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Home Forclosures Grip Southwest Richmond
October 14, 2007

Richmond’s Zip Code 94801, which includes my home in Point Richmond as well as much of the Iron Triangle, has the second-highest foreclosure rate, (15.7%) in the nine-county Bay Area, exceeded only by a zip code in Antioch with 23.1%. In Zip Code 94801, where the median sales price is $442,500, 233 default notices have been issued, and 88 foreclosures have been initiated. See article below from today’s Chronicle:

MORTGAGE MELTDOWN
NEIGHBORHOODS CRUMBLE IN WAVE OF FORECLOSURES

LOCAL TROUBLE ZONES: Epidemic repossessions hit several ZIP codes

Kelly Zito, Erin McCormick,Carolyn Said, Chronicle Staff Writers

Sunday, October 14, 2007

2007 Foreclosure Data

Of the Bay Area's 236 ZIP codes, 25 are foreclosure hot spots - places where more than eight of every 1,000 homes were repossessed by lenders this year.

Neighborhoods with affordable home prices, a historical popularity with minority home buyers, and a lot of new construction have been more prone than others to spikes in foreclosures, according to a Chronicle analysis of housing and census data.

Another big predictor of foreclosure hot spots is how far home prices have tumbled in a neighborhood since the Bay Area housing market peaked in spring 2006. That's because many recent homeowners put little or no money down and used riskier mortgages; as a result, they may now be "under water," owing more on the properties than they are worth.

Of the Bay Area's 236 ZIP codes, 25 are foreclosure hot spots - places where more than eight of every 1,000 homes were repossessed by lenders this year.

The ZIP code with the Bay Area's highest foreclosure rate, Antioch's 94531, also had the region's biggest drop in housing prices - a 15 percent plunge since May 2006, according to price index data provided by First American LoanPerformance, a San Francisco research firm. In this southeastern corner of Antioch, 271 homes - 23 of every 1,000 - were lost to foreclosure from January through August.

Two ZIP codes in East Oakland, and one that covers much of Richmond's Iron Triangle and another at the northern end of Concord also ranked among the top areas for foreclosures - with about 15 of every 1,000 being taken back by banks this year.

"The foreclosure situation has the greatest impact on those places with entry-level home prices and a lot of new home building," said Robert Kleinhenz, economist with the California Association of Realtors. "A lot of homeowners there who were able to qualify for loans under lax (lending) standards are now facing problems."

On the flip side, zones with some of the highest prices saw the lowest foreclosure rates - witness pricey towns such as Calistoga, Ross and Brisbane where there were no foreclosures filed in the first eight months of the year.

But even in expensive areas like Marin County the crisis is beginning to be felt. One of the Bay Area's highest-priced ZIP codes, 94920, in the tony Belvedere/Tiburon area, was home to nine foreclosures - including a $1.3 million "Bel-Aire tract home" with "floor-to-ceiling windows ... and French doors leading to the pool."

Despite its foreclosure spikes, the Bay Area overall has a lower share of homes lost to lenders than other California regions. The nine-county area had 3.4 foreclosures per 1,000 homes from January through August, according to statistics from DataQuick Information Systems, a La Jolla (San Diego County) research firm. That is lower than California's overall rate of 5.3 foreclosures per 1,000 homes, and only about a third the rate of the Sacramento metropolitan area, with 9.08 foreclosures per 1,000 homes. California's biggest foreclosure trouble area, Stockton, has 12.3 foreclosures per 1,000 homes, while the San Diego metro area has 5.9.

As a state, California ranks third in foreclosures this year, behind Ohio and Michigan.

"Everything has been driven by risky loans, and what they're leaving behind is a wave of foreclosures," said GU Krueger, economist with Irvine's IHP Capital Partners, one of the nation's largest investors in residential development. "The coastal areas will survive better because they will benefit from continued supply restraints and they have stronger economies."

Bay Area residents who lived in ZIP codes where home prices fell by 10 percent or more since the market peak in May 2006 were three times more likely to have ended up in foreclosure last year, according to The Chronicle's analysis, which compared foreclosure data from DataQuick with an index of home price changes from First American LoanPerformance.

The less expensive the housing in an area, the more likely the lender was to take over the property - in part because those ZIPs attracted many first-time buyers who took out risky loans that work well in a rising market, but can carry financial trapdoors in a falling market.

In ZIP codes where DataQuick found a median home price of less than $500,000 in July and August, including such areas as Antioch, East Oakland, Oakley and Brentwood, homeowners were nearly five times as likely to end up losing their properties than in other neighborhoods.

Many people were victims of bad timing. For instance, even if homeowners used a risky mortgage to swing the purchase of a brand-new home in a reasonably priced neighborhood five years ago, they would likely have built up significant equity from the home-price escalation of recent years. As a result, if they were facing a rate reset on an adjustable loan, they would potentially have enough equity to move to a safer mortgage, or to sell and still make a profit.

