It’s a dreary game of foreclosure leapfrog. Morgan Hill is worse
than San Jose. San Martin is worse than Morgan Hill. Gilroy is
worse than San Martin. Hollister is worse than Gilroy. Each
southeasterly jump is met by higher percentages of homes either
bank-owned, at auction or in default, according to foreclosure
website RealtyTrac. It’s a sour market driven by high unemployment
and waning consumer confidence, local realtors say, and things
aren’t likely to improve anytime soon.
It’s a dreary game of foreclosure leapfrog.
Morgan Hill is worse than San Jose. San Martin is worse than Morgan Hill. Gilroy is worse than San Martin. Hollister is worse than Gilroy.
Each southeasterly jump is met by higher percentages of homes either bank-owned, at auction or in default, according to foreclosure website RealtyTrac. It’s a sour market driven by high unemployment and waning consumer confidence, local realtors say, and things aren’t likely to improve anytime soon.
“The further away from Silicon Valley’s center you get, it’s worse,” said Intero Real Estate broker Patty Filice. “Foreclosures are still occurring at a steady rate.”
While the less-populated South County doesn’t touch San Jose in sheer volume of troubled homes – RealtyTrac reports San Jose had more than 5,000 through July – South County is getting more bang for its lack of bucks.
One in every 182 Gilroy homes received a foreclosure filing in July, the highest percentage anywhere in Santa Clara County, save the small community of Alviso located at San Jose’s north end. In all, the Garlic Capital has 465 homes in foreclosure, according to RealtyTrac.
In Morgan Hill, one of every 221 homes are in foreclosure, while in San Martin it’s one in every 206. Over the same period, just one in every 295 homes in San Jose was pushed into foreclosure.
Lisa Cassara, president of the South County Realtor’s Alliance, said there are “a lot” of homeowners in South County whose home values have decreased between 25 and 50 percent over the last several years.
“A year ago, we really thought things would be turned around. I think that we had that mentality, that we’re getting out of this,” Cassara said. “We’re all a little bit more nervous about the economy. People are really taking their time in making a decision. I think there’s a little bit more reserve.”
Median home sales figures in Morgan Hill have taken a nose dive over the past several years.
In July 2007, prior to the housing meltdown, the median price in Morgan Hill was $777,000, according to real estate website Zillow.com. Within a year in mid 2008, the price had dipped to just $633,000. The median price in Morgan Hill as of July 1, 2011 was $509,000. That’s only $3,000 more than 2010’s average.
Recovery from the collapse has been slow, though there have been some slivers of hope, Cassara said. With home prices low, there has been some recent increased activity.
“It does appear that, coming out of June, July, August there is definitely a better pace. A lot of people got off the fence at the summer time,” Cassara said. “The general consensus is that growth will be slow and gradual. We’re not going to go down further. That’s the hope anyway.”
But until unemployment rates improve, the housing market is likely to stay stagnant, Filice said.
Through July, Morgan Hill’s unemployment rate stands at 13.2 percent, according to the U.S. Bureau of Labor Statistics – above the jobless rates in Santa Clara County, 10.3 percent and statewide, 12 percent.
The last time Morgan Hill’s unemployment rate was below double digits was December 2008, when it was 9.8 percent. The city annual rate in 2009 was 13.9 percent unemployment and went up to 14.3 percent in 2010, according to the U.S. Bureau of Labor Statistics.
“If the economy continues to deteriorate, the market will continue to deteriorate. Until that stabilizes, that housing market will continue as is,” Filice said. “It’s all jobs. A zero percent interest rate is too much if you don’t have a job.”
The two, however, don’t agree on the value of short sales, a process by which a lender agrees to allow a homeowner to sell his or her property at a price far lower than what the home is worth. For example, a homeowner who owes $500,000 on his or her home can sometimes reach an agreement to sell the property to an interested buyer for $400,000. Lenders can work with the homeowner to set up a payment plan for the remaining $100,000, but “very little of that is being done now,” Filice said.
“Lenders are walking away from that 100-grand. It’s a loss to the lender,” she said.
Filice said short sales have allowed homeowners an easier path to resolving their frustrating housing situations. Cassara called the process “even worse than the foreclosures.”
“Some of the short sales that get closed are ridiculously low,” said Cassara, adding some comparable homes in the same neighborhood are selling with $100,000 differences in prices.
“Once that happens, that sets the precedent of the neighborhood. It makes it difficult to get that price to come back up,” she said.
But short sales, pursued almost exclusively in year’s past by homeowners suffering from illnesses or trudging through divorces – according to Filice – make ways for struggling homeowners to rid themselves of drowning properties without the embarrassment of a foreclosure.
“It’s kind of a better situation for everybody,” she said. “But the buyer for your property has to be very patient. Not every short sale is approved.”
The current pool of homeowners isn’t as fraught with people “who never should have gotten a mortgage in the first place,” as it was three years ago, said Martin Eichner, a program director for Project Sentinel, a Northern California housing rights organization with an office in Gilroy. But there are still droves of homeowners in danger of having their homes foreclosed, usually due to recent layoffs or a need to modify their existing loans, he said.
“The need and the demand for services has not fallen off,” said Eichner, who added many residents seeking helping have come from South County. He said the area has several pockets of low-income, minority neighborhoods that have been hit hardest by the recession.
Filice said it could be a decade, “if ever,” before the market returns to its strength of five years ago, but she hopes that lessons learned from the housing collapse would lead to smarter dealing in years to come.
“People have been horrendously hurt in this downtown. The memory of that hurt is going to be longer. The frenzies of the markets in the past, I think people are going to be slower to do that,” she said. “And overall, I think that’s healthier. It’s going to be slower and more measured. It’s going to be a healthier return.”
“People are going to remember this,” she added. “It’s been unprecedented.”
Angela Ruggiero contributed to this story.
