A Brief History Of California Foreclosures And What They Do To The Golden State

Quickly realizing how California foreclosures have affected the Golden State of late might be important when considering investing in property out in California but also anywhere else where people are considering getting back into the housing market. Why someone should look at California in order to draw lessons mostly has to do with the fact that whatever happens out in California inevitably has an effect on the rest of the country, meaning good lessons can be drawn.

By now, just about everybody knows that the economy finally took its inevitable dive late in 2008. It’s less well-known, though, that the Golden State went into its own recession a couple of years before that. At that time, the housing markets out in California had been contracting steadily, with some in the state ignoring the issue while others began to attempt to sound the alarm, if only to warn other states that a storm was coming.

It’s also the case that the rate of increase in CA foreclosures could have served as a precursor to foreclosures elsewhere in the country. The rate can also be traced back to certain defects in the way the state manages its housing inventory. In a way, California is like an early warning system though it doesn’t seem as if too many people heeded the warning as early enough as they should have this time around.

Much of this problem that confronts California and other parts of the country (especially in cities like Las Vegas and states like Florida) owes its genesis on the fact that a goodly amount of real estate speculating had been occurring for quite a while out in California. Additionally, many people chose to ignore the fact that an economic boom will inevitably be followed by an economic bust. Many people were unrealistic about real estate, it seems.

Eventually, prices of homes and land had no rational attachment to supply and demand. This was brought about partly because of the easy lending policies of many banks and other funding sources, all of whom expected the boom to go on forever, sadly. Of course, this was a dream that soon turned into a nightmare. Those policies — encouraged by certain quasi-governmental and actually governmental agencies — also helped to bring about increased foreclosures.

It’s a fact, though, that a recession was truly inevitable. Many investment instruments backed by all of the mortgages taken out (many by people who probably had no business getting into a mortgage in the first place) turned out to be what the industry now calls “bad paper.” Compound the effects of the recession, which sooner or later have to break out after such a long period of growth, and all of the ingredients were there.

There was no possible reaction other than for the rate of CA foreclosures to shoot up. Many communities in the state have seen declines in home values of more than 50% in some areas and the recession has contributed to a steep drop in state-collected revenues from loss of property taxes, for one. For another, keep in mind that those revenues propped up schools and other services across the state.

What the Golden State can do when it comes to getting the rate of CA foreclosures down isn’t well known as yet. There are some signs of hope out in the Golden State and many would say that now might be the time for an investor who is willing to take a long view of things to get back into the markets if, indeed, they’ve settled down. If it’s possible to make something out of these markets anywhere, it would have to be in California, most people might say.

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