Foreclosure flood foretold for Silicon Valley

http://sanjose.bizjournals.com/sanjose/stories/2004/01/19/daily45.html

A combination of falling affordability, rising interest rates and persistent unemployment will drive California foreclosure activity up in 2004, according to a report Thursday by Foreclosures.com, a Sacramento- based distressed property investment advisory firm.


"Only one in four California households makes enough money to afford a median- priced home in this state," says Alexis McGee, president of Foreclosures.com. "In many California communities, the situation is worse." Ms. McGee cites a January California Association of Realtors report that put affordability at 19 percent or less in several Bay Area counties in the north and as low as 15 percent in Santa Barbara.

"Santa Clara County is a classic case," Ms. McGee says. "The unemployment rate there is more than 7 percent, and was over 8 percent for the first seven months of 2003. Yet, with a median home price of $491,000, the affordability index there is about 24 percent. Many homeowners mortgaged themselves to the hilt during the refinance boom. Filings of notices of default have jumped to 18-25 new per day (from 12-15 new per day) in the last three months, and continue to climb. With only one out of four households qualified to look at these homes, can these troubled homeowners quickly sell their way out of foreclosure? It'll be tough to do."

...more...

employment is on the rise

that this is the beginning of the bursting of the real estate market bubble. Those mortgagers are going to have a tough time moving all that real estate to people who don't have jobs.

We have the corporate robber barons back and soon to be joined by the return of the slumlords.

so many will never be able to afford a home,
and many of those that do will be forced out
for the same reason.

Clinton said that republicans don't realize
how much their policies "hurt" people. I am
not so sure....I think they don't care!

the market is way overpriced in the bay area

I have a sister that lives in what is now called "American Canyon" - "the Gateway to the Napa Valley". When I was growing up we called it "the slews of Vallejo" where no one cared to live. She bought this house with no wood products in it for $350,000.00 and works for the post office.

The post office doesn't pay THAT much do they? How people afford to live in the Bay Area is beyond me. I left about 13 years ago and moved north.

This cannot continue ... because the bucks just aren't there!

:dem: :kick:

A Silicon Valley apartment complex of 300-plus apartments was sold in December and is in the process of being carved up and remodeled into "condos" for sale. The new owners are touting "pride of ownership." The property is approximately 20 years old. They are putting new fixtures to give it that special yuppie touch but are doing nothing with the soundproofing in a complex where the walls, floors and ceilings are paper thin. The property was purchased by a company in San Diego.

I may have missed the stories but I haven't heard of any suffering in Atherton, the "crown jewel" of Silicon Valley, where the median price of a home a decade ago was approximately $1 million. To the north in San Mateo County is Hillsborough, where Bing Crosby lived. In Menlo Park there is Sand Hill Road, home to bankers and venture capitalists in high-rise buildings...you know, the guys who wrote the checks for the dot-com folks who had a business proposal but no actual business.

There are many of the "one percenters" that are so near and dear to Bush's heart living a stone's throw from anyone living in Silicon Valley. I respectfully disagree with your "bucks" statemement...they may not be here in the pockets of the average working man and woman, but there are few places in the country where the stench of the affluent is stronger than Silicon Valley, USA. The "condo" ploy...mixed with with Bush's proposal for "no money down" loans...means that there are slums-a-plenty for anyone in this valley who can sign their name on the dotted line.

If there is one thing the BFEE can't stand
it's people with money who vote Democratic!

I'd say it was probably more like 3-4 million and that may be an underestimate.

Why do you think they are breaking america?

Either have inherited money, have owned another home & are buying up, or are doing a co-op with another family or two. Rarely would anyone on a salary be able to afford anything like this.

Of course this housing price boom has been the latest version of a pyramid scheme, at some point you run out of "the next guy" this may be what will happen very soon.

They are in debt up their ass - this is probably the real case. I have another couple of friends that bought in San Francisco a couple of years ago - $500,000.00 for a dump of a house that needed all new windows, etc. One works as a pumped up secretary - the other in the trade business.

