Posted on June - 02 - 2010
Higher end foreclosures are on the increase in the Bay
Foreclosure actions are on the increase in San Francisco Bay Area – this time it’s the richer that are getting poorer. Close to 1,000 homes worth over $730,000 have been repossessed in the past two years – the area looks like scoring again with 223 similar ones seized in 2010 by banks to date.
In boom years like 2005, a paltry 42 properties in that range went under hammers. In 2006 the score was 80, making the current rate remarkably high by historic standards. The difference is also in the affected zip codes – mortgage default notices are becoming prevalent in affluent areas too.
While it’s true that high-end foreclosure actions are way behind in volumes when with lower market ends, the zip code trend referred to is significant particularly in terms of underlying drivers. These include eroding unemployment, stock losses, and the consequence of ARM Adjustable Rate Mortgages.
The expanding focus reflects increases of up to 100% in wealthier zip coded areas. Empire Realty Associate’s John Sefton told me that the focus is clearly shifting, with increased delinquencies, foreclosures and short selling in better heeled communities, compared to a falling away in outlying, lower value communities.
The number of San Francisco Bay Area foreclosures valued at $1 million or more is also on the increase, as follows:
| 2008 | 289 |
| 2009 | 305 |
| 2010 Mechanistic Forecast | 344 * |
* Based of 86 for 2010 first quarter
These figures may not represent the full scale of this end of the problem – more wealthy owners are generally more astute, and understand the convenience of remaining in their houses while they market them at underwater prices, instead of waiting for foreclosure. They also have the added advantage that banks are more careful when higher-end short sales are involved – that’s because the risks and benefits of cared-for short-sold homes compared to trashed foreclosure properties are greater.
I chatted briefly with Kendra Wall of San Francisco Properties who confirmed this. “With any of my high-end foreclosed properties, if I find them vacant when I take them over, they’re almost always stripped,” she told me. “I had one where they sold everything on eBay – the kitchen cabinets, granite countertops, the appliances, [the lot].”
It’s hard to figure out how many relatively expensive short sales are actually taking place in Bay Area, San Francisco. That’s because realtors seldom list their properties as such, believing that this retains a better bargaining position. Notwithstanding this, all the local people in the field confirm the increasing trend. We may however just be seeing the beginning of the data, because richer people are often sharper, and have influence to extend their period of delinquency before short selling.
Visit www.foreclosuredatabank.com for further information.
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