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How Many Foreclosures in Palo Alto, 1 or 74?


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by someone else     💰tip   follow   2008 Apr 7, 3:35am  

A reader named John sent me a bunch of data on foreclosures, which I posted here:

http://patrick.net/housing/contrib/foreclosures_percent.html">http://patrick.net/housing/contrib/foreclosures_percent.html

The data says that there are 74 houses in some stage of foreclosure in Palo Alto, or 55% of all the houses for sale.

Another reader, named Carl, object that:

The foreclosure lister at sfgate.com doesn't correlate this at all, it suggests a single foreclosure in 94301/94306 for all of 2007. The issue may be that whoever calculated your page included Palo Alto in San Mateo county, generally known as East Palo Alto, which has a huge foreclosure rate.

I forwarded the objection to John, who replied:

Hi Patrick,

I love the fact that it’s “acceptable/normal” for a home to increase its value by 100% during a five-year time frame, but it’s “unreasonable/impossible” for a home to decrease it’s value by 30-40% during a similar time frame. It’s yet another symptom of how off-kilter and in denial most (especially in this area are).

Don’t get me wrong, I enjoy the Chronicle and I enjoy sfgate.com, but I’m always curious as to how much of their advertising dollars derive from the NAR, homebuilders, realtors in general, etc. Please forward confirmation of the numbers below:

Palo Alto “Proper,” CA: 150 total homes for sale, of which 74 (49%) are in various stages of the foreclosure process (the range is from lenders who have filed a Notice of Foreclosure at the recorder’s office to REO properties).

East Palo Alto, CA: 189 total homes for sale, of which 106 (56%) are in various stages of the foreclosure process (the range is from lenders who have filed a Notice of Foreclosure at the recorder’s office to REO properties).

I completely understand why anyone (especially someone living in one of these areas) might have some doubt and a hard time swallowing it. With that said, we always encourage individuals who have a similar stance to physically go to their Recorder’s office and ask for all the data. We have even had some literally go from street to street to count the number of homes for sale within a specific area (that was a bit extreme, but it’s what some people need to do to extract the “truth”).

I don’t want to exacerbate anyone during what is obviously a very difficult time for many, so all I simply say is “this is my resource and if you have doubts about the data, you should absolutely go there yourself.” At that point they have no legitimate response other “okay, I will” or “no” (because they’re too lazy/unmotivated) to go.

#housing

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1   Malcolm   2008 Apr 7, 3:52am  

I think we can expect the true extent of this meltdown will be masked. It has been all along. We have seen specific cases where inventory is held off of the market to prevent the true numbers being known. We have seen banks making back room deals to prevent a collapse. We have literally seen a 180 in public sentiment, and the mainstream media has all but lost its credibility among people in the know.

2   Peter P   2008 Apr 7, 3:53am  

So Shallow Alto is being expelled from the Fortress?

3   Peter P   2008 Apr 7, 3:54am  

I am absolutely depressed that my bubble bust profit is still minimal. :(

4   DinOR   2008 Apr 7, 4:06am  

Does anyone have the link to the article that showed many CA markets where 40-50+% of the "sales" were actually foreclosures?

5   OO   2008 Apr 7, 4:07am  

South Palo Alto is just San Jose, nothing surprising about it. But I still want to know how one can get to the source of the data, by subscribing to foreclosure.com and then compare each foreclosure sale listing to MLS?

What surprised me is Hillsborough. Shouldn't that be the ultimate fortress that will never crack come hell or high water? I thought people only buy in Hillsborough with cash, how can you get into foreclosure if you buy a home all cash?

6   Chillie45   2008 Apr 7, 4:08am  

Hi,
Been lurking here for a while, but thought I would post that this doesn't really surprise me. I walked past an open house Saturday for a condo in Boston that seemed...surprisingly affordable (even for little ol' me). I couldn't resist - I asked the realtor straight out if the place was a short sale and he didn't really answer my question; more like shoved a flier for Countrywide Home Loans in my hand ("of-course-there-is-a-veeeery-SPECIAL-financing-process-for-this-lovely-condominium!") and then he blinded me with his so-white-they're-almost bluish teeth and then I had to get out of there.

Looked up the neighborhood later on the countrywide foreclosures blog and lo and behold: there was the condo. Go figure. The thing is, I might have considered making an offer and jumping thru the hoops of the Countrysnide financing if he'd been straight with me.

