Real Estate Industry

Drive through California's sprawling inland suburbs and you'll spot the familiar mileposts of a real estate bust: foreclosure signs, brown lawns and abandoned subdivisions. To see the damage in downtown San Diego, walk a few blocks. Then look straight up. There you'll see hundreds of unsold luxury condominiums stacked in vacant high-rises. Some units downtown are now selling for less than half what earlier buyers had paid during the market peak.

Lloyd Charton recalls a fateful knock on the door. At his Dana Point home stood a cheerful man with an impressive knowledge of Charton's personal life. It was a neighbor, Dan J. Harkey. Harkey congratulated him on his retirement and asked about a recent vacation. He told him about his company, Point Center Financial Inc., which raised money from private investors and lent it to real estate developers.

In parts of Southern California, the housing crash has upended a basic tenet of the American dream: that home values always increase over the long term. Properties in several areas are selling for less than they did 20 years ago, and that's not even counting the effects of inflation. The reversal is a bonanza for some first-time buyers.

"Empty," says Jack Rodman, an expert in distressed real estate, as he points from the window of his 40th-floor office toward a silver-skinned prism rising out of the Beijing skyline. "Beautiful building, but not a single tenant. "Completely empty. "Empty." So goes the refrain as his finger skips from building to building, each flashier than the next, and few of them more than barely occupied.

There are homes. And then there is Candy Land -- all 56,500 square feet of it. Candy Spelling, widow of legendary TV producer Aaron Spelling, has put her 4.7-acre residence in Holmby Hills up for sale. Priced at $150 million, it's currently the most expensive residential listing in the U.S. Whether Spelling will have to take a haircut on that asking price in today's market remains to be seen. If so, she'll be prepared: The home has its own barbershop. Plus a whole lot more.

The slumping market for commercial real estate -- viewed by many as the next big shoe to drop on the economy -- now threatens to drag down regional banks as they struggle to collect on loans made against shopping centers and office buildings. Seriously overdue loans against commercial developments have shot up dramatically in recent months, as delinquencies snowball on construction loans and mortgages for office buildings, malls and apartments. That's bad for giants like Bank of America Corp.

The Southern California real estate crash has finally reached the high-end areas of the Westside. Home prices in Beverly Hills, Santa Monica and Malibu -- which continued to soar well into 2008 -- finally tanked at the end of the year, losing between 26% and 30% of their value in just a few months, the latest data show.

Jerry and Carol Ptacek bounced from one cramped apartment to another most of their adult lives, so they could hardly believe their luck when they were able to buy a San Bernardino house for the bargain price of $63,000. Nine years later, they are renters again -- a testament to the failure of the federal government's Dollar Homes program. Congress launched the program in 1998 to clear the Department of Housing and Urban Development's books of foreclosures and provide affordable housing.

More than 236,000 homes were lost to foreclosure in California last year, topping the previous nine years combined, data released Tuesday show. And the number of borrowers who defaulted on their payments hit a record high of more than 404,000. The wave of foreclosures, which began in early 2007, was initially triggered by falling home values and resets on adjustable-rate loans.

The Georgetown apartment complex was one of this city's most coveted properties back in 2005. Now Greg Chelius and Alex Size were touring it as if examining an exotic ruin. They walked past the unmanned guardhouse and its broken windows. Size snapped photos with a digital camera. Chelius lifted the green fabric on a fence tacked with No Trespassing signs. Building after building loomed in the near distance, all of them quiet and vacant.