Not all Sub Prime is the Same

Everyone is talking about the Sub Prime Loans and what it will do to the Real Estate Industry at large and I agree to a certain extent.  But as Real Estate is Local so the Sub Prime Loan problem is local also.  There are some Counties in California where there is virtually no Sub Prime Loans - so how can foreclosures of these loans affect the Market there?  Other Counties upwards to 40% of all loans held in those Counties are Sub Prime, so hold onto your halter Harriett we are in for a bit of a bumpy ride. 

Areas that were advertised as "Affordable" seem to be the hardest hit.  The house might have been larger, newer and cheaper than other areas but how solid is the investment.  Even if you are not in a subprime loan 4 out of 10 of your neighbors are and what do you think that will do to your value if only 1 out of 4 walk away from their homes.  The Banks or now the Bankruptcy Judge will do what they need to do to liquidate the property just as soon as possible, eroding your equity in the process.

It goes back to you get what you pay for. 

Santa Clara County is expensive to purchase a home in - there is no getting around it.  But if you are waiting for the Sub Prime foreclosures so that you can buy on the Cheap - think again.  In Santa Clara County only 16 out of 100 loans out there are Sub Prime.  A number that though painful to some is absorbable in this highly desirable area. 

I am not saying that there are no Short Sales in Morgan Hill or Foreclosures in Gilroy, but it is the exception rather than the rule.  Yes there are deals and bargains to be had - but not at deep discounts.  For that you might want to go to Hollister in San Benito County were 4 out of 10 of your neighbors are in Sub Prime Loans.  That is a bit more difficult to absorb.

Historically the Foreclosure rate is it high, yes because this valley has been so prosperous and the economy has been so good for so long that there has always been a buyer out there.  Now due to the lack of consumer confidence that is plaguing the Real Estate Market as a whole, buyers are fearful to purchase. 

This is creating a set of circumstances where one day pent up Buyer Demand will explode and the market will be off and running again.  Then everyone will be wondering why they did not buy today.