Foreclosure in America: A Tale of Two Cities

These days it seems that every real estate article around is saying a similar thing: that our country is in the middle of a storm – some might even say hurricane – of foreclosures. Bloomberg reports that the U.S. will experience as much as a 20% increase in foreclosure filings, up record numbers filed in 2010. This figure is all the more startling given that in 2010, “2.87 million properties got notices of default, auction or repossession.”

Still, while it’s true that foreclosures make up a significant part of the real estate market in many areas of U.S., there are defiantly pockets that are telling us a different story.

Thus emerges our tale of two cities, culled from ZipRealty’s market data. Today we look at San Francisco and Las Vegas: both cities iconic, historic, and popular tourist destinations. But while the Las Vegas real estate market shows impact from foreclosures with the full force of a hurricane, San Francisco is experiencing more of a gentle rain, one you might not even bother to open your umbrella for.

See for yourself. The following chart shows Las Vegas home sale distribution from July of 2009 to July of 2011:

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Clearly, foreclosures alone have made up a large portion of Las Vegas’ real estate sales for the past two years. And, when you combine foreclosure with short sales, you have a majority. You can see gradual improvement as the number of market-priced resales increases year-over-year, but overall, Hurricane Foreclosure has left her mark.

Yet San Francisco shows a very different reality:

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Look at all that green! For two years, the real estate market in San Francisco has steadily weathered the storm: in no month has foreclosure alone, nor foreclosures together with short sales, outnumbered market resales. Market-priced units, despite the fact that San Francisco boasts some of the most expensive real estate in the country, have continued to sell at well over half the rate of their distressed-property counter parts. Of course, some people may argue that “the worst” has yet to come. And particular to San Francisco, option-ARM mortgages that reset in the next two to five years at higher interest rates could push up the short sale or foreclosure numbers.

But the overall point here is that no matter how much doom and gloom we read about in national real estate, parts of our country are enjoying robust, healthy sales. This is a lesson that in understanding the American real estate market, we must learn that individual city markets are as unique as individual cities themselves.