One street's nightmare: People bail out, those who remain suffer
Erin McCormick, Carolyn Said,Kelly Zito, Chronicle Staff Writers
Sunday, October 14, 2007
Manuel Juarez stood in the middle of his patch of green lawn and gestured at the dead, brown yards of the empty tract homes in all directions.
"There are no people in that house there," he said, pointing at a large stucco home with a for-sale sign next door to his right. Then he pointed at two nearly identical houses for sale across the street, then to the one on his left and finally to the house directly behind his. "There are no people there, there or there either," the 51-year-old appliance repairman said in his native Spanish.
<< Epidemic repossessions hit several ZIP codes >>
The dead lawns and for-sale signs are stark evidence of the Bay Area's foreclosure crisis - and Antioch's Meadow Creek Estates, where Juarez's two-story home stands, is at the epicenter of it.
With 271 homes - or more than 2 percent of all residences - already foreclosed upon in the first eight months of this year, the 94531 ZIP code where Juarez lives has the Bay Area's highest foreclosure rate, according to a Chronicle analysis of housing data provided by DataQuick Information Systems, a La Jolla (San Diego County) research firm. In this southeastern corner of Antioch, another 671 households - or 6 percent of the total - have received bank notices this year that they are behind in their payments, the first step of the foreclosure process.
The foreclosure rate here is seven times that of the region as a whole and nearly 1,000 percent higher than it was a year ago. This small area of Antioch, with 23 foreclosures for every 1,000 homes, has twice the bank repossession rate of greater Stockton, an area often cited as the No. 1 foreclosure spot in California. On Juarez's block, at the eastern end of Catanzaro Way, the numbers are even grimmer. Nine out of 40 properties have been repossessed by the lender; another four are in default. That means almost one-third of the homes are in or facing foreclosure. You wouldn't know it if not for the dead lawns and for-sale signs that line the street. The neighborhood of spacious Mediterranean-style homes appears placid and pleasant, no different than any other California subdivision.
Built in 1994, the three- and four-bedroom homes tower over their small lots and share a color palette of beiges and tans. Most have two-car garages, high-ceiling living rooms with fireplaces, and master-bedroom suites.
Catanzaro Way and the 94531 ZIP code are a virtual petri dish for foreclosures because they share so many of the factors that fuel the trend: oversupply of homes, rampant price run-ups followed by swoons, lower-income residents, subprime adjustable-rate mortgages.
Hans Johnson, associate director of the Public Policy Institute of California in San Francisco, said the concentration of foreclosures in Antioch exemplifies an area on the geographic and financial fringe during a period when many people were struggling to get into a housing market gone mad.
"It's no surprise that you'd find more foreclosures in Antioch," Johnson said. "There's a lot of new housing, a lot of new homeowners, and those are the homeowners who are most financially stressed. (They are) taking out alternative loans, but also using a lot more of their incomes to pay for those alternative loans."
Erwin Solorzano remembers watching the neighborhood spring to life from a row of dusty lots when he moved here as a teenager in 1994.
"There was a green orchard over there and back there was just rolling hills," said the 28-year-old Muni maintenance worker, pointing east down Catanzaro Way to what now is a mass of tract homes. "That block there was the last to be built. When I moved here, it was just vacant lots."
Until six years ago the 94531 ZIP code didn't even exist. It was carved out from the 94509 ZIP Code as developers went on a building spree.
Antioch's population mushroomed from 43,000 in 1980 to nearly 100,000 two decades later, as it became a magnet for first-time home buyers looking for affordability, and families seeking alternatives to the inner city. Today it is the second-largest city in Contra Costa County after Concord.
Driving through the area, one sees block after block of nearly indistinguishable earth-toned homes, punctuated by strip malls and schools.
That burgeoning growth caused prices to rise rapidly. Houses on Catanzaro sold for about $150,000 when they were new in 1994. Two years ago, they went for more than $500,000.
Now prices have fallen precipitously. Catanzaro homes today are selling in the low $400,000s - if they sell at all.
Solorzano said last year his parents tried to sell the family's longtime home, located one house off Catanzaro on Waterford Way.
"It sat on the market for nine months," he said. "Now they've decided just to rent it out."
