HOLLYWOOD, Florida - 'You feel bad. You don't want to take their wedding rings from them - that's their memories and everything," says Michael Bruce from behind a row of thick steel bars. "But they need the money and that's what we are here for."Bruce holds out a black velvet jewellery tray. Each row holds a dozen wedding and engagement rings: big diamond, little diamond, stylish or gaudy, he has dozens. "When they take the ring off their finger, they get all choked up. It's just something you got to deal with ... that's just the way the economy is - it's trash."
Bruce, whom everyone here calls Junior, is the manager at a pawnshop on the outskirts of Hollywood, Florida, itself a diamond of a city in a perfect setting of Atlantic beaches. "It is easier for them to pull a ring off their finger than to bring in a lawn mower" to raise some cash, says Bruce, who every day sees Americans so desperate not to default on their mortgage payments that they come to his shop to sell "everything from musical equipment to the gold teeth from their mouths".
No one seems to have cash, debts are piled high and even the banks appear to be running out of money, says Junior. "Better to lose your ring than your house."
Junior's pawnshop sits alongside a faceless strip mall, across the street from a cement fortress - the sheriff's office - 30km north of Miami's South Beach. Inside a steady stream of people come in to sell off their possessions. There's a stack of palmtop computers, brand new Bose speakers and so many Guess watches that Junior won't take them any more. "I get the guy who drives up in the Bentley, and the people who walk in. No one has cash."
Down the street at Circuit City, an electronics store, the 18-year-old sales clerk, Alex, agrees. "Before, the economy was booming, the stock market was OK and people could spend. Now nothing is the same, a lot more people are struggling. There are more lower class than middle class," he says. "Do you know how many foreclosures there are every day? My aunt sells real estate and every day she has new foreclosures [by banks]. People just don't have enough money." Alex says he is already planning to leave the US to look for work overseas. "I don't think the country is going to go bankrupt, but if the next president can't get the economy going, I'm moving to Spain."
The collapse of the local economy is obvious along the palm-shaded streets of Hollywood, Florida. Instead of "Welcome to Hollywood", the first sign a visitor now sees is a bright yellow sign stuck into the flowers. It reads: "Sell Your House, Fast Ca$h 954-294-5420."
Answering the phone at that number is Ricardo Morales, 39, who set up his own website, ricardobuyshouses.com, and has been scooping up properties for as little as 25% of their listed value. "The banks have properties that are listed at $240,000 [£123,000], but now they are dumping them for $89,000 [£46,000]. That seems to be their favourite price now - $89,000 and we are talking a three-bedroom, four-bath home in a nice area. The banks are dropping the prices like crazy."
In 2007, Hollywood, Florida, was elected "All America City" by the National Civic League, a tribute to its sense of community and progressive social policies. Now it seems only to epitomise America's housing slump. Earlier this week, the government-sponsored mortgage giant Freddie Mac said that the country was facing the biggest decline in property values since the 1930s. In Hollywood, practically every street is packed with "For Sale" or "Open House" signs. On some streets five or six houses in a row are for sale, most with additional details like "Price Reduced" or "Foreclosure".
In a normal economy, no neighbour would ever so publicly admit to running out of cash and finding their house seized. Today the front doors are plastered with notices like "Sheriff's Notice" and "Final Notice of Eviction."
Instead of signs for lost poodles and beagles, the telephone poles and traffic signs in Hollywood are plastered with handwritten signs pleading, "Buy my home." One homeowner simply bought an "Open House" sign and scrawled in bad handwriting a single word: "CHEAP."
I follow the "cheap" trail and find a tired home, in a quiet neighbourhood, next to golf courses and a canal. The beach is quite close, about 15 blocks away. The owner is simply gone. He left the front and back doors open.
A box of cockroach poison sits on the table next to a piece of paper with a cellphone number. The house is abandoned, wires coil from the walls, the plants are dead and it looks like the owner just simply gave up. I wait an hour, but no one appears.
Pawning wedding rings and abandoning homes are just two small indications of the turbulence that is not only destabilising the US economy but also risks throwing the global economy into a stall. From 1995 to 2005, the US economy grew steadily. Housing prices in many areas trebled. Then in late 2005, the economy peaked. Housing prices slowed, went flat, and then started to fall. Prices for condominiums in the Hollywood area have fallen by approximately 40%. People who bought in 2005, 2006, or 2007 now owe the bank much more than their home is worth.
Nowhere has the economy been more crushed than southern Florida, where Hollywood sits. As developers, speculators and investors saw year after year of 20%-plus gains in property prices, money poured in. Banks joined the party by offering a novel kind of loan - "no documentation". Applicants would simply be asked by a bank's loan officer, "How much do you earn?" and "Have you ever been bankrupt?" and most important "How much money do you need?"
"There was a lot of fraud. People would lie about how much they earned ... Whatever you put was true. You put down your salary and they gave you $1m and said, 'Go buy a house,'" explains Carlos Justo, a broker who has worked in property for 30 years. "I had a client - he's a banker - and he said, "Carlos, my 13-year-old son could get a mortgage. He has a social-security number and a tax ID. If he had applied, he could have gotten $1m."
As the banks made little effort to verify the information, "credit-challenged" applicants were often able to get the now notorious sub-prime loans - contracts that allowed for two or three years of minimal payments and then an increase of 500%, so that an $800 monthly payment suddenly balloons into $4,000 a month.
