Silicon Valley swamped with REOs

Remember when banks lobbied heavily for the right to sell real estate? They now understand the phrase "be careful what you wish for."

by Broderick Perkins
© 2008 DeadlineNews.Com


Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - When President Obama recently signed legislation to keep banks out of real estate brokerage and management it may have been too late, from a banking standpoint.

Lenders already learned the hard way that real estate holdings aren't always a golden egg.

Take Silicon Valley.

Please.

The area is a bellwether for the state and the state is a bellwether for the nation. As goes California, so goes the nation.

All Lender Controlled Transactions	67%
By Price
Lowest 25%	94%
Low to Mid 25-50%	90%
Mid to High 50-75%	65%
Highest 25%	21%
By School District
Mt Pleasant	95%
Alum Rock Union Elementary	88%
Gilroy	86%
Oak Grove	85%
Morgan Hill	85%
Milpitas Unified	79%
Franklin-McKinley	78%
Evergreen	76%
Berryessa Union	67%
San Jose Unified	62%
Cambrian Union	58%
Luther Burbank	50%
Orchard	50%
Union	47%
Campbell	46%
Santa Clara Unified	44%
Moreland	22%
Sunnyvale**	47%
**Sunnyvale By ZIPCode
94085/9	78%
94086/7	13%
Cupertino Union	0%
Lakeside	0%
Loma Prieta Joint Union Elementary	0%
Los Altos	0%
Los Gatos Union	0%
Mt View Whisman	0%
Palo Alto Unified	0%
Saratoga Union	0%

Source: Richard Calhoun, Creekside Realty

When single-family sales by school district (which is how many homebuyers shop) were considered in Silicon Valley, CA, lender controlled transactions amounted to 67 percent of all sales in January 2009, according to some number crunching from Silicon Valley's resident real estate numbers analyst, Richard Calhoun of San Jose-based Creekside Realty.

See the chart (Percent of Silicon Valley Area January 2009 Home Sales Controlled By Lenders - By Price Point, By School District) to the left.

That may be a boon for buyers, but for sellers and lenders who hold foreclosed properties, it means they've got to unload properties at Blue Light Special prices.

For buyers, it means pull out the stops and negotiate until you drop -- just do it quickly.

But the end of low prices could be near and, in Silicon Valley, anything can happen.

"The median price for single-family, re-sale homes for February was flat at $450,000 compared to January. This tells me we have either hit the bottom in pricing, or we are very near. Obviously I'm not talking about homes selling for $450,000 in Los Altos or Saratoga, but in the lower priced areas in San Jose and further south, said Linda C. Boyd, a broker associate with Meredith Homes and Enterprises, Inc. in Los Gatos, CA.

"Would you have thought three years ago that you could buy a single family home anywhere in Silicon Valley for $450,000? You could hardly buy a one bedroom condo for $450,000. But this home buyers' nirvana has to end sometime, and I personally think the end is near," added Boyd.

Said Calhoun, "I think what this indicates is at this point and time selected areas have had a great drop in property values and likely combined with a high loan to value ratio initially causing more homeowners to be upside down. This data really isn't that much different than the Zillow report that showed the percentage of homeowner that had negative equity in their homes."

How bad is it?

Said Calhoun, "I don't have any idea what the historical levels of REO and short sales have been in Santa Clara County/Silicon Valley. However, because 100 percent financing wasn't available until recently, I feel pretty comfortable saying short sales of this magnitude is a new experience here in Santa Clara County and pretty much across the nation. When I got into the industry in 1981 20 percent down was the normal. Had that been the case (in the recent cycle), it would have been the homeowner's equity eaten up with the price declines. With 100 percent financing of recent years, it became the lender's funds that are at risk."


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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Shop DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.

Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime