Saturday, September 15, 2007

Foreclosures in SF

Everybody is talking about the recent fall of the sub prime market. What everyone really wants to know is how their local market will be affected; and, more importantly, how they will personally be affected. I don't want to trivialize what is happening in the financial world, but as the president of San Francisco/Peninsula Coldwell Banker points out, "99.2% of mortgages are not in foreclosure". It really depends on how you look at the numbers.

If I told you that according to Data Quick the number of homes that actually foreclosed in San Francisco went up 444% from 2006 to 2007, you would be shocked. If I told you the actual numbers were 9 homes foreclosing in 2006 compared to 49 foreclosing in 2007, that might put things into perspective. The loans least likely to foreclose in the Bay Area are in San Francisco and Marin counties. Also in the same study, the number of defaults went up 102.4% from 2006 to 2007, from 127 homes to 257 homes. Less than 20% of those defaulting on their loans are ending in foreclosure.

So what is the recipe for disaster? High cost loans and high loan to value ratios is much of it. Lenders were making it possible for people with low credit scores and little to no money down to finance a home. They could get a loan, but not a good a loan. Low credit scores bring interest rates up as do low down payments. The upside to all of this is that many families were able to realize the American Dream, and a majority of them have not defaulted on their loans. Only 10 to 15% of all loans are sub prime, and only 10 to 15% of those have defaulted.

In San Francisco, the neighborhoods with the highest concentration of sub prime loans are in the southeastern corner of the city: Bayview, Visitacion Valley, Excelsior, Outer Mission, Crocker Amazon, and Ocean View. If you see foreclosures or short sales, it will most likely be in one of those areas.

The prices of San Francisco homes in general have not been negatively affected as we continue to see the median price go up. If you are a buyer in today's market, you are most affected by the tightening of lending restrictions. One of our clients was pre-approved for $1.2 Million one day, and it dropped to $900,000 the next. They are now happily in a home they purchased for just under $900,000 thanks to Anja and her stellar negotiating skills, and it is probably for the best for them not to have stretched themselves too thin.

The number of foreclosures will continue to rise through the end of the year, and prices may be slightly affected negatively, especially in those neighborhoods I mentioned, but San Francisco's market as a whole is still going strong.

There are 850 open houses scheduled for tomorrow; one of them is just right for you! See you out there!

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