The 'Perfect Storm'

From the Fresno Bee:

Hundreds more homeowners in the central San Joaquin Valley are in danger of losing their homes to foreclosure this year because their houses are not gaining value fast enough, a real estate tracking company says. And some in the industry say the numbers could increase as more buyers -- especially those who purchased homes in the past year -- default on variable interest rate and interest-only loans.

The number of default notices sent by lenders in April, May and June climbed 55.7% in Fresno County over the same period last year, according to Dataquick Information Systems. Similar increases were recorded elsewhere in the Valley: 60% in the four Valley counties surveyed by Dataquick -- Tulare, Madera, Fresno and Merced.

"There has been a dramatic increase," said Bill Pfeif, a real estate agent in Fresno whom lenders use to sell distressed properties. Lenders did not contact him in the robust market of 2002 through 2005. That changed in 2006; Pfeif has seven lender-approved listings and expects more. He said rising interest rates combined with an abundance of homes for sale, liberal lending policies and stagnant prices have created a "perfect storm" for foreclosures. "The table was absolutely set," he said. "There is absolutely no way it couldn't have happened..."

Pfeif said the numbers are likely to grow because many buyers used high-risk adjustable-rate or no-down-payment loans to finance their purchases. Higher rates have driven the costs of those mortgages up. "If you have a reasonable amount of income and are financially set, it is not a big deal, but if not, that variable thing will kill you," he said...

The situation is more dire in other parts of California, where home prices are higher and where values have tumbled. Statewide, default notices climbed 67.2% over the last year. In Placer and Sacramento counties, where median-home prices in June fell 6.2% and 1.3%, respectively, from last year, the number of default notices more than doubled. The number also doubled in Riverside County and nearly doubled in San Diego County. "It was a really great party, and this is the hangover," Pfeif said.

From CNNMoney:

As signs mount of a slowing real estate market, the "vultures" are beginning to circle. But home prices may still have to fall further to create the bargains they crave...Jonas Lee, a co-founder of Redbrick Partners, makes his living by buying residential properties at the right price. Lee hasn't noticed any wholesale bargain hunting yet, though he says the general slowdown in markets nationally should create buying opportunities for vultures. Lee says that there could be some bargains soon in some once bubbly markets, such as South Florida. Another market that Lee identifies as ripe for a fall is the condo segment in the District of Columbia and its upscale suburbs. And he's eyeing California's Central Valley cities, including Bakersfield, Stockton and Modesto.