Foreclosed Home Market Stabilizing in California’s Monterey

After weeks and weeks of falling home prices and growing repossessed home inventories, the housing market in California’s Monterey County is showing some signs of approaching stability.

Real estate analysts in the area have observed that the number of houses sold in May almost matched the number of houses offered for sale in the same month, prompting hopes that the balancing of demand and supply is finally working out for the market.

In May, out of 343 housing units offered for sale, 369 units were sold.

Just like in other housing markets across the country, Monterey’s housing market started its downward spiral in 2007 when large numbers of subprime mortgage borrowers defaulted. Most of these home loans were provided by lenders to borrowers who actually could not afford to pay their loans.

Houses inflated foreclosed home inventories and pushed down the prices of not only foreclosed houses, but also the prices of new homes and the values of neighboring homes occupied by families who were faithfully paying their mortgage loans.

The recession that followed and the consequent loss of jobs worsened the situation and put more houses into foreclosed home inventories.

Despite concerns about declining home price levels, housing analysts and residents of Monterey are glad about the slowing pace of foreclosed home inventories.

A further slowdown in foreclosures is expected after the California Foreclosure Prevention Act, which included a three-month foreclosure moratorium provision, took effect this week.

Under the new foreclosure prevention law, mortgage lenders are required to first work out a loan modification before foreclosing on a property. They can cut the interest rates or extend the term to lower monthly mortgage payments.

Lenders are also required to submit their loan modification plan to the state if they like to get exempted from the three-month foreclosure moratorium.

Since 2007, California has already posted over 365,000 foreclosures, with many more expected as the scheduled adjustments of Alt-A home loans occur.

In the past 5 months, the number of houses for sale in Monterey has been declining. In January, there were 2,406 housing units for sale. The number dropped to 2,387 units in February and to 2,274 units in March. In April, there were 2,066 units.

If Monterey’s housing market sustains its balance of demand and supply and maintains its affordability without too much loss in home value, then Monterey’s residents can say they are coping well with foreclosed home effects.

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