Foreclosure hot spots

But a handful of neighborhoods are being hit far, far worse than others, according to a new analysis.

Foreclosures are concentrated in three areas of Sonoma County: Santa Rosa's west side, Rohnert Park and Windsor, based on an analysis of records collected by DataQuick Information Systems, a La Jolla real estate data firm.

Three of every five foreclosures in the first quarter of 2008 occurred in these three sections of Sonoma County. And these neighborhoods likely will bear the brunt of the foreclosure crisis in the months ahead as mortgage defaults continue to spiral upward this year.

These areas offered some of the most affordable housing in the county when the housing market peaked nearly three years ago.

They were particularly attractive to first-time buyers grasping for a chance to own a home even as prices were soaring beyond their reach. Many resorted to subprime loans and other risky mortgages that offered teaser rates they could only temporarily afford.

"That's your vulnerable place. That was entry level. The people that got in at the very end probably shouldn't have been buying at all. They were pushing it with their loans," said Belinda Andrews, a Coldwell Banker agent working with dozens of homeowners who could lose their houses.

Now, their mortgage payments are exploding as those loans adjust to higher interest rates. Low initial payments that barely fit within their budgets are replaced by monthly payments often 40 to 60 percent higher, or even more. And with home prices falling, it is harder and harder for these financially beleaguered families to get a new mortgage or pay off lenders by selling their home.

Today, foreclosure homes, short sales and other distressed properties dominate the "for sale" listings in these three parts of the county.

"I sit there and look at data all day long, but I didn't really notice that it was really this bad until the end of last year. It just seemed certain areas just went over the cliff," said Pete Deatherage of Pacific Appraisals in Rohnert Park. "Every once in a while I think it's pulling back, but a week later the data shows something different."

Every week, lenders seize, on average, 41 homes from Sonoma County borrowers who have stopped paying their mortgages, almost double the number from three months ago. Overall, lenders took back 538 homes during the first quarter, according to DataQuick.

Of those, 328 were located in five ZIP codes that cover west Santa Rosa, Rohnert Park and Windsor.

Southwest Santa Rosa had the highest concentration of foreclosures in the first quarter, by far. Lenders took back 80 homes there in the first three months of the year, or 1.26 percent of the homes in the 95407 ZIP code, according to DataQuick.

Although they are spread across a 15-mile stretch of the Highway 101 corridor, the three areas at the center of the foreclosure crisis have much in common.

As the price of the typical home in Sonoma County peaked at $619,000 in August 2005, these three areas offered the largest selection of entry-level homes.

The typical southwest Santa Rosa house sold for $530,000, for example, and in northwest Santa Rosa it cost $516,000. The median price in Cotati-Rohnert Park was $560,000. In Windsor, it was $610,000.

"Those are the blue collar areas. They were good for people with no or low down payments, and the loans were easier to get," said Hans Bruhner, managing partner for First Priority Financial, a Forestville mortgage brokerage.

The west Santa Rosa corridor also had one of the highest rates of subprime lending in Sonoma County around the housing market's peak, according to a Press Democrat analysis of loans.

Mortgage lending done in 2005 and 2006 now is described by analysts as "loans gone wild" because of the proliferation of subprime, negative amortization, stated-income and other risky mortgages.

Such loans soared in popularity as prices hit record highs. They featured low initial monthly payments that allowed borrowers to buy more expensive homes, often without documenting their incomes, making down payments, or even having very good credit.

"It was lax underwriting. The lenders made mistakes and so did the borrowers," said John Karevoll, a DataQuick analyst. "This pool of loans seems to be giving us trouble."

Defaults and foreclosures likely will go higher as those loans and affected properties work out of the housing market. That should take another six months, at least, Karevoll said.

Homeowners in financial distress are saturating the resale market and driving down prices.

Foreclosure, short sales and other distressed properties account for 79 percent of houses and condominiums for sale in southwest Santa Rosa. In northwest Santa Rosa, they comprise 72 percent of the listings; in Cotati-Rohnert Park, 63 percent; and in Windsor, 49 percent at the end of this week. Countywide, they were 43 percent of all homes for sale, according to a survey by Deatherage.

One southwest Santa Rosa street illustrates the market's direction.

On Blue Sky Lane in Bellevue Ranch, a lender is trying to sell a home it foreclosed upon in December. On the same block, two owners are trying to avoid foreclosure by selling their homes for less than they owe, known as a short sale.

And down the street, the owners of a fourth home must price their house to compete with the three distressed properties. They are asking $347,000, but owe $329,000 on the residence in a neighborhood where similar homes sold for about $540,000 three years ago.

Andrews has about 60 listings with homeowners who are behind on payments and attempting short sales.

Each one bought two to three years ago with adjustable loans and now can't afford monthly payments that jumped higher. The owners aren't able to refinance because they owe more than the homes are currently worth.

"They all have variable loans that adjusted in two to three years. They were all time bombs," she said.

Lenders and borrowers expected to avert that threat, counting on rising equity to refinance out of high-priced, risky loans.

But the county's median price has fallen 29 percent, leaving an increasing number of homeowners forced to sell or face foreclosure.

The toll is evident among anxious homeowners Bruhner can't help with a new loan because they owe more than a home is now worth, or don't qualify due to tightened lending requirements.

"I have to say 'no' to people a couple times a week. It's a normal part of the business right now," he said.

You can reach Staff Writer Michael Coit at 521-5470 or mike.coit@pressdemocrat.com.