California real property
The Start Of The Increasing Rate Of California Foreclosures In The Golden State
The genesis of the issue with California foreclosures in the Golden State of California has a long, though not distinguished, history that goes back to the 1970s. With the passage of the federal Community Reinvestment Act of 1977(CRA) and the passage of Proposition 13 in 1978, the table was set and all that was needed was a bit of time and a healthy amount of exuberance when it came to California real estate.
The original intent of the CRA wasn’t actually to politely encourage (or coerce, in some cases) banks and other lenders to start passing out home loans wholesale but that may have been an undesired (from the point of view of a financial adviser) result by the 1990s. Proposition 13, which was an anti-property tax initiative passed by the people of the state in 1978, held down the financial disincentive that ever-increasing tax rates presented.
Some economics experts believe that a combination of easy lending (brought on by the CRA in many cases, as it was misapplied by federal housing regulatory agencies and the Congress) and the possibly artificially-low property tax rates created a long and unrealistic demand curve for a supply that was insufficient to meet that demand (homes and properties of all types). House prices went up, sometimes steeply, for far longer than was the norm.
Through the late 1990s, values of homes had been increasing at a very stately pace and perfectly in keeping with normal supply and demand curves. Before the mid-to-late 90s, people mainly bought homes because they wanted a home to live in and not an investment instrument. Traditional lending standards were usually observed and they quite often put down 20% to get a home, which was the norm.
As the cost of money dropped over the last decade — in terms of interest rates and the like — this money became easier to get and borrowing it for a home loan even easier still. This is where the CRA came in to play, as regulators encouraged lenders to get loans to people who often had little or no money to put down and with terms, in some cases, that really shouldn’t have been offered.
It is only natural, then, that so many people chasing a limited supply of homes — often with inflated pre-approved home loans — would cause sellers to begin raising prices for their properties at much greater rates than used to be the case in the past. And while it looked like it could last forever, the balloon slowly began to deflate around 2006, though other parts of the country didn’t see it until 2007.
California, however, began to feel that deflation sooner, and because of it the rate of CA foreclosures began to climb as owners found themselves sitting on homes they’d paid much too much for and with no prospect of unloading them. Many experts trace this phenomenon back to the 1970s, though that’s cold comfort to people and banks sitting on properties they can’t hope to sell, though a smart and savvy investor could possibly do something in this market.
For most people though, who were holding onto California real estate but became caught up in the phenomenon of increasing rates of CA foreclosures, the economic recovery can’t come soon enough. Average home prices have declined by up to 50 percent in some areas of the state and the prospect that the market has finally bottomed out and stabilized will indeed come as welcome news in these economically-trying times.
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Generating Income From California Foreclosures In Economic Down Times
The fact that it’s possible to profit from CA foreclosures in most any market out in the Golden State is not yet appreciated, mainly because the markets out in California might not have stabilized fully. But even if those markets haven’t, there could still be several different ways smart and very patient investors might be able to succeed in California property over time.
It is still the case — even in the worst of markets — that buying low and selling high is a recipe for success. When it comes to CA foreclosures this is just as applicable as with any other sort of investment or purchase of stocks, for example. Finding a foreclosed home held by a lender or a bank that can be bought for $200,000 and then sold for $250,000 is entirely possible these days.
That’s because the Golden State has been experiencing a rise in the rate of CA foreclosures for as long as five years, by some estimates, though things can really begin going far south until 2007 or even 2008. This last figure coincides with the general decline in the financial markets, and the way. This also highlights the fact that California is still a leading indicator for most anything.
What this means is that the rest of the country usually experiences the same issues that first hit California, eventually. It was true in this case, because analysts first noticed the problem with CA foreclosures and again to sound notes of caution that largely went unheeded until late 2008. Now, states like Florida and Arizona in addition to cities like Las Vegas are feeling it badly.
What much of this might mean as far as being able to pull a profit out of CA foreclosures — for the investor or just a regular person thinking of taking on a California home that’s now priced well below what it once was worth — remains to be seen. Certainly, a certain amount of speculation will be just what the Golden State requires. Finding buyers for all those foreclosed homes is paramount, of course.
In part, this problem can be alleviated through encouragement of sales of all these foreclosed properties (they’re sometimes known as REO, or “real estate owned, ” properties) to those who can stomach the risk involved in getting into a market that may not quite has stabilized as yet. However, being able to purchase an REO property for much less than it will sell for even in a bad market is a powerful lure.
Maybe the best news would be that prospective home buyers — meaning those looking to actually get into a home and occupy it for a long time — might now look at California as a place to find the property that, for example, once listed for $400,000 but can now be bought for as low as $200,000. If this is the case, California property markets might begin to bounce back to more reasonable and stable rates.
