Thursday, June 12, 2008

Santa Barbara County Foreclosure Trends

I have been formally watching these numbers now for about 8 months. I wish I could say that I have a good handle on what to expect next.

My opinion on what's next seems to change by the day.

Certain people I speak with seem to think that the market that has been affected by the foreclosures is getting healthier. More of these foreclosed properties seem to be selling more quickly and buyers are thinking the prices they are paying are very good. This is evidenced by the increase in the number of sales we have seen in Santa Maria, Lompoc, & Goleta in recent months.

On the other hand some people are telling me they think that we are going to see many more homes go in to foreclosure. Reason being current loans that are adjusting are going to continue to raise a borrowers payment. These borrowers may find themselves in a situation where they don't have any way to refinance out of these loans.

I do know that getting a loan these days is much more difficult than it had been in previous years. Some lenders are still calling Santa Barbara a declining market so they will take 5% right off the top of the appraisal before determining how much they will loan a person. An 80% loan to value (that is after the 5% reduction) appears to be about as high as most lenders are willing to go.

Probably the biggest change in qualifying for a loan is how the lenders are looking at the ability to pay the loan back. A borrower must prove to a lender exactly what their income is. In the past many lenders didn't go through the process of tax returns etc... they only required you to state your income without backing it up.

Enough of this education on qualifying for a loan, what about the foreclosure market?

In looking at the numbers, Santa Barbara County is seeing an increase in the number of Notice of Defaults being recorded. Maybe we have seen this peak since the April number was a little higher than the May figure.

The number of properties going to the lender or a successful bidder at a foreclosure sale has been increasing slightly. This is represented on the chart by the Notice of Trustee Sale documents that have been recorded.

As I mentioned earlier the banks have been selling more properties as well, which is displayed by the REO number in the chart.

What does it all mean? Who can really tell, but here is my superfluous analysis of the information I have. I don't believe we will see the number of foreclosures climb much higher than it is now. There will be an increase but with the number of loans that are adjusting leveling off I believe so will the foreclosures. One thing to watch are interest rates. If they go down at all then refinancing might become an option again for homeowners who are having their payments increase due to a loan adjusting. This last scenario would be the best thing for everyone.

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