I am driving to ground zero of the collapse of the late, great American dream: a sliver of California’s Inland Empire snaking along the I-15 behind Orange County and Los Angeles called Foreclosure Alley. Across Southern California, nearly 500 families lose their homes to foreclosure each day; Foreclosure Alley has the highest concentration of such homes because the construction is newer and the financing looser. It is a kind of malignant tumor of the real estate bubble, a region where not much was going on until about ten years ago, when a boom occurred in a new product: bedrooms. Southern California—like Florida, Arizona, and Nevada—became a perpetual-motion machine of real estate profit, a place where everyone assumed they would have perfect teeth, large engines in their cars, and endless home equity.
Now the bedrooms stand empty, and whole subdivisions are becoming vacant—a ghostly physical fallout from this past October, when the housing collapse deepened and dragged the whole economy down with it. Up in Pasadena, a woman in her fifties who was the third generation to live in her family home put her houseplants out on a neighbor’s porch with a note—Please take good care of us or find us a good home—set her house on fire, and shot herself in the head. She’d taken out one of those equity loans so she could enjoy the boom times, couldn’t pay it, then sold the house and became a tenant; and then the new owner lost the property in a foreclosure. The sheriff had been coming that morning to evict her.
The town I am headed for, Lake Elsinore, is where people sleep who work in Orange County, Los Angeles, and San Diego. Nestled between the brown hills and blue lake and under the brown sky of smog, it is seventy-five miles from a good paycheck and surrounded by new developments. I will be renting a nearly brand-new unwanted home in a town that eight years ago had some 29,000 souls and now has nearly 50,000. Their fate is uncertain. Seventy-one percent of them owe more on their homes than the properties are currently worth.
A couple of years ago, Lake Elsinore adopted the slogan “Dream Extreme.” When I arrive, a big yellow billboard advertising emergency-home-financing help announces a new one: “Stop the ‘F’ Word (Keep Your Home!).”
The agency’s phone number is 1-800-RESCUE-ME.
my own little dream, 53198 Beales Street, is a 3,113-square-foot, two-story, five-bedroom, three-bath home in the Rosetta Canyon development. It is the largest house I have ever occupied. The kitchen counter is an endless expanse of fake granite; the two-car garage is big enough for his-and-hers chariots; the walls are so thin a Chablis drinker could put a fist through them without dropping the Brie from his wafer. There is so much space, in fact, that after designating the Gourmet Kitchen, Pantry, Nook, Family Room, Dining Room, Living Room, and Master Bedroom (which takes up half the top floor) and after numbering the four other bedrooms, the developer simply threw up his hands and labeled one large space “Bonus Room.”
The house is technically a “Plan Four”—one of six layouts offered by the developers. “Raise your family next to nature,” says the Rosetta Canyon brochure. “This exquisite community showcases an array of delightful homes and master-plan amenities.… No matter how you spend your days, the good life comes naturally.” Yes, it is easy to look at these cookie-cutter homes and mock all this marketing-speak, but to do so is to overlook the hunger that fuels American life. The people who bought these homes knew this: If you stretched for a five-bedroom with three baths on the hilltop, you could look down on poor African-Americans and Mexicans making do with the old Lake Elsinore—the tiny houses huddled around the lake itself—and your main worries were over. You paid the mortgage, watched your house gain value, ramped up the home-entertainment center to full speed, and worried that the GOP might go soft on you. You couldn’t lose your house, bang!, just like that—until you could.
The thing about a real estate bubble bursting is that it kills democratically: Real estate sellers and buyers go down in tandem. My landlords at Beales Street, Brian and Sheri Groen, were big players in the boom. Sheri has sold maybe 200 houses in Rosetta Canyon, and until this year Brian’s life revolved around classic muscle cars and flipping homes. Now both passions have gone out of him. He has the look of a surfer—sport shirt, tousled hair, warm smile—who has been beached far inland as the tsunami of cheap easy money recedes over Southern California. He lost his job; Sheri still hangs on. A bunch of the guys who once worked with Sheri have been canned, and they now have a business where they haul away the televisions, furniture, and whatnots left behind by folks who’ve abandoned their foreclosed homes.
