"Less than Fully Prepared for the Foreclosure Surge"

From the Davis Enterprise:

[B]etween January and April, a notice of default - the first step in the foreclosure process - was issued for 69 West Sacramento homes...Another 33 West Sacramento homes got auction notices, meaning the lender was prepared to take back the home and sell it at auction. And 28 West Sacramento homes were repossessed by the lender.

Those numbers are still rising, week by week, as cooling home prices, rising mortgage interest rates and competition from home builders take their toll. In other words, there are a lot of stressed-out sellers. “Right now, we have 273 houses for sale in West Sacramento,” said Lean Hertel, a Realtor and field trainer with Lyon Real Estate's office in West Sacramento. “Of those 273 homes, 102 are being advertised as ‘short sales.' And 34 are already owned by the bank.”
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Woodland has seen a rise in foreclosures as well. During the first four months of 2007, a notice of default was issued for 38 Woodland homes. Auction notices were issued for another 19 homes and 25 homes were repossessed.

Some areas in Sacramento have been hit much harder. In the 95823 ZIP code in south Sacramento, there were 213 homes that got a notice of default, 98 that got an auction notice and 107 that were repossessed during the first four months of 2007.

Observers see the same trend up and down the state - but it's more pronounced in the Sacramento area, where communities like West Sacramento, Elk Grove and Natomas added thousands of new homes over the past five years, and lenders were making all kinds of new-fangled loans to get buyers into those houses.
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“It's hard on the clients, and it's hard on Realtors, too,” Hertel said. “We didn't get into real estate to sell homes for people who don't want to sell their homes.

“The developers are hurting, too,” Hertel said, and some builders are offering $100,000 in upgrades at no charge, if you use their financing. But that can make things even tougher for the individual homeowner trying to move on. “You're competing with the developer” for the buyer's attention, Hertel said. “And the developer has 15 homes to sell, while you've got one.”
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Hertel added that there are relatively few Realtors working in West Sacramento who weathered the previous market downturn, back in the early 1990s. And many banks are less than fully prepared for the foreclosure surge as well, Hertel said. “The banks have so many of these short-sale contracts to negotiate and process, we're struggling to get them through,” Hertel said.
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“Two years ago, I was telling buyers, ‘Here are three houses, pick one, and we'll do the best that we can do for you.' Now, it's ‘Which one of these 20 homes do you like, and what would you like to pay for it?' ” Hertel said.

From the Sacramento Bee:

The dust is just settling from that huge home foreclosure auction last Saturday at Cal Expo, and here comes a bigger one. Dallas auction giant Hudson & Marshall will sell 175 bank-repossessed houses at 1 p.m. July 22 at Sacramento's Radisson Hotel. Many are owned by Seattle-based lender Washington Mutual Inc., according to home descriptions on the auctioneer's Web site. Only six days ago Real Estate Disposition Corp. of Irvine auctioned 107 houses from eight area counties.

Hudson & Marshall's event testifies to the dramatic rise in repossessions in California, especially in Sacramento and the Central Valley...It's easy to see what's spurring these auctions. Lenders took back 969 houses in May in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to Fair Oaks-based Foreclosures.com. About two-thirds -- 651 houses -- were in Sacramento County. Many belonged to owners who bought at the height of the housing boom with little money down and fell behind on payments as housing values fell.

From the Contra Costa Times:

As subprime loans have been resetting, the number of borrowers falling behind in their payments has risen and foreclosures are up...Realtor [Mark] Ross sees the effect of this in his business. You can't find a locksmith to lock out a non-paying renter: they're doing nothing but foreclosure lockouts.

Subprime borrowers are suffering a fate similar to stock market investors in the late 1920s. Then investors bought overpriced stocks on credit. When stock prices dropped, many people had to sell when their brokers demanded more collateral for their loans (margin calls). This caused the 1929 stock market crash, which ushered in the Great Depression.

Now, it is not likely that the subprime meltdown will cause another depression. But it is rippling though the financial markets already and will cause a lot more people financial pain before it's over.