Economist: Expect Second Wave of Bank Owned Foreclosures

by Donald Hanz on General

Members of the Marin Association of Realtors received a fair warning from California Association of Realtors chief economist Leslie Appleton-Young who told them to expect for a second wave of Bank Owned Foreclosures.

In her speech at the association’s meeting, Appleton-Young linked the languishing condition of the housing market in Marin and the national and state problems that exacerbate the ongoing crisis in the country’s economy.

She said that the economic outlook is important in determining how the city and the whole of the country could quickly recover from the crisis, adding that there is still uncertainty over how long unemployment can push higher the number of Bank Owned Foreclosures.

She told agents to brace themselves for a second wave of foreclosed properties this year or next as loans will start to re-set and properties repossessed by banks will begin to flood the market.

She noted a decline of 20 percent in the state association’s membership in 2008 despite the increasing number of Bank Owned Foreclosures selling at lower prices. She explained that the current situation in the real estate market is not for agents with faint hearts.

Appleton-Young’s speech was a contrast from her statements before the state association in April 2007. She told agents then that recession is not a possibility, citing job creation, the boom in the commercial real estate market and the economic growth in California. She pointed out that a 30 percent decline in home prices in Marin will not happen in her lifetime.

Fast forward to April 2009, the median price of a single-detached family house in Marin declined to $734,500 from $935,000 the previous year. Last month, foreclosed houses in the Bay Area accounted for nearly 50 percent of the total number of properties sold.

Appleton-Young said that she never thought home prices in California would decline by almost 35 percent. She added that the current housing market situation has a lot of lessons to offer. She told agents that today is the right time to make some changes on the housing industry.

Statewide, foreclosure filings were received by 230,915 homeowners in the first quarter of this year, a jump of 35 percent from the previous quarter. One out of 58 houses in California is in danger of becoming Bank Owned Foreclosures.