California is in an interesting position when it comes to home foreclosures. On one hand, according to RealtyTrac's just-released third-quarter Metropolitan Foreclosure Market Report, the state still has some of the highest foreclosure rates in the entire country, with bankrupt Stockton leading the pack.
On the other hand, California cities continue to see substantial year-over-year declines in foreclosure activity. San Francisco, Los Angeles and San Diego saw their foreclosures plummet, by 36, 29 and 26 percent, respectively.
On its face, this sounds like pretty good news. But as I reported earlier this week, the foreclosure crisis hit California so hard that its cities have a long way to go before the situation normalizes.
RealtyTrac compared 2012 to 2008 in political terms — What does the situation look like for areas that went for Obama versus McCain? — and found that counties carried by Obama have seen big improvement on the foreclosure front.
But in a place like Los Angeles, that doesn't mean we can forget about foreclosures. We've fallen farther than almost anyone else. But the number of homes going into foreclosure here continues to be relatively higher than in the rest of the country.
Ironically, we need those foreclosures — and we need the foreclosure market to get back to normal. In Southern California, we have a price bubble in housing at the lower end of the market, due to a lack of supply to meet surging demand.
Banks don't want to flood the market with foreclosures, so buyers can't get any relief on that front. Until homebuilders start to build more houses, foreclosures will continue to be an important part of the local housing economy.