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Paul Kiesel
Paul Kiesel
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California Hits Foreclosure Record

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Over the first three months of this year, California, due to sinking home values and the collapse of teaser rate mortgages, sent a record number of homes into the foreclosure process. About 110,000 California homeowners received default notices (the first stage of foreclosure) during those three months, skyrocketing the rate of default notices up 143 percent from the same quarter a year ago.

 

I wrote yesterday that DataQuick would be coming out with these foreclosure statistics later this week, and, unfortunately, this is not a surprise. With little government assistance and/or plans to combat this problem over the last six months, it is almost certain that we will see this number go up even higher in July, when reports of Q2 housing information is released.

 

DataQuick President Marshall Prentice presented a startling portent, “[If the economy is in recession] the foreclosure problem could spread beyond the current categories of dicey mortgages and into the mainstream home loans.” The Los Angeles Times reports that, “the number of homes actually repossessed in California totaled 47,171 during the first quarter, more than four times the 11,032 homes foreclosed in the first three months of 2007,” (LA Times, 4/22/08). With home prices continuing to fall, a slow real estate market and a bevy of underwater mortgages (mortgages that are greater than the value of the home) out in the mortgage marketplace, lenders are going to continue to be resistant in helping borrowers who have been pressed to keep up with payments. If lenders are unable to come to a compromise with borrowers, or the government doesn’t step in and alleviate the pressure on both ends, again, I hate to be so matter-of-factly about this, it is almost guaranteed that California will hit another foreclosure record when it reports on the health of the housing market for the second quarter in about three months.

 

Finally, I must point out that Yale Economist Robert Shiller, on the Web site housingpanic.blogspot.com and in several of his speeches, has stated that home prices could fall by more than 30 percent from their peak, “[. . .] exceeding the drop of the 1930s Great Depression.” The Los Angeles Times is reporting today that home prices are, “down 18 percent from their 2006 peak.” Robert Shiller’s pessimism is worth noting, as he is looking more accurate in his predictions, daily.