STOCKTON, Calif. — Stockton hardly looks like the most miserable city in the country.
But the statistics and stories over the last two years make a case that it is: Since the housing crisis began, this inland port city 80 miles east of San Francisco has had one of the worst foreclosure rates in the country – for most of the time, the worst.
At the height of it, about 1 in 10 houses fell to foreclosure. Houses that sold for more than $500,000 before the crash now go for $200,000. In some neighborhoods, fixer-uppers cost less than a new Honda Fit – under $20,000.
To spend time in Stockton, a plain-jane city of single-family home neighborhoods edged by freeways and lingering farms, is to begin to understand the calamitous effects of the nation's foreclosure crisis, which has devastated so many once-booming places.
Stockton is the San Joaquin County seat. And according to the Associated Press Economic Stress Index, a month-by-month scoring of U.S. counties' rates of unemployment, bankruptcy and foreclosures, San Joaquin had a score of 23.55 in November, making it the fourth-most stressed of counties with a population over 25,000. Its foreclosure rate of 6 percent was exceeded only by metro Las Vegas, metro Fort Myers, Fla., metro Orlando, Merced County, Calif., and Kendall County, Ill.
An outsider might not notice immediately how Stockton has suffered. It boasts a downtown mall, a mix of handsome, century-old and modern architecture, a new sports stadium, even a promenade overlooking the city's canal.
But two years into the housing crisis, Stockton is a changed place. Whole neighborhoods have been decimated by the mortgage disaster. The tax base has shrunken. City services and municipal jobs have been cut. Unemployment hovers at about 16 percent. Economists predict it will take years for Stockton to recover from the housing bust.
Locals say the same about the city's reputation.
Since the housing meltdown began, journalists from around the world have parachuted in to see the city felled by sub-prime mortgages, which enticed new homeowners priced out of the San Francisco Bay area with low interest rates that reset to levels they could not afford.
"Welcome to Foreclosureville, U.S.A." wrote the Los Angeles Times. "America's Most Miserable City," declared the London Independent. That headline was inspired by Forbes' "most miserable cities" index, which ranked Stockton No. 1.
City officials say they fully expect Stockton to shake the title in 2010 (it's recently dropped to No. 4 or 5). But how far away from the top can it go? The population of 290,400 is strapped. Up to two-thirds of homeowners owe more on their properties than the houses are now worth. Housing values have dropped more than 60 percent since the height of the boom four years ago, more than any other city.
Housing developments built for commuters have been hit the hardest, since they were the ones to attract newcomers fleeing the huge spike in prices closer to the Bay area. Those whose livelihoods depend on a healthy housing environment – real estate brokers, contractors, day laborers – are barely holding on here.
Probably the happiest people are the ones scooping up foreclosures. Speculators are back, of course, but the other bargain hunters include people who only dreamed of being able to afford a house. They're now living the dream in Stockton.
By the time the whole foreclosure phenomenon is done, Stockton may well look less like the bedroom community for commuters to the Bay Area that it was becoming and more like the working-class, immigrant community ringed by Central Valley farm country that it was before.
For now, residents just hope the worst is over.
The heart of Foreclosureville, U.S.A. – the Stockton subdivision that had more bank repossessions than any other place in the country for much of the last two years – is starting to look like its old self again.
The "For Sale" signs that overwhelmed Weston Ranch are mostly gone, and the lawns where weeds grew like corn stalks are shorn.
Foreclosure businesses that sprang up, including one that spray-painted brown lawns green and another that offered a foreclosure bus tour, have folded. Every time a foreclosure hits the market, bargain hunters snap it up.
But looks are deceiving. In Weston Ranch, financial devastation struck like a natural disaster and the ground has not yet settled. Speculators are buying houses to rent out. On streets where everyone knew everyone, no one knows anyone.
Orlando Mixon and his family – wife, son and daughter – are typical Weston Ranch settlers. They moved here eight years ago from Union City, east of San Francisco, after a search for an affordable house sent them farther and farther down the freeway.
In those boom times, the Mixons paid $175,000 for a new four-bedroom, three bath split-level, more than they would have paid just five days earlier. But they were excited. They didn't know Stockton, but the subdivision of 5,000 homes was like a town unto itself, built for easy access to and from a long commute. Beige and boxy, the houses made up in size what they lacked in style.
Now, the Mixons are hanging on by their fingers. Their house, they think, is worth just over $200,000, though some on the next street sold recently for $150,000. Still, with two mortgages, they owe more than that (they won't say how much). Until last month, Mixon spent four months out of work, pushing the family toward financial ruin.
