More tarnish on Golden State real estate

The folks over at DataQuick picked a pretty good day to release the latest California foreclosure statistics. While Ben Bernanke and the boys at the Fed were busy slashing interest rates and equity investors were scrambling to try to figure out if they should panic now or panic later, news came that home loan defaults in the Golden State during the fourth quarter reached a new all-time high.

The photo below from this LA Times story is now a familiar sight in much of the state where, just a couple years ago, it appeared to be a land of plenty for all as nearly every homeowner had become wealthy beyond their wildest dreams.

Who'd of thought that gains of $100,000 per year on the value of their home, the equivalent of more than a decade's worth of conventional savings for most families, would reverse itself in such dramatic fashion.
Many of the state's 36 million residents were just getting used to living large and now it's all coming to an end.

As usual, over at Calculated Risk there is an enormous graphic to put the latest developments into the proper historical perspective.

Remember a couple years ago - as recently as the summer of 2006 - when real estate "experts" were saying that foreclosure activity was still well within normal ranges. They could look back to 1996 and say, "The level of defaults is still far below the peak reached in the mid-1990s".

Not anymore - that 1996 peak now looks puny.
The story of one Mr. Hernandez in Southern California is probably typical of how the many other Mr. Hernandezes in the state (along with quite a few people with last names of Garcia, Nguyen, Lee, Smith, Lopez, Martinez, Rodriguez, Johnson, and Gonzalez) are quickly changing their views on real estate.

Leandro Hernandez of Chino Hills is among thousands more who could be next. He tried to sell his house in 2006 to get out of a mortgage he couldn't afford but found no takers.

Faced with a house worth less than his loan balance, he's trying to cut a deal with his bank. But if the lender won't budge, Hernandez, 45, says he knows what he will tell them.

"Foreclose me," he said defiantly.

Hernandez knows that an eviction is a lengthy process. "I'll live in the house for free for 12 months, and I'll save my money and I'll move on."

It's hard to imagine how things could possibly improve in the near term now that the tide of public opinion seems to have turned.

Here's the raw data from DataQuick for the fourth quarter:
The statewide fourth quarter total of 81,550 notices of default accounts for about one-third of the entire 2007 total of just over 250,000. Foreclosure rates will likely reach even higher levels in 2008.