It’s hard to have a conversation about real estate today and not mention the foreclosure situation, especially here in California and the Contra Costa County. But, what I’m finding is that a lot of people don’t fully understand the entire foreclosure process and how it is impacting different cities within the East Bay. Notice of Defaults, short sales, auctions, REOs - these are all terms that we hear used in the media, but what do they really mean? Well, I came across a great article on CNN Money this past week that helps explain the different stages to the foreclosure process and how you can purchase properties during each stage. If you have a couple minutes, I’d recommend that you read through it - How to buy a foreclosed home.

In addition, take a look at the following chart - it highlights the impact of foreclosures on some of the major cities in Contra Costa County.  As you will quickly see, not everybody is effected to the same degree!

Governor Schwarzenegger signed into law the first major bill designed to curb more foreclosures in California this past Tuesday. The bill is comprised of three main aspects:

1. Lenders are required to provide homeowners with more, and earlier, warnings that they are headed towards defaulting on their home loans.
2. Renters will now be given more time to find new living arrangements when they are evicted by a landlord who is losing the property to foreclosure.
3. Local governments will be authorized to force lenders to maintain vacant property after a foreclosure.

You can read more about the new law in the Los Angeles Times article titled California Senate passes mortgage default warning bill.

Aspects #1 and #3 of this bill have the potential to make immediate impacts on anyone looking to buy a home. By requiring lenders to provide homeowners with more warnings about potentially defaulting, the government is hoping that fewer homeowners will actually default. If this plays out accordingly, it means there will be fewer foreclosures and bank owned (REO) properties coming onto the market each month. This, in turn, means the available inventory of homes for sale will be reduced and the corresponding demand for each house will likely rise … read this as: house prices will go up! Aspect #3 is also likely to increase house prices. By forcing lenders to maintain vacant properties, there will be fewer neighborhoods negatively impacted by REO eye-sores - the property with boarded up windows and a yard full of overgrown weeds. Because of this, distressed neighborhoods won’t have their overall value degraded to the same extent as before … as we all know, nicer looking neighborhoods demand higher prices.

Starting on June 1st, Fannie Mae will institute a new, national policy on down payment requirements for conventional, conforming mortgages. As the announcement stated:

Starting June 1, 2008, Fannie Mae will accept up to 97 percent loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter (DU) automated underwriting system, and 95 percent loan-to-value ratios for loans underwritten outside of DU, in all geographic locations in the United States. The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining.

What does this mean for you? Well, it will be possible to get better terms on a loan for a new home in Contra Costa County with a smaller down payment. If you’d like, you can read the rest of the announcement on Fannie Mae’s website: Fannie Mae Announces Single National Down Payment Policy; Replaces Policy Regarding Markets Where Home Prices are Declining.

Now, I’m by no means a mortgage expert, but if you are interested in learning more about what your mortgage options are, please give me a call (925.817.8428) or send me an email (Brian@SPARRproperties.com) and I’ll put you in touch with a couple people who are.

Probably not too surprisingly, the April foreclosure numbers in Contra Costa are higher than they were during the record setting month of March. Now, although it is a very unfortunate situation, it has created a wonderful opportunity for investors and other buyers to purchase homes at significantly reduced prices. In fact, I’m working with a number of individuals doing just that right now. So, to help give you an idea of the mindset of many investors, take a look at the recent San Francisco Chronicle article titled Timing may be right for real estate investors. If this is something you or a friend of yours may be interested in, give me a call (925.817.8428) or send me an email (Brian@SPARRproperties.com) and we can discuss it further.

At the state level, March was a record setting month for California with over 42.7k Notice of Defaults recorded. This is a 14.3% increase over February and will help produce a jump in foreclosure sales and bank owned (REO) properties during the Summer months. When we bring these numbers down to the local level, however, we notice the biggest increase in our Single Family REOs.

Antioch, already one of the hardest hit Contra Costa cities, had over 180 Single Family REOs in March. Compare this to approximately 160 recorded in February, and you notice a 12.5% month-over-month increase. Richmond, in similar fashion, went from approximately 75 Single Family REOs in February to 90 in March - a 20% month-over-month increase. Concord and Pittsburg, although having smaller numbers of properties, actually experienced much larger month-over-month increases - 35.5% for Concord and 55.8% for Pittsburg!

Take a look at the majority of the Contra Costa cities to see how the past four months of REOs have impacted each:

If you are interested in seeing the other March foreclosure trends for Contra Costa please either give me a call (925.817.8428) or send me an email and I’d be happy to provide them to you.