Thursday, November 19, 2009

More foreclosures in the high end...?

The number of foreclosures in Los Altos, Los Altos Hills, and Mountain View are small compared to other harder hit areas such as San Jose, Milpitas, and East Palo Alto. However, those areas had mostly subprime loans.

The story now is that prime loans going into default have increased (in Q3) to 33% of all defaults versus 21% for the same quarter in 2008. The primary reason for this increase: unemployment.

In general, the Los Altos area is less at risk for completed foreclosures (trustee’s sales) because turnover of properties is well below lower priced markets such as Mountain View. Most homeowners in Los Altos bought with 20%+ down and/or have been here so long their equity allows them to borrow in hard times or sell before getting into a default situation.

However, there are exceptions. One Notice of Default was placed on a Los Altos property with a $1.5M loan. The value of the property is close to that amount so the owner may try to sell in the open market or attempt a short sale.

There were four (4) other homes that received a Notice of Default in October. All have loans under $1M with fair market values well over that amount. So, while we may see more defaults in the area, I believe we'll see very few actual foreclosures or trustee's sales. Currently, there are no listings for these types of sales in the area.

If the “in default” condition is temporary and you can catch up with your payments, of course it's in your best interest to do so. However, if you're a homeowner with plenty of equity and fall behind in your payments, sell before the default process goes too far. You're better off saving your credit by selling -- it will be less painful than foreclosure.

Here are the original articles from the SJ Mercury and MSNBC respectively:

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