Advances in California’s Home Sales Spoiled by Remaining Foreclosures

Most of these new sales came from Real Estate Owned (REO) foreclosure properties, which resulted to a drop of home prices. California home prices dropped dramatically in some areas, reaching a staggering 60%, which experts say may remain at 35% by the next year. However, more established areas and counties were able to maintain good prices amidst this financial mess.

In a bid to stem the flow of foreclosures, a new California state law took effect last September. In this new state law, lenders are required to make discussions with delinquent borrowers 30 days before a notice of default is filed. This new law, coupled with state-driven or bank-initiated loan modifications, led to a decrease in default notifications. However, the move is still not enough the put a plug to the foreclosures rush.

This temporary decrease in default notifications does not mean that the number of delinquent payments has already declined. With the prices of home sales in the low side, compounded by the nationwide recession and an increasing unemployment rate, the number of foreclosure homes is still expected to rise. Investors, in a bid to regain cash flows back into the system, have started to rent out these REOs at competitive prices. They would continue to do so until the housing market turns around and the values of these homes return back to normal levels.

Unless the government steps in with effective remedial programs, California, being the nation’s largest housing market, may continue to lose more homes and properties to foreclosures.

By Cassiano Travareli