"I try not to think about that," Mixon said. He spoke while washing his blackened work clothes in the driveway: He now works on an oil rig in Los Angeles when there is work, drives the 340 miles every other week to his job, seven days on, seven off. His wife Sharon's commute is 60 miles each way, five days a week in rush hour traffic, for her job as a manager in a hospital in Hayward.
Stockton residents on average commute 46 miles each way.
The biggest bargain in Stockton stands on a street most people would choose to avoid. Old men drinking from bottles in brown paper bags lean against an empty brick building. Younger ones loiter on the corners, wearing puffy parkas, selling ... something.
Rudy Willey, a real estate broker who knows his turf, had had no great expectations for the house. But the property was worse than he had imagined: more like a package store than a single-family home. It had no land, no porch, no stoop.
Squatters had had their way with the place. Its small, low-ceilinged rooms looked lopsided. All the fixtures were gone. The bathroom, the kitchen – the whole place – needed a do-over.
"$15,000?" Willey said, locking the front door. "I think they're asking too much."
He smiled at the irony of it. Twenty-seven years of selling real estate in Stockton had not fully prepared him for what has happened to his city, his vocation and his livelihood.
At 58, nearing retirement, or so he thought, Willey is working twice as hard and making half as much as he did two years ago. In two months, he has taken just two days off.
Not three years ago, Willey couldn't keep up with the demand for half-million-dollar starter homes springing up within a 30-mile radius of Stockton. Commuters were buying in; locals were trading up.
Having seen his share of boom and bust cycles, Willey knew the times were too good to last. A wave of selling in Elk Grove, a town half an hour away that had been the fastest growing in the country in 2007, became a sign.
"When I saw the 'For Sale' signs, I thought: 'Something's happening,'" Willey said. "I thought we were due for a correction – maybe a 15 percent drop."
Now, Willey is selling houses for less than half of what they sold for then. Even so, it is harder to close a deal.
A few brokers have acquired most of the foreclosure listings. Most no longer take phone calls to hear offers. Half the time, they don't return e-mails. In some cases, Willey suspects the broker simply does not want to share a commission.
Time to work on a Plan B: Willey is taking a multimedia course at San Joaquin Delta College, a two-year school where he also teaches real estate classes. He hopes to start a Web site.
At night, he works on a book, a guide for would-be homebuyers.
And each day, he tries to look on the bright side. On an afternoon's outing to see houses below $35,000, he kept remarking on the "wonderful opportunities" working people have to own a home.
"Not bad, not bad," he said, going through an $18,000 house that had decent bones. It was in a homely neighborhood of aging bungalows. But there were no drug dealers on the corners. "Redone," Willey said, "this could be a nice little home."
Among all the bargains in Stockton, Jason Ramey had his heart set on one.
It was not on the market yet. But on its window and door was the sign of the times: an eviction notice.
This was early 2009, the height of Stockton's foreclosure boom. More than 90 percent of the houses for sale in the city were foreclosures or short sales – where the lender lets borrowers sell a property for less than they owe on it, forgiving the balance, to avoid foreclosure.
Ramey, a 31-year-old insurance agent, knew what he wanted. He had been looking at real estate listings for years. But when the market was high, he could not afford to buy. Even "shacks," as he likes to say, cost $300,000 – well above his price range.
Then came the housing disaster, and opportunity.
Ramey began scouting houses on the San Joaquin County foreclosure listings. As soon as he saw The One, a corner property in a coveted new development, he decided to wait for it.
The house had an arched entrance that reminded Ramey of a French chalet. Neighbors showed pride of place – planting rose gardens, flowering fruit trees, dooryard bougainvillea. It wasn't as big as other foreclosures in the mid-$200,000 range. But Ramey, a local boy, knows Stockton inside and out. This house had location, location, location, besides its four bedrooms, three baths. This was a place where he could see staking roots, growing a family.
Ramey waited four months for the house to come on the market. Meanwhile, he and his girlfriend took a real estate class for first-time homebuyers. Their instructor: Rudy Willey.
He taught them how to research properties, find the right mortgage, make a deal. The very morning the house showed up on the real estate listing site he'd been checking every day, Ramey called Willey.
"We put an offer in that night," Ramey said, smiling widely, then adding: "Sure enough, our offer was accepted."
They bought the house, which had sold for more than $500,000 three years earlier, for $233,000.
"Every day, we can't wait to get home," Ramey said, while giving a tour of the house. Everything in it, stainless steel appliances, tile floors, paint, looked brand spanking new. A koi pond and above-ground pool shared space in the backyard with magnolia trees and hibiscus plants.
The family that lost that house had put love and money into it. Ramey said the solar panels – which have cut their utility bills to $30 from $250 when they were renting – were appraised at over $100,000.
"You hear all these horrible stories," Ramey said. "There are so many other aspects to this. This market, the way it is, gave us the opportunity to live the American dream."