Stockton Suffers Among Top U.S. Foreclosure Rates

Stockton, Calif., has one of the biggest foreclosure rates in the country, according to RealtyTrac. Art Godi, a longtime Realtor there and former president of the National Association of Realtors, talks with Michele Norris.

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MICHELE NORRIS, host:

The mortgage meltdown has hit the Golden State with a wallop. California has one of the highest foreclosure rates in the country. Of the top 10 list of cities with the largest number of foreclosures, six are in California.

One of those towns is Stockton, about an hour and a half east of San Francisco. Just two years ago, the housing market was hot, fueled by homebuyers looking for affordable housing beyond the pricy San Francisco Bay market.

According to the housing data firm, RealtyTrac, Stockton now has the highest foreclosure rate in the country.

Art Godi is a longtime realtor in Stockton and a former president of the National Association of Realtors. He joins us now from San Francisco.

So if I were to drive through your town of Stockton, would I see a bounty of for sale signs on the lawns?

Mr. ART GODI (Realtor; Former President, National Association of Realtors): Yeah, you would. I think, Michele, depending obviously where you drove through, because certain areas have many more than others.

A few weeks ago, when the press came to Stockton they asked about it. We took them in one of our listings. It was in a high concentration foreclosure area. And within one half mile of our listing, which is $445,000-home, there were 102 houses for sale within one half mile. At the time, 25 of them were either short sales or foreclosure homes. I have a hunch - kind of anecdotal, but I have a hunch that numbers probably doubled by now. I bet 40 or 50 of those homes around it are short sales.

NORRIS: What are short sales? What is that?

Mr. GODI: Short sale means that the bank, in order to avoid foreclosure, will sometime accept less than the borrower owes on the loan. In other words, if you bought a house, say, you speculated a year or two ago in the market - two years ago in the market - was hot, bought a house for 200,000. So a year or two later now, when it's time to refinance, instead of owing the 200,000 you borrowed, you might owe 210 or 220, or whatever. And that's fine if the market's going up as it was for about five years there. People would say, well, we'll just refinance it then.

What's happened in the last year and a half is they've leveled off and gone down in value. So maybe that house you bought, you know, a couple of years ago, now may be worth 190, but you owed 210. This is where we come in. And it's a pain, it's a headache doing it, but this is what we're doing now.

As you go to the banks and say you don't want to foreclose this because you've already got a pile of foreclosures. And how about take 190, which is market value right off your loss.

NORRIS: With all these homes in foreclosure and many more in state of delinquency…

Mr. GODI: Yes.

NORRIS: …are these homes that people actually live in or many of these investment properties?

Mr. GODI: Both. If they don't live in them, if they were investment properties, they rent it. So, obviously, you know, somebody is living in them. They're both. A lot of them were the Bay Area influx that came up and bought homes to flip. You know what flipping is, right?

NORRIS: Mm-hmm. Buying a house, improving it, selling it out of profit.

Mr. GODI: Yeah. And they buy them before the house is even finished. They go to builder and they buy a model number A from the builder for $300,000 or whatever it was. And then six months later, when the house is finished, they'd sell it for $350,000.

NORRIS: What does the future holds since many of these mortgages - to use your term - first enter the horizon about two years ago when we first, you know, seen the first round of adjustments, what do you expect to see?

Mr. GODI: Long term, what do I expect? I think we're seeing the adjustment period, now we're depending on this one, too far that all loans are under suspicion now and the lenders are over qualifying to a great extent now. And I think that within the next six months, you're going to see the pendulum swing back toward the center. And there are a lot of factors. It depends what's Bernanke, you know, what's the Federal Reserve going to do this month or next month. Are they going to lower the interest rates and therefore encourage more loans in real estate? There are so many other factors, but I think that you're going to see the financial institutions and their regulators - I think you're going to see it swing back toward the middle some more.

NORRIS: Art Godi, thanks so much for talking to us.

Mr. GODI: Yeah. I enjoyed it. Thank you.

NORRIS: Art Godi is a realtor in Stockton, California. He's also the former president of the National Association of Realtors.

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