Sunday, October 28, 2007

L.A. Times: California home foreclosures again set a record - the trend is creeping into affluent communities

According to this October 27 article by Peter Y. Hong, California is setting new records in foreclosure activity. Statewide, default notices hit 72,751, beating a Q1 1996 record. Foreclosures hit 24,209, also setting a record.

Foreclosure "pain" is now starting to creep into pricier neighborhoods in Orange County and Los Angeles County and is invading affluent areas. One real estate agent said, "it's working its way to the Westside. The Westside is always the last to get hit." The lady who said that apparently remembered the 90's downturn. She also said that those foreclosing in the pricier areas were "people who kept pulling money out of their houses, using equity loans to pay credit cards, buy cars, go on trips. They used their homes to get cash and kept pulling equity out."

Dataquick still claims the problem is just "a smattering." A Dataquick analyst speculates that foreclosures in the pricier areas could be tied to "job loss, divorce, or other hardships."

Q3 2007 saw 13,314 foreclosures in the counties of Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura. In Q3 the number of foreclosures was 1,960. Yes, you read that right, from 4 digits to 5 digits. Up almost 600%. Los Angeles had the highest number, at 3,627. The number of notices of default for Southern California reached 41,062.

In Orange County, about 10% of the for sale listings are foreclosures and short sales, which one analyst said is keeping inventories high as a time of year when inventories normally fall. "We can't come off those high inventories when we keep getting more bank-owned listings,", he said.

Here are further details from Dataquick. For the state, a total of 72,571 notices of default were filed in Q3. That's up 34.5% from Q2 and up 166.6% YOY.

About half the state's default activity is concentrated in 293 zip codes, largely in the Central Valley and the Inland Empire. These same areas saw prices surging through 2005, peaking in 2006, and now off their highs by about 11%. For 1,172 zip codes, prices peaked in Q2 2004 (earlier) and prices are now off their highs by about 2.5%.

Most loans defaulting in Q3 2007 were originated between July 2005 and September 2006. ARM financing for primary home purchases peakes at 77.8% in May 2005 and has fallen.

Since some properties are being financed with more than one loan, it was actually 68,746 residences that got notices of default.

The actual usage of home equity lines of credit is not available via public records. However, in the state, homeowners are a median 8 months behind in payments.

The zip codes with the worst foreclosure problems are 95330 (Lathrop), 92571 (Perris), and 95832 (Sacramento).

Of those in default, currently 45.9% manage to make their payments current, refinance, or sell the home and pay off what they owe. A year ago that figure was 80.9%. More homes are being lost due to foreclosure.

The peak of the last cycle had the actual number of homes lost to foreclosure at 15,418 in Q3 1996. The recent low was 637 in Q2 2005. Currently, the number is 24,209 in Q3 2007.


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