Real Estate

Market rising from the ashes

Economic climate, mortgage crisis hit East Palo Alto hard

East Palo Alto, like most cities in the country, has been hard hit by the economic downturn, including in its real estate market. Over the past two years, East Palo Alto saw its median home-sale price plummet 29 percent. It's also been especially damaged by the sub-prime mortgage crisis, with many homeowners forced into foreclosure.

Some experts see signs of things looking up in the real estate market, or at least stabilizing, while others see the high number of foreclosures and short sales (when a property is sold for less than its mortgage value) still plaguing residents as evidence that a bleak economic situation remains.

"East Palo Alto was one of the hardest hit areas, with residents getting bad loans and having to work nights and weekends at multiple jobs. It's been one of the most depressed places but now I think it's getting stronger," downtown Los Altos-based Coldwell Banker Realtor Noemi Ruelas said.

Ruelas said her company had 41 East Palo Alto listings in September, compared to around 65 a year ago and more than 100 in 2008, indicative that properties are selling more briskly, rather than languishing on the market.

"The current market in East Palo Alto has definitely improved," she said. "We're seeing the inventory reduced and prices are not going down by $10,000 every week like they were for a few years. Now, if it's priced fair, it sells pretty fast."

According to Ruelas, housing in East Palo Alto is in demand for buyers who want to live on the Peninsula but would be priced out of other, more affluent areas.

"East Palo Alto is very unique because it's the only place in San Mateo County with land for development and with affordable homes. It's like a jewel," she said.

Statistics on the East Palo Alto market show both small gains and declines. According to real estate website Trulia.com, while there was a drop in prices in recent months, home-sale prices were still up from last year.

"The median sales price for homes in East Palo Alto for June 10 to Aug. 10 was $252,500. This represents a decline of 49.5 percent, or $247,919, compared to the prior quarter and an increase of 7.7 percent compared to the prior year," the site states in its market summary.

Statistics from the Silicon Valley Association of Realtors show that the median home price has crept up 3 percent, from $242,000 in the first half of 2009 to $250,000 in the same period of this year. It's not a dramatic upturn but some agents are optimistic.

"One positive note is that because property values have gone down, there is more opportunity for new buyers, with more affordability. Five years ago, houses were selling for much more," according to Jennifer Tasto, president of the San Mateo County Association of Realtors. Indeed, Trulia.com reports that sales prices have depreciated 57.2 percent over the last five years in East Palo Alto.

On the other hand, Tasto said that while the East Palo Alto market may be attractive for buyers looking for good deals, for residents with loan problems things are still "really rough."

"East Palo Alto was one of the areas really targeted for predatory lending. Now there is a high level of mortgage delinquency," she said.

She said that as of early September, she knew of at least 80 homes in East Palo Alto on the market with short sale, foreclosure or REO (when a lender takes possession of a property after an unsuccessful foreclosure auction) statuses (a search on Trulia.com showed more than 200).

Leah Simon-Weisberg, an attorney with Community Legal Services in East Palo Alto who specializes in foreclosure and predatory-lending prevention, agreed with Tasto, saying for many residents with financial problems, "things are getting worse."

"People, many of whom are elderly, were convinced to refinance and take loans they couldn't afford," she said, adding that her office has been receiving many more calls from residents requesting assistance in recent months.

She attributes the slight upturn in median home prices this year to an increase in speculators who hope to buy homes as investments while they're relatively cheap, then sell them later ("flip" them) when the market improves.

Ruelas concurred, but suggested that some longtime East Palo Alto residents were making the shift from renting to owning and/or moving from family homes to their own.

"Over the past year, probably many investors bought and fixed up a lot of the properties, but a lot of EPA buyers are children of families who've lived there a long time," she said.

Thanks to the past several years of market woes, Tasto said, buyers, sellers and agents have all become more familiar with short sales as a regular part of the market.

"Now we know it's not an anomaly," she said.

Ruelas agreed.

"Lenders now know how to deal with the situation. If we know what to expect, it's not as hard," she said, adding that 18 of her company's 41 East Palo Alto properties on the market are foreclosures or short sales.

Simon-Weisberg advised that both buyers and sellers proceed carefully before going through short sales or any real estate transaction. "Make sure to be informed and read and understand what you're signing," she said.

Overall, the outlook for the East Palo Alto housing market is decidedly mixed and uncertain.

"It's hard to get a loan and house values are still down," Simon-Weisberg said, but on the other hand, "Buyers have more purchasing power. It's a good area to get more for your money and there are many homes for sale."

Ruelas remained positive, saying she predicted continued interest in the area.

"My phone is always ringing for East Palo Alto. There is sometimes a negative image but the people who live there really like it. I think it's a great place to invest and for first-time buyers, it's really affordable now and the prices are not going to be there forever," she said.

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