California foreclosure "surge": Up 327% from '07 levels

The number of California homes lost to foreclosure in the first quarter surged 327% from year-ago levels -- reaching an average of more than 500 foreclosures per day -- DataQuick said in a report, warning that the widening foreclosure problem could "spread beyond the current categories of dicey mortgages, and into mainstream home loans."

From DataQuick's report on California foreclosures in the first three months of 2008: "Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 47,171 during the first quarter. ...  Last quarter's total rose 48.9 percent from 31,676 in the previous quarter, and jumped 327.6 percent from 11,032 in first quarter 2007."  That translates into 517 foreclosures every day in the first quarter of 2008.

DataQuick president Marshall Prentice: "The main factor behind this foreclosure surge remains the decline in home values. Additionally, a lot of the 'loans-gone-wild' activity happened in late 2005 and 2006 and that's working its way through the system. The big 'if' right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans."

From The L.A. Times' Peter Hong: "Sinking home values and the collapse of flimsy mortgages sent a record number of California homes into the foreclosure process in the first three months of this year, a real estate information service reported today."

Default notices -- which mark the beginning of the foreclosure process -- increased sharply, but not as rapidly as outright foreclosures. From Bloomberg News: "California mortgage defaults more than doubled in the first quarter to the highest in 15 years as a drop in sales and prices prevented some homeowners from selling their properties to pay debt, DataQuick Information Systems said.

More: "Homeowners received 113,676 default notices in the first quarter, up 143 percent from a year ago, La Jolla, California- based DataQuick said today in a statement. The level was the highest since at least 1992, when DataQuick's statistics begin."

Despite well publicized federal efforts to reach out to homeowners in default, the odds that they will ultimately lose their homes appear to be increasing. DataQuick reports that, of the homeowners in default, "an estimated 32 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent.:

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Comments

[Calc]

We've seen the trend for some time.. increasing default notice combined with less likely possibility that someone in default gets out of it. I can't imagine what things would look like in a year if defaults and foreclosures increase from here.

The good news is that these REO homes are helping the housing market rationalize much quicker than it would normally. But I think we will start seeing the add in reports from DQ saying how many home owners sold their homes for a loss which was a regular feature to the reports in the mid-90's.

Houses are illiquid investments, equity doesn't mean much unless you can tap it. With home loans tightening and sales slowing it is becoming harder to do so just when the economy is slowing.

[Jules]

He He~Bring it ON. We all might not be home debtors after all , and pay a REASONABLE mortgage. It will be interesting to see how much the real estate will have changed one year from now. I just had a realtard leave a message regarding looking for homes. She said I should hurry up and get pre-approved "IF" housing should come down. I fired her a$$! Question though: We rent~will buy when we can afford it~should we get pre-approved now, even though it could be a year from now? Thanks all...LOVE THIS BLOG!

[caliguy2699]

This report makes a good point - many of the loans now exploding were made in 2005-2006 and were 80/20s where the borrower put 0 down, or others where the borrower put virtually $0 down.

It is very scary then that these kinds of loans - virtually by themselves - have been responsible for the worst foreclosure numbers in 15+ years. What happens if people with sensible loans who made downpayments start defaulting?

[dfafdaf]

LOL, big surprise. This is what happens when people with ordinary incomes by 600k houses. The banks and the borrowers should be disgusted with themselves for agreeing to a transaction like this that could never possibly work.

Me and my spouse together make 80k, let's buy a 600k house.

Good lord.

[Rick]

People going through foreclosure don't deserve any kind of sympathy. They should've read the fine print.

Nothing is more hilarious than hearing about a family who has an SUV with 24" inch rims on the driveway and yet cannot pay their mortgage. Let 'em fry.

[Cal]

DQ story is up:
http://dqnews.com/News/California/CA-
Foreclosures/RRFor080422.aspx

It will be interesting to see the trustee sales breakout for the Southland, LA Times usually posts that with the midnight version of the story. I have a hole in my data regarding last years Q1 trustee sales so hopefully they have the YoY data too.

47k homes lost to trustee sales versus 64k homes sold on the open market.

It is clear the banks are getting out while the getting is good (it isn't like it is going to get better anytime soon). If you think about those numbers and then think about the number of short sales... it is the very educated or very lucky homeowner that gets out now.

[Fred]

500+ foreclosures per day in California alone? That is an unreal number.

[TJ]

Serves the "flippers" right...I say, let their credit records go all to hell. Greed does terrible things.

[JBJM]

It would be fascinating to learn how many of these foreclosures were to illegal immigrants.

[JBJM]

It would be fascinating to learn how many of these foreclosures were to illegal immigrants.

