According to information from ForeclosureRadar via a Housingwire.com article by Jason Philyaw, notice of foreclosure filing in the state of California increased in August by 16.6 percent over July. This is the fourth month in a row that foreclosure notices rose.
Foreclosures are down in California 16.3 percent from the previous year, but foreclosure cancellations also declined, demonstrating that foreclosure modification programs are continuing to fail, at least in the California market.
While home prices in California are up over the last year according to Case Shiller, most of the increase is likely attributable to government stimulus in the form of the federal government’s first time homebuyer tax credit as well as state tax credit programs for taxpayers. Nationwide, demand for housing collapsed after the expiration of the stimulus. The same thing appears to be occurring in California ex-stimulus.
In the national market as well as the California market, there is an abundance of houses, and not enough demand to absorb them. Government stimulus pulled demand for homes into the spring at the expense of the summer and fall. Economic conditions, highlighted by the weak labor market are not conducive to household formation. Basic economics tells us that home prices will decline. It seems very likely that they are declining right now, but we haven’t seen the effects show up in the reports yet. The Case Shiller Home Price Index is a three month average that lags by two months. Expect to start seeing declining prices reflected in October and November’s reports.
Further declines in property values will wipe out even more homeowner equity, which could leave a larger number of borrowers in negative equity positions on their homes. Borrowers who are underwater on their homes are far more likely to default on their mortgages. California saw a dramatic increase in home prices during the bubble years and many homes have lost a third to half of their value, if not more.
What we are seeing now may be the beginning of another wave of foreclosures and price declines in the California market. Are you a California homeowner? Have you attempted to sell or buy a home in California? What is your viewpoint on the California housing market? Let me know in the comments section below.
Loading ...
Billy Bob Reynolds
January 6, 2011 @ 11:27 pm
I have lived in CA since March 1980. Bought my first home in San Mateo 1984 for $114,000 and sold in 1988 for $219,000. Then bought in Danville in 1989 for $256,000 and sold in 1991 for $285,000. Then in 1992 we bought in Alamo for $365,000 and sold in 2003 for $800,000. We’ve been on the sidelines since. I’ve got a pre-approved letter in my computer bag right next to me for a mortgage of $500,000 and I can not for the life of me find a Real Estate Agent to help me find a property to buy. I’m not even close to a purchase at this point in time. It seems as though the Ice Age for CA real estate has taken hold. When will the flood gates open for the shadow inventory and the underwater owners jump ship? Something has to give. I’m holding fast ready to move when the price is right.
Reply