Real World Woes for Disney's Ideal Town

Walt Disney (DIS) built Celebration, Fla., as an idealized vision of a circa-World War II small town, where litter-free streets are lined with homes, some featuring white picket fences and front porches. That doesn't mean Celebration can escape 21st century problems. The town's foreclosure rate is about double the state's, as homeowners who paid a premium for a version of utopia fall behind on their mortgages. In December a resident on the verge of losing his house shot himself after a 14-hour standoff with police. Three days earlier the 16-year-old town had its first murder when a man was bludgeoned with an ax. "A lot of people bought homes in Celebration thinking Tinker Bell had sprinkled the town with pixie dust," says Michael Olenick, chief executive officer of mortgage data firm Legalprise in West Palm Beach. "Reality is hitting hard."

The foreclosure rate in Celebration since the beginning of 2009, based on notices that initiate cases, is one for every 20 residents, compared with one per 48 in Florida as a whole, according to Legalprise. Celebration home values have dropped as much as 60 percent from their 2006 peak, while statewide values are down 51 percent, data from Seattle-based research firm show. Foreclosures in Celebration are occurring at a higher rate in part because property owners in financial trouble are walking away from vacation homes in the town, where real estate sells for about 30 percent more than it does in surrounding communities, according to Olenick. Before the recession, people were willing to pay more for living in a Disney "fantasyland," he says.

Craig Foushee, 52, barricaded himself in his home on Dec. 2, shooting at sheriff's deputies and members of a SWAT team before turning the gun on himself. His home had been in foreclosure since October 2009, according to legal filings.

The Osceola County Sheriff's Office says there is no connection between Foushee's death and the murder of Matteo Giovanditto, 58, who was killed in late November by an acquaintance who confessed, according to a statement on the website of the Sheriff's Office. Residents are "in shock" after the deaths, says Angela Sessoms, who has lived in Celebration for 10 years. She recalls visitors saying the town looked like the set of a Disney movie. "With the SWAT team, the roads barricaded, and the school in lockdown, it was like a different kind of movie set," she says.

Disney started building Celebration in 1994, and the first residents arrived in 1996. Located on the southern border of Disney World, 25 miles south of Orlando, it was designed by Robert A.M. Stern, dean of the Yale University School of Architecture, and Jaquelin Robertson of Cooper, Robertson & Partners in New York. The design of the development is called New Urbanism, also known as neotraditionalism, emulating 1950s mixed-use neighborhoods where it was easier to walk than to drive.

The 10,000-person town is 12 minutes from Disney World's Magic Kingdom and has a backdoor access road to the park. The median home value, including single-family properties and condominiums, was $250,800 in October, almost twice the $127,300 median value for the entire state, according to Zillow. For $529,000, buyers can get a four-bedroom, 2,800-square-foot home with a wraparound porch on about a sixth of an acre. In the second half of 2006, at the height of the real estate boom, the least expensive single-family house fetched $350,000, according to Kathleen Carlson, owner of Imagination Realty in the town's center. In the same period this year, the lowest sale price was $210,000.

Lexin Capital, a New York-based private real estate investment firm, bought the 18-acre Celebration downtown from Disney in 2004. Mike Nunez, a spokesman for the company, didn't return calls seeking comment. Disney still owns some commercial property in Celebration, according to Marilyn Waters, a spokeswoman for the Burbank (Calif.)-based company.

The town's Architectural Review Committee maintains strict control over the appearance of properties, dictating paint colors, regulating holiday decorations, and overseeing the size of political signs. Celebration shows its Disney heritage in annual seasonal shows, each with special effects originally designed by the entertainment company. In October leaf-shaped confetti shoots out of lampposts in the village center to simulate colorful falling foliage. During December the posts emit what locals call snoap—soap suds that look like snow. The snow falls four times a night, on schedule, and dissipates without shoveling. "Two of my grandchildren think we live inside Disney World, with Mickey Mouse," says Sessoms. "Except for the recent violence, I can understand why they would think that."

The bottom line: Celebration's carefully controlled environment hasn't been impervious to real-world woes such as foreclosures and lower home prices.

Before it's here, it's on the Bloomberg Terminal.