We were recently asked this question while being interviewed by the local ABC TV news station. What prompted the interview was an article and statistical survey published by RealtyTrac: “Forelcosure Sales Account for 31 Percent Of All Residential Sales In First Quarter.”
According to RealtyTrac, “California posted the second highest percentage, with foreclosure sales accounting for 51 percent of all sales there in the first quarter — up slightly from 50 percent in the previous quarter but down from 70 percent of all sales in the first quarter of 2009.” Wow! Over half of all sales were foreclosures, and that’s an improvement from the previous year. The highest percentages were in the San Joaquin Valley, San Bernardino and Riverside areas. Santa Clara County was relatively low by comparison.
So, are foreclosures on the decline in California? Hardly. According to the LA Times “banks foreclosed on almost 200,000 homes in California last year, and this year’s toll is expected to be even higher”.
Sometimes the news is confusing, which is to be expected because the media seems to be generally confused. It’s easy to misunderstand the facts. On one hand, foreclosure activity was down in May, but bank repossessions hit a record high (CNBC, June 10). What . . . foreclosures down, repossessions up? Aren’t foreclosures and repos the same thing? It depends on how the terms are used.
“Foreclosure activity” generally refers to the beginning of the process, and “bank repossessions” refers to homes that have already been foreclosed, or REO (see our earlier post).
Why did the percentage of foreclosure sales decline since a year ago? It’s not because there were fewer foreclosed properties, it’s because fewer of them were for sale. Doesn’t make sense, does it? If there are more bank-owned properties, there should more of them for sale. But according to Rick Sharga, senior VP of RealtyTrac: “they’re managing inventory to prevent a free fall in home prices.” See our earlier post: The Shadow Inventory.
We still have a long way to go.