Coming To Understand California Foreclosures And How They Affect California

Learning about California foreclosures and how they affect California is important even for those not living in or owning property in the Golden State

. There are many reasons why this is so, including that California, on its own, is one of the world's largest economies. What happens there affects the rest of the country and sometimes to a great degree.

There's almost nobody around nowadays who doesn't understand that the whole country went into serious recession in late 2008. However, the recession probably actually began in late 2007 and sooner than that out in California. Back then, the housing market in the Golden State had begun a very slow contraction that managed to elude the attention of most, though there were people warning that something was brewing and that it wasn't going to be something pleasant.

The rate of CA foreclosures served somewhat as a kind of early warning system for some. The problem with the foreclosure rate can actually be traced to certain structural defects in the California housing market, as well. This early warning system was partially ignored, though, by many in the state who were buying and selling vigorously as they probably should have heeded the warning signals earlier than they ended up doing.

Much as in certain other states or localities (Florida and Las Vegas, for example), a fair amount of speculation on land and homes had been going on for quite some time in California. Add in that the traditional behavior of the economy (boom and then bust) seemed to have ceased and a recipe for trouble was cooked up. Some might call it "irrational exuberance" but whatever its name, unrealistic expectations became the norm.

Over time, the traditional way in which people looked at homes as more of a place to live rather than an investment vehicle was overtaken by a kind of myopia when it came to the supply and demand model. Demand was raging and was stoked in part by very lax lending standards which led people to mistakenly assume that real estate prices would continue increasing forever. This push by government to relax lending standards misled quite a few supposedly smart people.

It's a fact, though, that a recession was truly inevitable. Many investment instruments backed by all of the mortgages taken out (many by people who probably had no business getting into a mortgage in the first place) turned out to be what the industry now calls "bad paper." Compound the effects of the recession, which sooner or later have to break out after such a long period of growth, and all of the ingredients were there.

The inevitable reaction to all of this out in the Golden State had to be an increase in the rate of CA foreclosures and that is indeed what occurred. There are many different parts of the state where the average price of a home has dropped by over 30% and by nearly 50% in a few regions. The recession has also cost a steep drop in tax revenue collections due to loss of property taxes, which also supported many different public services.

What the Golden State can do when it comes to getting the rate of CA foreclosures down isn't well known as yet. There are some signs of hope out in the Golden State and many would say that now might be the time for an investor who is willing to take a long view of things to get back into the markets if, indeed, they've settled down. If it's possible to make something out of these markets anywhere, it would have to be in California, most people might say.

by: Jack Bennington

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