7   Duke   2008 Apr 7, 4:18am  

Wow!
Did you see those numbers for Danville, Pleasanton, Walnut Creek?
One might guess that parents massively over-paid to get into the good school disctricts and are now losing their homes with resets.
But I am betting that with 0-down we are just seeing a number of people walk-away from their investment homes.

Did we ever conclusively answer the following question:

Someone owns their prime residence debt freee; call it home 1. Lets say that's now $1million in equity (although shrinking). They buy an investment property for 0 down, call it home 2. After 2 years of making payments, not being able to rent and not being able to sell, they are kinda cheesed at the, say, $80k cash loss (paying the loan and taxes) in adition to the loss of equity on home 2. So, they stop paying their mortgage. They are 'walking away'.

Can the bank who holds the loan for Home 2 go after the equity in home 1? The person is capable of paying. They are not insolvent. They just don't want to pay.

I guess what I am asking is this: is the collateral for home 2 that home alone? Can no other asset be touched by an angry bank ooking for moeny? I mean, if the threat is just having a home repossesed I can see why more and more specuators would walk away.

8   OO   2008 Apr 7, 4:23am  

Duke,

anti-deficiency law only applies to primary residence. No such a deal for second residence or investment home.

9   Duke   2008 Apr 7, 4:46am  

OO

10   Duke   2008 Apr 7, 4:47am  

OO,
I am afraid I need anti-deficiency explained for dummies.
Nod once if the bank can sue.
Nod twice if they cannot sue.

11   skibum   2008 Apr 7, 4:47am  

Clearly there is either manipulation of data from the MLS/realtors, or the foreclosure data is wrong. I just searched mls in Palo Alto, and for SFR, multi-family units (entire apt bldgs), and condos, I came up with 84 units total available in Palo Alto.

It seems in the best interest of the Realtors to keep foreclosure properties off the mls, as it removes the risk that short sales will add to the downward trend in comps.

Just sayin'...

12   Peter P   2008 Apr 7, 4:50am  

Shouldn’t that be the ultimate fortress that will never crack come hell or high water?

Many "rich" people are highly leveraged.

13   Peter P   2008 Apr 7, 4:55am  

Supposedly, realtors should hope that any correction be quick and sharp so that transactions can take place again.

14   OO   2008 Apr 7, 5:02am  

Duke,

anti-deficiency means if you walk, the bank cannot go after your ass if they cannot recover the full extent of their loan after the sale of the foreclosed property.

If this is the property you occupy as your primary residence (with proof of course), then under CA law, you can walk away a free man.

If this property is NOT your primary residence (2nd home or investment property), you cannot walk. Even in CA, the banks can come after your ass for the amount that they cannot recover.

If you refinance, even once, on your primary residence, you lose that anti-deficiency privilege and give the bank the right to come after your ass in foreclosure events.

Anti-deficiency ruling is strict. It is not like you can just walk. The court has to be convinced that you have made reasonable attempts to pay back as much as possible, which includes liquidating other assets. It is mistaken to be a very easy way out for borrowers, which it is not. People who went through anti-deficiency will get a huge ding on their credit score similar to that of a bankruptcy, which will take a long time to repair.

15   OO   2008 Apr 7, 5:04am  

Where do I find these foreclosure listings? Foreclosure.com?

16   Malcolm   2008 Apr 7, 5:18am  

Some sites like Countrywide list their bank owned properties. At least they used to.

18   Malcolm   2008 Apr 7, 5:25am  

OO Says:
April 7th, 2008 at 12:02 pm

"Anti-deficiency ruling is strict. It is not like you can just walk. The court has to be convinced that you have made reasonable attempts to pay back as much as possible, which includes liquidating other assets."

How sure are you about this? Non-reourse loans are a pretty clear cut concept. I'm not aware of the need for a court to affirm that a debtor can walk away, a loan is either a recourse or non-recourse loan in the event of default. I've never heard of a bank challenging the protection of a purchase money non-recourse loan.

19   Peter P   2008 Apr 7, 5:27am  

OO, I thought the One-Action rule (not necessarily Anti-Deficiency) applies to all mortgages in California.

Won't you think that most lenders will choose foreclosure over litigation?

Not legal advice.

20   Malcolm   2008 Apr 7, 5:34am  

OO, is right about it just being on the primary residence.

