California Real Estate Foreclosures and Falling Prices Finally Reported After Three Years of Industry Red Flags

By Mick Gregory

Foreclosures rise 500 percent in key Bay Area counties. (Reported one year ago).

I’d imagine a lot of Bay Area readers of the San Francisco Chronicle are wondering why they didn’t see any investigative reporting three years ago.

That’s because the realtor organizations were feeding the business reporters rosy press releases. Plus, very few reporters have MBAs or have even taken Economics 101 for that matter.

Foreclosures and default notices are reaching historic numbers in California and especially the high-tax, left-leaning Bay Area. The San Francisco Chronicle reports that in the fourth quarter of 2007, according to real estate stats released today.

Banks repossessed 31,676 homes in California in the October-November-December period, according to Data-Quick Information Systems, a La Jolla research firm. That was a dramatic 421.2 percent increase from 6,078 in the year-ago quarter. I predicted 200,000 for 2007 and 08.

More that 31,000 families lost their homes in California the past three months.

In the Bay Area, foreclosures rose a stunning 482.5 percent to 4,573 in the fourth quarter, compared with 785 a year ago. Contra Costa County, with 1,558 foreclosures, up 533.3 percent from a year ago, had the most, followed by Alameda County with 1,026 (a 514.4 percent increase) and Solano County with 704 (up 528.6 percent).

We moved from the Bay Area to Houston three years ago. My MBA and my wife’s law and real estate background paid off. We could see the bubble bursting in the near future and we timed it just right with a little luck. I built a river rock fireplace makeover and we had contractors put in hardwood floors and granite counter tops.

Our good friends Marjon and his wife, both attorneys, were studying the same red flags and moved out of California a few months ahead of us, after they did some extensive remodeling that included a new second story deck off their master suite and granite, of course.

So many of our friends and neighbors said “how could you leave California for Texas?”
(They were so smug.)

The Data-Quick company gives its services a little self promotion in the report.

“Foreclosure activity is closely tied to a decline in home values,” Data-Quick President Marshall Prentice said in a statement. “With today’s depreciation, an increasing number of homeowners find themselves owing more on a property than its market value, setting the stage for default if there is mortgage payment shock, a job loss or the owner needs to move.”

It was the most foreclosures since DataQuick began tracking them in 1988 and more than double the previous peak of 15,418 foreclosures in the third quarter of 1996. The fewest foreclosures recorded were in the second quarter of 2005, when 637 homes were repossessed.

Mortgage default notices, sent by lenders when homeowners are several months behind on payments, also hit record highs. Default notices are the first evil step of the drawn out foreclosure process. Once you fall about five or six months behind, the banks know you will never dig yourself back out.

Statewide, lenders sent 81,550 default notices, up 114.6 percent from 37,994 in the fourth quarter of 2006. It was up 12.4 percent from 72,571 in the third quarter of 2007. It was the most defaults since DataQuick began tracking them in 1992.

On Thanksgiving, we were at friends’ home in Texas, (they also came from California) having moved just a few months after us. There home has a saltwater pool and the two-story structure is about 3,200 sq. ft., a short walk to a large lake.

We laughed and congratulated ourselves as we realized that all five families at the party were from California.

Why did we leave? The state income tax is just under 10 percent, plus each employee has to pay disability tax, it went up about $600 per worker this month. Any connection to the job losses and mass exodus? Hey, but the lettuce is cheap! What about the weather, the mountains, the beaches?

10 thoughts on “California Real Estate Foreclosures and Falling Prices Finally Reported After Three Years of Industry Red Flags

  1. Pingback: Democrats @ 2008 Presidential Election » California Real Estate Foreclosures and Falling Prices Finally Reported after Two Years of Warnings

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  4. Ahhh yes, Mick is once again ahead of the curve, and in this case ahead of the mass exodus. Who could have seen the subprime mess and frothy housing bubble? Mick did! And who could have predicted that the democrats, running California into the ground, in tandem with their counterparts in Congress (Feinstien, Boxer, et al.), who are also taking us into a national recession? Mick did! The only thing left to ask is, what stocks is Mick buying in the stock market melee?
    The subprime mess can be traced back to the feet of the “feel-good” democrats in Congress, who forced- I mean provided incentives, to loan money to unqualified, democrat constituents- I mean borrowers. Now the same dems want to give us each $500.00 to ease their guilty minds. Next they will likely be giving away houses for free to anyone who votes for the big D this November.
    Only the eco-nazis have perpetrated a bigger hoax on the citizens of this great country with their Global Warming gag. It was 24 degrees at my house last night, so I welcome a little “global warming.” The perfect marriage of the econ-nazis and the feel-good Dem resulted in a $36 million verdict against the City of Half Moon Bay late last year when the city refused to give out a building permit. HA! Next they will be paying people to buy houses in the Bay Area.

  5. Thanks for the very kind words, Marjon. You are just as much a prophet of profit! To tell you the truth, I like Chevron and Schlumberger.

    Gold, the run is over. Time to get out.

  6. I live in San Diego, and find it hard to believe 1.5 million of our residents left in 2007. We have a city of about 2.5 million, which includes the surrounding communities. So, this is absurd to proclaim, because we would see those drastic numbers. Please, get your facts straight. As for living in Texas, I just came from Dallas, and while I was impressed with the home values, I wasn’t impressed with the landscape, the weather, or the lifestyle. I’ll take San Diego’s Mediterranean climate, our beaches, my coastal community and lifestyle over that of Texas any day of the year. You can have the heat, humidity, tornados, and drought. And about the only reason one would move to Texas is for the home values, and not the lifestyle. So, to those who are supposedly leaving beautiful California for Texas, you won’t be missed, trust me. And, don’t let the door hit you on the butt on your way out the door as you drive east on the interstate. Adios!

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