The rate of California foreclosures and how it's been affecting California presents a case study in how to not run a real estate market for long-term benefit, basically. California benefited from at least a decade of unbridled enthusiasm for its real estate that was coupled with uncontrolled speculation that masked the fact that nothing ever lasts forever, including a booming real estate market it would seem.
The 1990s -- especially beginning around 1995 and lasting for about a decade -- out in California was a boom time for real estate. Prior to 1995, home prices remained fairly steady after adjusting for inflation. Homes were usually looked at as what they were, which was a "home" and not an investment instrument to be bought, pumped up and then sold not soon after it was purchased.
And this is where the first issue with the increasing rate of CA foreclosures began to show itself; in the fact that home buyers were expecting to take profits from a home not soon after they purchased it. What this means is that they were loading more debt onto the home in the form of second mortgages and home equity lines of credit (HELOCs) as well as expecting a large profit from a sale in the future.
During that decade-long increase in property values in California, many buyers were getting into homes and then getting right back out of them within a couple of years and making good profits from doing so. But anybody looking at the market with even a little bit of economic smarts would've pointed out that every boom is eventually followed by a bust and this happened, of course, out in California.
Add in the fact that many of these people were over-leveraging themselves to get into homes that were being priced increasingly higher because of the increase in the demand for such homes and a recipe for potential disaster was being created. Taking home loans at initially-low payments and interest rates and then expecting to beat the market by getting out of the home before the rates increased made a little sense, initially.
But that kind of formula (buying more home than could be afforded and taking profits before the monthly payments went up steeply) can only work as long as home prices continue to climb. It was inevitable that a recession would hit and one did in 2007, though California began to experience a softening of the real estate market in late 2005. Many people chose to ignore it, unfortunately.
However, once California property values started on a downward swing, the problem could only be exacerbated further by any other drop in other markets, which occurred in late 2008 when Wall Street went off the rails for a short time. Suddenly, many owners of property out in the Golden State were in dire straits and that fact was evidenced by a steep rise in California foreclosures all across the state.
As to what the rate of CA foreclosures might mean for California, most would say that a period of decline and a shakeout accompanied by a solution to California's budget woes and structural defects in its real estate markets is necessary. With so many homes sitting in foreclosure or unsold, California is going to have to work hard to improve itself, which is something most hope it does soon.
When your being foreclosed with your current home and need help, the best thing for you is to find a CA foreclosure web page. They can have the latest information regarding Ca foreclosures that can help you with your problems.
Orignal From: Understanding California Foreclosures And Their Affect On California Economic Activity
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