Housing Market Meltdown Hits Home

The relatively new Stone Canyon Preserve homes in Northeast Claremont made headlines last month. ABC News ran a story about the problems created by the mortgage crisis hitting upscale McMansion owners, and they focused on several homeowners in the Stone Canyon homes.

No demographic, it seems, is immune to the wave of foreclosures and short sales hitting the real estate market. The ABC story, appropriately filed under "Reality Check" on ABC's news site, paints a grim picture:

Losing an Investment

People once had to place their names on a waiting list to buy a luxury home, but now owners trying to sell compete with new homes offered at lower prices, bank-owned properties and so-called "short sales," in which a home sells for less than the value of the mortgage.

Compounding the problem, buyers have disappeared because the subprime and 100 percent loans that made so much growth possible are gone.

"The people who qualified for the kinds of loans that bought these houses no longer qualify," said Char Constantino, a broker with Century 21.

Not only do those people no longer qualify, but many who did take risky financing are losing their homes. Foreclosures in Los Angeles were up 381 percent in the last quarter of 2007 from the same period the previous year.

This marks the second time a housing market crash has hit the north Claremont Stone Canyon land hard. The first occasion was back in the early 1990's. At that time, the city of Claremont had worked out a complicated deal with Pomona College wherein the city would purchase the land that would become the Claremont Wilderness Park as well as the land that later became Stone Canyon.

The plan was for the City to then develop the land and be left with the Wilderness Park. Yes folks, Claremont, under then-City Manager Glenn Southard, was going into the home building business.

However, the development plans fell through because Southard, with that golden touch that only he had, managed to pick the worst of possible times (a recession and real estate crash) to become a housing speculator.

The city had paid some $1.2 million in option payments to Pomona College over two or three years, but stopped making those payments and negotiated an exit strategy. In exchange for the option payments made, and the commitment to fast-track the specific plan that allowed Pomona College to sell the developable property, wrapped up and tied with a bow, to Centex Homes, the City could have the 1220-acre Wilderness Park property, stripped of its development credits.

The Claremont 400 would have you forget that one reason the Stone Canyon Preserve homes are the boxy McMansions you see now is that the City and Southard were forced to make developer-driven concessions (more homes per acre, for instance) to satisfy their creditor, Pomona College, in order to maximize Pomona's value in the land and to ease the eventual sale of the property.

Really, Pomona College, together with Centex and the city of Claremont, are responsible for the paving over of Chicken Creek, an area that had a much higher ecological significance in terms of native plant and animal life than Johnson's Pasture. Many of the folks at the Claremont Wildlands Conservancy, which includes a good number of employees from the Claremont Colleges, ignore this part of the history of the land when they rail against developers.

The other forgotten part of this episode is that Southard had to scramble around to put together the money lost in his failed development scheme, and he borrowed that money from the city's sewer fund with the promise that it would be paid back. There's still some debate in some circles in town as to whether or not that promise was ever kept.

Like a lot of Claremont stories, things got muddled with time. The 400 always points to Centex's Stone Canyon Preserve, which destroyed the Chicken Creek riparian habitat, and says that was the price we had to pay to get the Wilderness Park. It's a pleasant fiction, but it's far from the whole story.

The 400's axiom still holds true: wait long enough, and a lie becomes a truth. Oh, and no need to dedicate a plaque to this one. No word on how this affects Claremont's 5th Best Place to Live status.

So here we are again. This time it's individual homeowners, rather than the city of Claremont, who've overextended themselves at the risk of their investment. People (and cities) never learn that there is a law of gravity to markets. We want to believe things go ever upward, but then reality hits.

Chalk it up to the price of forgetting history. We're feeling that downward pull again, to no one's, and to everyone's, surprise.