Here is a good link for general questions.
http://eastbayplus.wordpress.com/2007/09/15/172/

Here is a link from another site (unchecked link) which is the actual law.

http://www.legaltips.org/california/california_code_of_civil_procedure/577-582.5.aspx

580b. No deficiency judgment shall lie in any event after a sale of
real property or an estate for years therein for failure of the
purchaser to complete his or her contract of sale, or under a deed of
trust or mortgage given to the vendor to secure payment of the
balance of the purchase price of that real property or estate for
years therein, or under a deed of trust or mortgage on a dwelling for
not more than four families given to a lender to secure repayment of
a loan which was in fact used to pay all or part of the purchase
price of that dwelling occupied, entirely or in part, by the
purchaser.
Where both a chattel mortgage and a deed of trust or mortgage have
been given to secure payment of the balance of the combined purchase
price of both real and personal property, no deficiency judgment
shall lie at any time under any one thereof if no deficiency judgment
would lie under the deed of trust or mortgage on the real property"
or estate for years therein.

21   Duke   2008 Apr 7, 5:34am  

Umm, then I am back to being confused.
If the bank can come after you because it is a second home then we have an even bigger problem.
Namely, they sell your spec home and have a large deificiency. Then they come after you for that money which may trigger bakruptcy? Force a sale of your first home since almost everyone re-fid?
They get some fraud for free as well after they prove the loan was not for a princpal residence since ya never lived in it.
Good Lord, this is all kinds of scary.
The class-actions are bad enough, can you imagine how many individual law suits are coming for all the rampant speculation in CA, Las Vegas, Florida?

22   Malcolm   2008 Apr 7, 5:39am  

In a nutshell, yes Duke, that sounds like a very real possibility. Also, people need to undestand that a non-recourse loan does not protect a primary home from liens which could very well be recorded as a judgement claim from the second home. Dennis can add some insight here but when talking about some of the homes declines in values there is a real possibility that a judgement could be big enough for a single creditor(lender) to force a bankruptcy.

23   Duke   2008 Apr 7, 6:06am  

Forgive my slow motion realizations. But if Danville, land of the $1m homes, has 102 homes of 338 for sale are in foreclosure - then we are seeing the wheels come off the bus WAY faster than I thought possible.

I am trying to think who, yet, would be under that much pressure in Danville? I mean Fed Funds and LIBOR are just too low to have it be rests. No big lay-offs anywhere near that labor force.

Maybe this is sepculation at the really spooky level? A host of totally non-qualified buyers over the last few years who can afford bankruptcy since they have no real assets?

I am in the dark here. What intha heck is going on?

24   skibum   2008 Apr 7, 6:20am  

OT,
but after hours Q1 earnings reports are looking ugly. Alcoa (Dow bellwether) reports profits cut in half. AMD (Bay Area jobs) cutting 10% of workforce...

The logical conclusion is, tomorrow, the DOW and NASDAQ will rally!!!

25   DinOR   2008 Apr 7, 6:36am  

Duke,

I don't think there's anything 'wrong' w/ you or your level of understanding. Believe me I've been beside myself w/ disbelief at how quickly the assessment has turned toward the perception that this is a "mean" economy.

Even before the re-sets have had much of a chance at all to work on owner's personal finances we're already seeing all this pressure? I think in ways these multiple residences were just another way of "playing a split hand" and having the option to declare the one w/ the better appreciation as "primary". But then again I'm always thinking that.

Are there legions of FB self-help blogs focused on 'your next move'?

26   sa   2008 Apr 7, 6:42am  

skibum says:

The logical conclusion is, tomorrow, the DOW and NASDAQ will rally!!!

Well, they have a buffer of about 600 points. They can let it slip for a couple of days and then we have bottomed out again, stocks are cheap, oversold rally and crap.

27   EBGuy   2008 Apr 7, 7:32am  

Palo Alto “Proper,” CA: 150 total homes for sale, of which 74 (49%) are in various stages of the foreclosure process (the range is from lenders who have filed a Notice of Foreclosure at the recorder’s office to REO properties).

Patrick, I appreciate all the work you put into the site, but John's rantings are a bit over the top. For those of you interested, go to Trulia.com and you'll find their (RealtyTrac) numbers pretty much match the numbers on the foreclosures_percent.html link at patrick.net. However, 49%(74) of the actual MLS listings in Palo Alto are not in some state of foreclosure. The 74 houses vary from Notice of Defaults to fullblown REOs and are not necessarily listed. You would need to compare both sets of data (listings and foreclosures sets) on Trulia.com to find the actual percent of listings that are "distressed". Note, on Trulia, that many of the NODs are on small HELOC lines that likely won't go all the way through the foreclosure process. I don't dispute, though, that the numbers are growing and that this ominous trend shows no sign of abating. Bubble sitters will be rewarded.

