Angelica Maciel used to drive through the oak-shaded streets of Santa Ana wondering if she’d ever be able to buy one of the charming little bungalows she so admired.
But the real estate frenzy had overtaken even this hardscrabble Orange County city, and prices kept going up.
Not any more.
Last month Maciel paid a bit under $270,000 for a two-bedroom, 910-square-foot house. It had previously sold for $504,000 in 2006 and was foreclosed upon in July.
All told, 357 homes in Santa Ana were in escrow in October, almost 10 times the volume of a year ago.
They’re selling fast because they’re cheap. They’re cheap because there have been so many foreclosures.
About 80% of houses for sale at the end of October in the city had been foreclosed upon, were in default or were listed for sale at less than their mortgage amount -- more than any other city in Orange County, according to an analysis by broker Steven Thomas.
But as one of the areas hardest hit by foreclosures, this heavily Latino, blue-collar town is leading a bittersweet boomlet, as people previously priced out of the market move into homes that others have been forced to leave.
There’s still plenty of suffering, and more on the horizon. An additional 261 Santa Ana houses went into default or were foreclosed upon last month, according to ForeclosureRadar, a seller of default data.
Santa Ana, however, has long been a glass-half-full kind of place. Surrounded by some of the nation’s wealthiest communities, Santa Ana may be viewed as a liability by some of its well-heeled Orange County neighbors. But for many of its residents, the town is the first rung in their climb to upward mobility.
A densely populated, older community, Santa Ana did not have space for the vast tracts of new housing developments that now lie vacant in the Inland Empire. As a result, the city does not have many neighborhoods with long rows of empty houses with brown lawns and broken windows.
Instead, many foreclosed houses are often tucked among occupied homes on busy streets, which has made Santa Ana more attractive to home buyers seeking lower prices but stable communities.
Cautious renters who waited out the real estate bubble are now buying homes they couldn’t, or wouldn’t, touch two years ago.
Graphic artist Jim Lee, 41, thought Santa Ana’s fledgling loft district would be a good place to set up an office and live, but the prices when he was looking three years ago just seemed too high.
Lee sold his Anaheim condominium unit in 2005 and moved in with his mother to wait out the market.
Last summer, he bought a two-story loft unit for just over $400,000. It had sold for $760,000 in 2006 and was foreclosed upon in May.
Lee plans to set up an office downstairs in the unit, which faces Bush Street, and live on the second floor. “It’s exactly what I wanted,” Lee said.
Experts caution that Lee’s loft and Maciel’s home may still lose value, despite the steep drop in prices in the area. Houses in town continue to slip into foreclosure, and unemployment rates are rising throughout Orange County.
More defaults and foreclosures are likely as adjustable-rate mortgages reset to higher rates next year, Chapman University economist Esmael Adibi said. That means the inventory of unsold homes will continue to climb, while the ability of people to buy may decline.
But, Adibi said, lower-priced homes in places like Santa Ana may be past the worst.
“At the low end of the market, I don’t see prices depreciating more than roughly 5% more,” he said.
Lubna Debini, 36, and Victor Gomez, 33, say they don’t mind a small decline: They can afford their new house, and they plan to stay in it a while.
The couple paid $410,000 last month for a four-bedroom house in Santa Ana’s historic Washington Square neighborhood. The World War II-era house sold in 2006 for $742,000 and was foreclosed upon in August.
“Even if prices aren’t at the absolute rock bottom, they’re good enough,” said Debini, an investigator for the Orange County alternate public defender.
Debini said the house they bought was actually the third they bid on. All of the foreclosed houses they pursued drew multiple offers, and they were outbid in their two previous attempts, she said.
The couple plan to stay in the house “at least until we retire,” Debini said. They purchased the home, their first, with a 15-year fixed-rate mortgage.
They were cautious, Debini said, because shortly after they were married the couple enrolled in personal finance courses at Orange Coast College. Their instructor warned them against overextending their finances to buy a house.
They took that advice and have lived in a one-bedroom apartment while saving for their house and retirement. “We have been living beneath our means,” she said.
Not all of the foreclosed houses in Santa Ana will be attractive to buyers, however, and city officials will have to find ways to remediate the blight as properties remain empty and deteriorate.
Santa Ana has received nearly $5.8 million in federal funds to purchase foreclosed homes to resell to low-income residents or turn into rental units. Officials say they will target homes that are unsafe to occupy and unlikely to be purchased on the open market.
Christopher Thornberg, principal of Los Angeles consulting firm Beacon Economics and an early predictor of the housing downturn, said Santa Ana might be close to the end of its home price decline, given the sharp drop so far.
But even if home prices flatten, growing unemployment will keep prices low for some time, Thornberg said.
“Getting to the bottom is different than getting off the bottom,” he said.
Maciel knows well that times remain tough despite the good fortune of her home purchase. Before she bought her house, another buyer had been in escrow on the property, but the deal fell through when he lost his job.
Before Maciel closed escrow, she witnessed another casualty of the recession. Her real estate agent, who worked for a firm that employed salaried agents, was laid off.