Foreclosures in state hit record
Sinking home values and the collapse of flimsy mortgages fueled a record number of foreclosures in California in the first three months of this year, dimming prospects for any quick recovery in the housing market.
The number of homes lost to foreclosure rose to a record 47,171, more than four times as many as a year earlier.
Default notices -- the first step toward foreclosure -- were sent to owners of 110,000 California homes from Jan. 1 to March 31, according to La Jolla- based DataQuick Information Systems. That’s about 1.4% of the homes in the state.
Defaults are up 143% from the same period last year. Homeowners in default can avoid foreclosure by catching up on payments, refinancing or selling. But fewer are doing so.
Just 32% of the properties in default will avoid foreclosure, DataQuick estimates, down from 52% a year ago.
That decline reflects the slow real estate market, which is being further weakened by the flood of bargain-priced foreclosures coming on the market, real estate experts say.
Those foreclosures are taking a bigger share of the home sale market. Statewide, foreclosures made up 33.1% of all home resales in the first quarter, DataQuick said, up from 3.2% a year earlier.
As with home values, outlying areas that attracted new-home buyers and speculators during the boom are being hardest hit by bank repossessions.
In San Francisco County, foreclosures accounted for 5.1% of resales, DataQuick said. But in San Joaquin County, which includes Stockton, 66.7% of all resales were foreclosures.
In San Bernardino County, Deputy Sheriff Mike Strickland says he is now delivering eviction notices to six or seven foreclosed houses a day, about twice as many as last year.
“It’s full-bore now,” Strickland said.
Most of the evictions are in new housing developments, he said, and the occupants have usually abandoned the property by the time he gets there.
“A lot of the homes were 5 or 6 months old. The people got in by the skin of their teeth,” Strickland said. “They can’t afford their payments, they skip.”
Default notices were up the most in Colusa County, which posted a 305% increase over the first quarter of 2007. It was followed, in order, by Merced, Sonoma, Napa and Monterey counties, all of which recorded yearly increases greater than 200%.
Most of the loans defaulting last quarter originated from August 2005 to October 2006, DataQuick reported.
Jay Brinkmann, an economist for the Mortgage Bankers Assn., said many loans now in default or foreclosure were made to borrowers who could not afford them. Those borrowers had planned to refinance the loans, but declining home values made that impossible. In other cases, he said, homeowners took out excessive home equity loans.
Lenders have asserted that some homeowners simply choose to abandon homes with declining values, even if they can afford to make payments.
Babette Heimbuch, chief executive of FirstFed Financial Corp. of Los Angeles, says about 50% of her company’s delinquent borrowers do not respond to requests to discuss modifying their loans.
But Brinkmann believes few homeowners walk away simply because they feel their mortgages aren’t worth paying.
“It’s usually much more involved,” he said. For instance, “someone loses a job and has to move away for another one” and can’t sell his house in a down market, he said. “There’s usually some other trigger.”
Brinkmann said when he worked at a Louisiana bank 25 years ago, homeowners dropped their keys in the bank’s drive-through window, but they did so as they left the state for work elsewhere.
In Southern California, foreclosures grew most rapidly in Imperial County -- which reported a 653% increase.
Foreclosures jumped 329.4% in Orange County and 314.5% in Los Angeles County. In the Inland Empire, San Bernardino posted a 397.8% increase and Riverside a 346.5% hike.
Overall, 25,024 homes were repossessed in the first quarter this year in Southern California, up 316.7% from the same quarter a year earlier.
Foreclosures go hand in hand with slumping home prices. On Tuesday the National Assn. of Realtors said home prices fell 7.7% in March from a year earlier, to a median price of $207,000. Home sales nationwide dropped 19% in March from a year earlier, the group said.
Christopher Thornberg, principal of Beacon Economics, said the growing number of foreclosures could prolong the housing market’s decline.
Thornberg predicts that within nine months boom-inflated housing prices will retreat to levels that are more in line with incomes. But a flood of foreclosed homes “could cause the market to overshoot. The question is, will all that excess inventory drag us past that fundamental level?”
Yale economist Robert Shiller said that home prices could fall by more than 30% from their peak, exceeding the drop of the 1930s Depression, the Associated Press reported. Shiller developed the widely cited Standard & Poor’s/Case-Shiller home price index.
Nationwide, home prices are down 18% from their 2006 peak, according to that index.
Times staff writer E. Scott Reckard contributed to this report.
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The median price for a home nationwide has fallen to $207,000, according to the National Assn. of Realtors. Here’s what you can get in that price range:
One-bedroom, one-bath co-op apartment in East Flatbush area. Four rooms total. Building has swimming pool and doorman. Asking $208,000.
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Two-bedroom, one-bath Spanish-style detached home in South Los Angeles with 648 square feet of living space. Asking $205,000.
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Times research by Scott J. Wilson