Why Are There No Foreclosure Properties in San Carlos?

Hunting for Unicorns.

There's probably nothing more dreadful for a home buyer in this market than to be stuck in the throes of a multiple offer circus. If you've watched the premiums that are being paid for homes in this current environment, you know exactly what I'm talking about. That's why savvy home buyers constantly look for ways to circumvent the this stress and try to find properties that perhaps nobody else knows about. Normally that means hunting for coming-soon listings, or those homes that are being sold off of the MLS.

Another sector of homes that buyers tend to explore to find hidden opportunities is distressed or foreclosed homes. The difference between the two is simply that a “distressed” home is one where the owners have fallen behind on mortgage payments, while a foreclosed home is one where the bank has literally repossessed the home and will ultimately sell it as an REO, or bank-owned property.

Despite the strength of our local tech-based economy, it would be foolish to assume that the pandemic has not adversely impacted a significant number of homeowners on the Peninsula, to the point where they may have fallen behind on their mortgage payments. Not everyone was able to retain their employment, and running without a paycheck for a year will drain the most robust of savings accounts.

We faced a similar threat to home ownership back in 2008 when the Great Recession knock the legs out from under the market, and there were indeed quite a few short sales and foreclosures as a result. But the pandemic market has almost nothing in common with the recession market for one very big reason.

It's All About Equity.

In the years leading up to the Recession, home prices were climbing rapidly up to its peak in 2007. Home buyers who purchased in 2007 bought at the very top of the market, and when the bottom fell out, many of them found out that they owed more money on the home than what it was currently worth. For those that were forced to sell in 2008-2011, that meant having to try to sell the house short (where the proceeds of the sale don't even cover the amount owed to the bank) or just seeing the home go to foreclosure.

The market today is entirely different. Since the end of the Recession, we have witnessed an unprecedented decade-long climb in home prices. This means that the vast majority of home owners in San Carlos are sitting on a LOT of equity in their homes. Even buyers who purchased in the past 1-2 years have significant equity in their home because house prices have continued to appreciate, and the vast majority of them put down far more than the minimum 20% that most banks require. Consequently, they still owe less on the house than what it's worth in current market.

That means that in the unfortunate event that someone is forced to sell their home, they can get out from under it without resorting to a short sale, or worse yet, seeing it go to foreclosure. Whether the choose to do so or not, of course, is an entirely a different matter.

So you now you know why you don't see foreclosures in San Carlos.