An analysis of housing price data provided by research firm First American LoanPerformance shows the median price in the 94531 ZIP code has fallen 15 percent since the Bay Area's housing market peaked in May 2006. That's the biggest drop of any ZIP code in the nine-county region.
For people who bought their homes at the peak of the market with 100 percent financing, a plunge in home values puts them "under water" - owing more on their mortgage than the house is worth.
Starting in the summer of 2004 and continuing until the end of 2006, more than 90 percent of all home purchases in the 94531 ZIP code were made with adjustable-rate loans, according to information from DataQuick. While adjustable loans became more popular throughout the Bay Area and the nation at the same time, the Antioch ZIP has an unusually high number of loans that were destined to reset higher after an introductory period, most commonly two or three years.
The combination of plunging values and higher mortgage payments created the perfect breeding ground for foreclosures. Homeowners who could not afford escalating monthly payments also could not refinance if their homes were worth less than the mortgages, and could not sell for enough to pay off their loans. That left foreclosure as the most likely outcome.
Studies have shown that a few foreclosures in a neighborhood can make a big difference in home prices of other properties. A study by Chicago's Woodstock Institute, a nonprofit that researches topics affecting low-income communities, found that each foreclosure of a conventional mortgage within one-eighth of a mile of a single-family home results in a decline in property value of between 0.9 and 1.1 percent.
A white sticker plastered on the door of the house at 5316 Catanzaro announces that the property has been declared vacant and the mortgage holder has been notified. An orange sticker says the locks have been changed. Public records show that the house was scheduled for a foreclosure auction this month.
But nobody on the street can remember who last lived in the house. Real estate records show the house changed hands in 2005 and offer no forwarding address for the woman who last held title.
"I think some people from Florida bought it, but never moved in," said Xavier G. Bustos, 70, who has lived on the block for eight years. Bustos and other neighbors are just as unclear as to who lived in other foreclosed houses that are now on the market.
"I think the for-sale signs scare everyone away," said Tommy Jenkins, who has rented a house on the street for two years. "If I came to this block and saw half the people selling their homes, I'd say, 'What's wrong with this neighborhood?' Really, there's nothing wrong with this neighborhood."
Most of the Catanzaro foreclosures appear to have affected people who bought about two years ago, presumably with low initial rates that later skyrocketed. Many of the foreclosed homes also appear to have been owned by investors. Property records suggest that at least five of the nine houses taken back by banks were owned by people who lived elsewhere.
Trinette Nastor of Fairfield owned two of the Catanzaro foreclosures. She said she bought the three-bedroom homes, located across the street from each other, for $530,000 each in late 2005, as an investment in a partnership with two acquaintances who arranged the deals but disappeared once property values fell. She thinks the acquaintances got her into the deal because she owns her own skin-care business in Vacaville, so she had the credit to qualify for mortgages.
"The plan was we were going to fix them up a little bit, flip them and then go from there," she said. Instead, "As soon as the market went for a loop, they were worth $470,000."
Nastor said one home was briefly occupied by renters and the other stayed vacant as far as she knows. She made a couple of monthly payments of about $3,000 each, but then couldn't keep up.
"I kept getting paperwork (from the banks)," she said. "I was like, 'Look, we've got to do something about this.' " That's when her partners disappeared, she said.
"I went crazy, I didn't know what to do," she said. "I had to let (the houses) go because they would bring my business and my health down."
She stopped making payments and the lenders foreclosed on both homes in January.
Many Bay Area homeowners in recent years looked to their houses not merely as shelter, but as piggybanks for funding renovations, educations, vacations or cars. There are ominous signs that some longtime Catanzaro residents who tapped into their home equity may turn into foreclosure victims as well.
Two doors down from the Juarez home, Patience White and her family are scrambling to avoid becoming another part of the grim statistics that have swept their neighborhood.
Having bought their home six years ago, White's family has imbued it with the pride of ownership, planting rose bushes in the front yard and hanging gold chenille curtains in the living room. Over the years, the family has built some equity in the house.
But White said an adjustable loan the family took out in a refinance last year is nearly killing them. The rates reset this year.
"We used to pay $1,700, and now we're paying $3,200," White said.
She said she was injured on her job as a licensed vocational nurse and has been able to work only part time. Her husband is pulling double shifts in his maintenance position with a San Francisco museum to try to make the payments.
