Stockton Goes Bust

Stockton Goes Bust

In California’s Central Valley, the collapse of the housing bubble is causing acute misery.


Cathedral of the Annunciation is one of the largest Catholic churches in Stockton, California. It is a vaulted brick building dating back to the mid-twentieth century, its interior, lit by shards of sunlight filtered through elegant stained-glass windows, as calming as that of any old-world cathedral. On Sundays thousands of parishioners stream in for services; latecomers can’t even get in the doors. Some of the sermons are in English, others in Spanish. The acoustics are lovely.

Annunciation is at an economic and ethnic crossroads. To the north are some of Stockton’s more prosperous neighborhoods, with tree-lined streets boasting lovely Victorian houses. To the south, as one approaches the large industrial port area, is an increasingly dilapidated string of communities, the lampposts tagged by gang graffiti, the parks a magnet for gun-toting drug users and dealers, the houses in disrepair. There are large homeless shelters and soup kitchens. Many of the buildings are boarded up, and some of the lots are strewn with trash.

Parishioners come from all directions and walks of life, and they reflect the area’s diverse ethnic makeup: Anglos, Filipinos, Chinese, Russians, Poles, Mexicans, Colombians and more. For the past four or five years, almost all of these disparate worshipers have shared a common concern: wherever on the economic totem pole they began the decade, they have since slid significantly downward—from wealth to something less, from middle class and secure to middle class but insecure, from struggling working class to poor, and from poor to desperate.

What is happening in this community is something like the opposite of gentrification—call it “shabbification.” And while the predicament is not unique to Stockton—cities and towns across the nation are suffering similar downslides in the wake of the housing bust—it is particularly acute in this Central Valley city of 290,000 residents. A forty-five-minute drive south of the state capital of Sacramento, Stockton has been savaged by foreclosures and collapsing real estate values, more than almost any other sizable town in California—itself one of the epicenters of the country’s housing crisis.

For the past two years Stockton has ranked either first or second in the country on Forbes magazine’s Misery Index. That doesn’t mean it resembles the urban apocalypse of Camden, New Jersey—which is in such disastrous shape that Forbes doesn’t condescend to critique it. It doesn’t even mean Stockton’s on par with, say, Detroit. Rather, like Cleveland, which currently tops the Misery Index, Stockton is a midsize city whose functionality is being undermined by growing levels of poverty, homelessness, insecurity and immobility (since those who want to move can no longer sell their property and start afresh elsewhere). In recent years declining high school graduation rates, which hit their nadir in 2007, have been accompanied by rising crime rates: in November Annunciation’s Altar of Remembrance displayed photos of those who had recently died; many were shockingly young, murder victims of an increasingly brutal, out-of-control gang culture. The town has an unemployment rate of about 18 percent, but with large numbers having stopped looking for work, community organizers estimate that the true joblessness rate is closer to 25 percent. Stockton is, in some ways, a town whose boots are now too big for its feet, plagued by a gnawing, pervasive understanding that its best days are irretrievably behind it.

* * *

For many of Stockton’s residents, Annunciation has become a sanctuary from the recession-era blues. When jobs disappear and homes go into foreclosure, the church community rallies around its own, providing solace, perspective and, often, charity. With state and city services stretched beyond the breaking point, places of worship and other community organizations are increasingly stepping up, keeping residents afloat who would otherwise sink into destitution. Many of the new poor report relying on churches and other places of worship to keep their spirits up during these tough times.

But even Annunciation, faced with declining contributions from its members, has had to lay off some staff and reduce the pay of others. For 63-year-old Yvonne Harrold, director of religious education for the children of church members, this meant a salary reduction of $400 a month. A few years back, Harrold’s husband suffered a stroke, and he has been in a rehabilitation hospital ever since. He wasn’t yet 65, so the family had to pay a significant part of his medical bills before his Medicare coverage kicked in. Despite generous charity contributions from her fellow church members (who raised $5,000 to help her), Harrold still couldn’t make ends meet. She let her utility bills go unpaid; she fell behind on her mortgage; she borrowed money from her mother.

