Telstar Logistics visited Modesto, California recently to take in the scenery, but it wasn't a pretty sight.
A city of more than 210,000 people located about 90 miles east of San Francisco, Modesto had the nation’s third-highest home foreclosure rate during the third quarter of 2010 (just behind Las Vegas, Nevada and Cape Coral/Fort Meyers, Florida).
In practical terms, that means 1 in 36 homes in Modesto is in foreclosure, and as we discovered, the evidence of this is visible from street level. You won’t find entire blocks of Modesto that stand vacant -- it’s not Detroit, after all -- but in on practically every steet in every neighborhood, there’s usually there’s one house that’s been foreclosed.
With some practice, foreclosed homespotting becomes easy: Amid the manicured lawns and tidy suburban blandscapes, the foreclosed homes are the ones where things are slighty awry; lawns go feral, the shades in the windows sit askew, and rows of legal notices are taped to the windows near the front door.
Although at some addresses, there's nothing subtle about the situation at all:
In other parts of town, you can see the remnants of housing developments that were started but never completed, as if the land itself is waiting for the economy to recover:
“We’re going to be near the top of the foreclosure list for a long time,” Bob Johnson from Direct Appraisals in Modesto told us. “The majority of the foreclosures here are people who used home equity loans to buy cars and other things. Banks often try to help out with loan modifications, but that doesn’t really help, so people just walk away. Bottom line is, people here say they just won’t pay mortgages that are worth more than the value of the property.”
Oddly, despite Modesto’s high rate of foreclosure, new home construction continues. At a brand-new subdivision called The Arbors at Graham Estates, workers pour concrete for new foundations, just yards away from a row of newly-completed homes. Prices here start at $230,000 for a 1600 square-foot house.
According to Tim Parish, the project superintendent for developer Frontier Community Builders, the new units are selling well, even though foreclosed houses often sell for half as much. Foreclosed homes are often plagued by mold infestation, damaged walls, and broken appliances, Parish says, so “even in a market like this, some people just don’t want a used car.”
It will be a long time before Modesto fully escapes the havoc caused by the foreclosure crisis.
“We see all kinds of properties, even homes bought in 2008.” explained Omar Perez, an appraiser with Cal Valley Appraisers. “It’s going to be like this for a few more years, and that will keep a lot of downward pressure on values. Home values will eventually climb again, but I doubt we’ll get to where we were in 2005 or 2006, even 10 years from now.”
All Images: Telstar Logistics