More Foreclosed Homes for Sales in Riverside due to ARMs

by Donald Hanz on States

Next year until 2012, the number of foreclosed homes for sales in Riverside, California will increase significantly as borrowers who took out adjustable rate mortgage loans in the past 3 years will default, according to a study submitted to the County Board of Supervisors by scholars of California State Fullerton.

The jobless rate, which is expected to reach 12 percent in the next several months, will make it hard for troubled borrowers to keep up with increases in their monthly loan payments. Big increases in monthly payments will start next year for many borrowers as their ARMs start to reset to higher loan rates.

As discussed in the report, the next couple of years in Riverside will be full of stories of foreclosed homes for sales, slow employment growth and slow improvement in home values.

The scholars blame the artificial housing boom in the Inland Empire as a major cause to the large number of foreclosed homes for sales in the region. They said that borrowers were forced to use ARMs for their home purchases because the boom put home prices beyond their reach. Borrowers could not afford to buy homes if they used conventional home loan products.

During the housing boom in Riverside County, the median house price soared to $415,000. Now, the median price has fallen by more than 60 percent, devastating builders of new homes and putting many construction workers out work.

In May, the median home sales price dropped to $180,000, another big drop from the $290,000 median in May 2008. It was also much lower than the median sales price in Southern California, which dropped by nearly 33 percent in May to $249,000 from the median price in May 2008.

Across the Southern California region, which includes the counties of Riverside, Los Angeles, San Diego, San Bernardino, Orange and Ventura, nearly 21,000 foreclosed homes for sales and non-foreclosure units were sold in May, a 1.3 percent increase from the 20,514 sales in April and an increase of nearly 23 percent from the 16,917 sales in May 2008.

While lenders are claiming that they have been increasing their loan modification activities under the state’s foreclosure prevention program and the federal Making Home Affordable program, statewide foreclosure filings in May surpassed the 41,000 level.

Last month, Riverside County was fourth in California in number of foreclosed homes for sales, with one foreclosure for every 958 households in the county.