Economic Reality Cools Promise of Prosperity : Recession: The grim realization sets in that Orange County will never go back to days of endless growth.
When Ferrari salesman Andre Javardian looks out the huge windows of his showroom, he sees could-be customers aplenty cruising down Pacific Coast Highway. But they don’t stop and shop like they used to.
“There’s people out there who have enough money to last them a couple of lifetimes,” Javardian said. “Why aren’t they buying cars?”
“It’s attitude,” he concludes. “It’s, ‘I better not spend my money right now because nobody else is.’ ”
After almost two years of grinding recession, the leading economic indicators in Washington are once again promising recovery.
But in Orange County, a land of endless summer that seemed to promise endless growth and prosperity, the mood remains grim.
In a county that by every measure ranks among the most affluent in the nation, this spring has brought a gnawing realization that while recovery may be on the way, the gold rush era on California’s Gold Coast is unlikely ever to return.
Simply put, the economy has stopped levitating. Economists say the recovery will bring new growth, but at a rate more comparable to other areas of the nation. A maturer Orange County will surely survive, but will the dream?
If the promise of prosperity and “the good life” is anchored in defense and development, the answer is clearly no.
Though the county has for three decades been defined by development, there are far fewer vast tracts of land to be subdivided. The aerospace industry, convulsing in withdrawal from Cold War defense contracts, will no longer lead the economy of the 1990s--and the job loss in defense industries, economists say, may never be replaced. Banking, tourism and retailing, all fattened by the double-digit growth, are faltering.
These are old problems to the industrial Northeast and the Rust Belt; but to people who fled to Southern California’s last frontier to escape the inescapable, they signal the end of an era.
“I grew up with a good life,” said Ruth Taylor, 33, an Anaheim native who still remembers passing orange groves on her way to grammar school, just across the street from Disneyland. “I grew up expecting these things to come easy, and they don’t come easy anymore.”
Taylor’s father worked in aerospace. The money was good and steady, and every few years the family moved to a better house.
But life hasn’t been as easy for Taylor; she was forced to file for bankruptcy after a divorce last year, is struggling to make ends meet, and worries that life could be even harder for her daughter.
“I don’t think this is going to be the place it was, to come and make a lot of money and have a nice life,” she said. “If I was in another state I’d think twice about moving to California.”
Taylor’s boyfriend, Steve Landeau, 26, of La Habra, also declared personal bankruptcy last year. He had been earning almost $40,000 a year for a company that installed skylights but had run up nearly $20,000 in credit card debts. When the recession hit, his employer went bust, and so did Landeau. Now he’s earning about $13,000 working for a company that distributes coin-operated electronic dart board games.
Both Taylor and Landeau are high-school graduates, but the good life seems elusive. They pay their bills comfortably but don’t seem to be able to put anything aside for a house and don’t expect to do as well as their parents did.
“If you don’t have it already, it’s going to be hard to get it,” Taylor said.
Taylor and Landeau’s bankruptcies are no longer unusual. Bankruptcy filings in Orange County jumped 32% between 1990 and 1991, according to the Kent & White law offices.
Bruce David White, a Garden Grove attorney who specializes in consumer bankruptcies, blames the credit card culture, which he argues is more entrenched here than elsewhere in the nation. In other cities, he notes, car buyers consider the final purchase price. Here, White says, both buyer and dealer focus on the monthly payment.
“In Orange County, it’s more important how things look, so it’s very important that you have a new, shiny car every year, preferably a Mercedes,” White said. “You have to have the best of things. . . .
“As long as the economy was fine, you could live from paycheck to paycheck, but as soon as there’s the smallest glitch in the economy, you’re in trouble.”
In the past, Orange County consumers could easily afford to spend, since the county was, by nearly every measure, one of the best places in the nation to make money.
In a 1991 ranking by Sales & Marketing Management magazine, for example, Orange County ranked eighth among areas in the nation with the highest percentage of households with incomes of $50,000 or more. In 1989, it ranked sixth in disposable personal income among all California counties.
But consumers interviewed at local shopping malls said that they are trying to spend less--even if they don’t have to. Some, especially those who still have good-paying jobs, see the recession as a healthy antidote to what they regard as the overconsumption and inflated expectations of the 1980s.
“I never really understood why the economy boomed so much in the ‘80s. I figured it was all on paper,” said Barbara Baehler, a 45-year-old drug counselor who fled Orange County for Hawaii six months ago in search of a better lifestyle. “We weren’t really going through a time of prosperity. We were going through an illusion. So how can we go back to that?”
For others, bad times have a moral message.
“The premise of Orange County has been ‘Paradise Offered Here,’ and a lot of it is having the Beemer,” said Ken Karlstad, regional director of Habitat for Humanity, who says the recession has brought an increase in volunteerism as people seek fewer material rewards. “I don’t think that people are ultimately made happier by conspicuous consumption beyond their needs.”
Indeed, a cultural tide seems to be turning in a place where “too much” wasn’t included in the local lexicon.
