Salamoni Drive, San Jose is a prime example of a community that suffers from the housing bubble, burst of the bubble and the downward spirals of short sales and foreclosures. The community is called Kingston Village
built by KB Homes in 2005. It has 78 single family residences of 3 bedrooms and 4 bedrooms, ranging from 1700 sq ft to 2200 sq ft. At the housing peak, a 3 bedroom sold for $830K in 2006. Now a similar 3 bedroom goes as low as $419,000 and the short sales sit on the market for days. When other newer single family houses of similar sizes in North San Jose can sell for mid $500 and higher, Salamoni is lagging behind the market. Why is that?
The first factor is the drag of future short sales and foreclosures. All the original owners that bought from the builders are well under water and even the most responsible owners who put down 20% and faithfully paid their mortgages still suffer $50K+ in negative equity. You can expect at least 50% of the community will be churned one by one before the foreclosure and short sales will trickle down. So far only 25% have been resold as REO or short sales at $600K or under. There are still a few to go. In fact, 5 are in the pipeline to be foreclosed.
The 2nd factor is the attractiveness of the community. They are the typical KB single family plans – very small lots and very dense. There is no private driveway, no front yard and no back yard. Detached townhouses would be better representations. In other KB communities there are usually large community parks, club houses and swimming pools to compensate for the high density. Due to the small plot, there isn’t any common amenity available.
Despite the two disadvantages, there are also 2 advantages going for it. The first plus is back to the price. As it’s below the market now and has reached the market clearing price, despite the future short sales and foreclosures, the price should be stabilized. For homeowners and investors who want to take a long term position, the upside is optimistic. And the 2nd plus is the coming of the BART station. The Berryessa BART station will be built right behind the community. When the community is within walking distance to a major transit hub, it’s shown in other US major metropolitan areas that the house prices will rise faster than the overall market. Salamoni Drive will be ideal for young couples and families who need to commute to Oakland or San Francisco. Though California is slow to adopt public transit, the BART extension will be a good start for South Bay. (Hopefully the California High Speed Rail will also come to San Jose in my lifetime.)