The number of default notices sent to California homeowners last quarter increased to its highest level in almost 10 years, due to flat appreciation, slow sales and post teaser-rate mortgage resets, a real estate information service reported. While foreclosure properties tend to bring property values down, it does not appear to be the case in Silicon Valley.
Lending institutions filed 46,760 Notices of Default during the first quarter of this year, up 23.1 percent from 37,994 for the previous quarter, and up 148 percent from 18,856 for the first-quarter of 2006, according to DataQuick Information Systems.
"Foreclosures are up everywhere, but the numbers are still pretty moderate compared from what we saw from the mid-1990s," California Association of Realtors Chief Economist Leslie Appleton Young said in a recent interview with KNX 1070 AM. "The people getting in trouble are likely those who purchased homes in 2005 and 2006 and got either into a subprime or zero down or some kind of a mortgage that is now adjusting on top of a loan where they don't have any equity."
Notices of default for houses and condos doubled in Santa Clara County – from 527 during the first quarter of 2006 to 1,058 during the same period this year.
According to Mark Burns, president of the Silicon Valley Association of Realtors, "The foreclosures are up quite a bit in Santa Clara County but many of these appear to be the purchasers of homes just prior to rates rising. The option to purchase with no money down (80 percent first loan and 20 percent second) or very little down was easy and very appealing for those who expected to have to wait to save at least 10 percent or more to put down. Good planning of household budgets, reserves for potential job loss, and other 'common sense' thinking may have been pushed aside in the rush to own a home."
Despite the rise in foreclosure activity, Burns remains optimistic about the future of real estate in Silicon Valley.
"Most properties that receive a notice of default are able to avoid foreclosure because the property owner finds a way to get caught up in payments," explained Burns. "The reason for that is usually the ability to find some loan that can cure the current problem. It could be from friends, relatives, sub-prime lenders, etc. This also points to strong and stable real estate values in Silicon Valley because the effort to keep the property seems worth it in the long term to these homeowners and lenders."
Foreclosure properties tugged property values down by almost 10 percent in some areas 10 years ago, but the effect on today's market is negligible, DataQuick noted. According to RE InfoLink, the Multiple Listing Service for Santa Clara and four other counties, the median price of a Santa Clara home in April of 2007 was $886,406, up from the median home price of $775,000 in April 2006.
Burns strongly advises homeowners who may feel they might be falling behind on payments, to take action immediately and contact their mortgage company right away. They may be able to work with their lender to refinance the debt, arrange a repayment plan or modify the loan by adjusting the interest rate or extending the terms to make it more affordable.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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