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MONDAY BUSINESS

Where recession's effects are magnified

East of San Francisco, jobless rates go up to 20%, home prices are down as much as 75%.

August 09, 2010|Alana Semuels

TRACY, CALIF. — Sixty miles northeast of the sleek corporate campuses of Google Inc. and Intel Corp., housing tracts sit vacant. Factories are closed and job centers are packed with people looking for work.

Think Southern California's Inland Empire is suffering? By some measures, the inland region east of San Francisco has it just as bad.

Like Riverside and San Bernardino counties, the inland area that includes San Joaquin, Alameda and Contra Costa counties became bedroom communities for workers priced out of real estate markets closer to the coast. And just like the Inland Empire, the area was among the hardest hit by the economic downturn as buyers lost homes to foreclosure and prices plummeted.

But other factors have compounded the northern inland region's misery.

The financial crisis erased thousands of the area's banking and financial services jobs. The housing slowdown crippled dozens of manufacturers that made building supplies there. And the closure in April of California's only auto plant, in Fremont, snowballed into the shutdown of dozens of inland suppliers and the disappearance of tens of thousands of jobs.

Though some economists have predicted the technology-rich Bay Area would lead the state out of the downturn, Jeff Michael, an economist with the University of the Pacific at Stockton, says its inland areas will be among the last to recover.

"That region has been really hard hit," Michael said. "It will be very slow to emerge from the recession."

To be sure, parts of Contra Costa and Alameda counties are tied to the wealth of the Bay Area and will be helped by renewed growth in the tech sector. In San Ramon, home to Chevron Corp., the unemployment rate is just 4.7%, and in Fremont, which has an unemployment rate of 8.4%, a solar company just announced a $45-million investment. But farther inland, their eastern regions are still struggling, as is most of ailing San Joaquin County.

Housing is perhaps the biggest millstone. During the real estate boom, families that couldn't afford real estate in San Francisco headed inland, buying homes in towns such as Tracy, Manteca and Brentwood. Dwellings there could cost $500,000 less than comparable properties in the Bay Area, said Michael Locke, president and chief executive of the San Joaquin Partnership, a private economic development company. Builders rushed to put up homes in vast developments, and employment in financial services in the three counties grew by a third in just a few years.

Now, building has all but stopped. Home prices in San Joaquin County have fallen 63% since the peak median price of $451,500 in November 2005, according to MDA DataQuick. Prices in Contra Costa County are down 53% from their peak of $600,000 in April 2007. One in every 135 houses in Contra Costa County received a foreclosure filing in June 2010. In San Joaquin County, that figure is 1 in 104 -- nearly double the California average.

Signs of a slowdown are everywhere. At Bethel Island, a Contra Costa County summer vacation area normally busy with tourists and fishermen, boats sit rotting in the Sacramento River. Nearby, a planned residential waterfront development has stalled. The builder completed boat docks before pulling out, an eerie remnant of the luxury once planned there. In Livermore, an Alameda County town, whole shopping developments are empty and foreclosure notices dot homes.

In Stockton, which had one of the highest foreclosure rates in the nation, the median home price of $100,500 is down from $397,000 at the height of the boom -- a stunning 75% drop.

That's forced people such as Troy White out of work. The onetime real estate agent has been looking for a job since 2007, the year he lost his home to foreclosure. His wife, a bus driver, commutes an hour and a half to Oakland to provide the only income for their family of four.

"People say this is the most miserable place in the world," said White, standing in the hot sun outside a job center in downtown Stockton. "It's really bad out here. There ain't no jobs."

Weston Ranch, the Stockton community where White lost his home, was one of the epicenters of the California housing crash. Median home prices there dropped to $110,000 from $446,000 in a span of three years. Now foreclosures plague nearly every block. In April 2008, there were 1,003 notices of default served in the city, up two-thirds from a year earlier, according to ForeclosureRadar.com.

As in Southern California's Inland Empire, investors have taken over some of these properties, changing the texture of the neighborhood.

Standing on the front lawn of his Weston Ranch house, where rosebushes climb up trellises, resident Ruben Modesto showed a visitor the homes that had been foreclosed on in the last few years.

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