"So far in 2010, short sales represent 25.7% of all active listing inventory, 59.2% of all sales pending and 21.5% of all closed deals in the Tampa Bay area" said Smith.

Analyzing these numbers a Coldwell Banker’s affilitate, Sunbelt Title Agency launched a new service, called Short Trac – for those who try to sell their homes through short sale.

"Basically it’s a program that makes it easier for sellers to navigate through what has proven to be a very simple consuming, and unfortunately frustrating process. We believe Short Trac streamlines the process and will lead to more lender approvals in less time," Smith added. "This benefits everyone involved, especially the seller who may be faced with the reality that this is the only way they can sell their home and potentially avoid foreclosure."

Although the housing market yet far from recovering, and the numbers of unemployment would lead us to think there is no need for luxury home sales, the number show that sales of $1 million-plus properties are on the rise. According to Smith, condo sales in this segment is up with 220% compared to last year.

However, short sales are on the rise, there is a 30% increase nationwide over the past year, which destabilizes the housing price indexes, explained Oliver Chang, a U.S. housing strategist, co-writer of the Morgan Stanley report. Short sales proceeds are needed up to 40% more than foreclosed home proceeds, driving up S&P/Case-Schiller indexes even when values of non distressed homes are falling.

"There is a price premium you can get from a short sale," said Chang. "That makes it look prices are going up when they’re not."

Although the S&P/Case-Schiller index shows a rise in San Francisco home prices in May from April, there is an increase of short sales among distressed sales  and a decrease in the number of distressed sales, according to Morgan Stanley. San Francisco prices have gained 21% since reaching a low in March pas year as the Case-Schiller index shows.

Washington, Dallas, Chicago and Los Angeles are other cities where property indexes increased which resulted in declined values of non-distressed homes.

The issuance of a Default Notice commences the foreclosure process. In the present foreclosure scenario, the numbers of Default Notices issued are taken as the barometer, to assess the foreclosure activity in a certain region – by its increase or decrease. Eventually it gives a wider meaning for industry analysts to interpret into more analytical predictions.

This way, the statistics released by Realtytrac for the month of May reveals that the number of Default Notices fell by about half in the East Bay, during May 2010, from a year ago, since more distressed homeowners opted for Short Sales.

Industry observers are of the view that the slowdown in Default Notices that began this year are tied to home loan borrowers facing foreclosure process, getting into trial loan modification programs.

According to Daren Blomquist, marketing and communications manager of Realtytrac, which released its latest foreclosure activity report, while defaults are down, the number of previously foreclosed homes being taken by banks is on the rise; lenders continue to work through a backlog of delayed home repossessions, including many that failed to get permanent loan modifications.

Blomquist commented that it is a tale of two different trends with the foreclosure process; it’s kind of good news and bad news.

The concept of Short Sale is selling a distressed home for a price less than the mortgage amount, which requires the approval and consent of the lender. The fact that the number of Default Notices are declining is an indication that more number of troubled home owners are opting for Short Sale route and thereby escape from the foreclosure process.

Despite this, the selling and buying of bank-owned properties are continuing steadily upwards in all parts of US, according to Rick Sharga, senior vice president for Realtytrac. The official went on to say that the actual sales of bank-owned properties (otherwise known as REOs), along with sales of properties in the foreclosure process, continue to increase. According to their data, these sales are accounting for more than 30 percent of total sales in the first quarter of 2010.

Realtytrac experts anticipate that there will be an increased number of both REO purchases and short sales throughout the rest of the year, as the most active buying segments – first time home buyers and investors – continue to look for bargains.

Taking the question whether the Bay Area, particularly San Francisco would see many such bargains, the experts are more tilted towards the positive and affirmative side. The reason they attribute is for many would-be buyers, they can fulfill their dream of owning a house in San Francisco, only through the reduced prices currently offered by Bank-owned and repossessed properties.

Of all the foreclosure home buying, Bank repo homes are better placed – no second or third liens attached, since all of them get cleared once the property is repossessed; generally well-maintained in a “marketable condition”; ready to occupy with the existing residents vacated; and there are lots and lots of such properties made available throughout the country, including the Bay Area.