Brian smiles and shules from leg to leg. He knows the market is bad now, but it’ll come back, don’t you think? You know, the credit will flow again through the arteries of real estate, people have to live somewhere, they need houses, there have been dips before, it always comes back.
This is not the same, I say. This is different. This is the big one.
Brian falls silent, then recounts the busts he’s ridden out before and says that you can always make money and money is not what life is about. Across the street is a house bought by a colleague who planned to flip it but then got laid o also. Thinking out loud, Brian offers that maybe in this collapse of the market, it would be a good time to get some land, a place to store his collection of muscle cars.
Brian bought my domicile for around $400,000 about two years ago, hoping to flip it. Now it is worth maybe half that, and he is happy to rent it, unfurnished, to me. Here in Rosetta Canyon, mine is one of 900 houses, around 150 of which have gone through foreclosure. Fifty percent of recent home sales in the area were of foreclosed properties, and many of the other half sell at the same price as foreclosed homes. Those that don’t sell go to brown weeds and algae green swimming pools. My next-door neighbors on one side have planted their backyard with corn and squash. On the other side, all day, I can hear my neighbors out sorting bottles and cans as they prospect for recyclable gold.
As I explore the neighborhood, I become a visiting vandal. I pull over when I see a brown lawn, look over the wall, and see an empty hot tub and swimming pool. A notice on the door announces that the city has cut o water for nonpayment. I go in. The kitchen cabinets still have lots of food. The recently departed was a lawyer; his garage is stuffed with nice executive desks from wherever the law office once thrived, and the nicely framed law certificates have been left behind. In the family room o the kitchen, several Jeppesen ring-bound air manuals are piled up: The attorney was also a pilot. Books are stacked on the floor—a biography of Bill Clinton, Michael Crichton’s State of Fear, a six-box video set of the Jenny Craig library for getting lean and mean. On the kitchen counter is a bottle of Jose Cuervo Especial. Empty.
As I wander both floors, the place has the look of a burglary: furniture, books, toiletries scattered everywhere, computer printers left behind because there is not another word to say. The
re is something maybe a little sad about all of these possessions, bought and so easily discarded in a moment’s desperation. And something scary, too. The people who owned these things are the foundation of our consumer society. They mow their lawns, collect their DVDs, and buy cars they slave to pay for. It is not a question of whether they deserve a seat in the lifeboat. They are the goddamn lifeboat: the family-raising, credit-card-spending American Buying Machines.
i leave my little mansion, get in the car, and drive out the Rosetta Canyon access road, along which two huge orange banners flutter by the pavement. One hovers over a freshly bladed lot where RVs may or may not be put up for sale. The other offers bank-foreclosed homes. I slide downhill past shopping centers with mammoth parking lots but few cars, cutting under the freeway to downtown. Below is the lake, where a marina is planned but now seems as likely to be built as a spaceport; up on a nearby hill sit old mansions built during the late ’20s, thrown up just in time for the Great Depression.
The working people who fled the crushing rents and street gangs of Los Angeles and San Diego arrived in Lake Elsinore not long after the millennium, along with those fine-print funny-money loans. They could handle the traffic-choked commute so long as they had something nice to come home to. So a few years ago, Lake Elsinore poured millions of its booming tax revenue into downtown rehab: diagonal parking, trees, restaurants with wine lists and four-page menus. And now the downtown is on life support as customers stay away and businesses bail. Main Street currently has three types of businesses: the fancy new restaurants that won’t last, the new Spanish-language taco joints that might, and abandoned storefronts. Just last week, a printing business down the block folded after fifty years. The big-box stores along I-15 also have few customers.