Harrold was lucky that her bank agreed to renegotiate the interest rate payments on her mortgage, allowing her to stay in her home. But in other ways her financial equilibrium was destroyed. “I can never pay my full bill,” she says. “Your lifestyle changes when the money doesn’t come in, when it’s cut by a third. It’s hard to live like that.” When her central heating system broke two years ago, she left it unfixed, instead putting small electric heaters into her mother’s room and keeping her coat on through the winter. She canceled credit cards and toyed with the idea of selling her car. She cut out meat from her regular diet and stopped going out to restaurants—although, she admits sheepishly, “Last night we splurged: my mother paid, and we went out to McDonald’s.”

For church volunteer Janice C., a school administrator a few years out from retirement, the collapse led to school district cuts that ultimately eliminated her job. While she negotiated for a decent severance package, she lost her health insurance—and, as a melanoma survivor in her 60s, she found that buying insurance cost more than $1,000 per month. She lost her dental and vision coverage too, and shortly afterward had to spend thousands of dollars on root canals.

A divorcée, Janice had purchased her home relatively late in life. But after losing her job, she could no longer pay her mortgage. The house that she had bought for $300,000 was foreclosed and sold at auction for $175,000, and she lost her $30,000 down payment.

Janice rented a house in a poorer neighborhood and started looking for work. The modishly dressed administrator—her stylish clothes now a bittersweet reminder of lost affluence—earned $138,000 a year, took ski trips to Lake Tahoe and traveled the world on her vacations. When interviewed in late fall for The Nation, she was working part time in a clothing store, earning $9.50 an hour. “I can’t shop like I used to, to be sure; can’t go out and eat,” she says. “I can’t be a member of a gym anymore, because I can’t justify $45 a month. And I can’t gift to my nephews and nieces—who are many—as I used to.” That said, she says with a smile, her stockinged feet tapping the floor as she talks, she now is more involved in Annunciation than she has ever been, volunteering more, baking cookies, spending time with her friends there. “It feels right. I feel like I get so much from it in terms of friendship and support, and a connection to God like I’ve never had before.”

For Matthew Joseph, a 49-year-old steelworker originally from the Bay Area, and one of the church leaders who give Spanish-language sermons, the disintegrating local economy has resulted in years of heartache and struggle for him and his wife, Celia. In the early 2000s, Matthew and Celia—originally from El Salvador—moved with their three kids into a brand-new house in the new community of Weston Ranch. Over the next few years, the value of their home rose from $245,000 to $545,000. Friends and relatives urged them to cash out while the going was good; after all, the kids had grown up and left their parents’ home. If the Josephs had moved into a smaller place, they would have created a large financial cushion for themselves as they neared retirement. But they stayed. It was, they figured, a comfortable two-story home on a quiet street, with a red-tiled roof, a two-car garage and cream-colored carpeting. They had their Bibles and other religious books on the shelves, statuettes of Jesus on their mantelpiece, a wooden cross engraved with the Lord’s Prayer on the hallway wall, photos of their kids on the little piano in the living room. Why would they want to move?

Matthew was earning $41,000 a year working for a steel company as a maintenance mechanic on high-rise building projects. But on May 1, 2009, he and most of his 125 co-workers were laid off. His boss told him it would be for only two weeks; instead, it turned into eight months. “I lay on my bed in a fetal position,” recalls Matthew, a large man with receding black hair and a gentle, somewhat bewildered-sounding voice. “I was starting to look at the things like, ‘What am I going to cut back on in my house? Where do I trim the fat?’ At the same time, my house went upside down.”