Another well-founded reason for this projection is although places like San Francisco have stayed strong through the slump, experienced in all other metros, home buyers may see more foreclosure properties made available, when Option ARM loans reset. Bubble Meter Blog predicts that these resets will “begin to become a problem in about the mid-point of this year and really shoot up around mid-2011”.

So the home owners are allowed an option to request for re-assessment of their home values and until such time can request for break in Property Tax payment. This is what happening at San Francisco in a never-before measure presently. On a revised assessment, if the property value is found lesser than the current market value, home owners can get a temporary reduction in Property Tax.

According to the city Assessor-Recorder Phil Ting, as many as 6,462 owners of residential properties in San Francisco have applied for temporary tax breaks in the current year.

Just like foreclosure, short sale, walking away from own home etc., this is a new phenomenon for US home owners. The upsurge in tax break applications in the recent past is proof enough for this. The number of requests for informal review and tax break received in 2009 were 4,421 and in 2008 there were only 1,673 applications. Three years back, when the foreclosure fever and reduction in home values did not catch up with the same vigor, a mere 248 applications for Property Tax reviews were received.

As it is, totally 11,700 home owners were granted temporary property tax reductions in the current fiscal year ending 30^th June. The revisions have been made at the request of the property owners and also at the initiation of the assessor’s office. In all, the reduced value as assessed so far added up to $1.4 billion.

While the home owners are benefited, the reduction in Property Tax revenue hits hard on the welfare measures of the city and municipal authorities, in carrying out services like – police patrol; health clinics; parks upkeep; street repair and so on.

Phil Ting says “The ongoing trend of increased informal reviews represents the downturn in the real estate market.”

As of date, nearly thirty thousand California homes are lying under the foreclosure process of various stages. When the home owners get evicted from their beloved homes, the property tax collection comes to an end, until a new owner gets that home. The budget allocations for welfare activities like education are made from the tax revenue accrued in a county or city and if there are short-falls in the revenue, it directly reflects in budget cuts, laying off or reducing staff strength for want of funds and so on.

According to available statistics, in the East Bay area mortgage lending banks hold – as repossessed but vacant properties over 10,000 in number and only a small portion of them are sold. News is a further 20,000 properties are in the pipeline to get added up during this year.

However, Gus Kramer, Contra Costa County Assessor, maintains that there is no question government services at all levels are going to suffer because of this and it is just one of the trappings of the county we are in.

The actual position is –  Concord City has shed a quarter of its workforce; a quarter of annual budget has been shelved by Antioch; and further taxes have been levied by Hayward in order to avert redundancies. Schools that are depending upon a combination of State income sources will be the most-hit.

While preparing the current budget, the foreclosure trend was not exactly measured, as admitted by a representative of the Department of Finance, California. The projection now is the State property taxes will fall short by 4.1 percent during the current period and by another 3.1 percent next year.

Property prices in the Bay Area in April 2010 worked out just $370,000 as against the peak of $665,000 in 2007.

In the 9 county SF Bay Area, during March it is reported that 32 percent of total home resales were made from foreclosure properties. Notably more than 24 percent of residential properties sold in Bay Area were bought through FHA loans. This figure is up by 2.3 percent when compared to March 2008.

Overall in the nation there is a visible upsurge in sales of government-owned properties such as HUD, Fannie Mae, and VA owned homes due to the fact that more number of home owners after buying their homes from government-backed mortgages defaulted. Again, more home buyers use federal loans to buy their homes.

In March this year, in the 9 county SF Bay Area about 7,000 homes were sold in all categories. This is 40 percent increase compared to February and increase by more than 10 percent from a year earlier.

This shows San Francisco Foreclosures attract buyers although the numbers of properties sold from the lower and middle-priced sector are on a decline and high-end properties are on the increase. Of the total home sales 17.5 percent were purchased by absentee-buyers, meaning they are not for personal use, but purchased as investment for rental income.

In comparison, the absentee buyer percentage was 19.4 percent in February; 18.3 percent same period last year; and the present percentage still above the average of 13 percent recorded over the last 10 years’ period.

Buyers making cash payment indicates that they don’t rely on financial assistance by loans and make these investments in VA foreclosures for profit motive, to snap up cheap properties when they are available. This is in spite of VA Department’s policy to give priority for owner-occupant buyers in bidding.

