The San Jose Mercury News has an article today titled “In Silicon Valley, home-price drops are bigger in communities with higher foreclosure rates” read it here
I don’t think this is a revelation as this is what has been happening here on the Central Coast. You can see it with the median home prices I blogged about a few days ago. A city like San Luis Obispo which has had very few foreclosures is not seeing the price declines as in other cities with foreclosures. I’ll take that one step further and say that neighborhoods with foreclosures are seeing higher price drops than neighborhoods without foreclosures. When a foreclosure happens in a neighborhood (or is a comparable used in a home price valuation), it’s going to take a couple of higher-priced recent comps to show this isn’t the true market value for the area.
So the crystal ball questions are:
1) When will the foreclosures stop?
2) Will neighborhoods that don’t have foreclosures hold their prices or are they just taking longer to decrease?