The Other Orange County

"A 1,000-square-mile swath of well-heeled suburbia just south of Los Angeles, the “O.C.” was the main headquarters for dozens of mortgage companies that have now gone bust, among them Ameriquest, once the nation’s largest subprime lender, and New Century, once among the top 10. As a result the region is one of the hardest hit by the collapse of the housing market. Big builders such as Lennar (LEN) are putting new construction on hold. The Orange County Register calculates that 43 local mortgage outfits laid off some 7,200 workers last year."

Boom Town Gone Bust

“The cultural here is very real estate- and finance-focused,” says Michael Capaldi, a principal at Newport Beach-based developer Renaissance Pacific Properties. “When real estate is good, it feels like a boom town.”

Even now, big cities such as Irvine and Anaheim are a far cry from more beleaguered locales such Cleveland and Detroit. While the county’s rate of 3,300 foreclosure filings in March is three times what it was a year ago, on a percentage basis Orange County is doing better than neighboring regions. In nearby Riverside and San Bernardino counties, 8% and 6% of homes are in the foreclosure process, vs. just 2.4% in Orange County, according to research by market tracker Default Research. Moreover, the median sales price of a home, while down 14% to just under $600,000, is holding up better than the statewide fall of 26%.

But there are other signs that the county’s economy is worsening. Retail sales and vehicle-registration fees are running 10% below what they were in the prior fiscal year. Frank Kim, Orange County’s budget director, says he’s anticipating much lower revenue next year from property taxes as homeowners ask to get their dwellings reassessed at lower market values. As a result he’s keeping the county’s projected budget flat at $6 billion, after years of 5% to 6% increases.