The residential meltdown and resulting foreclosures have played a large role in the Great Recession, at least in California and the rest of the sunbelt. As would be expected, there are a lot of numbers thrown around concerning the status of foreclosures in California: the number of "new notices of default," the number of new "notices of trustee sales," the number of homes actually foreclosed, etc. I would expect that as we exit this recession, these numbers should improve and according to many reports, there has been some improvement.
There is 1 set of numbers that doesn't seem to get much play...the number of active, pending foreclosures. An active, pending foreclosure is where the Notice of Trustee Sale (the last step before the property is actually auctioned off at the courthouse steps) has been recorded but a sale has not taken place. Under "normal" circumstances, the Trustee Sale would take place 21 days after the Notice is recorded. Even though the sale can be postponed for a number of reasons, there would not typically be an extended delay.
At the end of 2006, before the start of the recession, there were 8,500 pending foreclosure sales in California. By July 2008, well into the recession but before the real "meltdown" of 4Q08, the number climbed to 65,000, with 40,000 new notices being filed each month. The good news is that as of 12-31-09, new notices of sale have declined, but the number of pending sales is now 144,000! The number of sales getting resolved each month (sold to the bank, a 3rd party or cancelled) has recently been less than the number of new notices recorded! How can we possibly climb our way out of this mess without the lenders clearing up these "toxic assets" that we have heard so much about? I don't think we can.
The reason for this disconnect seems to be unknown to even the most knowledgeable pundits. The speculation includes: lenders want to control the supply of properties to avoid further drops in pricing, lenders can't keep up with the volume, the Feds are trying to protect the financial system and bolster the banks, etc. Whatever is happening on Wall Street or in Washington, I am going to keep my eyes on these numbers because I don't see how Main Street can begin to recover until the number of pending foreclosure sales starts to come down. I am inclined to error on the side of hoping it drops more quickly rather than continuing the pain for years to come.
