Untold foreclosure story: Flippers in trouble
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A new wrinkle in the foreclosure drama: ForeclosureRadar reports today that 44.3% of the foreclosed homes sold at auction in California in August were non-owner occupied.
“Many blame sub-prime lending for our current real estate crisis, but rampant speculation, even by those with great credit, played a leading role.” said Sean O’Toole, Founder and CEO of ForeclosureRadar.com. “The subprime market took the first hit as those borrowers had the least to lose when they walked away. Now that nearly half of foreclosures represent non-owner occupied properties, it is clear that speculators are walking away too.”
O’Toole sees a little-discussed culprit in the foreclosure crisis: oversupply of new homes, fueled by artificial speculative demand. ‘This is further validated by the fact that per capita building permits correlate quite nicely with our foreclosure rankings,’ O’Toole said. ‘Sacramento, the Central Valley, East Contra Costa County and the Inland Empire have all seen rampant growth, and now have the highest foreclosure rates in the state.’
Just two weeks ago, the Mortgage Bankers Assn. made news by estimating that flippers account for one in five foreclosures; today’s report indicates the rate could be more than double that in California.
Overall, foreclosure auctions jumped by 10.4% from July to August, according to ForeclosureRadar’s monthly report. The company began gathering data last September, so it does not yet have year-over-year numbers. Notices of Default, the first step in the foreclosure process, and thus a preview of coming foreclosures, rose 16.3% from July to August, ForeclosureRadar reported.
Riverside County has the most foreclosure auctions per capita; Los Angeles remains relatively immune to the foreclosure crisis, ranking just 37th among California counties in foreclosure auctions per capita.
Month Foreclosure Auctions month-to-month change
July 8,716 24.6%
August 9,477 10.4%
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Photo Credit: AP