Foreclosure Statistics in California

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The California Real Estate Market may have been ravaged by the U.S. property crisis but the deep plunge in home sales in 2007 has started to resuscitate a year after with a major component in this recovery attributed to distressed sales. Included in this are short sales where the U.S. Department of Treasury has observed a twofold increase in 2009.

Short selling, or selling the home at below market value to the lender as payment on the loan, has generated much attention this year in key cities in California. Following a tide of foreclosures that has come from the real estate market crisis, Feng Shui Investments observes that local lenders are now speeding up the short selling process in several counties to accommodate more delinquent borrowers.

 

Comparison of Short Sale Homes in California and Regular Sale of Homes

Data culled from the California Association of Realtors (CAR) reveals that short sale homes in California have jumped by one percent on a year-over-year (YoY) comparison in March (see Table 1).

On a month-over-month (MoM) basis however, short sale homes in California have slightly softened since January. Still, this is a fairly strong number since the share of short sales to total distressed sales in California has remained at 20 percent at the end of the first quarter. Buyers can also find bargains among short sale homes in California as the average price of properties remain below the $300,000 level, experiencing only a modest appreciation since the end of 2010.

Table 1. Share of Short Sale Homes in California to Total Distressed Home Sales in California
Mar 2010 Jan 2011 Feb 2011 March 2011
Short Sales 19% 22% 23% 20%
Total Distressed Sales 51% 54% 56% 51%

Source: California Association of REALTORS©

On a historical basis, short sale homes in California have already sustained momentum versus non-distressed sales following its gradual rise in 2009.

Figure 1. California Historical Sales

 

Comparison of Short Sale Homes in California by County

Bay area counties’ short sales statistics provide optimism for the local real estate market after significant improvements were recorded by the end of the first quarter of 2011 (see Table 2). This is more pronounced in Los Angeles (26 percent), Solano (25 percent), Riverside (24 percent), Orange County (22 percent), Sacramento (22 percent), Napa and Sonoma (21 percent each), and Kern (20 percent).

Table 2. Short Sale Homes in California by County (Monthly Percentage of Total Sales)
Jan 2011 Feb 2011 March 2011
Kern 20% 19% 20%
Los Angeles 27% 29% 26%
Marin 16% 17% 12%
Mendocino 2% 12% 13%
Napa 22% 26% 21%
Orange 24% 29% 22%
Riverside 28% 27% 24%
Sacramento 26% 22% 22%
San Bernardino 18% 19% 17%
San Diego 8% 9% 7%
San Luis Obispo 17% 13% 14%
Solano 26% 28% 25%
Sonoma 20% 28% 21%
Entire California 22% 23% 20%

Source: California Association of REALTORS©

Comparison of Short Sale Homes in California among other States with High Foreclosure Rates

Comparing California with that of other high foreclosure states, the large number of borrowers who are behind their monthly mortgage payments were able to short sell their homes with the highest number recorded in 2008 at 251,544 successful transactions. From then on, sales activity has started to wane down by reaching only 189,810 sales in 2010.

Arizona’s high foreclosure starts may have discouraged analysts from expecting improvements in short sales but the notable numbers generated are a huge improvement from the measly 18,775 sales in 2007. The Grand Canyon State is able to sustain short sales above 65,000 transactions since 2008.

On the other hand, Nevada, Oregon and Washington have equally impressive short sale activities since their slow recovery from the recession.

Figure 2. Short Sale Homes in California vs. Short Sale Homes in Other High Foreclosure States

 

Short Sale Homes in California from 2007 to Present

The California real estate market was browbeaten beginning in September 2005, when state-wide new home sales tapered by 28 percent according to Bloomberg News. The California Research Bureau’s data and Mortgage Bankers Association’s National Delinquency Survey on foreclosed homes in California both reveal that since the fourth quarter of 2005, foreclosures have steadily risen until 2008.

On this note, the total short sale homes in California have improved with a crucial takeoff in 2008 in an impressive 160 percent boost. This is mainly due to the increased pre-foreclosure activities through mortgage education programs and the procedural modifications in the state’s foreclosure law that commenced in September 2008.

YoY changes reveal that the strong momentum generated in 2008 was slashed by 20 percent the following year after lenders were able to take advantage of the Financial Accounting Standards Board’s mark-to-model pricing for mortgage-backed securities. Lenders were allowed to keep their bad assets instead of approving short sales to allow the borrower to be relieved of his financial obligations.

In April 2010, the Home Affordable Foreclosure Alternatives (HAFA) was thought of as a long-term remedy to the slowdown in short sale activities. Although sales have still decelerated by 6 percent, Feng Shui Investments is more confident in the slow rebound of the California short sale market.

Figure 3. Annual Total Short Sale Homes in California

The first quarter of 2011 is a good start for short sale homes in California following remarkable short sale figures in Solano, Sonoma, Napa and Los Angeles on a YoY basis.

Table 3. Short Sale Homes in California by County (Year-over-Year Percentage of Total Sales)
March 2010 March 2011
Kern 19% 20%
Los Angeles 22% 26%
Marin 12% 12%
Mendocino 8% 13%
Napa 20% 21%
Orange 24% 22%
Riverside 25% 24%
Sacramento 25% 22%
San Bernardino 15% 17%
San Diego 6% 7%
San Luis Obispo 17% 14%
Solano 25% 25%
Sonoma 21% 21%
Entire California 19% 20%

Source: California Association of REALTORS©

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