At any rate, turning a profit from CA foreclosures in these trying times — at least at present — is probably more for those who are stout heart and who also have a great deal of patience. They probably will need to engage in a buy and then a long-term hold until there is a certainty that the market in California has bottomed and is now climbing out of the trough, for a fact.
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Pondering On How California Foreclosures Could Be Dealt With By The State’s Leadership Class
California foreclosures and how California leadership may deal with them is an important issue. Understanding just how the Golden State found itself dealing with such a large problem in the first place and how it began to experience this problem years before the rest of the country did is an interesting problem. Some of the issue deals with rampant speculation while some of it also deals with a failure of state leadership, it needs to be said.
As it relates to the issue of CA foreclosures and how they increase or decrease (they’ve been increasing for the last few years), it’s worth noting that California, Las Vegas, Florida and other areas all featured extremely vigorous real estate markets for a number of years. With the supply and demand model completely in favor of the seller prices for homes went up, sometimes unreasonably or unrealistically.
California political leadership — just like leadership in most every other state — encouraged this boom in real estate for a number of reasons, including that more people buying more homes meant increasing tax revenues. This encouraged the state and its municipalities to add sometimes-needed services, all on the expectation that the good times would continue to roll on forever. But no real estate boom has ever not been followed by a bust.
As far as California goes, this bust in real estate prices probably first began in a serious way in 2006 though San Diego and other cities began to feel a softening of the markets about a year before that. Still, easy lending and easy (meaning low interest rate) money kept people flocking to the market for a few more years before it all finally began to come down in a serious way.
That let down in the markets began to really take off in mid-2007. After the financial markets themselves finally went down badly in late 2008, the real estate market out in California ground to a halt. At that point, the rate of increase in CA foreclosures really took off, with the state now featuring six of the top 10 cities in the country in terms of foreclosure. That’s not an enviable record to hold, it must be said.
State leaders have been trying to do certain things aimed at reducing the rate of CA foreclosures over time. They’ve been working with the federal government to get the word out (and to administer) certain programs that home owners can take advantage of to reduce their mortgages, for one. Also, the state has a law on the books (due to expire in 2011) that has added additional time to the foreclosure process.
California leaders hope that the combination of loan modification and lengthening of the foreclosure process may convince more home owners to try to stay in their homes. But with California home prices declined by 30% or even more, it’s the case that a lot of people are sitting in homes worth much less than they owe, meaning they are increasingly looking at foreclosure as the first choice rather than the last.
Whether anything to do with the rate of CA foreclosures will ever be truly amenable to anything other than the natural corrections that market forces seem to impose as a matter of course is a question for the ages. Some think that the Golden State’s foreclosure rate may even be stabilizing and could even be dropping. Time will tell on that forecast, it seems.
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The Rules Of California Foreclosures
When you are purchasing a home in California or many other places, you find that it involves the use of a deed-of-trust. This involves three different participating parties, which are the borrower, lender, and a neutral third party that will receive the right to foreclosure if needed. The process of CA foreclosures is a complicated one but may or may not be a long drawn out process.
It will also usually include a power-of-sale clause which allows the third party the actual right to enforce the overall collection of your debt. This is then enforced by the lender in a sale of the house if you fail to make your mortgage payments in a timely manner.
When you default on your mortgage loan, the foreclosure process begins. There is a 20-day notice period in which the borrower must get a notice of pending foreclosure. During this process the lender will take over your home in an effort to recover the principal investment. Once your home has been either sold or in some cases repossessed by the lender you must then vacate the home.
It takes a minimum of 120 days to execute a non-judicial foreclosure. The person in default can delay the process if they file a court petition to seek this delay or adjournments of sale. Alternatively, the delay can be brought about by the borrower filing for bankruptcy.
In the absence of a power-of-sale clause in the loan document, judicial foreclosure is permitted in California and involves the court’s final judgment of foreclosure. The property is then sold publicly; a recorded document is issued in the interest of public notice that the property is being foreclosed upon.
The borrower can reclaim the property after foreclosure sales, if the payment is made upfront which includes the sum of the unpaid loan in addition to the cost procured in one year after the foreclosure sale. That is unless the original lender included the full price bid. In that instance, cost procured is calculated for the period of three months, only.
Unlike other states, deficiency judgment may not be permitted in California, unless special conditions prevail. It cannot be obtained when a property in foreclosure is sold through a non-judicial public sale or if the foreclosure relates to a purchase money mortgage. The laws that govern California foreclosures are found in California Civil Code, Section 2924.
So, as you can see, the foreclosure process in California is very strict. Your best bet would be to make all your mortgage payments on time each month. Lets face it – no one wants to have their home foreclosed.
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