Unprecedented Circumstances In California
The California realtors have the June sales numbers. “Home sales decreased 24.7 percent in June in California compared with the same period a year ago, while the median price of an existing home increased 3.2 percent, CAR reported today. ‘The focus on foreclosures and subprime lending is ongoing and, coupled with higher inventories of homes for sale, is prompting many would-be buyers to play a ‘wait-and-see’ role,’ said C.A.R. President Colleen Badagliacco.”
“‘With just over a 10-month supply of homes for sale on the market, we expect further softness in prices in the coming months,’ said CAR Chief Economist Leslie Appleton-Young.”
The LA Times. “Southern California…saw the number of foreclosures in the three-month period ended June 30 rise to 9,504. Although that’s up 725% from a year earlier, it’s still well below the previous peak of 11,494 in the third quarter of 1996.”
“‘In the beginning, we were thinking the foreclosures were going to be limited to low-income, high-minority neighborhoods targeted by predatory lenders,’ said Ester Cadavid of Los Angeles Neighborhood Housing Services. ‘Now we’re seeing a shift to the middle class.’”
“Among the hardest-hit areas are Riverside and San Bernardino counties. Their low prices drew first-time buyers who used adjustable loans. More than 1 out of 5 foreclosures in the state take place there.”
“‘These are unprecedented circumstances,’ said John Husing, an economist at Economics & Politics. ‘Anyone who says they’re not guessing is a liar.’”
The San Francisco Chronicle. “The number of Bay Area homes lost to foreclosure during the second quarter hit the highest level in almost two decades, and the region’s homeowners also received a record-high number of mortgage default notices, according to a report to be released today.”
“California also set a record in the April-to-June quarter for the number of foreclosures, according to DataQuick. ‘Folks borrowed beyond their means in larger numbers because of how common creative financing became,’ said Andrew LePage, an analyst with DataQuick.”
“Contra Costa County, with 2,316 such notices, and Solano County, with 1,065, both set records, LePage said. The Contra Costa cities of Pittsburg, Antioch and Richmond are cropping up as hot spots for foreclosures and defaults, he said.”
“One ominous change is that notices of default increasingly are leading to foreclosure. This year almost half - 45.4 percent - of notices of default resulted in homes being lost to foreclosure. A year ago, only 12 percent of notices of default resulted in foreclosure.”
The Orange County Register. “Orange County…recorded 2,984 notices of default in the second quarter, the highest since 3,116 filed in the first quarter of 1998. The record was 6,422 filed in the first quarter of 1996.”
“Marshall Prentice, DataQuick’s president, said many of the loans going bad were made at the housing market’s peak or soon after, between the summers of 2005 and 2006.”
“‘Appreciation rates for most of that period were in the double digits and lenders let many households stretch their finances to the max, and beyond,’ Prentice said in a statement. ‘It’s that pool of ‘beyond’ mortgages that the market is working its way through.’”
The Union Tribune. “Home foreclosures in San Diego County continued a troublesome climb into record territory in June. DataQuick reported that during the first half of 2007, San Diego County had 2,896 foreclosures compared with 445 during the first half of 2006, a 551 percent increase.”
“That sets a record dating to 1988, when DataQuick began tracking foreclosures, researcher John Karevoll said. ‘A steadily increasing portion of those who get notices of default now are being foreclosed on.’”
“From May to June, county foreclosures increased from 532 to 657, a 24 percent increase and a record for any month since 1988.”
“‘It still is not a major factor in the real estate market, but if there is a recession, it could become a huge factor,’ he said.”
“Ryan Grothe thought he was making the right decision when he moved his family into a two-bedroom condo he purchased in Rancho Peñasquitos in late 2005. Their one-bedroom apartment had become cramped, and he wanted a roomier place for their daughter.”
“A year and a half after moving into their new home, the Grothes are renting again, unable to make the nearly $3,000 monthly payment on their $370,000 loan and are facing foreclosure.”
