Turning Around California’s Foreclosure Market Requires An Investment
By John Ford
The Great Recession of 2008 collapsed our housing market and foreclosures skyrocketed. More than seven years later, as home values are beginning to move upward, there are still economic caution flags. California isn’t out of the woods yet; we grapple with some of the highest numbers of foreclosures in the nation.
In 2015, national foreclosure filings, default notices, scheduled auctions and bank repossessions were reported on 1.1 million properties, down three percent from 2014 and down sixty-two percent from the peak of 2.8 million properties in 2010.
In analyzing California foreclosure data, Daren Blomquist, contributor to Forbes, concluded that the average California default amount was $56,415 in 2014, an amount representing homeowners who missed their mortgage payments an average of 18 months before the bank started its foreclosure process. While this process took 429 days, the total time from delinquency to the bank auction, took an average of 1,213 days – well over 3 years to complete the process.
In the past few years, the banking industry has tried to unclog the foreclosure pipeline, by working with homeowners to modify their loans or to get the homes back on the market.
As Blomquist noted, the foreclosure process can take a long time, but the timeline is intended to help homeowners exhaust every possible option they might have, in order to keep their home. If the financial ability is not there, the bank auctions off the property.
Real estate investment groups like Wedgewood in Southern California, for example, work with both federal government agencies and banking institutions to purchase blocks of homes, buying hundreds of homes each month. After taking title, a team of property managers inspects the homes, cleans them up, rehabilitates them and then makes them available to new homebuyers.
These investment groups often have limited knowledge about the condition of the property it is buying, taking the homes as is and assuming all the risks and responsibility.
Some of the homes are completely gutted. Others are abandoned. Some have been destroyed by transients or local gang members. In homes where the previous homeowner or tenant still resides, many of these real estate buyers have adopted a highly responsible and compassionate approach to working with those tenants who have fallen on hard times. It is industry leading approach includes a “Cash for Keys” program to help residents move into their next home by offering financial assistance for their transition.
Local communities depend on these real estate investment groups because they have the financial ability to buy, refurbish and quickly sell these homes in order to reduce the density of foreclosed homes. They help rid areas of blight; boarded up homes with unkept yards often times attract crime and reduces the property values of the neighborhood. Homes with good tenants make good neighborhoods. Responsible homeowners pay taxes and become an integral part of the community.
As the housing market continues to rebound and the foreclosure pipeline improves, investment companies will continue to play a pivotal role in improving the economic housing market and financial stability of local communities that depend on the property tax revenue to provide vital city and county services.
John Ford is a licensed realtor with the Ford Realty Group. He specializes in housing both in the San Gabriel Valley and North Orange County areas