The Destruction Of The Inland Empire

[FarCenter]

http://www.huffingtonpost.com/leighton-woodhouse/the-destruction-of-the-in_b_374032.html

Drive eastbound from Los Angeles on Interstate 10. Just beyond downtown, travel through a long stretch of the San Gabriel Valley suburbs. After passing Pomona, then crossing over the L.A. County line, the scenery takes a turn toward the exurban. Layered over the hardscrabble desert landscape like a carpet is a terrestrial sea of tract housing development that stretches to the San Bernardino Mountains and the western

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The catastrophic collapse of the housing market in the Inland Empire was preceded by the same reckless subprime lending practices that infected the real estate industry in neighboring Los Angeles County, the foreclosure capital of the country, and every other high-octane housing market in America. But in the Inland Empire, developers added yet another lucrative conflict of interest to the usual venal arrangement: the companies that built and sold the houses were also the lenders that financed those very same sales.

Eighty-five percent of buyers of Lennar Homes, for example, received their financing from Universal American, Lennar's mortgage subsidiary. In some cases, the developers' salespersons simply told prospective buyers they had to take out their loan from the company's financing arm. In the case of the homebuilder D.R. Horton, buyers were required by contract to apply for financing through the developer's subsidiary, DHI Mortgage, within five days of entering into the purchase agreement. If a buyer chose instead to use outside financing and was not able to close on time, he was considered in default of his contractual agreement. At that point D.R. Horton would either cancel the transaction and keep the buyer's deposit, or extend the period before closing and charge the buyer $300 per day over the course of that time period. In other cases, buyers would be coaxed into relying on the homebuilder's mortgage subsidiary through enticements such as waiving closing costs or promised discount points that never actually materialized.

Not surprisingly, the loans the housing developers' subsidiaries offered were increasingly of the subprime variety. In 2004, 5.5% of the loans advanced by DHI Mortgage were subprime; by 2006, 35.8% were. Between 2004 and 2006, the number of subprime loans offered by Universal American increased by over 6,000 percent. The terms of these loans tell the familiar story of the housing bubble everywhere: adjustable mortgage rates, balloon payments, negative amortization, etc.

By advancing subprime loans to middle- and working-class families who could not afford them, Inland Empire homebuilders were able to generate new demand for their homes in a market that would otherwise have been saturated. There was, in effect, no actual market in Inland Empire real estate, at least in as far as a "market" is understood to include transparency, competing interests and price bargaining. Instead, there was merely the prospective buyer on the one hand, and a real estate conglomerate that monopolized the home buying process from construction through financing on the other. Entire communities in the Inland Empire succumbed to these complex financial traps, and have been left decimated in the aftermath.
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[Cleita]

1. Unfortunately, before the freeways were built that track of land

was lovely, rolling oak tree savannas, vineyards and citrus groves that lined the highway between Los Angeles and San Bernardino. The little towns like Santa Ana, Cucamonga, Pomona and Fontana were just that, little rustic hamlets on the way.

[Codeine]

2. The IE started out bad; this just made it worse.

It's a motley collection of large cities operating with leadership still stuck in Podunk-think.

We build enormous housing developments with zero investment in infrastructure and then wonder why there's a mile-long line at the freeway exits in places like Fontana (no exaggeration here -- a mile-plus is totally normal in the evening) or why the schools are packed three-deep from the influx of new young families to the area.

And this is hardly new -- there's a whole chapter in Mike Davis's City of Quartz dealing with the long and dysfunctional history of the region as typified by one of its larger cities, Fontana.

[Cleita]

3. I remember when downtown Fontana was one street of a few blocks

and the city was mostly made up of orange groves and chicken and dairy farms. It sounds funny to hear that it's now a large city.

[Codeine]

4. Not a huge city,

but about 200,000 sunbaked folks live there. I come to Fontana to work and leave immediately. ;)

[Cleita]

5. Too bad. Back in my day, you could find shade from the heat in the groves.

The trees cooled the heat a lot. Concrete only increases the heat.