Look closely at California's foreclosure rate drop and you'll see a new state law clouding the picture.

Posted by: Prashant Gopal on November 13, 2008

You might be surprised to learn that the California foreclosure rate actually decreased by 18% in October compared to September, according to RealtyTrac’s new report. But the news isn’t necessarily good.

The state’s filings have dropped for two straight months because of a new law that requires lenders to make a number of attempts to contact homeowners and then wait 30 days before issuing default notices. This has slowed down the number of foreclosures and will likely just delay the inevitable.

Despite the drop in the California rate, foreclosures nationwide increased 5% from the previous month and 25% from Oct. 2007, RealtyTrac said.

And the worst is likely on the way. Rick Sharga, RealtyTrac’s vice president of marketing, told me today that he expects a sharp increase in coming months as the economy worsens and more and more people lose jobs.

“Another wave right now is about to come, driven by the economic downturn,” Sharga said.

Reader Comments

Snoz

November 13, 2008 4:39 AM

As punishment for Californian's real estate scam, the plague of the locust shall not cease until California repents on its knee for its transgression. Having been punished by tens of thousands of foreclosures in Stockton, Riverside, Bakersfield, Sacramento, Oakland, Los Angeles, San Bernardino, Orange Cty, and San Diego, the proud Californian will not completely repent for his sins. Even in the midst of the biggest real estate bust in the history of the nation and within the state, some evil Californians are still speculating real estate thru foreclosure properties. Some still cling to the illusion that their speculation home will soon be sold for several million dollars. Still others refuse to flee from California, the land of Sodom and Gomorrah, of false prophets and of legendary decadence. Faced with a growing state deficit to the tune of $20billion per year by 2010, California proposes to increase sales tax by additional 1.5%. In Los Angeles, a city plagued by rampant welfare fraud, crooked politicians, real estate pimps and gangs, illegal drug vendors and their turf warfare, the 1.5% tax increase will be on top of the new city tax rate of 8.5% for a total of 10%. For the past 30 years, the Angelenos are told that more money is needed to hire more police to fight rising crimes and provide more social services. Yet, Angelenos are now suffering more than ever from: high crimes; more homeless people; collapse of real estate prices; rising property taxes; new 10% sales tax; record unemployment. These events are reminiscent of what happen to Detroit real estate in the 60's. Like Detroit in the late 60's, Los Angeles will experience a "white flight" follow by influx of poorer minorities followed by unmanageable fiscal deficits. Like Detroit, the real estate prices in Los Angeles will plunge into the abyss spreading its cancer upon the adjoining land. Unfortunately for the real estate flippers who are locked-in by their up-side-down mortgages, they will die before they can relocate. Refusing to acknowledge that the golden era of real estate fraud has ended and the Ponzi paradigms have shifted, southern California real estate believers cling to their grant deeds and desperately wait patiently for the second coming that will never materialize within their lifetime. A slow painful death filled with despair. A just reward for the California's faithful.

amazed reader

November 19, 2008 8:59 PM

Wow - what a comment

Z

January 31, 2010 1:12 AM

He's right on the most part... there are still a bunch of people in California still trying to hold on to their houses, however, there are even more that are holding onto their "older" houses because of California's Proposition 13 which makes property tax low for the homeowners but revenues less for the government (especially since expenditure needs are rising higher than the revenue from property tax). Because of California's balanced budget rule (which many states have), state and local government cannot run a deficit or surplus like the federal government so the cuts are just hurting the economy more, plunging it further down. Yes, California's situation will hurt other states - infact the whole United States as California is the top economic contributer to the US (13%+ of the total US economy) not to mention it's agriculture and technology base. Just as New York's 9-11 situation affected the world because of ignorant government (not to mention the majority of the ignorant citizens who want government to do everything but don't want to pay for the services), California's situation will most likely be felt on a grande scale.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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