Posted by John Lockwood on 28th December 2006
The National Association of Realtors® recently published an article voicing concern over the rising foreclosure rate in many areas, urging consumers “to make sure they understand the risks and rewards of all types of mortgages before they make a decision on a loan”.
One of the really interesting tidbits in the article was the idea that problematic loans are made in certain areas.
Foreclosures are not only a disaster for families but also for communities. Problematic loans are often made in concentrated areas, and high foreclosure rates of single-family homes can seriously threaten a neighborhood’s stability and a community’s well being.
The reason I found this of interest is that I had previously noticed in working with some buyers in neighborhood in Sacramento County that there was a high concentration of short sales all within the same neighborhood. This stood out even more because even the buyers I was working with were being forced to move because the home they were renting was in foreclosure, and they lived in the very same neighborhood.
What NAR’s article fails to address, however, is why this should be the case. What are we dealing with here that it should be limited to a given subdivision? Is it just agreessive lending practice, or outright loan fraud? I know at least in the case of the landlord of the buyer I was working with, the loan in foreclosure was not one that was made when the subdivision was first created, but much later on. Are we dealing with unscrupulous “area specialists” here, and if so, NAR’s remedy for the problem (consult a Realtor®), is rather like consulting the fox to solve the problem of maimed chickens. Or is it simply the case that a subdivision that experiences lots of sales and rapid price appreciation during a buyer’s market tends to attract more speculative buyers by appearing to be a “hot” area.
I’m also very curious as to whether my readers have encountered anything similar in El Dorado or Amador County. I wouldn’t be surprised if you could uncover something like this in Serrano in El Dorado Hills, for example, but I haven’t proven that, it’s just a hunch at this point. (Fortunately, since I’m not Alan Greenspan, my hunches probably won’t sway the market one way or another, folks).