Foreclosures mean trouble community-wide

ConsumerWatch reported on January 17 that overall housing prices, which have been declining steadily for over two years, were down 14.8 percent from a year ago. The median price for a home in San Francisco declined 1.9 percent to $731,000. But of the nine Bay Area counties, Sonoma County posted the sharpest decline, plummeting 21.9 percent to $410,000 from December 2006. Sonoma is not immune to the housing crisis.
Nor is Sonoma immune to the nationwide sweep of foreclosures. A recent listing of foreclosures in the Sonoma area numbered 73. The number includes properties in various stages of the foreclosure process, which can take as much as six months to complete. Each represents some kind of individual trouble, and together they represent trouble for the community.
“If a property goes through foreclosure,” said Ron Pfleger, loan consultant at First Security Loan Corporation, in Sonoma, “it will lower the values in the neighborhood 5-10 percent for at least six months.” A neighbor, should he find himself unable to pay his ballooning adjustable interest payments and want to refinance, using his house as equity, will suddenly discover he has not a $500,000 property, in Pfleger’s example, but since the nearest “comparable” has been drastically reduced, he has only a $400,000 property. That down-valuing may cost him the loan he needs, and then he may be in trouble, too.”
This is happening neighborhood-wide, even here in Sonoma, where the cluster of foreclosures centers in the lower income areas and where there are many first-time homeowners. And the effects are long range. “Individually,” said Pfleger, “it impacts your credit score. Credit score is your Holy Grail. The foreclosure can be on your credit for the next 10 years. Foreclosure is a judicial thing. It goes through the courts. It’s a very, very significant thing.”