The value of Matthew and Celia’s house dropped to $170,000, so they couldn’t refinance to cover the hole in their income. The couple hunkered down, saving pennies, running through their savings, trying to survive the storm. They replaced meat with beans, holidays with staycations. They lost their medical insurance and racked up bills for dental work and medicines Celia needed following a workplace accident. Matthew took a massage therapy class so he could at least massage some of his wife’s pain away. “I panicked,” he remembers. “I was at a house payment that would take all of my unemployment check and leave me with nothing. For a year, I worked with my bank to get to a place where I’d have enough to eat and have a place to live.”

After nine months, Matthew finally found work at another local steel company. But his wages had gone down to $35,000; he had to pay more for his benefits; and he lost seniority, getting only one week’s vacation a year—though perhaps that didn’t matter so much, since he and Celia could no longer afford to go anywhere. Moreover, he says, he and one other colleague were expected to do the work previously done by six men.

During the Great Depression, the Central Valley was a magnet for refugees from the Dust Bowl. In the decades following, towns like Stockton flourished, becoming hubs for agriculture and industry and centers for companies with Defense Department contracts. They offered a good, affordable quality of life, decent schools and the conservative values of the heartland. “Stockton was spectacular,” recalls Annunciation deacon Mike Wofford, whose parents, both teachers, relocated his family from Oklahoma to a small community near Stockton in the 1960s. “The downtown had theaters where people could go with their kids. The downtown community was very alive and vibrant. The port was very active. It was a much healthier environment. At school, you never heard of kids getting into trouble with gangs and drugs and stuff. It was a Father Knows Best community.” In the 1980s and ’90s, things started going wrong: local jobs dried up, the schools deteriorated, gangs and drugs began migrating from Los Angeles.

For a couple of decades, however, the rot was more or less masked. As property values began to soar, especially in the Bay Area and Silicon Valley, Stockton and nearby towns like Merced and Modesto, as well as Sacramento suburbs like Elk Grove and Natomas, rebranded themselves as commuter exurbs. Affluent professionals moved in—especially to the new tract-house communities ringing the core of old Stockton. Real estate values began rising, and then soaring—three-bedroom tract houses in some neighborhoods, supposedly removed from the woes of gang violence and urban crime, tripled in value over four or five years at the start of the new century, selling for well over $500,000 in some of the developments during the height of the boom. Adding to the frenzy, developers bought up huge tracts of land to convert into identikit housing units. Large numbers of jobs were generated in construction and service industries—malls, restaurants and the like—to cater to the new residents, and city tax revenues increased. Like many other Sunbelt communities whose original raison d’être had been replaced by a “grow, grow, grow” mantra, Stockton believed it had created for itself an impregnable virtuous circle.

When the real estate bubble burst, however, property values vanished even more quickly than they had been generated—declining by an average of more than 50 percent citywide between 2006 and 2009. The jobs disappeared. The city’s tax revenues collapsed. And despite Mayor Ann Johnston’s progressive leanings, city services hit the skids—the number of police officers declined by ninety-nine positions, nearly a quarter of the total force, in a two-year period, during which time the murder rate doubled, car thefts topped national averages and gang activity increased. Teachers were laid off or saw their pay cut, and the county hospital had to reduce its staff. Stockton, so recently seen as a real estate booster’s dream city, was forcibly reinvented as a tearful poster child for the postbubble economy.

For older people this meant job losses, declining income and despair. Matthew Joseph started to see old-timers coming back to the steel companies and begging for any jobs on offer—as handymen, lawn guys, janitors. “Ten years ago,” he says, “we saw guys coming in in their 20s and 30s, looking for jobs. Now you’ve got guys coming in in their 60s. They’ve lost everything.”

For younger people, Stockton’s collapse meant a delayed entry into the workforce and independent adulthood. Mike Wofford’s 25-year-old daughter, Jennifer, has a bachelor’s degree in criminal justice from Sacramento State University and experience working as an intern investigator for the Federal Defender’s Office in Sacramento and as a paralegal. Since July 2009, however, she has been unemployed. Dressed somewhat gothically, with dyed-blond hair and heavy black mascara, Jennifer is hardly an introvert. She knows what she wants—investigative work in the legal profession—and articulates her wants well. But like most of her friends in Stockton, she can’t find a job. Her boyfriend, who has nine years of experience as a glassworker, is also unemployed. Unable to rent an apartment, they live with her parents.

