September 18, 2008
Today’s Merc headlines were the most depressing economically that we’ve seen in years with the highlights being the crash on Wall Street, the rise of foreclosures in many San Jose zip codes, and the state of California’s budget crisis.
The piece on foreclosed homes, written by Sue McAllister, focused on the zip codes in San Jose where foreclosures are between about 1% and 2.6% and on the issue of blight in vacant homes. Lenders can’t keep up with their paperwork on these distressed properties, let alone worry about watering and mowing lawns and keeping homes from being vandalized. As might be expected, the areas hardest hit with these problems are those with the lowest income. Cambrian Park, Willow Glen, The Rosegarden, West San Jose and Almaden Valley did not rank among the areas with high levels of foreclosures. The Mercury News article did not cover just short sales, but homes in any stage of foreclosure.
Short sales are usually the first step in the foreclosure process, as many homeowners who’ve been served a Notice of Default and know or believe that they cannot save their home will try to get out from under the mortgage burden with as little credit damage as possible, and thus turn their efforts to the hope and opportunity that a short sale may provide.
[Some agents are trying to help homeowners to not just cut their losses when they lose their homes, but instead to cut their debt pressure and keep their homes. A friend of mine in Tuscon, Frances Flynn Thorsen, has a forum to help homeowners keep their homes. (You can read about it here.)]
Back to the issue of distressed Silicon Valley properties: I’ve been tracking short sales for about six months in selected areas of Silicon Valley. The parts I’ve been tracking are largely along the west and northwest part of Santa Clara County, where there is more wealth and stability generally in this market. There is not a shocking rise of short sales in these areas overall. Have a look at the snapshot of short sales among single family homes, condos and townhomes in Silicon Valley:
|Los Gatos Mtns||3||2||3||0|
|San Jose (all)||1534||1777||1708||1578|
Blossom Valley, which made the Merc’s list, has actually improved on short sales (but perhaps gotten worse with the number which are now bank owned?). Los Gatos is worse. Cambrian Park is better. The total number of San Jose short sales is lower than it was in July or May. (This may be a statistical blip as some homeowners may be getting an extra window of time before feeling pressured to sell.)
So what can be said from this for the Silicon Valley real estate market? We have had a bifurcated market for a couple of years already in which the wealthier areas have been fairly stable and the poorer areas have been badly impacted by the mortgage crisis and the general state of the economy. We are not yet seeing the end of the tunnel in terms of the foreclosures in Santa Clara County – more are to come as adjustable loans are reset and an oversupply of cheap, bank owned housing puts downward pressure on pricing in many districts.
At the same time, turnkey, fully remodeled homes in areas with excellent schools and aggressive pricing are still selling – and at times with multiple offers. Buyers are being picky, because they can be picky with so much selection available.
Buyers with large cash downpayments are calling the shots generally, but sellers with “like new”, high quality homes in areas where the schools have API scores over 900 are running their own show too. How’s the market? It completely depends on where you’re looking.