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A for sale sign is posted in front of house in Glendale. California saw foreclosure starts pick up in June, suggesting that a new wave of defaults is underway.
For the first six months of 2012, foreclosures in California declined from the same period a year earlier. But RealtyTrac, an Irvine-based company that specializes in tracking foreclosures, reports that the state still has the fourth highest foreclosure rate in the nation. In fact, in June, default notices sent to homeowners increased from May. And year-over-year, California's rate of foreclosure starts increased 18 percent, making it the top state for the month, the first time that California has held that slot since 2005.
I talked to RealtyTrac vice-president Daren Blomquist. He said that states with the worst foreclosure rates have remained consistent during the housing crisis. The top five haven't moved around a lot: it's Nevada, Arizona, Georgia, California, and Florida. He noted that the only surprise was that Georgia has moved into the top four and that Florida has slipped.
Foreclosure filings in California fell by about 11 percent in the second quarter of 2012. But in June foreclosure moved up a bit more than 12 percent over May.
Blomquist said we’ve seen this pattern before in California. He calls it a “foreclosure wave” and expects the pattern to continue, as banks cope with the national mortgage settlement that was signed into law by Gov. Jerry Brown yesterday and avoid flooding the market with foreclosures. Blomquist's interpretation is that banks will work through their foreclosures gradually, so we'll see activity ebb and flow.
"Lenders are looking at their loan portfolios and figuring out how many mortgages to set aside for modification," he said. The banks are determining which ones likely won't qualify and sending out notices of default, the first stage of the foreclosure process, to homeowners.
Regardless of how these waves are paced, the foreclosure crisis isn't going away any time soon. At the current rate, Blomquist expects it to take until late 2013 or early 2014 before the country’s million-and-half foreclosures are in the rearview mirror.