[RIP]

Too many people living beyond their means to impress the guy next door who is going under also. Just dumb. Let them sink and deny them AMY form of credit period.

[Barbara Tiemeier]

I don't know of ANY foreclosed homes in this little Texas town. Homes here are $200K to $1.3million. We didn't ever get into those exotic loans.

[dave]

This is very misleading. FORECLOSURES UP 327 PERCENT.

What is failed to be related in this article is the fact that there are TWENTY MILLION active mortgages in california. Lets say the number of foreclosures LEAPS INTO THE STRATOSPHERE, say, to SIXTY THOUSAND foreclosures from its current level (47k). Well, that may sound REAL impressive and doom and gloom lovers can rejoice, but that is only THREE TENTHS OF ONE PERCENT of the total number of active mortgages. 99.7% of mortgages are intact, a dreadful, horrible, amazing MEASLY three tenths of one percent are in foreclosure!

Let's face it, we do have a problem in the housing market, but it is WAY WAY WAY WAY overblown by ridiculous, and misleading headlines such as this.

[Bob Graham Las Vegas]

If I hear "CYCLICAL" as the culprit one more time , I also want to hear Harley Davidson metioned as this would be the grand daddy of all real estate cycles . What this represents is a downturn in what people have as real income and an adjustment needs to be made in something other than more visas which would allow more low wages and bring more illegal immigrants into the fray . This is the beast , the lenders have just ridden the beast into the dirt .

[qzaki]

i published a mortgage walk-away calculator and it quickly became one of the top downloads on my site. i wonder how many of the "foreclosures" are really just people who decide to stop paying their mortgages and save up for a security deposit on a decent rental.

you too? here's the link (Excel format):
http://www.qzaki.com/Archive/BITS-LAcondoII.xls

[tom]

No wonder my landlord wants me out; rents are starting to skyrocket!

[chinaski]

It hasn't even started yet. Here in the South Bay people who can't sell are renting, so the rental market is getting saturated, driving the prices down. So why would I pay $4,000 month to own a house in the Inland Empire and choke in 110 degree heat in the summer when I can pay $2500 a month to live three blocks from the beach? Plus the people here are so used to bidding wars for their houses that they take it personal when they get an offer that is 50K less than their asking price. Sellers here refuse to believe that this mortgage mess will affect the price of housing here when in reality, Southern California is likely to become the epicenter.

[JPG]

On a side note, the New York Times has an article today by Roger Lowenstein that will be in Sunday's magazine about Moody's and how and why it rated mortgage backed securities so highly. It's an enlightening look (in hindsight of course) at the stupidity of supposedly intelligent people.

http://www.nytimes.com/2008/04/27/
magazine/27Credit-t.html?pagewanted=1

[Red Fred]

It is great that you are publishing all fo these spectacular numbers, but as a responsible communication medium, why don't you publish the actual foreclosure rate against the total number of mortgages? NAtionwide, the foreclosure rate is about 2%. If you add in the mortgages that are on the verge of foreclosure, it goes to 5%. What does this mean? IT MEANS THAT 95% OF THE PEOPLE WITH MORTGAGES ARE PAYING WITHIN TERMS!!!!!!!! Based on your spectacular reporting I would expect to see tent cities- modern day "Hoovervilles" popping up all over LA. iT IS NOT GOING TO HAPPEN!!!!!

[Tim]

Jules --you should wait to get "pre-approved" as the qualifications more-than-likely will change by next year. So, what you qualify for now may not be the same next year. And why did your "realtard' forget to explain this to you --perhaps she/he could not get away from you quick enough!!

Realtor

[RIP]

Too many people liveing above their means to impress the guy next door who is sinking also. If they are that foolish and vain let them fall.

[USAALLTHEWAY]

Oh, well. I guess people shouldn't buy houses they can't afford. What did they think was going to happen??!!

[Vince]

Is there some reason why we have to see these type of articles every single day? Have news people run out of things to report? Every month we get dozens and dozens of stories telling us last month home sales are down from last year. Yeah, we know the market is down and people made bad decisions. Do we need to be bombarded with it on a daily basis? No.

[argex]

Well, since there is no recourse for loans used to purchase a house in California (other than taking the house), foreclosure is a very tempting proposition when you have a $4000/month mortgage and you owe $200K more than your house is currently worth.

People are literally walking away. And it really doesn't hurt your credit any more than if you didn't pay a credit card and settled on it.

Perhaps house prices will drop to the point to where responsible working families can afford a home after they have saved a reasonable down payment. I think we have a long way to go before we find bottom in California home prices.

[Potsmoke]

Must be all those "flippers", "God made me do it", New Age, get rich quick, crack head, idiots. Guess what? Y'all screwed up big time. Tough.