TheLoop21.com

By: Devona Walker (Add to your loop)
Wed, 10/15/2008 - 01:00

More and more 'for sale' signs are going up in Baldwin Hills.

(Read more of our stories about the Covenant with Black America.)

Baldwin Hills is one of the most affluent black communities in the United States. Most of its residents make at least $50,000 per year, well above both national and state averages, and roughly three-fourths of its residents are black.

Homeowners there, though well-heeled, are in no way immune to the faltering economy. California's economy, like most states', had been bolstered by strong real estate sales and strides in the financial services sector. When the real estate market went south, it was the first to begin feeling the pain.

California, making up about 15 percent of the total U.S. Gross Domestic Product, is in many ways the canary in a coal mine for the rest of the nation. And some might argue that Baldwin Hills serves as a similar indicator for black folks in America.

"People are selling their homes," said Denise Johnson, 54, who works in the Los Angeles District Attorney's office. "I've seen the 'For Sale' signs going up. Apartment complexes are up for sale. One couple bought a house on my block within the (last) year; they are now gone, and their home is up for sale. A lot of people I know are running into problems now."

Homes in Baldwin Hills are situated on the hillside like a multi-tiered wedding cake. At top, it is a bastion of modern architecture, looking down on the Los Angeles basin. At its base, there are apartment complexes and bungalows, with for rent signs and move-in specials hanging off the sides of buildings. In the commercial district that serves the community, many store fronts are vacant. (Read about how the businesses are facing the economy.)

"I own a duplex. My tenants work in tile. I can tell they are struggling," Johnson said. "They are working two and sometimes three jobs, but the people they work for don't always pay them on time, and the work is not dependable. They are still making the rent. But I worry that soon they won't be able to."

Georgia, another state with a strong, black middle class, lost 26,200 jobs in August, more than any other state in the nation, according to the U.S. Labor Department. Its unemployment rate surged to a 15-year high of 6.3 percent, putting it above the national average for seven straight months, the longest period in three decades. Its labor commissioner said the downfall has been a culmination of factors, such as the housing crisis, the credit crunch, the outsourcing of manufacturing jobs and rising gas prices. It's all strangling the state's job market.

In Prince George's County, Maryland, another well-known enclave for the black middle class, a forum was recently held to figure out how it could best handle the economic downturn.

Maryland is giving the county $10 million to battle a growing foreclosure problem there. County Executive Jack B. Johnson also recently proposed furloughing 5,900 county employees, attempting to stem a $57 million deficit.

The real estate market bust

Back in Baldwin Hills, Emma Gable, a 57-year-old, retired Metropolitan Transit Authority worker, said she saw this financial crisis coming years ago when home prices started skyrocketing, even though wages remained the same. She bought her own home in 1979 for $55,000. It was recently assessed at $650,000. There was a time, in the mid-'90s she recalled, it jumped $200,000 in one year.

"Greed took over. Greed is the damnation of the world. Homes should have never cost this much money, not for something that is a necessity," Gable said. "There's a house on the corner that sold for $450,000 and it doesn't even have a yard. It's just a house."

Gable retired years ago. Her nest egg money was hit in 2002, the last time the stock market went south. Since then, she put her money in long-term investments that pay modest dividends. She also rents out three units on her property, which helps subsidize her retirement.

"This is just how crazy it all got," Gable said, describing how, as she sees it, housing inflation directly caused the current collapse of the financial markets.

Brokers, she said, were putting people in homes the people couldn't afford, and they were all betting on home values continuing to rise. Both parties were making foolish bets.

Thomas Davidoff, an assistant professor with the Haas School of Business at the University of California-Berkeley said inflation in the housing market was in some ways the result of the dot-com bust.

"When that happened, people were looking for a safe place to put their money. Real estate was viewed as a safe place. And people started seeing values rise," Davidoff said. "People got very optimistic about housing, and people were very willing to lend money, which contributed to the whole subprime lending problem."

This frenzy led to some irresponsibility from borrowers and lenders.

"African-Americans, in general, have lower incomes and lower wealth. They were also disproportionately targeted by subprime lenders, so they are more vulnerable," Davidoff said. "I would be surprised if the people of Russian Hill (a wealthy area of San Francisco) walk away unscathed, but the middle class and the working class is where the subprime loans took place, where the new housing was built. There, it is going to be much worse."

The shrinking black middle class?

And it's left a lot of people feeling like Johnson, a clerical worker.

"For people who only have a certain amount in terms of income, it is like everybody and everything is taking a piece of this, a piece of that. And then what are you left with?" she asked. "People are losing jobs left and right. Jobs that teenagers used to have, now you have senior citizens working those jobs, because they have been forced to go back to work."

In July, the Los Angeles County Economic Development Corporation and the Kyser Center for Economic Research reported that California's economy was on the brink of a recession due to the housing market crash, problems in the financial sector, and soaring prices for gasoline and diesel. It said high gasoline prices were threatening both tourism and international trade and a drought was plaguing agriculture.

In July, the state's employment rate for 2008 is 6.4 percent. Los Angeles County's jobless rate jumped from five percent in 2007 to 6.2 percent in 2008. In San Diego County, the spike was 4.6 to 5.7 percent, according to the LAEDC. As of August, LA County's unemployment rate was 7.9 percent, the state unemployment rate was 7.7 percent and San Diego's rate had risen to 6.4 percent.

Some areas of California, including San Bernadino-Riverside and Orange County, were already in recession. The LAEDC also reported the state could remain this steeped in financial distress until 2010. And that was all reported before the Wall Street collapse.

"I think of myself as someone who use to be middle class and is being pushed down to lower class," Johnson said. "I truly think they are phasing out the middle class altogether."

Devona Walker is The Loop's senior reporter/blogger.

Check out some other stories on the credit crisis:

Business stories feel the economic pain

Opinion: Blaming minorities for the credit crisis

A bailout for (black) homeowners

Minority-owned banks fare well . . . for now

Opinion: A bailout just for Wall Street

Are you affected by the major retail closings?

Yes, I have to travel further now

No, stores aren't closing near me

Major retailers were never near me

I would be, if I planned to shop