When considering why California foreclosures might be occurring so often out in California, one should also look at the issue from the standpoint of whether or not it’s a good time to either stay in Golden State real estate or jump back into it. For sure, there are currently more homes up for sale and in foreclosure than there are buyers out there willing to purchase them, though it wasn’t always that way.
In fact, the current market might be propitious for those investors who have some guts and know how to find the right kinds of properties that can be sold at a decent profit. It’s made a bit easier in California by the fact that home values have declined by up to 50%. As an example, there are $400,000 homes that have been going for around $200,000, which is a very steep drop.
Of course, nobody’s sure if the market has bottomed out as yet. It could be that the rate of CA foreclosures may continue to also rise as a result as many people who owe more than the home they’re in is worth continue to try to dump them on the market. Ideally, they’re selling them for whatever they can get but many are taking the foreclosure route more readily than in the past.
Many real estate and economic experts look at the Golden State and its property markets and relate that the issue was a question of supply and demand combined with rampant speculation on the part of both investors and regular home buyers. Many thought they’d get into homes that they could then turn around and sell for a nice profit shortly thereafter. Eventually, that model proved invalid.
Eventually, when the broader economy began to contract, it was inevitable that home prices would begin to drop. Money became tighter and harder to get, meaning lending standards became more rigorous, which meant not as many buyers of any type would be available to buy all those homes still flooding the market. It’s now the case that CA foreclosures are a fact of life in the Golden State and they will be for some time.
This isn’t to say that there haven’t been other reasons for why the market in California seemed to be slightly irrational. The federal government, through various laws and regulations, encouraged lenders to keep the home loans flowing and they did. These actions by the government helped to lead to the creation of certain securities backed by vast pools of mortgages that had been sold off by lenders.
By now, most people understand how the big Wall Street correction, or crash (according to some experts), occurred. Many investment banks were nearly driven into insolvency in part because of those mortgage-backed securities, which began to lose what value they had as various phenomena such as CA foreclosures began to increase greatly. As foreclosures rose, securities lost even more value in a vicious cycle.
As to how long the present rate of CA foreclosures will remain on the increase, nobody can say for certain. Some believe California property markets have seen the worst of things and will soon begin a gradual improvement while others think its commercial real estate markets are the next sector to take a big hit. Keep in mind, though, that a smart investor can take advantage of any market, including California’s, so there’s hope for investment, it would seem.
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