Wednesday, January 28, 2009

California Foreclosures Quantified

Foreclosures in Southern California
In California, more homes were foreclosed upon in 2008 (236,000) than in the previous nine years combined. The number of homeowners who were in default on their payments in 2008 also hit a new high – 404,000.

It’s not the “ticking bomb” of subprime mortgages which is at the heart of the most recent foreclosures and defaults – it’s job losses and cutbacks which render even “prime”, qualified buyers with good credit scores incapable of making their monthly payments. Current unemployment in California is more than 9.3%.

More evidence of that trend can be found in the default rate on "prime" loans, those made to borrowers with good credit. The rate of default for “prime” borrowers rose 340% in the three months ended Sept. 30 over the same period in 2007.

The areas In California that have been most impacted by foreclosures are the Inland Empire, the Antelope Valley and the Central Valley, outside of the urban core, where many “nothing down” first-time buyers made purchases on over-inflated homes with overly-lenient lending terms.

By some measures, two-thirds of recent sales transactions in California are on foreclosed homes. This partially explains how the median price of homes in Southern California fell to $278,000 in December, a steep 33% drop from the $415,000 median price in January 2008.

Jamie Adner