It’s good to see area homes steadily gaining value, as detailed in The Bee on Thursday. And the fact that so few homes are being lost to foreclosure is even better news.
The median price for a home in Modesto is $199,000; in San Joaquin it’s $225,000. Best of all, only 170 Stanislaus homes have been lost to foreclosure this spring.
Still, there are troubling trends nearby.
Think back to 2004, when real estate values began climbing past the point of sanity. At one point in 2008, developers in Stanislaus, Merced and San Joaquin counties had filed plans to build nearly 50,000 new homes. It was a clearly unsustainable pace.
Then the bottom fell out. In 2008, 2,800 homes in Stanislaus County went under; in Merced another 1,640 were lost and in San Joaquin 3,800. And those huge new developments? They fizzled, with many homes left unfinished.
Part of what drove the building and buying frenzy were stratospheric home prices in the Bay Area. If a 1,200-square-foot fixer-upper in a dicey location near a BART station was selling for $650,000, then a deluxe 4-bedroom home in a new neighborhood in Patterson or Salida for $265,000 looked like the steal of a lifetime.
Except it wasn’t. Those insane Bay Area prices inflated our own real estate bubble. While we can’t blame all the speculation, bad mortgages and fevered buying on Bay Area expatriates, in hindsight we can see the correlation. Most importantly, we don’t want to see it again.
That’s why what is happening just one county away is so concerning. The median price for a home in Santa Clara County is almost half-a-million dollars higher than a home here – $674,000. This isn’t property in New York or even Los Angeles, it’s right next door. According to trulia.com, it gets worse as you move north – $799,000 in San Mateo, $839,000 in San Francisco.
Stop the tape; we saw this scene 10 years ago and it didn’t have a happy ending.
The 2008 meltdown was precipitated by malfeasance in the financial industry as mortgage brokers sold loans to people who didn’t qualify for them. Then those mortgages were packaged by commercial banks – Goldman Sachs, Lehman Brothers, JP Morgan, CitiGroup – into bonds that were given top ratings by Moody’s and Standard & Poor’s and sold to investors. The fraud that started at the bottom in Merced, Modesto, Stockton and elsewhere went all the way into the portfolios of the world’s biggest investors.
But this couldn’t possibly happen; we’ve learned our lesson, right?
Not exactly. Those big banks admitted wrongdoing, but they all got off the hook with fines they’ll be able cover with just a few days’ or weeks’ profit. Not one of the top executives went to jail.
And the law that was supposed to keep it from happening again – the Dodd-Frank Wall Street Reform Act – has been stalled, delayed and obstructed by many of those same giant banks and investment firms. Less than half has been implemented. In fact, the Blackstone Group was recently praised in Forbes magazine for its skill in packaging mortgages on formerly foreclosed-upon properties and selling them to investors.
So while we’re happy foreclosure rates have fallen and our real estate prices are rising, we’re wary. Very wary.