OAKLAND -- Local homeowners will see their collective property values drop by more than $12 billion by the end of 2012 as a direct result of the nation's foreclosure crisis, according to a report to be released Thursday.
Using projections from Realty Trac, researchers estimated that from 2008 to the end of 2012, more than 28,000 Oakland homes will have gone into foreclosure. When a home goes into foreclosure, it usually drops in value by an average of 22 percent, and other homes within an eighth of a mile tend to be hurt by about 1 percent, according to the report.
Titled "The Wall Street Wrecking Ball," the report is one of five being released by the Alliance of Californians for Community Empowerment, or ACCE,
"These numbers haven't really been out there in any way before now," said Bahar Tolou, a research analyst who worked on the report. Tolou said the reports look for the first time at how individual cities and their neighborhoods are being hit.
The hardest hit ZIP code in Oakland is 94605, an East Oakland area expected to lose more than $700 million in property value after more than 4,800 foreclosures. Close behind are 94601, 94603 and 94621, covering large swaths of the Fruitvale district and most of East Oakland.
In total, the report figures the foreclosures are expected to cost Oakland
Oakland Mayor Jean Quan cited falling property tax revenue as a major cause in the city's recent budget shortfall. When the City Council passed a solution in June, they reduced the police force and made large cuts to most public services.
"The key point here is seeing the full cost of foreclosures," Tolou said. "This is affecting every single person. Not just our home values and our assets, but taxpayers everywhere. It's big. It's devastating."
Maxwell Park resident Marie Hudson agreed. She said she gave up her job and her home to move in with her 61-year-old sister, who is a diabetic in a wheelchair and facing threats of foreclosure after her illness forced her to retire "early" from her 40-year career at the post office. Her medical costs affected her fixed income, forcing her to ask her bank for a loan modification, Hudson said.
But when her sister called the bank to ask for mortgage help, Hudson said, "They told her, 'You can either walk away from the property, or you can do a short sale. You might get about $3,000, and you can take that and move somewhere else.' Now that's a coldblooded thing to tell someone that's disabled!"
The ACCE report condemns banks for what it calls predatory lending practices, and calls on the largest institutions to begin writing down mortgages to the current market values of the homes.
More than 26,000 Oakland homeowners are currently underwater -- meaning they owe more on their mortgage than the value of the home -- and the report argues that by adjusting mortgages accordingly, banks can keep more people in their homes, enabling owners to spend and invest more and helping to stabilize the economy.
Contact Sean Maher at 510-208-6430.