“‘The lenders told us if we didn’t do something, our place would go into foreclosure,’ said Grothe, who is hoping to sell the condo, but for far less than the purchase price. ‘We had called both lenders trying to refinance and they said, ‘No, the property values are going down and you’d have to fork over money in advance to refinance.’”
“‘I’m upset; I’m really disgusted with everyone involved in selling us this place,’ he said. ‘We told them that we couldn’t afford this, that we would need to refinance, we’re starting to fall behind, and it just amazes me that they help you get into these places and when you need help, they run the other way.’”
The Fresno Bee. “Fresno County saw foreclosures jump a whopping 134% in the second quarter, compared with the same period last year, as the once high-flying real estate market continued to plummet.”
“‘This is unquestionably the worst I’ve seen,’ said Bill Pfeif, a 30-year veteran agent in Fresno who sells lender-owned real estate. ‘Every week, the pace increases. You just wonder where it is going to end.’”
“Pfeif, who is trying to sell nearly 200 lender-owned homes and estimates one of every 10 houses on the market is a troubled property, thinks 2008 will be even worse.”
“The vast number of foreclosed properties contributes to a glut of properties on the market. Nearly 6,000 single-family homes are for sale in Fresno County, which Pfeif said is nearly a record. Add new homes offered by builders, and the likelihood of a recovery soon seems distant.”
“Real estate analyst Robin Kane of Fresno said home values skyrocketed beyond the ability of families to pay and are now falling back to earth.”
“‘The pendulum swung pretty far to one side, and now we are seeing balance being brought back to the market,’ he said. ‘There is a demand [for housing]. But it got out of reach and kept going because of the crazy debt [that] people were willing to take on.’”
The Appeal Democrat. “Foreclosure activity is picking up the pace with Yuba County leading the state in its percentage increase in default notices, according to a report issued Tuesday.”
“Second-quarter 2007 notices of default nearly quadrupled in Yuba County over the same quarter a year ago, according to DataQuick.”
“Yuba County’s median home price decreased by 10.4 percent in June 2007 compared with a year ago as the once-hot Sacramento housing market chilled, while Sutter County’s home prices were down 8.5 percent, said LePage.”
“‘Sacramento is the weakest large market in the state,’ said LePage.”
“Homeowners with two-year, adjustable subprime mortgages comprise some, but not all, of the three foreclosure-related calls per week that Bimal Mann, president of Trinity West Mortgage Inc, has been getting lately.”
“People whose incomes fell or who lost jobs can also face problems, as do homeowners whose ‘teaser rate’ mortgage allowed them to get into a bigger home then they could afford, as well as those who borrowed against the home’s value to get equity.”
“‘Some consumers just did it to themselves,’ said Mann.”
“Falling home values also present a problem, particularly in pocket areas like Plumas Lake that have seen home values fall as much as $100,000 to $150,000, said Mann.”
“‘The value dropping as fast as it’s been has not helped the situation,’ she said.”
From KSBY 6. “Compared to last year, default notices are up by more than 195 percent in Santa Barbara County. In San Luis Obispo County, it is by more than 163 percent. Pages of local foreclosed homes can be easily found on the internet.”
“‘If the market price of the house falls, then you wake up one morning and you owe more than what it’s worth,’ said San Luis Obispo resident Jim Stahl.”
“Real estate broker Gretchen Ricker said she has not only seen clients, but friends fall victim to a lack of financial planning. ‘They go through the whole grief process, denial, and anger and ultimately acceptance,’ Ricker said. ‘But unfortunately, the acceptance part hits a little bit too closely to the end.’”
“Joyce Maloney, credit counselor with Consumer Credit Counseling Service, said high interest, risk loans, and creative financing are now catching up with homeowners as the housing market slows down. ‘It’s a sad situation, but it’s the sub prime lenders that created that situation, so they lowered the bar and let anybody buy a house,’ said San Luis Obispo resident Ron Hatch.”
“But Ricker has a different opinion. ‘If you wanted to put fault into the conversation, the fault might lie in not planning ahead,’ Ricker said.”