'It's Hard to Find the Positive Spin'

From the Sacramento Business Journal:

Sal Guevara burned through $50,000 in savings to keep current on his adjustable-rate mortgage, but with a monthly bill hundreds of dollars more than his $2,500 in workers' compensation income, he expects this month to miss a payment for the first time on his Elk Grove home.

Guevara, 37, is out of work with a back injury, going through a divorce and praying he can escape foreclosure by working out a "short sale" deal with his lender.

But if the lender rejects a short sale, he will become one of hundreds whose homes have been foreclosed upon in Elk Grove, a Greater Sacramento city that has among the highest concentrations of foreclosure proceedings.

"I have just my faith to keep me going," said Guevara, who owes $400,000 on the four-bedroom house he bought in 2003, likely more than buyers are willing to pay. "I feel like I'm starting from scratch."
...
Guevara, a custom flooring installer...was working seven days a week and pulling in more than $100,000 a year during the construction boom. He knew what he was doing when he cashed in equity on his Elk Grove home to buy other property, fix it up and sell it. It worked when the market was strong. That was until his last purchase, a three-bedroom home in the Meadowview neighborhood he bought for $289,000 at the market's peak in 2005.

Then, he was hit with a perfect storm: a work-related injury, divorce and two mortgages, one with a rate that will float above 9 percent in October.

Both homes have been on the market since January, and neither has drawn much attention from buyers.

He had planned to use the proceeds from the fixer-upper as a college fund for his boys, aged 13 and 7. "Now, I'm telling my boy he's got to get straight A's," Guevara said of his eldest son. "It's putting a lot of pressure on him."
...
Foreclosure proceedings initiated during the first three months of the year -- default notices, auction notices and properties reverting to bank ownership -- are more than triple what they were during the same period in 2006. But in Natomas, Elk Grove and south Sacramento, those proceedings have multiplied even more, up by 400 percent to 700 percent, according to RealtyTrac.

"It's hard to find the positive spin," said Karen Berkovitz, an agent with Lyon Real Estate with 14 years of experience who's trying to sell Guevara's home..."It's really a shame," she said. "These people are walking away with zero."
...
"If you look at the listings, half of them are short sales," Berkovitz said as she scrolled through a screen showing listings in the Elk Grove area. "That's scary."
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Brokers don't know how long it will be before the tide of foreclosures recedes...Across the Sacramento area, the inventory of homes set for foreclosure sale stands at 2,175, with another 5,274 homes owned by banks or mortgage companies. Another 7,000 homeowners are at least 60 days late with their mortgage payments.

"It's going to be a rough year and a half," said Michael Lyon, chief executive officer of Lyon Real Estate. He predicted the effects might reach into 2009. [2012 anyone?]

From About.com:

A client asked me to do a comparative market analysis of her home. There have been no sales in that subdivision over the past six months except for a foreclosure, which makes that sale the only comparable sale. Now, appraisers can pull comps outside of that subdivision and adjust for value, but the likelihood is that foreclosure is going to affect this client's market value. Throw into the mix that nine out of 10 homes are not selling in any given month, and it's not a pretty picture.