A few months before Christmas, Jennifer found two temp jobs: the first, evaluating telemarketers’ phone skills; the second, in a clothing store. “I’m a college grad with two minimum-wage jobs—not exactly a success,” she says. She laughs nervously, fidgets. “I’m living at home right now; I have no other choice. I envisioned being more independent, starting my life, but I’m in a hold.”

* * *

On the edge of the middle-income community of Weston Ranch, where Matthew and Celia Joseph live, the signs of collapse are all too evident. Rows of street lamps, marking roads that were never laid for houses that were never built, protrude out of fields overgrown with weeds. (Depressingly, the street names and locations have already been programmed into car GPS systems.) A handful of model homes stand empty, sentry ghosts waiting for the rest of the community—not to mention the gas, water, sewage and electricity connections—to sprout magically around them.

Recently a half-constructed neighborhood information office in a newer part of Weston Ranch was torn down; now that lot, too, is overgrown. Where a Wal-Mart was supposed to rise is yet another fenced-in, weed-tangled lot, an incongruous High-Speed Internet sign hanging haphazardly from the industrial fencing. In the nearby malls, vacant storefronts are liberally interspersed among the hardscrabble businesses that have stayed open.

Large houses that were once valued at more than $500,000 are selling for less than $200,000—that is, in the rare instances that buyers with good credit can be found to take them off lenders’ hands. Like some other ZIP codes in the south of the city, Weston Ranch continues to see epidemic levels of foreclosures. Owners who had refinanced up to the hilt or taken out large lines of credit on their home equity are defaulting at an alarming rate. Many houses here are vacant; others are occupied by an increasingly besieged and insecure middle class, no longer protected by the developer’s private security patrols. The local neighborhood watch is in disarray, and the overstretched police department is unresponsive.

By the fall of 2010, at least 30 percent of homes in Weston Ranch had received a notice of default. In some areas to the north, nearly a quarter were behind on their mortgage payments. Even in wealthy parts of Stockton, more than 13 percent of homeowners had gotten notices of default. (Shockingly, some of the smaller towns along the I-5 corridor in the Central Valley had even worse housing data; close to 40 percent of homes in Mountain House and Lathrop were in default.)

Put simply, not being able to pay one’s mortgage, not being able to get a line of credit on an underwater house, not being able to sell a house one can no longer afford to keep and ultimately losing everything to the bank has become the new norm for many Central Valley residents.

Matthew has grown accustomed to seeing neighbors in dire straits everywhere he looks. Unemployed computer techs who used to commute to San Jose began staying home, trying to save money for the near-impossible monthly mortgage payments. Furloughed state employees fell behind on payments. People started subdividing their properties, bringing in renters to raise cash. At one point, Matthew counted fifteen foreclosed homes on his street.

As more and more houses in Weston Ranch ended up vacant, they became magnets for burglars, squatters, druggies. When Celia toured some of them with her brother, who was hoping to buy a place on the cheap, they saw scenes of devastation: shit on the walls, piss on the floors; toilets ripped out; copper wiring stripped; air-conditioners stolen. Some of the homes, Celia recalled in wonder, were huge—five bedrooms, a swimming pool out back. “And they were just destroyed. It was crazy. Bare rooms. Graffiti.”

All over Weston Ranch, people began selling their life’s possessions in impromptu yard sales. People would phone Matthew and Celia and tell them they’d just driven past a great deal on clothes or furniture or kitchen wares. The Josephs would tell their friends to buy the stuff and bring it over to store in their garage; then they’d give it away to needy members of Annunciation.

