California Foreclosures Back on the Rise

by on Foreclosure Crisis

California Foreclosure

Foreclosures have been on the downswing across the country for years now. A combination of rising housing prices, federal and state programs designed to help those in foreclosure, and homeowner-friendly laws on the books has helped keep down the number of distressed properties that have entered the national pipeline.

That doesn’t mean foreclosures are done, however. In California, the opposite is true – foreclosures are actually rising.

California foreclosure starts, according to statistics, increased by 10 percent on a year-over-year basis from first quarter 2013 to first quarter 2014. This is the first increase in this statistic in two years. This was also the first double-digit increase in five years, since 2009.

One cause is the state’s non-judicial and judicial foreclosure laws. New laws were codified in January 2013, and foreclosures went down sharply as a result. But now, lenders are using the judicial foreclosure system to send more homes through the process, which has caused the number to rise.

Another change is the size of the default amount, or the amount of payments that the homeowner is behind on. In the first quarter, California homeowners were behind on their homes by an average of $56,415, up 53 percent from first quarter 2013.

Also, the time it takes to sell a bank-owned home – a home that went to a foreclosure auction but did not sell – increased from 172 days on average to 220 days on average. From the time the home becomes delinquent to the time it becomes an REO property, a distressed property in California takes on average over 1,200 days to leave the pipeline.

The longer it takes to sell foreclosures, the longer they languish in the system, and the longer they drag down property values around them. There are plenty of foreclosures and distressed properties in the system to purchase, which means there are plenty of properties with upside potential up for grabs.

As the market continues to mature and recovery, it is likely that foreclosures will begin to decline. Foreclosure starts may increase further for a short time, but the combination of rising home prices and available inventory will attract more buyers to the state. More buying activity will gradually decrease the amount of time it will take to sell these properties, which will only serve to improve the overall process.

Look through our listings of California foreclosures to find properties perfect for purchase.