Those who only bought within the last couple of years, however, face a different story. Since their homes may be worth less than what they paid, they can't sell for enough to pay off their mortgage and could face skyrocketing monthly payments when their loans reset to higher interest rates.

"The people who are in the most trouble are those who bought most recently, because they bought when it was going up and then it went right down," said Hans Johnson, associate director of the Public Policy Institute of California in San Francisco.

In the Antioch ZIP code of 94531, the median price stood at $452,000 in July and August, according to DataQuick. But that seems to be dropping fast, putting more homeowners in danger of losing their largest asset.

Luis Salas, a real estate agent with Prudential California Realty, has about 10 listings in the Antioch area; eight are short sales, in which the sellers ask the bank to take the properties for less than they owe on the mortgage.

"Many people came (to Antioch) because they could get bigger, newer homes for a cheaper price," Salas said. "But many had loans that were interest-only for two or three years. Too many people thought they could refinance - they had friends who refinanced and they got money out and their payments went down. What happens when interest rates go up? Boom - the payments go up and they've paid no principal. There are so many people here in that situation."

In part, Salas and others blame the steep competition for buyers' attention. Along the line separating Antioch and Brentwood sit winding streets filled with just-finished homes - more than 40 percent of the housing stock there is considered new, according to the Construction Industry Research Board. With so many choices for buyers, builders are offering big price reductions or luxurious upgrades. Why buy a home from a bank or distressed homeowner when a builder will kick in granite countertops or knock off tens of thousands of dollars from the sale price?

"They can afford to give you $100,000 in incentives," Salas said. "I can't afford to give you $10,000 in closing costs."

The eastern edges of the Bay Area, where developers have had ample land on which to build huge tracts of new homes, are not the only sections with high numbers of repossessions by banks.

Towns closer to the region's urban core - Richmond, Oakland and East Palo Alto - also show rising foreclosure rates. While there is less land there available for new construction, those areas do share some of the other characteristics of the most foreclosure-prone parts of Antioch or Oakley: affordability and large price drops.

A lot of these areas have experienced huge price increases since 2000. The East Oakland ZIP codes 94621 and 94603 saw their home prices rise by more than 200 percent between 2000 and mid-2006 - the highest increases in the region. Now with their home prices dropping, they are among the first slammed by foreclosures.

The Palo Alto ZIP code 94303 is one of the hardest-hit areas in the South Bay. Ironically, the ZIP code includes both a high-priced section of Palo Alto and the less-expensive East Palo Alto. Nearly all of the 40 foreclosures were on the East Palo Alto side.

Although no data were available about the race and ethnicity of recent home buyers in each ZIP code, areas that have historically had a high percentage of minority homeowners tended to be hit hard by foreclosures. Those who lived in ZIP codes where more than half the homeowners identified themselves as something other than white in the 2000 Census were twice as likely to be foreclosed than those in other ZIP codes.

In San Francisco, Assessor Phil Ting points out that the neighborhoods with the highest jumps in foreclosures are also those with large minority populations - Bayview, Visitacion Valley, Excelsior, Crocker Amazon, Outer Mission and Ocean View.

With foreclosures in the dozens, rates in those ZIP codes remain relatively low when compared to other parts of the Bay Area. But Ting and others are concerned that more minorities are the victims of predatory loan practices. In addition to paying higher costs for their loans, Ting said many also have extremely high loan-to-value ratios.

In a study of federal home loan data, the Mission Economic Development Agency found that 41 percent of San Francisco borrowers of high-cost lending institutions in 2005 were Latino, versus 10 percent of borrowers from all lending institutions. Five percent of borrowers from high-cost lenders were African American, compared with 2 percent from all lenders. Whites made up 60 percent of the borrowers from all lenders, compared with 23 percent from high-cost lenders.

Like many public officials, Ting is concerned that the subprime fallout and foreclosures will push vital workers, such as teachers, government workers and emergency responders out of the housing market, and more important, out of San Francisco.

Ting said the city is trying to come up with a policy response.

"It costs so much money for some of these people to get into the housing market," he said. "We're looking at an emergency loan program to help people refinance, in part because the cost to help these people keep their homes is more efficient than building more affordable housing? It's something we have to look at."

-- To see Bay Area properties involved in the foreclosure process, go to sfgate.com/ZBET.

E-mail the writers at kzito@sfchronicle.com; emccormick@sfchronicle.com and csaid@sfchronicle.com.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/14/MNVPSEMVQ.DTL

This article appeared on page A - 1 of the San Francisco Chronicle

MORTGAGE MELTDOWN NEIGHBORHOODS CRUMBLE IN WAVE OF FORECLOSURES

LOCAL TROUBLE ZONES: Epidemic repossessions hit several ZIP codes

2007 Foreclosure Data

MORTGAGE MELTDOWN
NEIGHBORHOODS CRUMBLE IN WAVE OF FORECLOSURES