The housing foreclosure crisis has slammed the Central Valley as hard as any region in the country. Stockton, Sacramento, Modesto, Merced and Bakersfield are typically listed the top 10 to 15 markets with the most foreclosures per capita. In some cities, 5% to 7% of homeowners are delinquent on their mortgage payments. And whole neighborhoods, such as portions of Natomas in Sacramento, sometimes seem to have been completely emptied.

Why is the Central Valley suffering so badly? I put that question to Carol Whiteside recently while reporting for a story scheduled to appear in the June edition of Planning magazine. Carol founded the Great Valley Center. from which she recently "retired." Before that, she was mayor of Modesto and a member of Gov. Pete Wilson's cabinet. If anyone knows the Central Valley, it's Carol.

"These markets were very subject to flippers. People were coming in from the Bay Area and other places because prices were rising so fast," Carol said. Investors put down as little cash as possible on a house, arranged some sort of exotic financing, and then assumed they could sell for a profit within 12 months, Carol observed. The scheme worked for a while. But when prices started flattening out two years ago, and the fancy loans' interest rates reset or balloon payments came due, the game was over.

"The other part of it is that this is an area without a lot of wealth and high incomes," she said. Many people who bought homes in the Valley commute to the Bay Area or, from Bakersfield, to Los Angeles. These folks bought houses in the Valley on the "drive until you qualify" theory. Such families live on a tight margin, and the slightest economic blip could make their financial situation untenable, especially if they had refinanced or taken out a second mortgage on the assumption that property values would continue rising.

I guess that none of this should come as a surprise. Two years ago, the Congressional Research Service reported that the San Joaquin Valley is the poorest region of the country — poorer than even Appalachia. Economic development efforts have been stymied by the Valley's poorly prepared workforce and a less-than-ideal quality of life in many places.

But in recent years, public agencies, businesses and property owners have invested heavily in downtown Modesto, making it a true urban delight. (Seriously, if you haven't been there lately, you'd be surprised.) Will efforts such as downtown Modesto revitalization pay off in the long run by attracting entrepreneurs and well-educated workers who could build a stronger, more durable local economy? Carol Whiteside would like to think so. However, she warned, today's society is focused on the quick buck, not the long-term.

"I hope we learn our lesson, and be smarter and more cautious," Carol said, pointing to the high-tech and real estate bubbles that have burst during the last eight years. "But experience tells me we will forget the lessons."

— Paul Shigley