“You have a lot of people buying Ford Explorers who used to be buying expensive European sports cars,” said Michael Jeffers, a Newport Beach securities lawyer. “Conspicuous consumption is out of fashion these days.”
Indeed, at Newport Imports, the landmark Newport Beach purveyor of Ferraris, Jaguars and Aston Martins, sales have dropped about 40% since December, 1990. Owner Lee West says he has been forced to lay off 50 of his 160 employees, and close two of his four showrooms.
West agrees with the economists who say this recession has afflicted the affluent like none in recent memory. For the first time, he has seen repossessed Ferraris. Customers are no longer trading in their Jaguars at 30,000 miles. Some high rollers have even had to unload pricey cars for fast cash.
“People are voluntarily giving them up, saying, ‘I’ve lost my job, I can’t make the payments,’ ” West said. “We’ve helped good customers out that have got in trouble. We’ve sold their cars for them.
“The amazing thing about this recession is it’s hurt everyone--absolutely everyone. . . . It’s hit many people you thought weren’t vulnerable.”
West says the last month has brought faint signs of recovery. But meanwhile, he consoles himself with good news about Range Rover sales. At $45,000 a copy, sales are up 10% to 155.
Salesman Javardian, however, says the recession has brought out some bargain hunters. Back in the boom years of 1989-1990, some dealers were selling Ferraris for $100,000 more than the so-called sticker price; now, they can be had at a discount.
“The doctors and lawyers are buying them now because they’re available at a great price,” Javardian said. Developers, who once provided both his bread and butter, are nowhere to be found. But he has had some interest from mortgage brokers who have profited from the boom in refinancing due to lower interest rates.
At the other end of the economic spectrum, the recession has given plenty of ordinary folks sticker shock. Prices seem to stay high, but raises are harder to come by.
“Everything is so expensive, everything,” complained Diane Russell of Laguna Beach, who was lured to Fashion Island by a sale at Neiman Marcus but emerged with only a small purchase of makeup. “Clothes are too expensive, housing is too expensive. The cost of all the goodies is so expensive!”
“Prices don’t seem to have gone down a heck of a lot,” said Rosalinda Manno, a retired restaurateur who also emerged from the stores, without a shopping bag, to survey a deserted courtyard.
“In the old days, it wasn’t like this,” said the 36-year veteran of Southern California. “There were more people everywhere you went. . . . It’s never been this bad. Never.”
Notes Irvine pollster Mark Baldassare: “People have been so bullish here in the past that the psychological reaction to the recession has been very severe.”
Suddenly, glitz is out. Thrift is in.
“People are taking a lot of pleasure in saving money, in getting a bargain, and it’s fun,” said Suzanne Jeffers of Newport Beach. “I have grown to love Target and the Price Club. And some of the people there have a lot of money--or did.”
“People here have been weaned on a blazing economy,” said her husband, Michael Jeffers. “Everybody was prepared to have their house go up in value substantially every year.”
The median price of a resale home in Orange County peaked in May, 1990, at $256,990, according to the California Board of Realtors. By December, 1990, it had fallen to $229,120. It has since rebounded marginally to $230,930 in February, but remains down 11% from the peak.
And gone with the steep annual appreciation in home values is much of the “borrow big, buy bigger” mentality.
“If someone drove up now with a new Testarossa, you’d think they were nuts,” Jeffers said.
Some argue that money hasn’t been any easier to come by in Orange County than elsewhere, but rather that the land which offered less smog and all the sunshine of Los Angeles has simply been a magnet for the highly skilled and the highly paid.
But the blistering rate of growth has helped almost everyone who arrived before 1988.
“You don’t have to be smart to make money in a rising economy,” said one wag who declined to “trash Orange County” by name. “All you have to do is be there.”
Now, being here isn’t enough, and a steady job seems harder to come by. The latest Times Orange County Poll found 37% of county residents were worried that they or a family member would lose their jobs--and another 7% had already lost theirs.
“I don’t think it’ll ever be the same here,” said Gladys Steff, 69, of Placentia, who came to Orange County in 1964 when her husband was transferred from Ohio. “Even if the economy comes back to what it was, people are still going to be skeptical about spending money--especially the retired people.”
Even in 1964, Steff recalled, life in California was more expensive than elsewhere in the nation, but jobs were plentiful. Now, she said, “everyone is afraid for their jobs. No one is sure they’ll be able to keep working.”
Economic anxiety has even changed the way some con artists do business. The Securities and Exchange Commission in Los Angeles has noticed a growing number of scams that hook investors not with the get-rich-quick schemes of the ‘80s, but with the illusive promise of investment safety.
One Beverly Hills-based company recently shut down by the SEC sold investors AAA-rated municipal bonds billed as fully insured for both interest and principal. “There is no better protection than this anywhere in the marketplace,” promised the promotional literature from F.S.G. Financial Services Inc.
The only problem, according to the SEC, was that the municipal bonds never existed. Fraud charges are pending against the company, but meanwhile at least one Mission Viejo investor who had sought a recession-proof investment has lost $70,000.
