Defaults Continue to Depress California Housing Market

The rising number of foreclosures in San Joaquin County, Calif., is hurting home sellers because that pumps up competition, makes it tougher to sell properties and depresses prices, the Stockton Record reports.

Still, home builders, mortgage brokers and industry experts said that even with default rates climbing, the impact may not be significant because homes-for-sale numbers have plummeted in recent months anyway.

Shane Hart, vice president for Stockton-based Grupe Co., said the sales market has been improving as many people are “getting off the fence” to buy.

Finally, Hart believes, people are realizing the slow California housing market may have bottomed out or at least be close to doing so. Therefore, they’re getting into the game while it’s good.

Still, he worries about foreclosure.

“My concern is foreclosures. In San Joaquin County, pre-foreclosure notices are three times greater than at the end of 2005. This could translate into increased inventory as these hit the market,” he said.

Greg Paquin, president of the Gregory Group, a real estate information and consulting service in Folsom, said the percentage increases in California mortgage defaults are significant, but the numbers started so low, there won’t be a big enough impact to affect the sales market.

John Knight, a professor of finance and real estate at the University of the Pacific, said mounting foreclosures depress market prices, because lenders tend to sell low to get rid of the property quickly instead of holding out for the best price.

But when faced with taking possession of a property, a mortgage lender will typically bend over backward to work with homeowners to avoid foreclosure.

David DiDio, a mortgage broker with Greene Dream Homes and Loans in Stockton, said the foreclosures downturn should end soon, adding that the last foreclosures upswing a decade ago lasted about a year and a half.

The housing market has picked up noticeably recently.

“By spring, we’ll be out of this, because most of these homes will be able to sell,” DiDio said.

Ben Balsbaugh, residential sales manager for PMZ Real Estate in Stockton, said growing foreclosures do make it tougher on sellers, and will continue to do so until the state’s wave of bad credit mortgage troubles has passed.

SOURCE: Stockton Record