Life in 'Southern California's Foreclosure Alley'

In "What Happened to the Neighbors?," GQ sends writer Charles Bowden "to live in one of the loneliest neighborhoods on the planet" in Lake Elsinore, part of what they refer to as "Southern California’s Foreclosure Alley."
                     
For his rental he picks a place not far from where bobcats took up residency in August in a foreclosed home. Bowden gets to know his landlords, who are struggling to hang on to an "underwater" house, as well as neighbors in similar situations, and concludes the area won't be bouncing back any time soon:

These houses are seventy-five miles from jobs in a world where oil gets ever scarcer. They are large and thus expensive to heat and cool. And forgive me, Southern California contractors, but they are junk. The market for $450,000 houses with ARMs waiting like assassins in the financial tall grass is over for good. It is quite possible that we have built and financed houses, developments, whole towns, without futures, that will collapse and become curious ruins.

That's a sobering  thought as this slice of life plays out in one neighborhood after another across the Southland. A hat tip to Pete from Mar Vista for calling the article to L.A. Land's attention.

-- Lauren Beale

Thoughts? Comments?

Photo: Bobcats photographed in August at a vacant foreclosure in Lake Elsinore. Credit: Karen Brown

Comments

[MyLessThanPrimeBeef]

Maybe it's time for a little Percy Bysshe Shelley with a cup of hot apple cider (homemade, not from a Starbux):

I met a traveller from an antique land
Who said: "Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
`My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!'
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

We are all Ozymandias now!!!

[keith]

I remember the lake being green, not blue, and smelling kinda bad when in years past I'd go test boats out there. Other than that, probably spot on. Let's face it, when those homes get down to the $150k range, they'll start selling again and the neighborhoods will fill up. It's all about finding the right price, and it will be found over the next couple of years. Not to worry.

[Scott]

Unrelated, yet related question: Our HOA dues were just raised about 25% due to "the number of foreclosed homes in our (64-home) tract." Shouldn't the banks be paying those dues??

[Apartment for Sale in Dubai]

You make me feel guilty.

[Tim K.]

Scott - the banks *should* pay those HOA dues, but typically they don't. I used to live in a condo where about 4 of the 14 units became lender owned and none of them paid their HOA dues. It was like pulling teeth getting one of the owners to pay his dues too.

That's the major downside to HOAs - people pay their HOA dues last usually, and so some HOAs either resort to nasty tactics to get their members to pay, or they simply take their lumps and force all the other members to pay more. Kind of like government taxation. :(

[syscom3]

Those homes are going to drop below $100,000. Just as the story says, they are far from the jobs. Even if you can easily afford the transportation costs, who wants to put up with the multi-hour commutes?

And I bet those new homes also have steep HOA's and Mello-Roos fees.

I forsee a mass exodus from the IE back to OC and LA.

[Laker]

Scott ,
The banks should pay it but in many case they simply "forget" or delay payments. The best course would be to take them to court. In court you will win easily, all you'll need to prove is that they hold the title/ownership simply by pulling the record from the public records.
You would also get money to pay for your attorneys and other expenses.
Good luck!

[Inland Empire]

In the high desert there 100's of home sitting empty. This included Victorville, Adelanto, Hesperia and Barstow this is a area with no jobs and lots of new house and long communities to high paying jobs. Look for price to level out at 130k and stick for years currently there over 270 homes on the MLS listiing for >125k and they where built after 2001. People are not buying these home most sales are to investor and the rental market is not doing that great either.

[SoCalDriver]

For some, it is not necessary that hours be spent commuting between home and work. With high-speed Internet connectivity, many can telework from their homes. In my line of work, many of my co-workers are teleworking from home using the Internet, and do not have the need to be in the office frequently. One such co-worker lives near Lake Elsinore and only appears in the office about twice yearly. He has a 3000+ sq.ft. home on a large lot and finds the area to be much safer for his family as compared to where he could afford to live in the L.A. area.

[tarbubble]

Scott, my experience (I'm on an HOA board, lucky me) is that the banks don't pay the back HOA dues until the unit/house sells. That's in addition to the loss the HOA takes when the unit is foreclosed and all but the primary lien is wiped out (meaning we don't usually ever get what the ex-owner owes us). I don't know what the laws are concerning housing tracts vs. condo/PUDs, but we have a legal cap on the % by which we can raise dues annually. A 25% increase sounds like it's over our cap; if you want to be a rabble-rouser you can look into whether your HOA acted legally or not. We've been trying VERY hard to not raise dues, although we did have to have a special assessment last year. Instead we've been slashing expenses and running bare bones.

Tim, we always try to negotiate with our members who are behind. We don't typically start collections until we're at least three months behind and have had no response from the owner who is in arrears. What makes it hard to be charitable is that we've been scammed twice by owners who defrauded everybody on their way to bankruptcy court and eventual foreclosure, then left trashed units - one of which still hasn't sold. I don't think the HOA has seen a dime from it in 3 years.

The next home I buy (if I ever buy a home again) will not be in an HOA.

[sheila]

what a waste. you think about all the opportunities these builders had to make "green" energy-efficient properties, and instead, they went for the mcmansion trash that is as hard on the environment as it is on the wallet. if these houses were half the size and twice the efficiency and had their own solar panels, even at these prices they would be fully occupied, without a doubt.

too bad we have been unable to get any green building codes past schwarzenegger's vetoes. his buddies in big development are 100% to blame for the glut of crappy, energy-wasting boxes they call "homes," and did so with his full, aggressive support.

maybe at some point, somebody in our government will start to care more about constituents and less about lobbyists. that would have prevented all these problems.