Another bit of encouraging news from Bay Area home sales is properties priced $500,000 and above –  in the high-end homes bracket – accounted for 35 percent of the total home sales during March.

The total home sales in March, in all the counties of the Bay Area, were recorded as 6,992 properties closing escrows. This shows an increase by 40.2 percent from the figure of February and again up by 10.5 percent from March 2009, when only 6,325 homes were sold. It is noteworthy that the Bay Area home sales have continued to record increase during February and March every year from 1988.

Two favorable comparisons can still be made. March home sales were the first to show a year-over-year increase in sales, since December 2009. Secondly for the month of March, the total sales made were the highest since 8,317 homes sold in March 2007, although it fell short by 22.4 percent of the average number of homes sold in March – 9,016 properties – since 1988.

As regards home sales made out of foreclosure properties, in the month of March the participation is recorded as 31.7 percent of total home sales, from properties lying under pre-foreclosure, scheduled foreclosure auction and repossession by lenders after foreclosure sale public auction.  On comparison, foreclosure property sales peaked at 52 percent of total sales in February 2009, 50.2 percent in March 2009 and this March the figure is down from 36.3 percent recorded in February 2010.

Another area-specific fluctuation observed in SF Bay Area is the jumbo loan market – with the specified limit of $417,000 for high-end home purchases – is lying low now. Before the credit crunch hit the market in August 2007, nearly 60 percent of Bay Area home loans were falling under this segment, compared to last month’s jumbo loans made up a mere 29.5 percent.

The reason for the above decline is lack of interest by borrowers in Adjustable-Rate-Mortgages (ARMs). Prior to the credit crunch in 2000, the average home loans through ARMs was 50 percent, declined to 13.7 percent of all home purchase loans in September 2008 and dwindled to mere 8.7 percent in March 2010.

Here is an example in San Jose – came to light recently. A former nurse, after losing her job and paying the mortgage promptly from her savings, wanted to exercise Short Sale option for her condo in a beautiful location of San Jose. During March 2009, she listed her property for $249,000 – less than the price she paid four years back, namely $435,000 – and less than what she owed to the mortgage lender.

To explain the Short Sale procedure – it is a complex one. If the lending bank holds the first lien, it would be fairly easy in the sense that you get the approval in months. But this is not the case mostly. The mortgage is owned by investors through securities and the lender is only servicing the loan or collecting the monthly payments towards the loan. The stipulation is all the mortgage lien holders should approve the Short Sale.

Generally the lenders are reluctant to come forward to grant their approval to Short Sale application – the obvious reason being losing money out of the “forgiven” amount in a Short Sale. Often times there are many excuses – like in the San Jose case above – the concerned document file was “missing” more than once – there was switching of computer systems in another.

The foreclosure process has already begun in the meantime, through a Trustee Sale public auction and it was postponed for four times, since the borrower was “waiting” for the lender’s approval.  The mental agony of the individual, opting for the Short Sale route, needs no elaboration. Finally after a delay of 11 months, one buyer family clung on their offer considering the location of the said condo and bought it four weeks ago.

Despite all these, statistics reveal 23 percent of home purchases in Santa Clara County and 12 percent of total home purchases in San Manteo County in March were Short Sales – up by comparison to last year.

The foreclosure trouble is continuing at the more or less same levels in lower and moderate priced neighborhood properties, but there is apparent increase in some of the affluent locations in the Bay Area. However the default notices served on delinquent borrowers are on a decline overall in the California State and Bay Area in particular.

During the quarter ended March, 81,504 notices of default got served in California State – less by 3,514 compared to quarter ended December 2009. Default Notices issued for delinquents in Bay Area numbered at 13,517 – a decrease of 30.5 percent when compared to first quarter of 2009 – when California State had a record level of default notices.

This trend is explained by experts as sign of the worst being over in the low priced neighborhoods and the problem is spreading to expensive neighborhoods. Another reason attributed is that lenders learnt from their past experience and have come forward to accommodate loan modifications and short sale options.

Another notable development is bank repossessions have also come down during the quarter in question. The bank repossession figure for California is less by 8,213 properties denoting a 16 percent decline from the previous quarter. As for Bay Area the repossession properties numbered 6,417 – about 1,000 properties down from the previous quarter.