ROCKY FACE, Ga. -- Cambridge Drive looks like a fine place to live, but judging by the for-sale signs along the street, there just aren't many takers nowadays.
On this street, among the Bradford pear trees, children's playthings and a dozen or so homes, three residences sit vacant and for sale.
Since the start of the Great Recession, Whitfield County has been hardest hit of anyplace in the region by foreclosures and declining property values.
In 2010, home prices in Dalton fell by an average of nearly 10 percent, federal figures show, the third year of steady declines.
Officials fear property values in general are falling. A shrinking tax digest -- the total value of property from which the county derives tax income -- could drain tax collections, deepening the community's financial problems.
By local estimates, the digest is down by almost 10 percent overall in 2010. Whitfield lost $303.9 million between 2009 and 2010 in a digest that totals almost $3 billion.
"Our overall digest was down, which includes a loss in real estate value, loss in personal property value, loss in motor vehicle values, loss in mobile home values," Whitfield County Tax Assessor Trammell Suddeth said.
Already, the county has dipped heavily into its reserves and for the first time asked employees to take leave without pay in 2011.
The county Board of Tax Assessors has ordered Suddeth to figure out exactly what's going on and what might happen.
"The board is certainly concerned with real estate prices falling and home values coming down with repossessions and bank foreclosures and [is] trying to make sense out of all this," Suddeth said.
Whitfield's freeport exemption, which exempts certain warehouse inventories from property tax, also has eroded the county's bottom line, as has declining sales tax revenue.
The tax commission staff still is collecting data and the report to the board is a work in progress, he said.
Figures from the Federal Housing Finance Agency and CoreLogic, a real estate data and analysis company, show an almost continuous decline in home price indexes in the Dalton Metropolitan Statistical Area since 2008.
After a 3.74 percent gain in the first quarter of 2008 and one small rebound in 2009, prices dropped at an annual rate averaging 4.9 percent over each of the last 10 quarters.
Only the third quarter of 2009 had a slight rise of 1.91 percent over the previous year's 4 percent dip.
CoreLogic -- which calculates its index based on price, time between sales, property type, loan type and distressed sales -- reports that Dalton home prices declined for four straight months at the end of 2010.
Prices declined by 3.92 percent in November 2010 compared with November 2009, CoreLogic reports show. That figure includes distressed sales -- situations where the seller is under financial pressure to sell quickly. If distressed sales are excluded, the November comparison shows a year-to-year decline of 6.97 percent, reports show.
Federal Housing and Financing Agency senior economist Andrew Leventis said Dalton home prices took their most serious beating between the first quarter of 2009 and the third quarter of 2010.
"Over that interval, prices fell 9.3 percent in Dalton, whereas in Chattanooga and Rome, prices fell 1.9 percent and 5.2 percent, respectively," Leventis said.
Leventis said Dalton's textile-based economy felt the impact of the recession more quickly than communities with more diverse industrial bases.
Chattanooga prices have remained "relatively steady" since the first quarter of 2008, he said, while prices in Tennessee as a whole have fallen about 3.7 percent since the third quarter of 2009.
"Chattanooga during the boom years wasn't particularly 'boomy' but it didn't exactly miss out, either," he said. "We're talking price increases of 6, 7 or 8 percent during the middle part of the decade."
Meanwhile, Georgia "is sort of pulled down by Atlanta," where home price conditions have been "pretty rough," he said.
Atlanta had consecutive declines in the first three quarters of 2010 of 4.01, 8.6 and 9.77 percent, respectively, federal records show.
Dalton's situation is not rare, Leventis said.
"There are some areas that have seen much, much larger declines and much more difficult situations," he said.
Federal records show that of the 25 most populated metropolitan areas in the U.S., the Atlanta-Sandy Springs-Marietta area had the greatest four-quarter price decline, 10.1 percent between the third quarters of 2009 and 2010.