[Pablo Oliva]

Back in September, KCET documented the devastation that foreclosures were having in the Inland Empire, which includes Lake Elsinore. A very disturbing report: http://preventingforeclosure.org/foreclosure-alley/

[Michael Snyder]

As a Contractor I both bless and curse those who built much of the junk passed off as houses over the past five years. I bless them because I'm grateful to be working in this economic environment , and I curse them because of the idiotic lazy shortcuts and not to code stupidity I have to repair. A home's electrical system is no place to take shortcuts. I also have to heap a bit of the blame for the shoddy work on the inspectors that are supposed to be the consumers advocate with regards to building standards.

Having said that it's Christmas eve and I'd like to wish all of you who've patiently (mostly) endured my pontifications over the past year the very best this season has to offer.
Merry Christmas, Happy Hanukkah, and a Joyous solstice to all of my Druid friends.

ps: That neighborhood's toast for a decade.

[ocrenter]

we now have a foreclosure story from GQ.

where were they and the LA Times even 2 years ago?

http://bubbletracking.blogspot.com/2007/02/flippers-delight-tuscany-hills.html

http://bubbletracking.blogspot.com/2007/02/flippers-delight-tuscany-hills-part-ii.html

Happy Holidays!

[Dan]

For Keith (above) - Elsinore is one of the largest natural lakes in the state, and it's shallow (unlike Tahoe) so not blue.

Lk. Elsinore and the entire Perris Plain/San Jacinto Vly. has some of the highest plant and animal species diversity in the U.S., including several threatened/endangered forms found no where else. I assure you these developers fought (and continue to fight) environmental regs tooth-and-nail, arguing they simply can't profit from small developments, lower density, etc., but have to sprawl using cheap modular construction. After all, the people want giant homes, and they're just filling demand.

Sanctimonious public officials held pro-forma hearings as they approved project after project, particularly once the paltry open space reserves were agreed upon and set aside (mainly in areas too expensive to grade, like steep slopes). Residents would fight back, but can't really compete w/ a Lennar or a KB Homes - anyway, why stop when the money's still coming in?

And now this is the inevitable result - hundreds of acres of denuded land, 1/2-build junk, and soon, all the accompanying urban blight. Nice work, IE.

[k2polo]

Convert all these homes to duplexes and triplexes and reduce the prices..put more people in homes and abandoned areas and everybody wins. The commute would be a problem though..

[Inland Empire]

n the high desert there 100's of home sitting empty. This included Victorville, Adelanto, Hesperia aninvestor and the rental market is not doing that great either.

Posted by: Inland Empire | December 24, 2008 at 11:34 AM

I have been posting on this board for several years using "Inland Empire". I did not post this message. Perhaps this person should get their own handle and quit using mine.
THANKS!!

[Joan Jett]

100s of housing sitting empty? Are you kidding? There are thousands and thousands. For every bank owned home you know about, there are 300-500 in the shadow inventory.

People who bought REOs for a 50% discount a year ago in the IE are living with a $60k-$80k loss already. Today, the smart "investors" buying the two or three REOs the banks throw out each month, are next year's losers.

[sfvrealestate]

Scott, usually the banks will pay off the existing HOA fees when they re-sell the foreclosed condo. They factor it in as a cost of sale. Hopefully, when all the foreclosed units sell, you'll get a nice drop in your HOA dues. If there is a bright side, at least your association isn't draining its reserves to cover the difference -- low reserves can keep lenders from funding loans on condos in addition to resulting in low maintenance.

[DT]

Good article, but I think eventually these homes will sell. It may sell for 50K, but it will sell. I agree about the telecommuters but also retirees will move to these areas as well. When the population becomes large enough to sustain businesses, that will create jobs(although not good jobs probably) and attract more people to those areas to work and live there without having to commute 75 miles to work. But that will not happen until the prices drop enough to attract enough people that want to live in these areas. So in some sense, government efforts to prop up the prices of homes are causing the rapid demise of businesses in these areas.

[unomas]

Thank you for linking the article.

[Crash Burn]

Laying it on a bit thick I think. I think some retirees will love to have a huge mansion style house for under 100K within driving distances to their children in Los Angeles. They would be quite shocked they don't have to go all the way to Arizona. I don't see these being reclaimed by the desert unless the banks never try and sell that at their real value, but I do see a potential boom in the golfing industry.

AKA 75% of the capital was wasted, not 100%. But when you are underwater, I guess you just don't care how deep.

[NoWayinLA]

Those homes are going to drop below $100,000. Just as the story says, they are far from the jobs. Even if you can easily afford the transportation costs, who wants to put up with the multi-hour commutes?

And I bet those new homes also have steep HOA's and Mello-Roos fees.

I forsee a mass exodus from the IE back to OC and LA.

Posted by: syscom3
-----------------------------------------------------------

Ummm... no. People bought in the IE because they were priced out of OC and LA (any neighborhood they'd feel safe living in, anyway), and that's not going to change anytime soon. Not everyone thinks a WWII-era bungalow with a postage stamp sized yard with bad traffic and a crushing mortgage is worth the tradeoff for nice weather.

The exodus is to states outside of California, and they won't be coming back.