california housing defaults double last year
by skippy, Wed Jan 24, 2007 at 06:01:55 PM EST
things are not all that rosy w/the housing market in california. the east bay business times reports that mortgage defaults are at an 8 year high:
the number of mortgage default notices filed against california homeowners jumped last quarter to the highest level in more than eight years, a real estate information service reported.
lending institutions sent homeowners 37,273 default notices during the october-to-december period. that was up by 36.9 percent from 27,218 the previous quarter, and up 145.3 percent from 15,196 for the fourth quarter 2005, according to dataquick information systems.
more after the jump:
last quarter's foreclosure activity was the highest since 38,053 default notices were recorded statewide in the third quarter of 1998. defaults peaked in the first quarter 1996 at 61,541. an average of 33,615 notices of default have been filed quarterly since 1992, when dataquick's statistics begin.
"several factors are at play here. the numbers last year and the year before were very low because of strong sales and appreciation. also, most defaults occur a year or two after the loan was made, so we're in a period where the loan pool is at risk. and then there are those inventive loans that have been made the last few years, where qualifying involves assuming more risk. we're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said marshall prentice, dataquick's president.
we like that euphamism "inventive loans."
these would be the ajustable rate mortgages, sold to the unsuspecting homeowners w/the comforting lie "they probably won't go up." the sfchron:
california is experiencing a rise in defaults because so many people took out adjustable-rate mortgages, economists say. about 28 percent of all outstanding loans in california are adjustable, more than in any other state in the country, according to first american loanperformance, which tracks mortgage risk. borrowers with such loans have seen their monthly payments increase at the same time that home price appreciation has slowed, making it more difficult for homeowners in financial trouble to sell or refinance.
"the state of california has been tremendously dependent on adjustable-rate mortgage products," said scott anderson, senior economist for wells fargo. "when people have overstretched and are spending more than 50 percent of their net income on housing, it doesn't take much of a surge in interest rates to lead to financial problems."
no, not much.