Sitting in the rectory at Annunciation, dressed in a black suit and white shirt, Matthew talks about one of his friends. The man owns a gorgeous 1939 white Chrysler. It is his most prized possession. “He put everything back to original. There’s a lot of pride in that car,” Matthew says. But the owner can’t afford to keep it anymore. He’s told Matthew he’s selling it.

The thought is painful for Matthew, but he knows that he could one day have to do something similar. Does he still consider himself middle class? Yes, he answers, after a long pause, but these days he wouldn’t have the money to help even his own kids out if they faced a cash crunch. “It would take having to sell something, maybe something you valued all your life,” he says.

* * *

As Stockton’s residents adjust their aspirations downward, more and more of them are coming to rely on the good will of neighbors and nonprofit organizations to meet their daily needs. Catholic Charities and other groups that distribute aid to the poor have seen vast increases in demand for their services. Food banks have started giving out bags of food to families who until recently had always thought of themselves as securely middle class.

“These people who’ve never had to apply for services don’t know the system,” explains Elvira Ramirez, executive director of the local Catholic Charities chapter. Some of them didn’t know how to fill in the forms; others were too embarrassed or too proud to apply. Ramirez met a woman with cerebral palsy and a metal plate in her leg that had begun protruding through her skin. She needed an operation, but her husband had lost his job and the family had lost their health insurance. She didn’t know how to apply for disability, a designation that would have qualified her for free emergency medical care.

Pastors started reporting that congregants were asking for help paying the utility bills. When the financially hobbled State of California defunded the Healthy Kids program—which provided hundreds of low-income Stockton children with health coverage—Catholic Charities scrambled to enroll them in other programs, including one run by Kaiser. Given that the Central Valley is home to vast numbers of undocumented immigrants and their children, a demographic many health plans shy away from, it is a fair bet that many of these kids have ended up with only minimal access to healthcare.

A few years ago, poor communities such as Boggs Tract, a predominantly Latino and African-American area isolated from the rest of the city by a maze of freeways and train tracks, were ripe targets for predatory lending practices; now they are vulnerable to other scams. Early in the housing crisis, subprime mortgages began sliding into arrears when their adjustable rates kicked in. Soon the ragged streets—the front yards surrounded by chain-link fences, behind many of which pit bulls prowled—were pockmarked with foreclosed bungalows. Tiny houses, the hard-earned repository of the working poor’s dreams, were being sold for a pittance at auction. On some streets, one in four homes ended up abandoned. Handwritten signs started appearing on lamp posts and utility poles. I Buy Houses. Cash for Houses. The signs had a phone number but no name. As if you could get out of a legally incurred debt to the mortgage owner simply by accepting someone else’s under-the-table cash in exchange for a title deed. Midweek yard sales became commonplace, as desperate homeowners sold everything they had—clothes, furniture, toys—in often futile attempts to get enough dollars to keep the lenders at bay for just a few more weeks or months. Under the freeway overpasses, a growing number of homeless gathered.

“We’ve had a disaster,” says Carol Ornelas, CEO of Visionary Home Builders, a group working to build houses for low-income Stockton residents and help foreclosure victims rebuild their lives. A large woman with gaudy nails and an overly painted face, Ornelas is somewhat theatrical in her mannerisms. She waves her arms expressively and compares Stockton’s real estate calamity to a natural disaster like Hurricane Katrina—or, in California argot, to an earthquake. “It’s going to take time to recover,” she says. “There’s this huge sector of people trying to figure out what’s the next step.” They have lost their homes and shattered their credit. If they had 401(k)s, those savings are long gone. Many still owe money on secondary loans on their foreclosed homes. Some were forcibly evicted by sheriffs, their meager possessions humiliatingly thrown onto the street; others fled in the middle of the night to avoid creditors.

“The shelters are filled,” says Ornelas. “Families are doubled up. Some people can rent the house next door—but those are people with money. We’re covering a 25 percent unemployment rate. Our construction industry is going into its fifth year of not building anything. The homeowners are repeatedly scammed by people claiming they can help them save their homes. It’s like a wildfire.”

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