California Foreclosures Remain at High Levels
California foreclosures are driven by several factors in the economy including the overall unemployment rate in the state. While the rate is still very high by historical standards, and is among the highest in the nation, it appears to be slowly improving. As of mid-April, 12.0% of the workforce in California was unemployed, down from 12.7% at the beginning of the year.
This minor reduction in the number of unemployed workers seems to relate to reductions in the number of foreclosures and default notices sent out by lenders. However, as with many other descriptions of the real estate market, there are wide variations depending on the locality. Some areas of the state are showing continued improvement, while other areas are showing continued deterioration.
Other measures that affect the foreclosure market include mortgage interest rates. As rates remain below 5%, it is easier for new buyers to step into the market and make a home purchase. Current rates as of mid-May show a 30 year fixed rate for a conventional mortgage in the range of 4.75% to 4.80%. Lower mortgage interest rates do not directly impact the number of foreclosures, but make it easier to sell homes, which is one way for homeowners to avoid foreclosure.
Finally, there are several investigations into foreclosure processing, which could be slowing the number of foreclosure filings. Many lenders have been reviewing their processing to ensure that all the correct steps are taken.
To what extent this has had a significant impact on the number of foreclosures is unclear right now. It may be that this problem has just delayed filings, which will increase later this year or next. In any case, it appears that the total number of California foreclosure filings has reduced in the last months.
Foreclosures continue to climb in some cities, particularly in some of the inland areas that have seen explosive growth over the last decade.
* Fresno foreclosures grew by a nominal 1% from mid-April to mid-May, showing that the number of foreclosures in that market may be peaking. The average sale price for foreclosed homes is $114,800.
* Lancaster foreclosures grew by 10.4% in the same period, showing that the market has not settled there. The price of an average foreclosed home in the county is $308,000.
On the other hand, the number of new foreclosures during the last month has dropped in very many California cities.
* Sacramento foreclosures dropped by 4.4% and the price of a foreclosed home averages $169,800.
* Bakersfield foreclosures dropped by a huge 11.6%, with an average price of $135,500.
* Stockton foreclosures were down by 2.6%, with an average price of $121,700.
* Victorville foreclosures were also down by 2.3%, and the average price for a foreclosed home is $125,500.
It appears that there is a small but measureable reduction in the number of homes going into foreclosure. What is important for California is that the unemployment picture is beginning to show signs of improvement.
The second important development is that the mortgage market continues to remain at historically low rates. Both of these provide more funding for the buying public and put many first time homebuyers in a place to make a purchase—a situation that has not been that positive for several years now. On the other hand, the continuing California budget crisis has the potential to discourage home buying.
No one knows what the eventual outcome will be or how the solution to the budget will affect homeownership and, perhaps even more important, the attractiveness of California businesses in other western states looking to relocate.
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