Sue -
Whenever a particular area/neighborhood has a lot of foreclosures the future value is in question compared to an area with few foreclosures. Two trends we see over and over again in the Bay area:
1.) Areas that were at the lower limit of the "affordability" curve were hit harder with sub prime loans and now represent the areas with large amounts of foreclosures. For example, in the Alum Rock area of San Jose, where the median price for a home was around $550,000 (2006) and a great number of subprime loans were issues and now foreclosures have occurred, the average sales price has dropped nearly 40% compared to 2007.
On the other hand, in Palo Alto, where the median price for a home was in $900,000 (2006), very few sub prime loans were made and very few foreclosures exist, the average sales price has actually appreciated about 3% over 2007.
2.) "Core" neighborhoods tend to attract longer term home owners and less investors and therefore tend to be more stable neighborhoods overall. They tend to be convenient to shopping, cultural activities, and mass transit. Prices of homes on the "edges" of these core areas are always hit harder by changes in the general economy (gas, food, jobs) . Core areas are the last to be affected by a down turn and first to appreciate.
When you hear the media talk about real estate, they tend to talk in broad terms. To answer your question accurately, it would be best to look at the exact neighborhood and evaluate the trends. Sometimes I will see a pocket of a good neighborhood be in trouble simply because one developer is in trouble. Other times a neighborhood has historically been the last to appreciate and the first to fall.
There was a great article pointing out similar comparisons in Mercury News last week.
Richard Calhoun and Sue McAllister did a great job of visually showing "local" differences.
http://www.mercurynews.com/realestatenews/ci_9850283?nclick_
CJ
CJ
- Wed Jul 23 2008, 15:07