San Jose foreclosure listings continued to grow in the third quarter as more foreclosures occurred in higher-cost neighborhoods, based on data from a foreclosure tracking firm.
In the July to September quarter, a total of 8,185 residential units in the San Jose-Santa Clara-Sunnyvale metro area have been hit with default and foreclosure notices, representing 1.29 percent of all households in the area.
With a foreclosure rate of one in 77, the San Jose metro area ranked 35th in a ranking of 203 of the largest metro areas in the country based on rates of foreclosure. The rate marked a 2.68-percent increase from the previous quarter and a nearly 29-percent rise from the July to September quarter in 2008.
According to foreclosure analysts, the increases in foreclosure filings in the third quarter were no longer largely caused by the delinquencies of subprime borrowers, but by unemployment and the rate resetting of pay option adjustable mortgage loans. According to Credit Suisse, the next flood of foreclosures will arise from the resetting of Alt-A and option ARM loans over the next several months.
While the unemployment rate in the San Jose metro area dropped to 11.8 percent in September from 12.1 percent in August, the jobless level is still high, much higher than the nationwide rate of 9.8 percent. Job losses in the manufacturing, hospitality and leisure sectors pushed more homes into San Jose foreclosure listings.
In nearby San Benito, the jobless rate was 12.5 percent, and in Santa Clara, the jobless rate was 11.8 percent. These two counties lost a total of 2,600 jobs between August and September this year.
Unemployment has also adversely affected housing in high-end communities. Based on data from Credit Suisse, many middle-class Americans took out Alt-A and option ARM loans during the boom years of 2004 to 2007. Because more and more residents of higher-cost neighborhoods have also been losing their high-paying jobs, a rising number of higher-end homes have been entering foreclosure.
As seen in the foreclosure chart of metro areas recently released by a foreclosure research firm, the pace of foreclosure has been rising in cities which were previously at the bottom of the chart.
In San Jose, homes which were purchased for $850,000 are now being sold at only $420,000, more than 50 percent below their original prices. California analysts predict that the trend will continue into the next year.
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