Larry Johnson is one of my new neighbors; he runs Ongoing Collection Solutions and Recovery right downtown and has been a bill collector since age 13, third generation in the business. “Five years ago,” he notes, “we had eight collectors. Now we have three. No one has any money to pay debts. I’m willing to do anything, $5 a month, $10. Before, most of the people I dealt with never planned on paying their bills; they were committed deadbeats. Now it’s ‘I’m a single mother’ or ‘I’m a college student.’ And they can’t pay anything. In the last ninety days, payments just stopped.”
Scott Burns works for the city just down the block. He handles foreclosed properties for a simple reason: “Our permit side of things is dead. No one comes in for a building permit.” The district has instituted a “green lien,” in which Realtors must keep the lawns of foreclosed homes green, and this bill becomes a debt to be paid by the new buyer, should such a creature ever appear. In nearby Murrieta, 7 percent of homes are now in foreclosure, and the current city-council race pivots on the issue of what to do about the brown lawns that come with abandoned homes. Some plucky local entrepreneurs have even set up a lawn-painting company nearby; for a few hundred bucks, they’ll come with their biodegradable spray and turn a foreclosed lawn green again.
As one local pol in Lake Elsinore explained to me, the value of the word recession is it gives you a way not to say the word depression.
And then she laughed.
the houses of Rosetta Canyon stare out with blind eyes, the shades pulled and, at night, few if any lights on. This is a place where putting your trash out the night before pickup or pulling your car onto your lawn to wash it will earn you a citation by the neighborhood association. It is a Place for Families—and the way of life for these families is to never be together. The parents work an hour or two away and the children are at school, so the streets are always empty. Even on weekends, there is silence as exhausted people rest so they can face another week.
Across the street from my place is a “Plan Six”: 1,979 square feet, four bedrooms, two and a half baths, but sorry, no Bonus Room. Vitaliy Podlisetskyy is out front stapling up a sign supporting Proposition 8, the gay-marriage referendum. No, he has nothing against gay people, he says; it’s just that if this doesn’t pass, they will teach his kids to be homosexuals in the public schools.
Vitaliy and his wife, Yelena, are the essence of Rosetta Canyon. Six years ago, they left the Ukraine with two kids and a strong appetite for freedom and God. They’re in their midthirties now, have had two more children, and are fledgling homeowners about to be devoured by that specialty of the fabled Western world: capitalism. As he sits in the living room of his Plan Six, Vitaliy says, “We bought this house at the highest price in December 2006.”
That means he and his wife paid around $400,000 for a home that is now worth maybe, just maybe, the current asking price for a new Plan Six, $293,000. This is called being “underwater,” which means you owe more than your house is worth. You have a lock on a piece of junk. As it stands, the Podlisetskyys can pay only about half their monthly payment, and the bank has said they’re on their own, so Vitaliy roams the Internet looking for some outfit that can renegotiate his mortgage and save them all.
“I didn’t expect this economic situation,” he allows. “We wanted to be normal people and work hard and pay our bills.”
In recent months, there’s been a lot of talk from right-leaning pundits about poor people—especially poor minorities—who bought houses they didn’t deserve and by doing so destroyed the American economy. That talk is at least partly correct: People who bought houses with adjustable-rate mortgages they couldn’t pay are dumb—just as dumb as those college-educated boys and girls on Wall Street who peddled mortgage paper they never really read, and just as dumb as the bankers in all those cities around the globe who bought the mortgages as they smoked cigars and drank twelve-year-old scotch. The only real dierence between the working souls who signed on for the mortgages and the highfliers who profited from them is that the people on Beales Street intended to pay their debts.
Consider the Podlisetskyys, public enemy number one according to conservative radio stars: They came here because there is work and because they are born-again Christians and America is God’s country—every politician can tell you that much. Back in the Ukraine, Yelena got her degree in mechanical engineering, and Vitaliy bagged one in maintenance engineering. He also was a bodybuilder, and for a while things seemed okay. He became a personal trainer at a gym, and Yelena worked at places like Costco.
