Explaining Southern California's economy

San Bernardino is not having a very good week

 bankrupt pensions

Steven Cuevas / KPCC

As if bankruptcy weren't enough to deal with, San Bernardino is home to some of the highest unemployment and home foreclosure rates in the country, recent surveys say.

The Inland Empire city of San Bernardino declared bankruptcy last year. Now it's slogging through the Chapter 9 process, taking on CalPERS, the giant California pension fund, at the same time. 

Sound like enough to keep one struggling municipality busy? Not quite. Two new reports indicate that the city's problems run deeper than just being broke.

On Wednesday, the U.S. Labor Department reported that what it calls the Riverside-San Bernardino-Ontario "metropolitan area" had the highest unemployment rate of all large U.S. cities in December: 10.9 percent. That’s down from more than 12 percent in December 2011.

Meanwhile, real estate analytics firm RealtyTrac says the San Bernardino area had the second highest foreclosure rate in the U.S. last year: nearly 4 percent of homes there had a filing in 20-12.

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Why California saw fewer foreclosures than other states in 2012

Foreclosure

Kevork Djansezian/Getty Images

For sale signs are posted on a foreclosed house in Glendale. In 2012, foreclosures fell off in many California cities, but seven still finished in the top 20.

The housing crisis was also a foreclosure crisis, and many homeowners in California lost their homes. But the situation in the state improved in 2012.

One reason for this is that California is a so-called non-judicial state; i.e., it does not require that foreclosures be overseen by the courts. That allows foreclosures to be completed more quickly. And that is why  judicial states -- those that require court oversight of foreclosures, such as Florida -- surpassed California and other non-judicial states in the number of foreclosures.

That prompted Irvine-based real estate analysis firm RealtyTrac to report on Wednesday that 2012 was the “year of the judicial foreclosure.”

I wrote about this last year:

The process is streamlined [in California], to avoid a lawsuit. 

Ironically, this is supposed to make things easier on the homeowner, but the robosigning scandal that put the brakes on foreclosures by banks was largely confined to states where the foreclosure process is judicial. Borrowers who could seek legal recourse were a bigger problem than borrowers who couldn't, at least not as easily.

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Short sale boom: Maybe in California, but not in the rest of the U.S.

A short sale home in the Spring Valley a

MARK RALSTON/AFP/Getty Images

A short sale home in Las Vegas. An expected short sale boom in the U.S. hasn't materialized, according to the National Association of Realtors. But in California, short sales have been on the rise.

If you’re underwater on your mortgage, you might want to consider a short sale, asking the bank to take less that what you owe. Some real estate experts thought a boom in short sales might appear at the end of 2012. But the National Association of Realtors says that hasn’t happened.

Why? It all comes down to the fiscal cliff. In addition to tax cuts and stimulus spending, something that might also go away is the Mortgage Forgiveness Debt Relief Act.

It expires at year’s end and if Congress doesn't extend it, short sellers could face an IRS tax bill for the forgiven portion of their mortgage. But on Thursday, the president of the National Association of Realtors, Gary Thomas, pointed out that there’s been no short sale boom. Short-sellers haven't been rushing to beat a possible fall off the cliff.

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November home foreclosures: California and Florida switch places

Reed Saxon

A foreclosure sign at a home in Pasadena. The foreclosure situation in California is improving, reports RealtyTrac.

When it comes to November's foreclosure activity, California and Florida have switched places, real estate analytics firm RealtyTrac reports. But the two states still have a lot in common when it comes to real estate woes.

Nationwide, 16 of the top 20 cities for foreclosure activity are in California  or Florida, said RealtyTrac. Both states have cornered the entire top ten for cities with populations over 200,000. 

But for a change, California is in the bottom three (Riverside-San Bernardino-Ontario, Stockton and Modesto), while Florida took the top seven spots. As recently as August, Modesto was the number one city for foreclosure activity in the U.S.

In November, the Palm Beach-Melbourne-Titusville metropolitan area led the list. There, one in every 158 homes faces foreclosure.

Foreclosure activity declined year-over-year in all of California’s top 10 cities, while in Florida, it increased. But overall in California, foreclosure rates are still among the country’s highest, with one in every 430 homes receiving a filing in November. 

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There's a short sale boom in California — but will it last?

A short sale home in the Spring Valley a

MARK RALSTON/AFP/Getty Images

A short sale home in Las Vegas. Short sales have begun to supplant foreclosure-related sales in the U.S. market.

The real estate market is California has improved - slowly and steadily - but a shift is underway. Real-estate data firm RealtyTrac, which specializes in foreclosure information, has released its 2012 U.S. Foreclosure and Short Sales Report and it indicates that short sales are supplanting foreclosure-related transactions in the state. 

A short sale is, in essence, a kind of foreclosure without the the bank getting stuck with the property. In a short sale, the lender agrees to accept less than what’s owed on a home — but the homeowner locates a willing buyer. The process can take a while. But for borrowers who are underwater on their loans — and many in California still are — a short sale can be one way out of a bad financial situation.

It also means that the homeowner avoids foreclosure.

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