"They didn't tell us there was a prepayment penalty. Now we've tried to refinance. We've gone to so many places and nobody will give us a loan."
She said the family began falling behind three months ago and is now being pestered with daily phone calls from collectors.
Her husband is trying to negotiate with the loan company.
"I just see the for-sale signs going up all around us," said White. "It's sad to see people put years in their homes and now they're getting kicked out.
"What can we do? Times are just getting harder."
Bustos works to maintain the close-knit neighborhood he remembers from the Catanzaro Way he moved to eight years ago.
He often stands beneath the Mexican flag he flies outside his two-car garage, keeping a watch on the street. He mows his neighbors' lawns and acts as an interpreter for a family three doors down that speaks only Spanish.
But Bustos said the neighborhood lost its feeling of cohesion over the past few years as there was rapid turnover. There used to be neighborhood block parties, he said, but lately some of his new neighbors came and went so quickly that he never got to know them.
Now he and other neighbors who remain say they are concerned for their home values and vexed about crime at the vacant properties.
"Oh sure, I worry," said Bustos, who has retired from his upholsterer's job and now works in the sporting goods department at Wal-Mart.
Pointing across the street to a for-sale house with a dead lawn, he said, "That house there was vandalized several times; they tore the banisters down, made holes in the wall."
Solorzano agrees the character of the neighborhood has changed - from a close-knit community to a place where neighbors hardly know each other.
"When I first moved here, it was like 'Cheers' - everybody knew your name. Everybody knew everybody's car. There were a lot of little kids."
In about 2001, he said, the market got so hot and the bidding for homes got so competitive that people could hardly buy a house.
"Then a lot of people started selling their homes and cashing out," he said.
"Now nobody knows anybody," said Solorzano's friend Tommy Jenkins, who moved to a rented house on Catanzaro Way 21/2 years ago and has lived nearby since the mid-1990s. He said the area's growth has brought a lot of urban problems like traffic and crime.
"We've seen Antioch grow from nothing to something and then back to nothing again," said Jenkins, 27, who works in construction.
The Juarez family is hoping to hold on in the neighborhood until things turn around and they get some stable neighbors.
"There's constant turnover; people move in, they move out," said Juarez's grown daughter, Esmeralda Juarez, who lives in the house with her parents and her two children. She added that one set of neighbors had disappeared in the middle of the night.
"We like it here, except for the ..." she pointed to the empty houses around them and across Catanzaro Way.
Resources
Places homeowners facing foreclosure can seek assistance:
Your bank - Lenders emphasize that financially stressed homeowners should contact them well before the loan is scheduled to reset higher. Ask if your loan can be modified, for example, by fixing the rate below the scheduled reset amount. Ask if you qualify for "forbearance" - temporary reduction or suspension of payments. Consumers can also ask a community group to contact the lender on their behalf. Phone numbers of major servicers' loss mitigation departments are at links.sfgate.com/ZTG.
ACORN Housing - www.acornhousing.org; (866) 672-2676 or (888) 409-3557. This nonprofit has programs with many lenders to help homeowners negotiate affordable loan workouts, payment agreements and foreclosure prevention. It also advocates for policy reforms to stop predatory lending.
Homeownership Preservation Foundation - links.sfgate.com/ZMV, (888) 995-4673. This community development group offers free foreclosure-avoidance counseling and assistance contacting lenders.
Counseling agencies - links.sfgate.com/ZMW, (800) 569-4287. The U.S. Department of Housing and Urban Development sponsors housing counseling agencies throughout the country that offer advice at little or no cost.
State government Web sites - California recently began Web sites in English and Spanish with tips on foreclosure prevention at www.yourhome.ca.gov and www.sucasa.ca.gov.
The Internal Revenue Service - Answers to questions on the tax implications of foreclosure and debt cancellation are at links.sfgate.com/ZBDG.
Source: Chronicle research
By the numbers
The total number of foreclosures from January to August 2007 by city within the San Francisco Bay Area:
Antioch
525
Oakland
337
Vallejo
337
Pittsburg
223
Brentwood
197
Richmond
179
Fairfield
153
San Pablo
151
Oakley
121
Concord
91
E-mail the writers at emccormick@sfchronicle.com, csaid@sfchronicle.com and kzito@sfchronicle.com.
This article appeared on page A - 1 of the San Francisco Chronicle