The Affluent Localities of Silicon Valley Are Now Being Affected by Foreclosures

February 11th, 2009 | Tags: Foreclosures

The more affluent localities of Silicon Valley are now being caught in the foreclosure net. In nearly all the neighbourhoods in Santa Clara County there are increasing pockets of foreclosed houses. These places till the latter part of 2007 had remained immune to the viral attack according to a survey conducted by Mercury News.

The problem of defaulting on mortgages is spreading towards Willow Glen, Sunnyvale and Campbell. It is apprehended that with mounting unemployment and resetting of interest rates more will fall back in their mortgage payments and there will be further drops in home values.

A study of the zip codes of Silicon Valley indicates that the foreclosure crisis is no longer contained within the working class localities – the places that had been the targets of sub-prime lending during the time of the housing boom. From the trend it seems clear that foreclosures are marching ahead and showing no signs of retreat.

Jed Kolko of Public Policy Institute of California said, “People at all income levels are losing jobs, so we are likely to see at least some delinquency and foreclosure in all types of Zip codes.” The zip code 95125 (Willow Glen) can be citied as an example. It is a scenic place that had been much sought after. Here delinquencies began to rise from November 2007 jumping from 0.3% to 1.7% in one year. There were similar jumps in Milpitas and parts of West San Jose, Santa Clara and Sunnyvale.

According to First Amercian CoreLogic that gives Mercury News the necessary statistics from 55 zip codes of the county, the worst affected region is East San Jose. In zip code 95122 about 11% of the house owners are in default marking a jump of 3.5% from the previous year.

The house owners become defaulters when they miss mortgage payments. A notice is served to the delinquent borrower marking the start of the foreclosure process. Not all the defaulters are foreclosed upon because sometimes agreements are worked out In California about two thirds of the defaulters in December 2007 have been foreclosed upon. This leads to the fall in the value of the neighbouring houses as the supply outstrips demand in the real estate market.

As soon as the default numbers increase there is reason for consternation because it indicates that the various measures being taken by the government at all levels are not having the required impact. The worry for the borrowers start even before the actual falling behind in payments.