Has the foreclosure crisis bottomed out?

January 27, 2009 7:00:04 PM PST
The number of default notices sent out in California was down 20 percent last quarter. Has the foreclosure crisis finally bottomed out?

Few people expect the hint of good news about California's slowing foreclosures to last.

Jim Matzen is a San Jose realtor specializing in foreclosed properties.

"Myself over the last five days, I've gotten three properties. That's a lot over five days so were really seeing some rising despite what everybody is talking about things slowing down," said Matzen.

A closer look at the numbers bears that out. In September the state's foreclosures had dropped significantly to fewer than 15,000. But in December, defaults were back up hovering near 40,000.

Leon Huntting is Past President of the California Association of Mortgage Brokers. He says in some ways, new regulations aimed at trying to keep people in their homes is just deferring foreclosures, not stopping them.

"So instead of the process taking it's normal course to close out on foreclosure, it can allow up to a year before the foreclosure can go through," said Huntting.

There's also a new concern that the increasing number of people without jobs will eventually hit home, literally, if the newly unemployed can't afford to keep up on their mortgage payments.

Those in the market to buy though are finding bargains. The median home price has dropped to $281,000 dollars. That's down from nearly half a million a year ago.

The pressure on prices is a direct result of the foreclosure crisis.

"I did an open house last weekend. Fifty people showed up looking at a foreclosed home so there is a lot of interestes from buyers because the prices are so low," said Matzen.

Foreclosures are at the heart of more buying activity. Last quarter foreclosed properties accounted for 55 percent of all home re-sales in California. Last year, it was just 19 percent.