In Foreclosure Capital, Meltdown And Poverty Feel Permanent
CAPE CORAL, Fla. -- They sent her off with a lavish retirement party -- dinner and drinks at a local yacht club, overlooking the inky waters of the Caloosahatchee River. They thanked her for her more than two decades of service in the office of a local real estate company and they wished her well.
She was 63 years old and looking forward to the rewards of a lifetime of work, moderate living and diligent savings. She had stashed away nearly $400,000 in her retirement savings account, a sum that seemed sufficient to produce the income needed to make the payments on her modest home in this community alongside the Gulf of Mexico. She envisioned occasional vacations, entertaining friends on her patio, and seeing a show every now and again.
But 10 years later, she is sitting inside the Cape Coral United Way house, amid hungry people waiting to pick up groceries at a food bank. She is about to see a career counselor, hoping for insights on how a woman might reenter the work force at age 73 with minimal computer skills, a rusty resume and a local unemployment rate above 11 percent.
The stock market crash that accompanied the financial crisis of 2008 wiped out half her retirement account. She is current on her mortgage, but only because her son has been making the payments. She worries that she might yet slide into the weeds of foreclosure.
Eileen -- who asked that her last name be withheld, citing embarrassment -- could pass for any retiree you might encounter on a cruise ship or at the Grand Canyon. She wears a crisp white blouse over Bermuda shorts and sandals. Her silver hair is cut short and neat. Yet here she is among the homeless and near-homeless, her gaze steely, as a clerk calls names to pick up donated cans of green beans and chicken noodle soup.
"It's humiliating to be in this position," she says, her composure giving way abruptly to tears. "There's a value that is inbred by your parents. You contribute to society. You don't take from it."
Eileen has landed at the confluence of two precarious currents tearing at the foundation of this waterfront community on Florida's southwestern coast and, more broadly, the American economic landscape. The gears of the foreclosure machinery grind on as millions of formerly middle-class suburbanites continue to slip into poverty -- each reinforcing the other.
Since the real estate bubble burst, replacing the finer points of no-money-down mortgages with details of the bankruptcy code, Cape Coral and the city of Ft. Myers across the river have become leading centers of foreclosure. As of August, more than one in 10 homes in the greater metropolitan area was in some stage of the process, according to CoreLogic, a housing data research firm. Nearly 17 percent of homeowners were delinquent on their mortgage payments by 90 days or more.
"I'd like to think we've been through the ugliest part of the foreclosure process," says Marc Joseph, a local realtor. "But we're nowhere near out of the woods."
Not coincidentally, Cape Coral has emerged as a conspicuous example of another wrenching American trend -- the growth of the suburban poor. Between 2007 and 2010, the share of people living in poverty in the suburbs of Cape Coral, a city of about 150,000, leaped from 11.3 percent to 18.6 percent, according to analysis of Census data by Elizabeth Kneebone, a senior research associate for the Metropolitan Policy Program at the Brookings Institution. Only Modesto, Calif., another community assailed by foreclosure, suffered a larger percentage increase during those years.
A full accounting of the human costs of this reckoning runs beyond the material facts of diminished incomes and homes lost to foreclosure. It encompasses the anxiety and bewilderment that now dominates life in many households.
That includes the soaring demand for aid. Local relief organizations such as Community Cooperative Ministries, Inc., which runs the food bank at the United Way House, have grown accustomed to a steady influx of people who had never before in their lives asked for help.
In 2007, the year the recession officially began, United Way received 19,000 calls on its 211 hotline, a kind of 911 call center for people who need food and help paying their bills. Last year the hotline fielded 59,000 calls.
A full accounting also includes those hunkered down inside deteriorating houses effectively lost to the messy filing cabinets of the financial system -- people who have not made payments to the bank in years, yet have received no orders to vacate. They occupy the surreal purgatory of the mortgage crisis, a morally ambiguous realm in a nation where the very concept of ownership seems to have been compromised. To the outsider, they are freeloaders occupying properties at no expense, but they speak of daily fears of eviction and a dispiriting sense of rootlessness, their futures colored darkly in uncertainty.
And a full accounting must include the spectacle of a senior citizen who began working as a teenager, who thought she would by now be sitting on her lanai drinking in the musty Florida breeze, yet instead needs charity to keep herself fed.
"It's devastating," Eileen says. "I did everything I was supposed to do."
HOUSE OF CARDS
Ever since the boom in American real estate gave way to a crippling bust, I have used Cape Coral as a journalistic laboratory to explore the consequences. On my first trip here, four years ago, I confronted a community in which declining housing prices were insinuating themselves into basic expectations about the future. The school district was scrapping plans to construct new buildings. The city was putting off a plan to expand the sewer system.
