California Real Estate
If Wall Street wants to get even more worried about the real estate market, it need look no further than southern California. There, the culprits aren’t just the bad-credit borrowers whom banks and lenders loaded up with ballooning debt to purchase their dream homes. The well-to-do have partaken of those treacherous loans as well. And now everyone is hard pressed to pay as interest rates rise.
Up to now, the booming housing markets in Los Angeles, San Diego and Orange counties had barely felt the chill that hit Miami and Denver from rising inventories, declining prices and slowing sales. But this week’s spate of gloomy housing data included ominous reports from the West Coast. Led by an astonishing 799% rise in Los Angeles County, foreclosures in southern California jumped 725% in the second quarter, to a record 9,504, from 1,152 a year ago. The spectacularly bad trend was coupled with news from mega-mortgage lender Countrywide Financial that homeowners with good credit are starting to fall behind on mortgage payments. It has all contributed to a contagiously pessimistic mood. “We thought the upper end of the market was immune,” says Steve Johnson, of real estate consulting firm Metrostudy. “But this is now like Kudzu in the South, spreading into all product types in the southern California housing market.”
… Foreclosures in San Bernardino shot up 987% to 1,489 in the second quarter. In Riverside they jumped 793% to 2,509. That stock will soon be competing with a 13-month supply of unsold inventory that’s already on the market. Santoro is braced for the worst. “There’s a tsunami coming and we’re going to get slammed,” he says. And while economics is always local, economic nervousness can go national — even global — in a matter of hours, as recent financial events have shown.