IRVINE, CA—While national and Southern California foreclosure rates are at 11-year lows, foreclosures could rise in this market if some fundamentals don't change, reports ATTOM Data Solutions.
In a new report from the firm, Michael Mahon, president of First Team Real Estate, which covers the Southern California market, says, “Across Southern California, while foreclosures have maintained historically low levels during much of 2017, housing affordability has become the concern that has many watching the market for a potential shift in the near future.” He added that with wage growth not meeting equity growth across many Southern California markets, along with rising interest rates, there are some concerns that foreclosures could be on the rise in 2018.
Daren Blomquist, SVP at ATTOM Data Solutions, tells GlobeSt.com it's hard to know for sure how much foreclosures could rise in Southern California due to the affordability issue, but in some other markets with low affordability, we are starting to see recent upticks in foreclosure starts. “For example, in Dallas, foreclosure starts have increased on a year-over-year basis for the last two quarters—up 10% in Q4 and up 6% in Q3. Also, in the Inland Empire (Riverside and San Bernardino counties combined), we did see a 4% year-over-year increase in foreclosure starts in the fourth quarter following 14 consecutive months of year-over-year decreases, but we did not see an increase in the L.A./Orange County area.” Agreeing with Mahon, Blomquist added that if home prices continue to appreciate at the same pace they have been without a corresponding increase in wages, he would expect to see some similar single-digit percentage increases in foreclosure starts pop up across Southern California in 2018.
According to the report, national year-end 2017 foreclosure filings were down 27% from 2016 and down 76% from a peak of nearly 2.9 million in 2010 to the lowest level since 2005. “Thanks to a housing boom driven primarily by a scarcity of supply, which has helped to limit home purchases to the most highly qualified—and low-risk—borrowers, the US housing market has the luxury of playing a version of foreclosure limbo in which it searches for how low foreclosures can go,” said Blomquist in the report. He noted that there were a few notable local market exceptions to this trend in which a backlog of legacy foreclosure activity leftover from the last housing crisis is still winding its way through a labyrinthine foreclosure process, resulting in incongruous jumps in various stages of foreclosure activity in markets such as New York, New Jersey and Washington, DC.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
