Average Negative Equity at Foreclosure Exceeds $200,000

Notices of Default and Properties Sold at Auction Continue to Rise in February

Discovery Bay, CA, March 12, 2009 - PropertyRadar, the only website that tracks every California foreclosure with daily auction updates; today issued its California Foreclosure Report for February 2009. The average difference between current market value and outstanding loan amount exceeded $200,000 for properties sold at a foreclosure auction in February. This represents a 189 percent increase in negative equity when compared to properties foreclosed on a year earlier. Notices of Default have increased 21.3 percent from January and have nearly returned to the peak levels reached in April 2008, despite the President's Day holiday and February being a short month. Properties sold at a foreclosure auction (trustee sales), rose 11.9 percent from January to 17,131.

High-level findings for February include:

• • Notices of Default, the first step in the foreclosure process, increased 21.3 percent over notices recorded in January. A total of 43,836 default filings represents a 17.3 percent increase from February 2008. Given the short month, the average daily number of Notices of Default recorded in February was up 27.6 percent from January.
  • Notices of Trustee Sale filed in February decreased 14.7 percent from January filings, with a moderate year-over-year increase of 2.2 percent from February 2008. With the current average delay of 125 days from the filing of a Notice of Default to filing the Notice of Trustee Sale, this drop follows the decline in Notices of Default seen late last year in response to Senate Bill 1137.
  • Auction sales for February increased 11.9 percent from January to February, to 17,131 sales, representing $7.2 Billion in loan value. While sales were up 1.2 percent year over year, they remain 41 percent below the peak reached in July 2008. Of the properties sold at auction, 92.8 percent went back to the lender, representing $6.65 Billion in loan value for the 15,904 properties.
  • Properties sold to third parties at auction continue to increase, rising 222.9 percent from the same time last year to a record 1,227 properties, a 38.8 percent increase from January.

"Despite their unpopularity, foreclosures and short sales are currently the only mechanisms working to eliminate the negative equity now plaguing 30 percent of Californians," says Sean O'Toole, founder, and CEO of PropertyRadar. "While prices have corrected to affordable levels in many parts of California, housing markets and the economy continue to suffer due to the unsustainable debt taken on during the housing bubble."The average property sold at auction in February of 2009 had $201,052 in negative equity, based upon an average value of $250,030, $422,349 in loans, and an additional $28,733 in negative amortization, interest, and fees. A year earlier the average foreclosure had $69,529 in negative equity, based on a value of $378,578, loans totaling $423,111, and negative amortization interest and fees of $24,997. These averages likely underestimate negative equity as they exclude past due amounts and negative amortization on 2nd mortgages for which no Notice of Default has been filed. Nearly 99 percent of the loans foreclosed on in February were originally made between 2004 and 2007, with 46 percent having been made in 2006 alone. On average, these properties were 3 bedrooms, 2 baths, and 1,589 square feet, with more built-in 2005 than any other year at 5.7 percent of February's foreclosures.

Opening bids at auction were discounted an average of 36.3 percent from the outstanding loan balance, a decline of nearly 5 percent from the prior month. Still, the number of properties that were discounted by 50 percent or more increased to 6,307 of the 17,131 taken to auction. The largest discounts were found in Monterey, San Benito, and San Joaquin counties, at over 46 percent, while San Francisco County continued to see the smallest discounts of any major county at 20 percent. "These deep auction discounts reflect the significant negative equity lenders and homeowners are facing, while also offering opportunities for knowledgeable investors," offers O'Toole.

PropertyRadar Report by County

Sign up to receive the California Foreclosure Report

CALIFORNIA FORECLOSURE REPORT METHODOLOGY

Rankings are based on population per foreclosure sale.

NDF indicates the number of Notices of Default that were filed at the county, and NTS indicates filed Notices of Trustee Sale.

Sales indicate the number of properties sold at a foreclosure auction. Percentage changes are based on monthly Sales. The data presented by PropertyRadar is based on county records and individual sales results from daily foreclosure auctions throughout the state—not estimates or projections.