up giving community assets back to the bank to avoid bankruptcy. "The market is really focused now on which builders could fail to make it," Wilson says.   

What they lost
Empty streets and missing clubhouses and swimming pools are just the most visible problems that the customers of insolvent builders face. Many will deal with subcontractor liens on their property that block access to refinancing or a sale. And when things break down —  as they often do in the first year of homeownership — no one is around to perform needed warranty work. The Kunzes have already paid for a broken pipe fitting and drywall work, after they discovered a leak. And the sprinkler system was never installed in their phase of the project.

At Seasons, security also was a casualty of the bankruptcy. Guards who had manned the front of the gated community were fired. The gate is now left propped open during the day. "We are feeling quite vulnerable," Mari Kunz says.

And, she says, they are frustrated because they are still paying association fees for security, an activities director and other staff and services that are not being provided.  

Homeowners are doing their best to pick up the slack. Mari Kunz says she has begun watching her new neighbors' half-built homes to make sure no one vandalizes them or steals fixtures and kitchen cabinets, as some thieves have done on other streets.

And one of her neighbors has begun lining up activities, so the residents' social outlets don't consist of angry homeowner meetings.

The Kunzes are actually among the luckier customers in Seasons; their house was finished before the bankruptcy filing. Dozens of other residents who put down a deposit for the $300,000 to $400,000 homes in this community south of Myrtle Beach don't know when they will see their houses built or their money back. Some had already sold their other homes and were living with relatives. And many can't afford to walk away from their pricey deposit.

"We have seen homeowners stressed. The two couples that have houses across from us … all of their goods are in storage somewhere and they have no idea when it is going to be resolved," says Larry Kunz.

Some states, such as California, require that deposits be held in escrow, or that the builder post a bond. But in other cases, contracts specify that the money will be used to fund new construction. That was the case for Turner-Dunn Homes of Phoenix, which filed Chapter 11 bankruptcy a year ago, leaving many residents with little hope of getting their money back.

Levitt's Florida bankruptcy attorney, Paul Singerman, has said publicly that he has asked the court to return customer deposits obtained after Aug. 29. However, he did not return repeated calls for comment.