Palo Alto, that hotbed of foreclosure activity.
So I was hanging around my favorite bubble blog the other day when I ran across this archived thread, "How Many Foreclosures in Palo Alto, 1 or 74?", kicked off earlier this year by a poster claiming that, as of April 2008, Palo Alto had an improbable 74 homes in foreclosure and that, furthermore, this number represented 55 percent of all homes for sale in that admired and unaffordable corner of paradise.
I was 99 percent sure the first claim was bogus and 100 percent sure the second was, because I'd worked in Palo Alto all that spring, and none of the Palo Alto homes on the market in spring 2008, let alone over half, had been indentified in the MLS as either a short sale or bank-owned property. Of course, the poster had a ready answer, as such people always do—"the realtors are keeping it quiet"—and let's meet the nitwit's last refuge, conspiracy theory. Because if "realtors are keeping it quiet" in Palo Alto, why aren't they also keeping the foreclosure epidemic quiet in places like East Palo Alto, San Jose and Stockton? Why can I read about it in gory detail on the front page of the San Jose Mercury and hear about it every night on the 6:00 News? Why can I go on the MLS and find 304 San Jose condos for sale priced at $225,000 or less, and see that all but three of them are either short sales or bank-owned?
Well, I pretty much knew how this poster, whom I'll call Imposter, had come up with his numbers, and a quick trip to one of the foreclosure Web sites, RealtyTrac, confirmed it. Here's the scenario: With an axe to grind and way too much time to burn, Imposter searches for foreclosures in Palo Alto, perhaps the most sought-after place in the Bay Area, poster child for multiple offers and all the other aspects of home-buying enthusiasm that bubbleheads tsk-tsk over. It doesn't hurt that Palo Alto is the kind of wonderful city bubbleheads would love to live in, not only because a) they're human, despite their denials, but because b) their social, if not always economic, demographics, fit Palo Alto to a "T". Yet Palo Alto has remained amazingly, stubbornly and, if you're a bubblehead, irritatingly impervious to the foreclosure epidemic.
In other words, unaffordable.
But Imposter's search for Palo Alto foreclosures rewards him, no doubt to his fevered amazement, with a plethora of Palo Alto properties somewhere in the foreclosure process—eureka! The only problem with this stunning advance in bubblehead science is that almost all these distressed properties are in East Palo Alto, a completely different city and price range and a genuine hotbed of foreclosure activity.
Why the confusion? RealtyTrac doesn't distinguish between Palo Alto and East Palo Alto—and sometimes it doesn't even distinguish between Palo Alto and nearby cities like Menlo Park and Mountain View. Imposter doesn't catch this subtlety because he can't tell an East Palo Alto address from a Palo Alto address. Thereby inadvertently demonstrating the difference between Internet knowledge and real knowledge.
And the problem apparently goes beyond a single Web site. A few days ago I used RealQuest, a widely-used real estate information aggregator, to look up all 63 single-family homes on the market in East Palo Alto east of 101 identified in the MLS as either bank-owned or a short sale. RealQuest gave every one of these 63 East Palo Alto homes a Palo Alto address, even though the owner mailing address in the sub-section "property detail" was invariably an East Palo Alto address (if the home wasn't bank-owned). Again, why the confusion? Perhaps because East Palo Alto shares its 94303 zip code with a portion of Palo Alto, even though they're different cities in different counties. Imposter's source may be incorrect because its source is incorrect.
Or maybe every actor in this farce is unbelievably sloppy.
Then, somehow, in a leap of logic fathomable only to a guy desperate for affirmation and fifteen minutes of fame on a bubble blog, Imposter takes all these foreclosures, almost all of them not in Palo Alto, and assumes that not only are they all in Palo Alto, but they're all for sale. Thereby inadvertently demonstrating the difference between Internet knowledge and real knowledge.
And since Imposter is a bubblehead, his post has plenty of posturing about the thoroughness of his research and the rigor of his science—if these guys don't think they're the next Robert Shiller, they think they're the next Donald Trump or Warren Buffet—plus plenty of fake pity and real condescension for any skeptic who, like fellow poster "Carl" who can find only one Palo Alto foreclosure, can't "face the facts". And by barely lifting a finger I prove that all he's done is take the square peg of bad data and pound it into the round hole of wish fulfillment.
