Los Altos Real Estate Blog

Are you looking for Los Altos foreclosures?  Well, it could be a long wait as there are very few homes that actually go to foreclosure.  When they do, they often, but not always, sell for the going market rate.  As a buyer, you're looking for a deal or bargain and I understand and appreciate that.  However, as a buyer you need to know that you're looking in one of the hottest markets in the country.  While I understand wanting to find a deal, you need to understand that the foreclosures that actually make it to the market typically have all sorts of issues ranging from bad locations to being in need of major remodeling.  A foreclosure in Los Altos is not like it is in the rest of the Bay Area or the country.

What you do see a lot of in Los Altos are homes that get a notice of default.  In this case, the homeowner has missed several payments and the bank has filed the notice of default to start the foreclosure process.  The vast majority of Los Altos homes that get these notices will be placed on the market and sold.  If the loans exceed the value, it will go to foreclosure and still sell in the open market at the going market rate.  It is possible that you could buy a Los Altos home at auction on the steps of the county courthouse.  However, I have not heard of anyone actually doing that.

The number of default notices in Los Altos is far greater than the number of actual foreclosures.  There have been dozens of default notices filed in the last few years but the vast majority of homes end up being sold before they foreclose or the owners bring the loans current.  Of the remaining Los Altos properties that actually go to foreclosure, there have been many that were land only, condos, and townhouses.  The remaining number were houses but most of those have been homes in poor locations such as at busy traffic corners, close to freeways, or located in hard to access streets.

The bottom line is that Los Altos is a market defined by the law of supply and demand.  A nice, well-located home in Los Altos will sell with multiple offers regardless of whether it's a short sale, foreclosure, or normal sale.  The expectation of getting a deal on a foreclosure was only really viable in the 2009-early 2010 timeframe.  Since the market has turned around and demand is so high, I would focus efforts on working with an agent to find a good value and forget trying to find a Los Altos foreclosure deal.

Negative Media Spin
The local media is back in the habit of negative spin with the SJ Mercury News publishing a headline entitled "Silicon Valley foreclosure data: signs of stress, but some improvement".  The first line states that hundreds of homeowners fell behind but foreclosures increased.  Nice start to a story guys.  Knowing that most people just read the first couple of lines in a story, it's no wonder people think we're in trouble.

Positive Reality
However, in reading the article we find that default notices were down a whopping 36.7% in August as compared to August 2009.  That's a huge reduction!  In addition, actual foreclosures were DOWN 7.5% in Santa Clara County.  In addition, cancellations of foreclosures were up almost 100% from the year before and they outpace overall foreclosures.  Only San Mateo County saw an increase in actual foreclosures, up 8.7% in August.

Market Shifting
The market is moving away from foreclosures for a couple reasons, properties are selling in the open market as regular or short sales (not all foreclosures are negative equity) and banks are working with more homeowners to avoid foreclosure.  Both of those statements are supported by sales statistics and banks.  There is less build-up of "shadow inventory" which means as more buyers enter the market, there is less inventory available.  This also supports the rationale behind increased median and average selling prices.

Los Altos is not a hotbed of foreclosure activity and the few homes that get a Notice of Default end up selling well in the open market.  Our market and the general area are selling well with prices trending up.  As long as inventory stays low, we should post solid numbers for the year.

Rich Defaulters?  Hot off the New York Times presses this morning is a report that there are five homes in Los Altos - my primary market - coming up for foreclosure.  Furthermore, this town, one of the most expensive in the country, is an indicator that the wealthy are walking away from their loans.

Very Few Actually Do: The article states that Los Altos had 16 defaults for the first five months in 2010 versus the same period in 2009.  However, those are NOT translating into foreclosures.  Of the 141 homes sold in 2010 so far, the MLS data only shows 7 homes sold as short sales and 2 as REOs.  The defaults may be happening but owners are mostly selling them as short sales, just like everybody else.  The picture painted in the article is that one in seven high-end homeowners are defaulting on loans over $1 million but the numbers for Los Altos tell a different story.

Why Default?  Because these "wealthy" folks are mostly dual-income families of people in middle or senior management, engineers, etc who lose their jobs just like everyone else.  They may live in a $1.5 million house but they're also working 50 hours a week earning the $300-400K household income needed to cover the bills.  If one person loses their job, they don't have millions in reserve to keep going.  Again, the article has made our town look like we're all rich and a default is just another financial decision.  I sold three homes in Los Altos and Los Altos Hills in June and none fit the bill of "rich" painted in the article.

Here's a link to the original article to compare my opinion.
http://www.msnbc.msn.com/id/38158763/ns/business-real_estate/