A full 15% of all home sales in California now are foreclosures sold at auction. Of the roughly 10,000 homes up for auction last month, only half actually sold. The other half went back to the lender without receiving a single bid. This is not good news for those banking on the Californication effect here in Oregon.
The news from Oregon isn’t much better. Foreclosures grew 40% in the state last year. With about a third of all home purchases in the state being financed with exotic loans I think it’s safe to assume this trend will continue.
The local legislature is taking notice and is now seeking to ban the riskiest type of loans: option-arms. Not many people would argue that these loans should be eliminated. They are a major source of the growing problems in the markets for homes and mortgages.
But by forcing the reduction of credit available to existing homeowners desperately needing to refinance, the local goverment will only exacerbate the problem. I think it’s only a matter of time before we start seeing a multitude of local auctions.