More homeowners miss payments, foreclosures increase

Foreclosures are back, sort of.

California had more than 14,200 homes with foreclosure filings during the third quarter, a 31% increase compared to the same three-month period a year ago, according to ATTOM Data. 

The figure is more comparable to foreclosure filings before the pandemic, when most foreclosures were banned by the federal government.

But lenders have been allowed to resume foreclosures during the past few quarters, eliminating the pandemic safety net. However, the California Mortgage Relief Program can help some homeowners catch up on their mortgage and property tax payments, up to a maximum of $80,000.

ATTOM defines foreclosure filings as default notices, scheduled auctions and bank repossessions. Of course, many homeowners may receive a default notice but could catch up on their mortgage payments. And financially strapped owners may decide to sell, especially since many homeowners are considered equity-rich.

BAD, BUT FAR FROM THE GREAT RECESSION

Foreclosure filings affected about one of every 1,000 households with a mortgage in California, a bit higher than the national average of a foreclosure filing for every 1,121 homes. The Golden State had the most foreclosure filings in the U.S. during the third quarter, followed by Texas.

However, the current figure is far from the Great Recession, when California had an average of 60,000 filings every quarter between 2008 and 2011. Plus, again, many homeowners have equity and are more likely to sell their home and enjoy a nifty profit than allow a mortgage lender to foreclose, eliminating the equity in the property.

Eight of the nine metros in California surveyed had at least a 20% increase in foreclosure filings during the third quarter compared to a year ago, with Redding leading the way at 60%.

Bakersfield had the fourth-largest ratio of homes with foreclosure filings in the U.S., with one of every 424 homes. Redding and Stockton also had high ratios at one for every 488 and 623 homes, respectively. 

Nationwide, about 124,500 homes had foreclosure filings, a 28% increase from the second quarter – and up 34% from a year ago.

“Foreclosures are on the rise again this quarter,” says ATTOM CEO Rob Barber. “Foreclosure starts are nearly back to where they were two years ago when the federal government lifted a pandemic-related moratorium on most foreclosure filings. This rise in foreclosures might also be attributed to pending filings finally (being processed). Even with the national economic upturn and job stability, it’s evident that some homeowners are still grappling with the pandemic’s financial aftermath or encountering new challenges.”

RegionQ3 foreclosure noticesCompared to Q3 a year ago
California14,230+31%
Bakersfield64536%
Fresno424+27.3%
Los Angeles3,907+21.1%
Redding163+60%
Riverside2,458+27.5%
Sacramento1,105+43%
San Diego789+18%1
San Francisco1,336+37%
San Jose275+7.4%
Stockton400+50%

Source: ATTOM Data

New-home construction remains solid, like in this Lodi-area development. SHUTTERSTOCK

California needs another 880,000 homes

California has been battling a critical housing shortage for the past two decades, with more households than available homes.

The deficit has a far-reaching effect, from affordability – only one of every six households could buy a home during the second quarter – to increasing the number of residents experiencing homelessness.

So, how big is the shortage? California has a shortage – also referred to as an underproduction – of about 880,000 homes, according to Up For Growth.

California has the biggest underproduction of homes, almost three times the figure of second-place Texas at 306,000 homes.

Or, think of it this way: If each of those missing homes were people, the City of Underproduction would be the fourth-largest city in California, slightly more than the population of San Francisco.

VENTURA, INLAND EMPIRE AND CENTRAL VALLEY NEED MORE HOMES THE MOST

Six of the 10 cities (see table below) with the largest underproduction of homes on a percentage basis were in California, with Ventura County off a nation-leading 12.5%, according to Up For Growth. The county – home of Ventura, Oxnard and Camarillo – needs about 36,000 more homes.

The Inland Empire (Riverside and San Bernardino counties) had the third-highest percentage in the nation, with a 10.7% underproduction of homes (or about 161,000 homes).

Oddly, eight of the 10 cities with the largest underproduction, again based on percentage, are in some of the most affordable housing markets in the state, such as Madera, Visalia and Yuba City. 

But many homebuilders are focused more on larger metro regions, where development costs are high but prices are richer. For example, the average prices in Madera and Visalia in the Central Valley are half the median home price statewide, according to the California Association of Realtors.

MORE HOMES ADDED, BUT MILLIONS MORE NEEDED

Now, California has fared better in home construction during the past few years, according to the State Department of Finance. California added about 123,000 homes in 2022, the most since the Great Recession.

But housing experts estimate the Golden State needs about 2.5 million more homes during the next few years to ease the housing shortage.

Of course, with more Californians moving out of state – hello, Arizona, Idaho, Nevada, Texas and Utah – the housing shortage may change slightly.

% short of housing neededHousing units needed
Ventura County12.5%36,161
Inland Empire10.7%160,841
Madera8.8%4,251
Salinas8.3%9,868
Merced7.9%7,053
Stockton7.9%19,957
Visalia7.6%11,410
Los Angeles-Orange County7.1%332,275
Vallejo7.1%11,577
Yuba City5.9%3,698
Modesto5.810,547

Source: Up For Growth

A cool housing market in California, but Santa Barbara is warm. ADOBE STOCK

Santa Barbara stands alone on WSJ/Realtor.com index

California’s housing market is one of the coolest in the U.S., with only one city listed on The Wall Street Journal/Realtor.com Emerging Markets Index for the third quarter.

The closely watched lists metro areas where the housing market is appreciating and with strong local economies, likely leading to prices rising.

Santa Barbara County finished at No. 14, the only metro in the state to finish in the top 50. Salinas, San Jose, San Diego, Ventura County and Sacramento-Roseville were in the top 100.

Blame high mortgage rates (sound familiar?) for the disappointing number of California cities on The Wall Street Journal/Realtor.com list. Home sales were down 22% in September compared to a year ago, and home listings are off as much as 40%, according to multiple reports.

Topeka, Kan., topped the list, followed by Elkhart, Ind., and Oshkosh, Wis.

ADOBE STOCK

Home-improvement projects will get hammered with high mortgage rates

The highest mortgage rates in more than two decades are significantly affecting the housing market, as home shoppers hold off on buying – and homeowners put off selling.

But homeowners will also hold off on home-improvement projects as much as possible in 2024, according to the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University.

Home remodeling spending will decline 7.7% through third-quarter 2024, or a drop of almost $40 billion. That’s bad news for home-improvement giants Home Depot and Lowes, and manufacturers like Andersen and Kohler.

“Homeowner concerns about the health and direction of the broader economy may also dampen plans for remodeling projects,” says Carlos Martin, project director of the Remodeling Futures Program at the Center.