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Nearly five times as many homeowners in Santa Clara County lost their properties to foreclosure last month than in July 2007, signaling there’s no end in sight to the local mortgage crisis. Even many county residents not threatened by foreclosure saw their home values plummet in the second quarter, according to a report released Tuesday.

Mortgage lenders and servicing companies foreclosed on 646 Santa Clara County homeowners last month, according to ForeclosureRadar, a Discovery Bay company that tracks foreclosures statewide. Together, those homeowners held a total of $364 million worth of mortgage loans.

Statewide, there were 28,795 foreclosures last month, with combined mortgage loan balances of $12.55 billion, a record for one month. Since January 2007, lenders have foreclosed on $100 billion in loans, said Sean O’Toole, ForeclosureRadar’s president.

Even the one hint of welcome news in the company’s report, released Tuesday, might be falsely positive, O’Toole said. The number of homeowners who received "notices of default" — the first step in the foreclosure process — fell slightly for the third consecutive month, both statewide and in Santa Clara County. But nearly all of the statewide decline is because fewer default notices were filed by Countrywide, perhaps because the collapsed lender is being acquired by Bank of America. O’Toole said all the other lenders are reporting either more or the same level of defaults over the past few months.

"We shouldn’t draw any conclusions from this three months of decreased defaults,” he said. "I don’t think it’s yet a sign that we’ve hit a peak" in foreclosures.

Lenders sent Santa Clara County property owners a total of 1,144 default notices last month, down from a peak of 1,412 in April 2008.

Although fewer mortgage borrowers are newly in default, the chances that those homeowners ultimately will be able to avoid foreclosure appear very slim. With home values in most Silicon Valley neighborhoods dropping, it’s harder for homeowners who find themselves unable to pay their loans to sell their homes for enough money to pay off their loans and avoid foreclosure.

It’s likely that about 90 percent of properties in default will end up sold on courthouse steps, up from 50 percent in a typical year, O’Toole said.

"The number of notices of trustee sales we’re having as a percentage of defaults is unprecedented," O’Toole said.

In a separate report Tuesday, real estate information Web site Zillow.com said home values in the San Jose metropolitan area declined 12 percent in the second quarter compared with a year earlier.

The performance of home values varies widely, reflecting what some real estate experts call the Apple effect. Homes located near the campus of the maker of iPhones and Macintosh computers —as well as other A-list tech companies — have seen their values rise as others in the Bay Area have dropped.

But price appreciation in communities like Cupertino and Los Altos says as much about the stellar reputation of certain school districts as it does about easy commutes to technology companies.

Overall, Bay Area homes values have declined faster than the rest of the nation, according to the study.

During the second quarter, nationwide home values dropped 9.9 percent compared with the same period a year ago, while those in the San Jose area — primarily Santa Clara County — slipped 12 percent overall to a Zillow-estimated median value of $663,585.

For the San Francisco region, which includes the counties of San Francisco, San Mateo, Marin, Alameda and Contra Costa, the decline was nearly 17 percent. Zillow estimated that the median value of all types of homes in that large region was $577,208 in the second quarter.

"In the Bay Area, you see a real east-to-west continuum. As you head farther east, you see a real drop-off in home values," said Stan Humphries, vice president of data and analytics for Zillow, a Seattle-based real estate information company.

In Silicon Valley, though, the strength of home values can vary city to city, or even neighborhood to neighborhood. Downtown San Jose saw a 15 percent year-over-year drop, while East San Jose had a home-value plunge of 23 percent. On the other hand, Palo Alto and Cupertino, the headquarters of Apple, were each up 5 percent.

Overall, the picture for the Bay Area is not a pretty one for many homeowners.

In the San Jose region, 38 percent of homeowners who purchased their property in 2005 owe more than what the properties are now worth; 46 percent of those who bought their homes in 2006 have negative equity and about 32 percent of those who acquired real estate last year are under water, according to Zillow.

Adding to falling home prices is the need for buyers to put more money down. The median down payment from 2004 through 2006 was 10 percent. As a result of the credit crunch, though, lenders are being much more strict, and the median down payment was 20 percent in 2007 and 2008.

"It’s definitely a market correction," Humphries said of the drop in home values. "It’s working off the significant run-ups the Bay Area encountered in the 2002-to-2006 period."

That does not mean, however, that skyrocketing Bay Area home values are necessarily a thing of the past, he added. The region is prone to "boom-and-bust" periods, he said.

However, Humphries doesn’t see any big market shifts any time soon.

 

By John Boudreau and Sue McAllister Mercury News

This entry was posted on Wednesday, August 13th, 2008 at 4:11 am and is filed under FSBO. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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