subject: Thinking On Just Why And How California Foreclosures Seem To Be Increasing Or Occurring [print this page] Understanding why California foreclosures have been occurring in the Golden State over the last several years could be important for those people considering investing in California real estate or for those thinking about buying a home in California. At present, more people are looking to sell their homes (oftentimes without success) than there are people looking to buy them, though.
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.
Presently, though, opinion is divided on whether or not Golden State property markets have yet hit the floor. If they haven't, it could be that the rate of CA foreclosures might remain on an upward swing as more people look to dump their properties onto banks. It would seem that many owners are willing to go into foreclosure far more readily than they did in the past, as well.
Most economists look at California's real estate market and say that a high demand was combined with a lower supply that was only exacerbated by a great deal of speculation on the part of investors and regular people who thought they'd like to get into a home in California. Of course, they expected that they'd be able to turn that home around and sell it not soon thereafter, and at a very nice profit.
As the economy, not only in California but in the rest of the nation, began to go into recession it was an inevitable condition that home values, which were over-inflated, would begin to decline until a natural equilibrium point is reached. Once lending standards were tightened and money became more expensive to get, there were fewer buyers, which is another reason CA foreclosures began to rise.
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.
Everybody's now familiar with the story of Wall Street in late 2008 and early 2009. Many investment banks teetered on the brink of insolvency, which was due in some part to the shaky securities which those banks bought into. After CA foreclosures began to increase sharply, though, there was no way to offload those securities and it became a vicious cycle of real estate decline and securities decline.
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.
