Foreclosures In California
Although the rate of ca foreclosures soared in the second quarter it is not clear yet exactly how bad the situation is. Of course it isn't good, but in spite of the soaring rate of California foreclosures, they are still at a below-normal level.
In the time period from April through June lenders sent over twenty thousand default notices to homeowners, up 67.2% from the same period of last year. When a homeowner receives a default notice, California foreclosures are still quite a way away. After the first default notice the homeowner still has a number of options before they lose their home to foreclosure. Such default notice is usually sent to a homeowner who is late with their mortgage payments.
When you're faces with California foreclosures there are a number of factors that need to be watched. These factors include the amount of equity the homeowner has in the home and the type of mortgage they have. It is true that this default activity bears watching but does not necessarily mean the housing market is about to collapse.
Of the homeowners that receive default notices, only about seven percent actually go into foreclosure and have the bad luck to lose their homes. It's not like the market is going to be flooded with homes because of the California foreclosures. However the appreciation of prices is visibly slowing. Homeowners who depended on that appreciation to continually refinance and take out equity are the homeowners that will be feeling the pain. For investing purposes the market bears close watching.
There are some professionals that believe the default rate would almost have to double before home values would be affected. The spike in defaults is slowing the appreciation of home values. In San Diego and Sacramento for example, home values are flat. These are two areas in California that saw their appreciation rates soar. San Diego and Sacramento are two areas in California that are now vulnerable to falling home prices.