It was all so...puerile. It was all so...bubblehead.
But what was really fascinating—and so telling—about this latest blindered insight into real estate courtesy of blogdom, is Imposter's fellow bubblehead's comments on his post. Because they immediately, as if by primal instinct, began ant-like to fabricate an elaborate mythology—again, oh so bubblehead—explaining why not only was it natural, but inevitable, that "Shallow Alto" (no envy here) was roiled by a foreclosure crisis. Now, remember, there is no foreclosure crisis in Palo Alto, not in April 2008 and, as I'll show in a moment, not now. But as usual, reality can't stop these shrewd observers of the real estate scene, observers sharing their insights and experience for the common enlightenment, skeptical observers who don't take no wooden nickels from no one, no sir, not from established opinion and certainly not from the real estate industry, nope, boring old reality couldn't keep this "herd of independent minds" from lovingly and lingeringly explaining, over the tortured course of 217 posts, a phenomenon that hadn't happened and doesn't exist.
Don't believe me? A few examples:
I think we can expect the true extent of this meltdown will be masked. Yes, and you might be surprised if you knew who, exactly, is in the dark.
South Palo Alto is just South San Jose, nothing surprising about it. That's why everyone's busting a gut to live in South San Jose. Denial is a river in Egypt.
...this doesn't really surprise me. I'm really not surprised you're really not surprised. In fact, I'd be really surprised if you were. Really surprised, that is.
Clearly there is either manipulation in data from the MLS/realtors, or the foreclosure data is wrong. Good grief, is a bubblehead about to get it right? No hallelujah! because it seems that the best interest of the Realtors is to keep foreclosure properties off the mls. Good old conspiracy theory keeps yet another bubblehead on the straight and narrow path.
Many "rich" people are highly leveraged. Yes, and I hear they're not "happy" either.
A note of incredulity, nay, sacrilege creeps into the conversation: I am trying to think who, yet, would be under that much pressure...no big lay-offs...maybe this is speculation at the really spooky level? A host of totally non-qualified buyers over the past few years who can afford bankruptcy since they have no real assets? I am in the dark here. No kidding. But at least you're willing to consider it. Plenty of other people here have their eyes tightly closed. Like this guy...
I don't think there's anything "wrong" w/you or your level of understanding...these multiple residences were just another way of "playing a split hand" and having the option to declare the one w/ the better appreciation as "primary". But then again I'm always thinking that. And look where it's gotten you.
This doesn't make sense to me. I can't imagine that much unemployment in Palo Alto...home values haven't dropped but MAYBE 10% in some areas--enough to squeeze out an appraisal for refinancing for those ARM resets. Another doubter? Call Security! But wait! Who are these people? Ah, that's more like it! That's the bubblehead spirit! "These people?" These so-called "people"? Why they're nincompoops, of course, because they bought the home you want in the city you like. No punishment too great, no retribution too stern!
A brother brings this doubter gently back into the fold: These homes are from (sic) liar buyers that never ment (sic) to "own", they meant to "flip". And english (sic) might be a second lingo. Obviously you've mastered English yourself. And the idea of recent immigrants (your mow-and-blow guy, for example) speculating in Palo Alto's million-dollar real estate might elicit a rueful laugh from them.
Well, I could go on, but it's time to leave Wonderland and look at the data—the real data, that is. Data pulled a few weeks ago from the HUD (Department of Housing and Urban Development) Web site. Data compiled by disinterested parties, data that even come with their own methodology. Data with all the scientific trimmings Imposter, our junior Mr. Science, can't offer.
Let's compare Palo Alto's "estimated foreclosure rate" (number of mortgages in foreclosure/total number of mortgages) with that of eight other cities or neighborhoods, including:
As of December 24, 2008 there are twenty-five homes for sale in the Burbank neighborhood of San Jose. Of those twenty-five, fifteen, or 60 percent, are either bank-owned homes or short sales (and not all short sales are in foreclosure). Compare this to Imposter's claim that 55 percent of the homes active in Palo Alto in April 2008, when statewide foreclosure numbers were lower, were in some stage of foreclosure.
Note that Burbank's estimated foreclosure rate of 4.4 percent is eighty-eight times higher than Palo Alto's .05 percent, yet Imposter asks us to believe that these two markets have a roughly equal percentage of homes for sale in foreclosure.
'Nuff said.