How they manage is beyond me. I don't think either one of them is making enough to justify these prices, plus they bought insurance in case one becomes disabled so the payments will be made. This alone is another $1,000.00 a month. However, they just returned from a Hawaiian holiday. :wtf: ????????

I don't think I'd sleep a wink if I was this far in debt. Comes a time when it just isn't worth it IMO.

:dem: :kick:

We saved up and lived in a 2 bedroom apt for 7 years. We were also lucky to buy during the slump of the early 90's. Many out here are also Stanford and Berkley grads making good money. Many are high tech and MBA's. I know of a few who inherited either their money or their houses, but I think the majority work looong hours to get them.

The pyramid scheme bit, I'll grant you that one!

During the dotcom peak I was making about $120,000 a year as a Java developer in the bay area, and many people considered me underpaid. At that income level I could have EASILY bought a $500,000 home. I didn't, but many others did.

Then the bubble burst, the high incomes vanished, and a lot of people were left holding mortgages they couldn't afford in a market that still acted like the median buyer was wealthy. Today, I make about $45k a year and gripe about my $1,100 a month house payments, but many of these other people are making the same $45k and are paying double or triple that on their homes.

It was bound to crash sometime.

Pittsburgh and Atlanta are both already reeling from foreclosures, so it seems the dominoes may start to fall over more swiftly now. Gulp. Hang on tight.

...housing is comparatively cheap in Pittsburgh--you can get a livable house in a fairly decent neighborhood for well under $100,000. And yet we're STILL having a lot of foreclosures. That's scary.

I paid under $100,000 for my house and I live in a nice neighborhood...but we do have our fair shair of McMansions around and there are a lot of people who are teetering on the edge.

I bought a new house in 2002, a 1380 sq. ft. 3br/2ba, in a new subdivision. Since I've moved in, at least 4 people, within sight of my house from the sidewalk, have put their houses up for sale, all but one have also moved out. I see more and more for-sale signs up around the subdivision every day. These are brand new houses, most bought on really good mortgage deals, in a good housing market (Charlotte NC). Some of these have been for sale for over a year, with no movement in sight. Things are definitely rough for the working class. Luckily for me, I only bought what I needed in a house, not what I could technically afford to buy, so I have some cushion room.

here has held up because so many are unemployed. Last time I checked several months ago, a friend in real estate said they were still getting multiple offers on the 400k - 1 million range homes and that the million and up market was not moving. :crazy:

i just feel awful for those poor banks and mortgage companies, many of whom are major gop contributors, being stuck with all that foreclosed property on their hands. shucks. what an awful thing.

of course, many of those financial institutions will remain solvent. at taxpayer expense, of course. probably in direct proportion to the size of their contributions to the bush/cheney '04 campaign.

will tell them to f*ck off just like he did during the energy crisis.

Over the last four years I have watched the average home price in my neighborhood climb from about $170,000 to $280,000 with over two dozen sales happening in that period (most of my neighbors have cashed out and taken the profit). Who is buying these homes? Not working class families or immigrants...they were ALL purchased by investors. Most of these people were investors in the dotcom boom who simply switched their money over to real-estate, and are now creating a price bubble similar to what we saw with the stock market. One home a few doors down from mine has sold four times in two years, climbing from the original $150,000 to $260,000...and ALL FOUR TIMES it has simply traded hands between investors (for reference, my neighborhood is about 10 years old, and the houses sold for $80k-$90k when they went in).

It will be interesting to watch the reactions of these investors when the prices start to tumble. Will they panic like they did with the stock market and cause prices to crash? Or will they sit tight and wait the 5-10 years that it might take for the market to recover?

Oh, and many of the investor/owners around me are learning another unpleasant truth...you can't always count on renters. Half of the investor owned homes around me are sitting vacant (and increasingly vandalized) because they can't get renters in them. Most investors operate by renting the houses back out for their mortgage costs, but few renters in my area are willing to pay $1500 to $1600 a month for a 3/2 in a decidedly middle-class neighborhood. Since these investors still have to pay their bank bills, I don't see how they can sustain these investments for much longer.