"You want to know how crazy it got?" asks Katerina Brosda, a 28-year-old estate agent. "At one point [in 2006] I was walking around with 57 cheques for $100,000 each in my pocketbook, for two weeks! Each one was a deposit for a new condo and I walked around with my purse like this ..." She clutches her white Chanel purse close to her chest. "I had a couple of associates who were sleeping out in a tent waiting to get into the sales office to buy a condo and I saw people fighting over units, hitting each other over who was going to get the last one."
These days the locals are struggling to dig themselves out of debt. At the Hollywood public library, in the section where they sell off used or surplus books, the only empty shelf is the section on financial help.
"We can't keep that kind of book in stock. As soon as they come in, they go out," said Antoni, a grey-haired, bespectacled man in his 60s who is a library volunteer. "People are just upping and leaving. For the middle class on down, it is going to be a heartache."
With so much chaos in the economy, everyone you meet on the streets of Hollywood is either a property expert or a victim. "It's all about greed," says a man in an SUV the size of a bus. "George Bush spent a trillion dollars on this war in Iraq; what is that going to do to our grandchildren? He's going to cause another great depression." While he blocks the street and ignores cries to move his Chevrolet Excursion and let traffic through, he tells me that the meltdown has shaken his faith in America. "I never thought that Americans could do this to Americans."
Around the corner, standing outside his three-bedroom home, notionally worth $780,000 (£390,000), "Jim Robinson" - he refuses to give his real name - smokes a cigar and admits that if he wanted to sell, he would have to drop the price to about $600,000. But he sees the economic collapse as extending far wider than housing: "This country is no longer an industrial power. We don't even manufacture steel, the Saudis own 30% of Wall Street and Dubai had to bail out Citibank."
With his dense tattoos and tales of gunfights in the Sudan, Robinson is an ex-mercenary who has travelled widely in the developing world, in conditions of drought, starvation and war. Now he sees those same chaotic conditions engulfing his beloved Hollywood. "These people are so clueless about what is happening beyond their compact little world, they are absolutely clueless as to what the potential [for economic meltdown] could be. You shut down the grocery store for a day and they panic. Look at what happens when we have a hurricane! People go to stores and fight over a loaf of bread."
Bob Boynce, a south-Florida estate agent, also sees signs of panic. "People are walking away from their homes," he says. "We sold homes to young couples four years ago for $400,000. Now they could only sell for $275,000, so they are walking out and losing it all. This is happening in great numbers. You won't see that in the newspapers." He describes this new generation, known as "the walkers": "Their [mortgage] payments may be $4,000 a month. They can rent a place for $1,700. They are cutting their payments in half. The only thing that can be done to them [for defaulting] is that their credit rating will be bad. They can't arrest you; it is not a crime. This is happening by the thousands; I have two close friends who have done this."
"Walking" has become endemic in parts of urban America where house-price falls have been particularly steep, and the pattern is often the same. First the family move out their furniture. Then the car. Finally they post the keys back to the bank. In the morning, when the bank employees go to collect the day's mail, the box of letters often rattles, the sound of so many keys clanging together. This too has a name: "jingle mail."
But with the locals out of cash, who is buying? "The foreigners are coming in droves: 80% of the people coming into our office are from England, France, Germany, Italy. Between the falling prices and falling dollar, they can buy here for practically nothing. Who wouldn't be here?" says Paul Merlesena, a local estate agent who notes that some of the first homes at auction have just sold for $240,000. "Last year they were selling for $660,000." Looking a bit sad, he says: "If this was all reversed, America would be eating up Europe." Another group of buyers has started moving in at the luxury end of the market in parts of the Miami area - wealthy Russians. Fond of winter sunshine and gated security, Russians are picking up mansions whose price tags have become increasingly attractive thanks to the weak dollar.
In the US media, the housing meltdown has been portrayed as a series of isolated events, rather than a connected body of evidence pointing to another great depression. Outside an office building in Hollywood, crates of unopened mail dumped in a skip give an indication of the breakdown that is occurring between ordinary Americans and the financial system.
The first letter I pick up is dated March 25 and addressed to Isaac from Miami: "Your debt to Land Rover Capital Group is still unpaid," it begins, offering him a simple form to fill out and mail back with a cheque for "the balance in full" - $13,540.76. As Isaac evidently does not open such mail, what is the chance that the money will be paid off?
Another letter is chasing a debt of $88,000 owed by Uri of Miami. The lawyers from New York are making a once-only offer: if he will just put post a cheque for $35,000, the debt will be cleared. This is a 55% discount on the total actually owed. There are other letters for Uri, for other debts running to tens of thousands. One bank is offering to settle for 15 cents on the dollar - a $32,000 debt instantly chopped to barely $5,000. Judging from the letters in the skip, Uri alone owes close to $100,000, yet the people chasing that money seem unable to get him to even open the mail. Multiply Uri by a few million and you begin to understand the seriousness of this meltdown. It is not the kind of story that a generally patriotic American press likes to investigate. But in that one skip, in a small corner of a picture-perfect American city, all the evidence shows repayment claims from banks, car companies, credit-card providers, all turning into so much worthless paper.
I stayed in Hollywood for only a week. I came to love the quiet streets where the screech of parrots was often the loudest sound around. The bike lanes were swept clean and the library, a huge building with 24 internet-ready computers, was free to the public. But I left haunted by that pawnshop, the wedding rings, the broken end of the American dream.
Even Junior's takings have slumped. "People come in here and want money. They are not spending anything," he says on my last visit. "Our sales are completely down, except for one thing: golf stuff is selling. It's crazy. The stuff you think people will not want to go out and do! Obviously they are not working, so they go out to the range".
© 2008 The Guardian