Despite the Hubbub, Foreclosure Rate Still Low

While some regions of the nations have more problems than others, Southern California and the San Fernando Valley in particular have seen increases in delinquencies and foreclosures that may seem dramatic for only one reason — both rates had been unnaturally low for so long that any increase would seem like a giant leap.

By WINNIE DAVIS, President, and David Walker

Southland Regional Association of Realtors®

To read some reports, the sky surely must be falling on the housing market when it comes to increases in the national loan delinquency and foreclosure rates, yet that view is absolutely disconnected from the reality here in California.

While some regions of the nations have more problems than others, Southern California and the San Fernando Valley in particular have seen increases in delinquencies and foreclosures that may seem dramatic for only one reason - both rates had been unnaturally low for so long that any increase would seem like a giant leap.

In fact, the Mortgage Bankers Association said recently that despite an increase in foreclosures late last year, California home owners are paying their monthly mortgage bill. In fact, fewer Californians were behind on their loans than were U.S. homeowners overall.

Consider the following numbers and it will be clear why understanding the big picture is essential to knowing which way the market is going locally.

Nationally, the Bankers Association said that during the fourth quarter of 2006 nearly 4.95 percent of all home mortgages in the annual survey were delinquent, which they defined as 30 days or more past due.

Across all loan types, the state with the highest loan delinquency rate was Mississippi with a 10.64 percent rate. Louisiana and Michigan came in second and third at 9.10 percent and 7.87 percent, respectively.

Ohio had the highest foreclosure rate at 3.38 percent, followed by Indiana at 2.97 percent, and Michigan at 2.39 percent.

Compare those numbers to figures for the Golden State.

California ranked 43rd in delinquencies with a rate of 0.43 percent. It ranked 40th in foreclosures with a rate of 0.58 percent, according to the Mortgage Bankers Association.

Foreclosure notices in California currently are two-thirds below the record set in 1996 when the national and local economies were in a deep recession.

The housing market in California is in better shape than other regions of the country due to strong economic fundamentals and low unemployment.

"Far from being a problem, said Doug Duncan, MBA's chief economist, "these clear and effective market signals and actions will help the market to more efficiently regain its equilibrium.

"The market is working," Duncan said, "culling over-capacity from the industry.

"Given our macroeconomic forecast of below trend economic growth and a slowly recovering housing market, we would expect delinquency and foreclosure rates to level off as the housing market regains its footing towards the end of 2007."