Stockton, a bedroom community to the Bay Area known for its asparagus festival, saw a boom in home-building and subprime loans this decade. Now, median home values are down nearly 50% from the market's peak, according to real-estate information service Zillow.com.Well, these days Stockton is known a lot more for foreclosures than for its asparagus festival. The really bad news if you happen to own a house in California is that you can bet with great confidence that Zillow.com's estimate of a 50 percent drop is too low. Zillow price estimates have consistently badly trailed the market.
One story that has barely been reported and that is truly scandalous is that as recently as a few months ago hopeful buyers, many of them financially unsophisticated, were purchasing foreclosed houses at auctions such as those run by REDC, paying inflated prices, and getting steered to mortgages from IndyMac and Countrywide--the very same mortgage companies that brought us the crash. Now many of them are stuck with rapidly depreciating homes in places like Stockton--and we will see a whole new set of mortgages that will fail.