28   Peter P   2008 Apr 7, 7:43am  

Bubble sitters will be rewarded.

I still doubt the prospect of being rewarded as a fiscally responsible person.

29   EBGuy   2008 Apr 7, 7:56am  

I still doubt the prospect of being rewarded as a fiscally responsible person.
Okay, then, how about taxpayers will get hosed.

30   skibum   2008 Apr 7, 8:14am  

Okay, then, how about taxpayers will get hosed.

Now that's more like it.

31   Claire   2008 Apr 7, 10:08am  

I wish it was by zip code - I am disheartened at the moment because the "better" zip codes in Mountain View/Los Altos are still holding up :-(

Has anyone checked out all those townhouses (?) going up on Miramonte by St Joseph's? They are going up very fast - but boy do they look crowded in together!

32   SP   2008 Apr 7, 10:29am  

# OO Says:
What surprised me is Hillsborough. Shouldn’t that be the ultimate fortress that will never crack come hell or high water? I thought people only buy in Hillsborough with cash, how can you get into foreclosure if you buy a home all cash?

I personally know SIX different individuals who bought in Hillsborough using their startup company stock as collateral. Four of them had to dump their houses in a hurry after the dot-com bust - when their stocks tanked, they got a margin call from the bank. I don't know exactly what the details of the arrangement was, but that was the gist of it...

The point is that there are probably a few other "creative" financial schemes behind the houses there - some of which may turn out naked in the current counterparty/solvency crisis.

33   Paul189   2008 Apr 7, 10:43am  

"I am absolutely depressed that my bubble bust profit is still minimal."

I'm depressed that gold/silver dealers are starting to run out of stock! First the US mint discontinues sales; now this! https://online.kitco.com/bullion/

*Kitco Gold Bar 1 oz (Currently out of Stock)

$937.30

*Silver Eagle 1 oz (Currently out of Stock)

$20.63

*Silver Maple 1 oz (Currently out of Stock)

$20.38

*Palladium Maple 1 oz (Currently out of Stock)

$499.00

34   StuckInBA   2008 Apr 7, 11:01am  

Duke :

I have been trying to gauge this problem for months now. There is hardly much information on this. I know "many" people in BA took out "equity" in their home and bought 2nd (and more) homes in Sacramento / Bakersfield and what not.

That particular problem is either not that big OR it hasn't even started in a meaningful way OR both.

35   StuckInBA   2008 Apr 7, 11:04am  

EBGuy :

I concur with your observation. The numbers given by John C are not necessarily listings. They kind of match the numbers on Trulia - but most of these notices of default and not yet a foreclosure.

That Trulia doesn't show the the exact address. It only shows the street name. I was very surprised to find a known street name listed as NOD. Now only if knew the street number ...

36   Brand165   2008 Apr 7, 11:32am  

The only Gellar I want to picture in leather pants is Sarah Michelle. :twisted:

37   wednesday2   2008 Apr 7, 12:03pm  

This doesn't make sense to me. I can't imagine much unemployment in Palo Alto proper, at least at this point. Home values haven't dropped but MAYBE 10% in some areas - enough to squeeze out an appraisal for refinancing for those ARM resets. Who are these people?

38   northernvirginiarenter   2008 Apr 7, 12:49pm  

I'd speculate the Palo Alto NOD's are largely composed of single income MEW earners. The water has receded and left those naked who have been living off their house appreciation. For reasons mentioned earlier in this thread, unlikely speculation property walkaways.

So these are the people that have been factually unemployed all along, with maybe a few relitters and mortgage brokers mixed in for good measure.

First "victims" whose genitalia get exposed in credit stop loss environment are those without cash flow. Apologies for being so obvious.

39   PermaRenter   2008 Apr 7, 1:11pm  

>> First “victims” whose genitalia get exposed in credit stop loss environment are those without cash flow. Apologies for being so obvious.

I like this kind of language ....

40   gizelda   2008 Apr 7, 2:01pm  

OO,

Regarding REO listings. I read about them on the site a month or so ago and did some hunting, do a search for REO (I used Google) and several come up in the results:
http://www.countrywide.com/purchase/f_reo.asp
http://www.ocwen.com/reo/home.cfm
http://bankofamerica.reo.com/search/
http://www.fanniemae.com/reoSearchApplication/fanniemae/reoSearch.jsp?p=Fannie+Mae-Owned+Property+Search

From the prices I saw a month ago, it would appear than there are many people still paying too much for houses, as the prices did not seem like the banks were in a hurry to unload. No need to I guess since they will be bailed out...

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