Uptick in Short Sales and Foreclosures in Sherman Oaks

Over the past year, short sales and foreclosures, key indicators of the health of the housing market, have dramatically increased in Sherman Oaks.

Short sales, in which homes are sold for less than their existing mortgage, rose by a whopping 154 percent in Sherman Oaks from January to December this year compared to the same months last year. Meanwhile, foreclosures rose by 33 percent this year, compared to last. These statistics were compiled by Jim Wagner (www.jimwagner.net), associate manager at Rodeo Realty in Sherman Oaks.

“Originally, foreclosures and short sales were occurring in the Inland Empire, Lancaster and northern Los Angeles County,” Wagner said. “Now, they’re moving in and creeping south.”

Wagner compiled the data to confirm what agents were encountering out on the streets. From Jan. 1 to Dec. 1, 2010, 59 short sales were recorded in Sherman Oaks. This year during the same period, 92 homes sold in short sales with another 36 pending sales and 22 actively listed, for a total of 150 properties, a 154 percent increase, he said.

Meanwhile, foreclosures sold during the same months last year totaled 48, compared to 51 foreclosure sales closed, four pending and another nine on the market, for a total of 64 homes, a 33 percent increase, he said.

About a third of the short sales and the majority of foreclosures occurred in pricey neighborhoods north of Ventura Boulevard, Wagner said.

Although home prices in the southern San Fernando Valley, including Sherman Oaks, slid down about 26 percent to 35 percent during the economic downturn, they were still less than the 40 percent to 60 percent price declines recorded in other locales.

The increase now in short sales and foreclosures in Sherman Oaks may be caused by a number of factors. Buyers who had interest-only loans for the past three to five years and now need to refinance and convert to a conventional loan have found the value of their property is less than the mortgage, Wagner said.

“Refinancing with no equity is very difficult to do,” he said.

Residential realtor Mary Baldwin (marybaldwinhomes.com), of the John Aaroe Group in Sherman Oaks, added that even if banks are willing to work with homeowners to modify their loans, the process can take as long as 18 months to a year because of the amount of paperwork that must be completed.

“The loan gets sold to another bank and you have to start the paperwork all over again,” she said.

Those hardest hit in this cycle are owners who assumed home prices would keep rising and either bought properties with no money down or withdrew the equity in their homes to add square footage and top-of-the-line major improvements.

“Baby boomers and the generations after them wanted all the good stuff right away," Baldwin said.

By comparison, a sizable portion of Sherman Oaks homeowners bought their homes in the 1950s and 1960s, raised their kids and have stayed put without luxury additions to their homes.

“For the older generations, it just wasn’t in their psychological makeup,” Baldwin said, adding, “I guess we didn’t learn [from them].”