Recent data from DataQuick bear out the negative impact foreclosures are having on home values.

In July 2008, REOs accounted for one third of all sales in the San Francisco Bay Area, compared to just 4.2% of sales in July 2007. In some areas, like Solano County (where I happen to live), as much as two thirds of all sales were foreclosures. The median sale price in the Bay Area is down nearly 30%, pushing home values back to what they were 53 months ago.

Some people see a silver lining: sales were up 2.2% compared to July 2007. In Solano County, sales were up 56% compared to a year ago. It appears that the only people buying right now are investors and first time buyers who can meet the underwriting requirements to get a loan.

Some people in the real estate community claim that foreclosures are "skewing" home value data downward, and are quick to point to "core Bay Area communities" where prices have not declined as drastically...yet. But I disagree: no one ever claims that values are skewed when the trend is upward.

The current value declines are very real, and are bound to spread because of the large number of people stuck in junk loans that are about to explode. I'd be willing to wager that a fair number of those loans will affect those "core" Bay Area communities just as they have already wreaked havoc on communities like mine. For anyone in doubt, call an owner who just put their house on the market because their rate is about to reset or their option ARM was recast early, and their lender won't work with them.