Wednesday, September 13, 2006

California Foreclosures Skyrocket 160%

From CNNMoney:

With real estate markets slowing and mortgage rates well above levels of recent years, times are getting tougher for homeowners - the number of homes entering into some stage of foreclosure is surging, according to a survey released Wednesday...

Some of the bellwether real estate market states are among the leading foreclosure markets. Florida, had more than 16,533 properties in foreclosure in August. That led all states and was 50 percent higher than in July and 62 percent higher than in August 2005.

California foreclosures are increasing at an even faster annual rate, up 160 percent since last year to 12,506. And the formerly red-hot Nevada market recorded a spike of 24 percent compared with July and a whopping 255 percent increase from August 2005.

Rick Sharga, RealtyTrac's vice president of marketing, says the rising foreclosure numbers are in part the result of rising monthly payments on adjustable-rate mortgages, which have a low introductory interest rate that heads higher after an initial period. "Usually, foreclosures are a lagging [market] indicator," he says. "But we've never had a situation like this with adjustable-rate mortgages amounting to $400 billion to $500 billion coming up for adjustment over the rest of the year."
From the Sacramento Business Journal:
Foreclosures in California increased 25 percent from July to August, according to a report released by RealtyTrac. The state ranked 12th in the nation for foreclosure rates, and had 12,506 properties enter into some stage of foreclosure, the report said.

9 comments:

Lander said...

Thanks to readers Jonathan & Spacebar for sending in these articles.

JR said...

I have seen several foreclosed properties come back on the market in Rocklin, listed by Realtors. Sizes of 900 sf to 1100 sf("starter homes", more appropriately called "ending homes" for the unfortunate first time home buyers). They are foreclosed on by lenders carrying 100% financed $300,000 to $330,000 loans! And the banks use that loan amount as the basis for the resale prices. These homes might rent for $1200/mon on a good day. After expenses, they might net an owner $10,000/year. A reasonable buyer would pay about $150,000 for these homes as an investment.

They will sit a long, long time until $150/sf is the norm for selling prices again, just as it was in 2002.

Anonymous said...

Here comes the first wave as note holders scramble to try and save their investment. It's no Tsunami yet as the bell curve for IO and ARM is still building momentum. I wonder if most of these foreclosures have to do with the sub prime market. Could it be that some major financial institutions are in trouble as well?

Anonymous said...

I think it's amazing how much press is being generated recently about the surge in forclosures, considering this is barely the beginning of the tidal wave that is soon to follow.

SCProfessor said...

In the Spring of 2004, I created a class titled "Real Property Foreclosure: Debtors' Rights, Creditors" Remedies." I did so, recognizing that we would soon be facing a downward cycle in the residential real estate market that would be both longer in duration and of greater depth (in terms of the drop in values) than we saw in the market declines associated with the early '80s and early '90s (when I ran a foreclosure operation for a title company).

I have repeatedly warned students for the past three years that the events we are now seeing were going to happen. What I fail to understand is how so-called experts didn't see this situation materializing. If they have anything close to the number of years of experience I have in real estate industry (I started on the transactional side in 1972 as an escrow officer), then they are either idiots or purposely chose to mislead people into believing this situation would not happen.

This my friends is going to be bloody and far worse than anything I've seen in my lifetime.

Stefan said...

SCProfessor,
"What I fail to understand is how so-called experts didn't see this situation materializing."

Did you make a lot of money telling people that the good days would come to an end? These so-called experts are not impartial bystanders, they get paid by people who have a vested interest in convencing people that the good days would last for ever.

There are always people who see these thing comming, you just won't find it printed in the papers until the money has all dried up.

Anonymous said...

Straight up equals straight down in a very unorderly real estate market. This is not like owning equities, where liquidity and money, flow in and out with each computer keystroke. The time lag between selling and sale is such that those on the edge will lose their homes to foreclosure before the ink dries on the listing. New homes under construction dump prices in order to loosen the bind of inventory and carrying costs. Once negative sentiment and perception turns, buyers will continue to sit on their hands until foreclosures and bankruptcies provide them great buying opportunities. The whole financial underbelly of this country could be in jeopardy.

I can hardly blame those selling homes or mortgages. Half those people don't even have a clue as to supply and demand or economics in general. Most don't even have an extended education. All they are doing is trying to make a living and singing the "Green Acres" jingle that comes down from above.

rocklin renter said...

scprofessor:

I keep repeating two words:

"NASDAQ 5000"

tom stone said...

two points,a bell curve does not accurately reflect the behavior of markets,see mandelbrodt's book.another point REO's are a nonperforming asset that is expensive to carry,and banks aren't allowed to hang on to them forever...they will get dumped for whatever the bank can get after6 months to a year.