Thinking On Just Why And How California Foreclosures Might Be Continuing To Rise

Looking at reasons for why California foreclosures occur and look like they will keep occurring out in California for some time might be important for anybody who’s considering staying in Golden State property markets or getting into the markets out there. Presently, there are more homes for sale in California then there are buyers to purchase them, though that wasn’t always the case.

For many investors, the current market conditions might actually be favorable for purchasing properties that have now been discounted. The market seems to be more oriented toward buyers than it is toward sellers, evidenced by home values that have declined by up to 50% in some markets in the Golden State. For example, a $400,000 property might go for around $200,000, which is a steep drop indeed.

Right now, there are just as many people saying that the market hasn’t yet bottomed out as there are saying that it has. If it hasn’t truly hit bottom yet, it just may be that the rate of CA foreclosures might continue to rise or stay steady as more people try to sell off their properties or allow them to slip into foreclosure more readily than they did in past times.

Much of the rise in home prices over the years in California can also be attributed to a demand curve forced upwards by speculation on the part of not only a significant number of home buyers but also those looking to buy property and turn it back around for a profit. During the good times, when money was cheap and the economy was on the rise, this model could work for a while and that “while” went on for longer than should’ve been the case.

Eventually, though, as the economy began to contract — not only in California but around the country, it was inevitable that market prices for homes would begin to drop, sometimes steeply. As easy money dried up and lending standards were tightened, fewer people were able to buy properties in California. As a result, the rate of CA foreclosures began to reflect this new market reality.

There are, of course, other reasons for why California real estate markets seemed to operate in their own world for quite some time. Various federal laws and regulations encouraged banks and other lenders to keep extending home loans even in the face of an apparent recession. Also, certain mortgage-backed securities propped up by the government soon began to turn into the bad paper they really were.

By now, everybody’s familiar with the near-collapse of a number of different investment banks on Wall Street, many of whom were heavily into these securities. When the rate of CA foreclosures began to increase steeply, though, these securities proved to be nearly worthless and are now known as “bad paper.” It seems that the markets weren’t immune to irrational exuberance either.

Just how long the increase in the rate of CA foreclosures is going to run is a question up for debate. Some economists think the Golden State has come through the worst of it while others think that still more trouble in its commercial real estate markets looms. However, an investor who has guts and smarts can make it in any market, including in the market currently going on out in California.

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