Northern California Foreclosure Update

Posted in Foreclosure, August 31st, 2006 |

Homeowners in Northern California’s San Francisco Bay Area fell behind in their mortgage payments in the first three months of 2006, and statewide the number of homeowners in default rose to its highest level in more than two years.

The increase in defaults — the first step in the foreclosure process — signals that slower home price growth is taking a toll. Homeowners who are unable to pay their mortgages now find it harder to sell their homes at a profit and pay off lenders.

Mortgage lenders sent notices of default to 527 homeowners in Santa Clara County during the first three months of the year.

2,583 homeowners altogether received notices. That figure is up 8.3 percent from a year earlier, and up 12.7 percent from the end of 2005.

The rising rates of default seem to be the result of lower home price appreciation. When prices are rising, most homeowners who find themselves unable to pay their mortgages have enough equity in their homes that they can sell, pay off their loans and avoid foreclosure. When price appreciation begins to slow, as it did in the second half of 2005, foreclosure activity increases.

Now that the market appreciateion has been slowing after the recent housing boom, many homeowners find themselves facing foreclosure.

In March in Santa Clara County, for example, the median price of a previously owned single-family house was up 11 percent compared with March 2005, to a new high of $735,000.

Mortgage defaults in the Bay Area are still low by historical measures, Karevoll said. Based on default data compiled since 1992, he said, it would be normal for about 4,000 owners to receive notices of default each quarter.

Default notices hit a peak in the Bay Area in the first quarter of 1996, when 6,830 owners defaulted.

In recent quarters, more than 90 percent of Bay Area homeowners who have gone into default have been able to avoid foreclosure, either by getting up-to-date with their loan payments, or by selling their homes and paying off the mortgages, Karevoll said.

Lenders foreclosed on only 529 Bay Area homes last year.

Statewide, 18,668 owners received default notices in the first quarter, 28.7 percent more than during the same period of 2005.

-John Grady