On my second trip two years later, the mess left behind by the real estate disaster had seeped into the fiber of the community. Code enforcement officers found themselves picking through the detritus left behind by families abandoning homes lost to foreclosure -- human excrement, boxes full of unpaid bills, furniture left curbside. Joseph, the real estate agent, had begun running foreclosure bus tours, serving up distressed real estate as something like an amusement park adventure for opportunistic buyers.
But on my most recent trip here late last month, the mess seemed to have crystallized into something permanent. More than its physical imprint of dilapidation, the decline has brought financial pain to the doors of people who did not even participate in the upside, back when real estate was synonymous with growing local spending power.
Even people like Eileen are now suffering.
Eileen did not partake in the orgy of real estate speculation that has made Cape Coral an involuntary poster child for homes surrendered to banks. She is living in the same 1,900-square-foot, single-story stucco home she built 18 years ago. Her mortgage balance is just $43,000. Unlike many of her neighbors, she did not tap her home equity for a newer car or a boat. She did not sign off on an exotic mortgage to trade up for a larger lot on the water with a swimming pool. She watched such things happening all around her with a mixture of scorn and alarm.
"I saw all these young people buying all these beautiful homes on the water," she recalls. "I thought, 'I can't afford to get something like that. How can they afford it?' It was not obvious to me, and I knew there had to be a consequence. It's a house of cards. It's going to come tumbling down."
But even as she avoided participating in the events that turned Cape Coral into a financial wasteland, her prudence did not render her immune to the consequences of its collapse. In every direction, houses once full of retirees and families with children have gone lifeless, with weeds overtaking some formerly well-tended yards, and trash piling up in empty driveways. She is not clear on the particulars -- who landed in foreclosure, who walked away, who moved, who died. But the effect is palpable: Her neighborhood is pockmarked by abandonment.
"It's been happening up and down the street," she says. "It's tragic. Young people raising families, they need a home. It's home to their kids. They're in school. They lose everything when they walk away. It's a very, very sad thing."
Eileen is adamant that she will hang on to her own home, yet she is also cognizant of the arithmetic. Her monthly mortgage payment is only $600, yet her retirement savings now produces less than $1,000 a month in income.
"Every month," she says, "I struggle to make that payment."
So she applies for jobs, bracing for rejection. Online applications for secretarial work yield come-ons for commission-only positions selling insurance. An administrative job she sees advertised at a nearby hospital attracts 1,500 applicants.
She is taking classes on how to use spreadsheets and word processing software, but she cannot dismiss the sinking feeling that even additional skills will not transcend the crudest facts of her situation.
"Look at me," she says. "I'm an old lady. Nobody wants to bring an old lady in."
LIFE BEYOND WINTER
Sprawling across a flat peninsula, Cape Coral has for decades beckoned as a developer's paradise, with tens of thousands of buildable lots arrayed on a network of canals filtering into the Gulf. From the Midwest to the Northeast, the winter-averse have descended, availing themselves of waterfront access at discount prices.
By the dawn of the 2000s, this process was accelerating dramatically, fueled by a credit bubble that made mortgages nearly as easy to secure as scratch-off lottery tickets. Speculators poured in, smelling easy winnings.
Between 2000 and 2004, the median house price in the Cape Coral-Ft. Myers metro area soared by 70 percent, reaching $192,100, according to the Florida Association of Realtors. In 2005 alone, the price jumped by another 45 percent to $278,000.
But these increases rested on the assumption that new people would continue to pour into the area and snap up the properties then being constructed seemingly at the rate of Lego pieces. When the markets figured out that much of the appreciation was the result of speculators flipping properties to other speculators, local real estate suddenly looked like a Ponzi scheme and prices commenced plunging. By 2008, the median home was selling for $153,000. In 2009, it dropped to $88,000, less than one-third of its value only four years earlier.
Thousands of homeowners who had bet on being able to refinance their mortgages before their low introductory rates jumped sharply higher instead saw their equity wiped out, triggering a wave of foreclosures. Speculators walked away, leaving their bad investments to the elements.
At the worst of it, in the summer of 2009, nearly 14 percent of all houses in the metropolitan area were in foreclosure, according to CoreLogic.
At the offices of the realty companies that remain, marketing efforts filled with golden sunsets and yachts have given way to signs promising full lists of distressed property. Outside Lehigh Acres, a spread of suburban development carved from former pasture east of Ft. Myers, the model homes once draped in banners for national homebuilders are largely abandoned. A hot-pink stretch Hummer sits parked in front of one such home, now the headquarters of a limousine company.
Some now see signs of a turnaround. By the middle of this year, the median home was again selling for more than $100,000 -- a fraction of the market's peak, yet up from its nadir. And sales volume has exploded: More 16,000 homes changed hands in Lee County, which contains Cape Coral and Ft. Myers, in both 2009 and 2010. The county is on track to hit similar numbers this year.
But much of this volume represents speculators returning to scoop up distressed assets. Few foresee an end to the ceaseless drip of foreclosed homes landing on the market, even as the pace of foreclosure has slowed.