They were living in an apartment in Orange County when they decided to buy this house—partly, he explains, to escape what he calls “the Spanish.” Now Vitaliy has lost his gym job, because few will spring for a personal trainer these days. Yelena left Costco to work at the Goodwill store, but that ended because Goodwill had to lay o a lot of folks. Now she’s back at Costco part-time, making eleven bucks an hour. For a while, Vitaliy was driving 150 to 200 miles a day to work, until a hit-and-run accident totaled his vehicle. He thinks this may have been God’s will, since he was getting up at 3:45 a.m. to go to a maintenance job with L.A. County and not returning home until 9 p.m. He could hardly square
that schedule with being a good family man.
Yelena says, “It is very, very hard. Everyone is just trying to survive.” And then she looks out with Soviet eyes and notes, “In our country, we have tough times. This seems normal.”
Yelena is busy in the kitchen, getting things ready before she heads o to her part-time job. Food is bubbling on the stove, an open Bible stares up from the coee table in the living room, and there is a family portrait with Vitaliy and his sons dressed like tough dudes in an old Western and his wife and daughter decked out in pioneer bonnets in studio-provided Americana costumes. The house is immaculate. One wall is nothing but certificates their children have won by acing spelling bees in school.
The Podlisetskyys combat the economic meltdown with prayer. When they get some money, they intend to apply for citizenship—but the filing fee is nearly $600 a head, and money is tight right now in the land of the free and the home of the brave.
Vitaliy believes that “the United States will wake up. I am asking myself, why this style of life here? I don’t know the names of my neighbors. In the Ukraine, I would know everything about my neighbors.” He likes the book of Revelations—he can see the sacred words becoming fact right now in these United States. This is End Time. It is obvious, he explains: “Too many signs right now. People will start to think about life, not just business or money.”
There is a judgment coming.
That judgment will come as ARMs, adjustable-rate mortgages that will soon strangle more families out of their homes. On Beales Street, many of the families that surround me are paying merely the 1 percent interest on their mortgages or even less. But in three to five years—depending on what kind of suicide note a person has signed—the payments will jump way past reach. Some people in other parts of California may be expected to pay as much as $12,000 per month. Can you please find for me the mortgage broker who thought it realistic for anyone, no matter their credit, to pay that much?
Not to worry, everyone thought, because homes magically increase 10 to 20 percent per year, and you’ll have a nice profit. Well, nationwide, upwards of 2.5 million homes have gone into foreclosure so far this year, and around 40,000 fall into deliquency each month. Think of those delinquencies as dead homes walking. Still more are joining the queue. There are currently 7.5 million mortgages underwater, and when those homes go into foreclosure, the $1 trillion bailout will look like powder-room money.
What then will become of places like Lake Elsinore? There will still be a lake, and the sun will rise, and at night stars will stare down from the heavens. The faith of our fathers tells us that places like Rosetta Canyon will go through a shakeout, prices will lower, and new smiling families will appear, and the American dream will once again populate culs-de-sac as God intended.
I doubt that.
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.
Rosetta Canyon ends abruptly at the wooden fence in my backyard. When I walk to the edge of the development and look off, I see in the dry hills signs of old tumbledown ranches and spent farm equipment—all the stigmata of that earlier rural life when Americans generally had less money, less credit, and less house. It is like staring into some distant era, one that maybe is not all that far off. Back in August, just over the hill from my house on Beales Street, a family of bobcats moved in and colonized a similar abode.
For now, 53198 Beales Street remains empty—a vacancy that weighs not just on the neighborhood but on us all. And while we hold our collective breath for the promised rebound, I say: Welcome to Rosetta Canyon! I’ve got four extra bedrooms here, plus the Bonus Room—and if you’re lucky, I’ll give you a deal on the Nook.
charles bowden is a GQ correspondent.