Most good stories start with a fundamental list of ingredients: the initial situation, conflict, complication, climax, suspense, denouement, and conclusion. Great writers sometimes shake up the recipe and add some spice.
Exposition (Initial Situation): Home Again, Home Again
Danny's back after the War—World War I, that is—and finds that he has inherited two houses from his dead grandpa. He's not too excited by this prospect, but he has no choice but to become a landowner, a respectable person in Tortilla Flat.
This sets the stage for the novel. It's Danny's change in condition from an irresponsible, footloose, and fancy-free guy to homeowner with responsibilities and headaches that makes him form his gang of friends.
Rising Action (Conflict, Complication): The Gang's All Here
One by one, Pilon, Pablo, Jesus Maria, the Pirate, and Big Joe Portagee move into Danny's house after burning down the house they were living in. The six friends become a sort of a family, living off of what they can scrounge and steal and helping each other when they can... with a good fistfight thrown in every now and then for good measure. The house burning down pushes all of them into one place together, creating the collective that Steinbeck was known for writing about.
Climax (Crisis, Turning Point): Dan's Depressed
Danny starts to feel trapped as his days get more and more routine, and nothing seems to make him happy. The irresponsible life he lost when he inherited the houses seems appealing again. He runs off into the woods, coming back to the house only to ransack it while his friends are asleep or out looking for him. They are desperate to find him and bring him back home, but he's gone wild.
Falling Action: Party Time
The friends make a last-ditch effort to cheer Danny up. They throw a huge party, and everyone in Tortilla Flat shows up. There's dancing, drinking, more drinking, and even more drinking. Danny dances with every girl and fights with every guy there. He runs out the door in a frenzy and falls down a ravine, killing himself.
Resolution (Denouement): Burnin' Down the House
With Danny dead, the friends have no reason to stick together; it's like he was the glue holding them together. They're sitting in the house remembering him and accidentally start a fire. They let it burn, and once the house is gone, each man walks off in separate directions, disbanding the brotherhood. The house, which was the symbol of their friendship and the force that held them together. When it is gone, so is their friendship.