The foreclosure crisis is lingering longer in San Mateo County than elsewhere in the Bay Area and a giant backlog of bank-owned foreclosed homes could depress property values around the county for years to come, a new study suggests.
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The report, “State of Foreclosures,” found that while the rate of foreclosures in the county may have peaked in 2010, banks are not disposing of such properties at anywhere near the pace they are acquiring them.
As of July 20, county banks own more than 10,000 homes foreclosed since 2007, and this giant pool of distressed properties is still growing.
Whether by design or chance, it’s now taking local banks much longer to foreclose upon and dispose of properties. The average delay between when a homeowner receives a notice of default and when the bank ultimately resells the property has increased from about 325 days in late 2008 to roughly 600 days in mid-2011.
“Banks are sitting on a lot of properties and they’re not releasing them,” said Becky Irwin, legislative aide for county Supervisor Rose Gibson, whose staff helped assemble the report.
Many observers believe banks are hoarding distressed properties to prevent a continued decline in property values.
Since 2007, 18,252 county homeowners have been told their loans are in default. Some 14,548 have had their homes repossessed. Yet banks have only resold 4,456 of those homes, and the report suggests they now own about 10 times the number of homes they possessed in 2007.
This vast bottleneck of unforeclosed and unsold homes suggests that the crisis of declining property values in San Mateo County, which the report says dropped $4 billion in the 2009-2010 tax year, could be far from over.
“The market can’t absorb all that inventory,” said Donald Kung, broker with Remax Investments, which sells repossessed properties for banks. “The overall price will decline.”
Further declines are unlikely to be meted out equally.
Each city in the county is different in this regard, including how often properties change hands, the income brackets of residents, and the assessed values of homes, said Terry Flinn special assistant to the assessor.
At present, coastal markets are “almost dead,” Kung said, but homes under $450,000 in northern Peninsula cities such as Daly City, San Bruno, and west Millbrae are “hot.”
The report, the first comprehensive update on foreclosures published by the county since 2009, clearly shows that foreclosures also are geographically lopsided.
For example, in 2011, 23 of every 1000 homes in East Palo Alto were foreclosed upon, compared to just 5.4 per 1,000 in Hillsborough.
While the bulk of foreclosures have occurred among midpriced homes in the $500,000 to $600,000 range, houses worth over a million dollars have a much higher rate of foreclosure, said Irwin.
“Most of the high-end homes were bought with stated income, or liar loans,” said Kung. “Today’s lenders don’t provide those kinds of loans anymore so how is a homeowner going to refinance their home? They really can’t.”