500 Foreclosures PER DAY in California During the First Three Months of 2008
If you want a first-hand view of just how particularly gruesome this real estate downtown has been, then look no further than California.
DataQuick, a company based out of California, reported that foreclosures in California were up 327% from year-ago levels, an astonishing climb that has ravaged real estate values throughout the state. California is Ground Zero when it comes to the boom and bust cycle of the real estate market - prices were soaring up until a couple of years ago, and now they seem to be crashing just as quickly.
According to Dataquick, there was a total of 47,171 homes foreclosed in the state during the first quarter of 2008. This is up from 11,032 homes that were foreclosured during Q1 2007. The 47,171 home total works out to an average of about 517 foreclosures every day. If you are wondering why real estate values are dropping so quickly in the state, then look no further at this number. That is an awful lot of supply that needs to be absorbed by the market. If the demand is not there then supply will build up and prices will drop. That's exactly what is happening now.
The report goes on to state that the reason for the surge in foreclosures is declining home values. This is obviously a self-fulfilling prophecy, because as home values drop, more and more people just simply walk away from their mortgages. If you bought a home in California for $800k and couldn't afford it in the first place, then how eager are you going to be to keep paying down the mortgage when the home is only worth $600k? Many people are simply turning in their keys and simply walking away from their homes.
The ridiculous loans that were given out, especially in 2005 and 2006, have turned out to be both a gift and a curse for the market. These loans propelled the markets higher during these years, as many people took advantage of no money down mortgages to buy expensive homes. Now that the market is tanking, people are simply walking away from these mortgages because a) they hardly have any equity in the homes anyways and b) the home values have plunged dramatically. This has resulted in an incredibly fast correction in the market.
The article also points out that if there is indeed a recession either currently under way or about to take place, then the total number of foreclosures could continue to mount.
Filed under: Real Estate News | The Economic Meltdown