In the Central Valley these days, the bankruptcies and foreclosures don't just affect individual homeowners. They swallow entire developments -- and the people who conceive them.
Three massive high-end projects in the San Joaquin Valley symbolize the California housing bubble at its most extreme. Combined, they have cost lenders and investors tens of millions of dollars -- and offer clues about the roots of the financial crisis that has gripped Wall Street and the world's economies.
Each is striking in its own way:
Diablo Grande, partially built out in western Stanislaus County, is faring better. But homeowners grumble about water-quality problems and plummeting values, and the project became a nightmare for original developer Donald Panoz, a pharmaceutical tycoon who made a fortune on the nicotine patch. He lost Diablo Grande after it filed for bankruptcy protection.
After Running Horse in Fresno collapsed, none other than Donald Trump jetted in with a rescue plan. He gave up months later. One of the original developers, accused of fraud, turned up dead in a Fresno motel last month.
Bakersfield's McAllister Ranch defaulted on a $235 million loan from Lehman Bros., the investment giant whose Chapter 11 bankruptcy filing helped heat Wall Street's woes to their current boil. McAllister's only occupants are a herd of sheep grazing on a golf course designed by Greg Norman.
All three developments were designed to bring the luxury life to the valley, and that's where the problem lies. Their struggles illustrate how hard it is to transplant $800,000 homes and designer golf courses to California's chronically depressed midsection.
Bakersfield boom turns to blues
While the housing boom brought money and diversification to a region too dependent on farming, the overall impact was somewhat hollow. The fundamentals of the economy didn't change. The valley didn't generate nearly enough high-paying jobs needed to sustain such high-end developments as Running Horse.
"The markets were so overheated they were chasing any deal," said Fresno real estate consultant Robin Kane. "Part of the problem that always hurts us in the valley, from Bakersfield to Stockton, is your employment and per capita income (are) not rising."
With the boom a faded memory, unemployment is creeping back up to the 10 percent range in much of the valley. The real estate market is a disaster: Stockton had the nation's highest foreclosure rate in August, according to researcher RealtyTrac, followed by Merced and Modesto.
Developers of big projects are paying for what Kane and others said was a classic valley mistake: They fell in love with the area's inexpensive land but ignored its troubling demographics. The valley is still plagued by low incomes, a poorly educated work force and other ills.
"We're not another Silicon Valley," said Bakersfield real estate appraiser Gary Crabtree.
Nation's hottest market fizzles
That didn't seem to matter when McAllister Ranch was taking shape in southwest Bakersfield. The city in 2005 had become the nation's single hottest housing market, as measured by price growth, thanks to a stampede of home buyers from Los Angeles.
McAllister was going to be a big-time operation, with 6,000 homes and a host of amenities. Developer SunCal Cos. of Irvine borrowed $235 million from Lehman Bros. -- part of a $2.2 billion war chest Lehman handed SunCal to develop properties throughout California and Nevada.
SunCal had a grand vision for Bakersfield. After buying out the original developer, it doubled the asking price for individual lots, to $115,000.
But once the market petered out, "those prices were no longer viable," ex-project manager Darryl Tucker said.
Work halted months ago. The partly built golf course became a sheep pasture. SunCal defaulted on the Lehman loan, and contractors forced McAllister Ranch into involuntary bankruptcy.
"You've just got tumbleweeds growing, and that's about it," Tucker said.
It's a similar story at Running Horse, which was going to bring prosperity to Fresno's long-neglected west side.
Homes would sell for up to $800,000. The PGA pledged to stage a tournament on the Jack Nicklaus-designed course.
Instead, Running Horse became Fresno's longest-running soap opera. After years of promises, developers Scott Webb and Tom O'Meara -- the latter a California State University, Fresno, grad living in Pebble Beach -- ran out of cash. They sold to Mick Evans, a Ripon golf course builder, in March 2007 for $200,000.
A month later, Evans put the property in Chapter 11.
All that had been built were two holes of Nicklaus' course.
Then came Trump. The brash developer arrived one afternoon in May 2007 in his jet. Emerging from a meeting with elected officials at the double-wide trailer serving as Running Horse's headquarters, Trump told reporters: "We're looking to try and save a very troubled situation."
He was willing to buy, but only with a subsidy from the city.
After months of negotiations, Trump bailed out. The property was taken over by its San Diego lenders.
Recently the state Department of Real Estate accused O'Meara and Webb of defrauding investors out of more than $4 million by allegedly selling the same lots to multiple buyers.
The two were stripped of their real estate licenses in September. Two days later, Webb was found dead in a Fresno motel.
Authorities said there was no foul play, but the case remains under investigation.
The property sits idle.
"It would have been a big deal for Fresno," said Harlan Kelley Sr., 71, a west side resident who put $385,000 into the project and was among those said to be defrauded. "We still got our fingers crossed that Donald Trump or someone else will come in and take over."
Patterson project still struggling
Another Donald built Diablo Grande. Donald Panoz, a pharmaceutical executive, land developer and owner of an auto-racing business endured eight years of environmental lawsuits and spent $120 million bringing Diablo Grande to life.
His goal: a luxury hideaway in the dusty hills west of Patterson, the self-proclaimed "apricot capital of the world." A vineyard and winery, plus two 18-hole courses, became part of the vision.
But the 33,000-acre site was geared to the Bay Area transplants flocking to valley towns in search of cheaper housing.
That made it vulnerable. Once housing prices softened in the Bay Area, buying a home in the valley made less sense, said Dean Wehrli of Sullivan Group Real Estate Advisors in Elk Grove.
Diablo Grande "was absolutely ripe to be hit hard by the downturn," he said.
More than 450 houses were built when the project sputtered earlier this year. Both golf courses closed temporarily. A Chapter 11 filing came in March.
The project is trying to get back on its feet. A Los Angeles developer named World International LLC bought it for $20 million and pledged to build a resort spa, equestrian center and Spanish-style shopping village. It said last week it plans to rename the development to give it "a fresh start." Meanwhile, a rash of foreclosures among the finished houses lured bargain hunters.
East Bay couple Karen Cinfio and David Rose bought a million-dollar home with panoramic views out of foreclosure for $375,000.
"I kind of refer to the people who lived here first, they were kind of like the Donner Party," Cinfio said as she stood by her backyard pool. "They paved the trail."
Valley prices back to earth
Many of the trailblazers still live at Diablo Grande, and they wonder when things are going to improve. A chemical problem has left the water undrinkable and prompted a $1,000 state fine. The plummeting home values are another cause for concern.
Darcie Nessinger lives with her parents in a home valued at $275,000. They paid $534,000 three years ago.
"We expected the values of the houses to go up," said Nessinger, 33, an AT&T employee. "It's a resort area on a golf course."
A quick return to 2005 pricing is unlikely, at Diablo Grande or anywhere else in the valley. Steve Smiley, who tracks valley trends for consulting firm Meyers Builder Advisors, said outrageous housing prices are gone for good. Taking their place: modest prices based on the valley's economic fundamentals.
"I don't know if pricing is ever going to come back to that $800,000 house in Manteca," he said. "In my mind, it shouldn't."