Foreclosure Rate in California hits Real Estate Market

According to a report, the number of home and condos sold in the state of California last year was 20,513. This shows the rate of sales as very slow with the last slow rate of sales being recorded in 1988. The sales of homes including California foreclosure homes were up by 7.1% as compared to the 19,145 in January 2007 but it was down by 34.3% as compared to the 31,228 in February 2006.

The median home price in California in Feb 07 was $373,000, which is 2.6% less than $383,000 recorded in Jan 07 and is 21.0% less than $472,000 recorded in February 06. The number of homes for sale is so high that most of the homes don’t get sold at all – not even at the auctions where home buyers can get a good discount. A large number of homes up for sale are foreclosed houses and are being sold through auction by lenders.

There is a two-fold effect that foreclosures by state have had in California. The first one is that due to the high number of foreclosures, there are several foreclosed properties that are ready for auction. Since the homes are selling for a discounted price, most homebuyers end up buying these homes instead of the actual real estate property and this has led to a major slow down in the market. Secondly, the neighborhoods where homes have been foreclosed are reeling from the after effects as existing homeowners find it difficult to sell their homes due to depreciation in the value of their property. Foreclosures in California are acting like a two way dagger and at this moment there seems to be no way out!