Mounting Foreclosure Inventory in California

Posted on August 8th, 2007 by hinson

According to the latest news report, the rate at which foreclosure is taking place in California is on a rise. Since the last two years, California has been on the verge of topping the list of states that are witnessing the maximum foreclosure inventories. However, in the second half of the year 2007, it has reached its pinnacle.

California has been observing more and more houses finding their way in one or the other stage of foreclosure from the period between April and July. It was shocking to find San Diego experiencing the most terrible situation. It has come into the forefront for facing the largest number of foreclosures. From July 06-07, San Diego has seen such a drastic rise in the amount of foreclosure inventory that it has crossed over 450%.

When there are numerous buyers of the property especially during the boom period, it brings about a downfall in the value of property. People take extremely high loans on their property, which is tough to pay back, thereby paving way for foreclosure to take place. The worst part is that, it is quite cumbersome to sell off the property at a worth cost in the slow moving market. It is in this scenario that bank foreclosure comes into force.

California has always been perceived as the best location for making investment in property. It provides the real estate as well as home buyers with the opportunity to procure the ownership of property with a small amount of investment. This in turn has brought about an increase in the foreclosure inventory, thereby worsening the situation. In the second quarter of 2006, 90% houses that entered the initial stage of foreclosure evaded the foreclosure sale by either selling the house or by means of refinancing.

The reports suggest that in the year 2007, there were only 55% houses that succeeded in avoiding the consequences of foreclosure. This is indicative of the fact that, the rate at which default is taking place is the same, but the rate of foreclosure has increased, thereby causing a rise in the foreclosure inventory. The California bank foreclosure market is witnessing a flood in terms of number of houses for which the foreclosure auction is to be held.

The house owners at default usually find it difficult to get a lucrative price for their property. The houses are then finally sold to the bank at a price, which is quite less as compared to its market price. Thus, the value of house in question drops down to a very low level. Such foreclosures give a golden opportunity to the real estate investors to enter into a profitable venture and that too by making a small amount of investment.