Over the last five years, communities in California and Florida had the lion's share of decline. The worst were in California, where prices in Merced dropped more than 58 percent, in Modesto by more than 52 percent and in Stockton by more than 51.5 percent, records show. Across the nation, nine other metropolitan areas in California, Florida and Nevada had home price declines of more than 40 percent in the last five years.
Falling property values are devastating for homeowners, said Gaile Jennings, executive director of the Dalton-Whitfield Community Development Corp.
In the third quarter of 2010, Whitfield had more than 500 home foreclosures, compared to 120 three years earlier, she said.
The city-county agency she heads has been overwhelmed trying to help residents stay in their homes. It helps homeowners get loan modifications and other services, she said. The agency has sponsored two foreclosure fairs in the last two years.
Even a 9 percent loss in home value can erase a significant chunk of equity for homeowners. They will suffer if they try to sell their homes in this market, she said.
"If you can stay in your home and just wait things out, you're in a good position," Jennings said. "But if you can't, that's where the trouble is."
The first wave of foreclosures in 2008 was mostly among borrowers who took part in predatory loans -- variable rates, mortgage payments that were just too high and other lending schemes, Jennings said.
But now, many of the people asking for assistance are people who have depleted their savings to stay in their homes and now face foreclosure. With home values declining, those people have limited options.
Someone who has missed one mortgage payment in 11 months doesn't qualify for refinancing, and selling the home is difficult because the market is saturated, Jennings said.
"You might have paid $120,000 for your home, but if a few of your neighbors have been foreclosed on and their home sold for $100,000, it's hard to expect that price now," she said.
Loan modifications, in which the bank forgives a bit of the loan and refinances the rest at a lower payment, are sometimes a race against the foreclosure process, she said.
"In Georgia, on your third missed payment, the bank can begin advertising the foreclosure," Jennings said. "Sometimes in 120 days, the homeowner can be out of their house."
If national trends translate to Dalton, 2011 could generate more foreclosures.
RealtyTrac, a housing industry analyst, predicts more than 1 million foreclosures nationwide this year. That's more than in any year since the meltdown started in 2006, The Associated Press reports.
Rick Sharga with RealtyTrac Inc. said 2011 "is going to be the peak."
According to 24/7 Wall St., an online financial news and opinion operation, Georgia is among eight states that are running out of home buyers.
Selling foreclosed homes at auction or through quick sales drives down the remaining property values. Governments use those values when levying taxes. Less value means less revenue, and that's hit Whiftield County hard.
"It already is causing us funding issues," county Finance Director Ron Hale said.
From a peak of about $16.5 million, values have fallen $3 million in just a couple of years.
"Our overall budget is about $42 million, and taking $3 million out of that is a huge shot," he said.
He said local governments face the same increases as families in utility costs, fuel expenses, health care and other costs.
Whitfield cut spending $5 million last year, Hale said.
"If nothing changes between now and next year, we will have at least another $5 million that we'll have to take out of the budget," he said.
Dalton hasn't had the financial woes of the county and school system, because Dalton derives most of its income from commercial real estate taxes. Those properties will be reassessed this year.
But the city is hurting, too, said Mayor David Pennington. Setting aside the tax issue, the city's network of small businesses is affected when real estate falters.
"If you can't sell your house, you aren't going to buy another house. That hurts real estate agents," Pennington said.
Financially pinched real estate agents don't spend in restaurants or other businesses and "it just ripples on and on throughout Dalton," Pennington said.
County leaders shored up the budget's red ink for 2011, in part, by pulling funds from a reserve fund, but Whitfield can't pull from that fund again next year without depleting its necessary 90-day reserve fund.
So Whitfield will have to cut spending drastically next year if home prices and tax revenue don't improve.
"This is having a major impact," Hale said.
Contact staff writer Adam Crisp at firstname.lastname@example.org or 423-757-6323. Contact staff writer Ben Benton at bbenton@times freepress.com or 423-757-6569.