Foreclosures Drop, but Effect on Prices Lingers

Foreclosures are declining in Ventura County, but such actions by lenders against delinquent home buyers probably will continue to act as a drag on the county’s housing prices at least until spring.

That’s the opinion of John Karevoll, an analyst with DataQuick Information Systems, which tracks real estate activity throughout the state.

“There are still quite a few delinquent mortgages in the pipeline in Ventura County,” Karevoll says. “I don’t expect to see a major reduction until April, May or June.”

Lenders started formal foreclosure proceedings against 222 Ventura County homeowners in November, Karevoll said. This was down 11.6% from 251 in October, but up 24% from 179 in November 1994.

In the first 11 months of 1995, 2,270 actions were begun in the county, 4.2% fewer than 2,369 in the same period a year earlier.

Ventura County is one of the few counties in California where foreclosures declined on a year-to-year basis in the first 11 months of 1995.

Statewide, lenders took action against 123,000 home loans during the period--9.6% more than a year earlier.

But foreclosures declined statewide in November, dropping 6.4% from October even though they exceeded the number in November 1994, by 26.7%.

Karevoll cites a continued softness in home prices as the main factor making it difficult for some owners to avoid foreclosure.

“Because prices are flat, some owners are finding that they have very little equity,” Karevoll said.

“If they fall behind in their payments, they don’t have the option of selling and using the proceeds to pay off their debt, as they might have done in former years. So they become candidates for foreclosure.”

First-time buyers are most likely to be hit, Karevoll said. In many cases, they made minimal down payments, so they have little, if any, equity to serve as a cushion.

Owners are usually eight to 10 months behind in their mortgage payments when a lending institution starts foreclosure proceedings. The formal process can take as little as four months, though it currently averages more than eight months.

When foreclosed homes are resold, the average selling price is about 20% lower than for comparable houses in general. Thus, foreclosures tend to depress overall housing prices.