New Law Cuts LA Foreclosures 50%
Los Angeles home foreclosures fell sharply in October from September as a new California law came into effect, while the number of foreclosures in Miami continued to grow at a slower rate, real estate research website PropertyShark.com said Tuesday.
The number of newly scheduled auctions on foreclosed properties in Los Angeles county fell 51 percent, the greatest monthly decline in two years.
The law, passed July 8, requires lenders to contact homeowners and explore options to avoid foreclosure before initiating the process. Some sections of the law became effective Sept 8.
Its implementation accounted for most of the decline, to 2,389, in the number of newly scheduled auctions foreclosures in Los Angeles County, said PropertyShark.com Chief Executive Bill Staniford.
By comparison, such auctions fell only about 1 percent to 4,863 between August and September.
However, the law requires only a 30-day waiting period before the lender files the foreclosure notice, which means the closure of that period might result in a reversal of this month's dip, Staniford said.
"We could see this snap right back," he said.
Foreclosures are at the heart of the slump afflicting the U.S. housing sector, its worst since the Great Depression.
The boom that peaked in 2006, fueled by a wave of lending to risky subprime borrowers, was followed by a bust as those borrowers began to default on their mortgages.
Foreclosures force supply up and prices down, setting off a vicious cycle in which a growing number of otherwise creditworthy homeowners default as well because they are "underwater" on their mortgages, or owe more than their homes are worth.
Metropolitan areas such as Los Angeles and Miami, where subprime lending and the accompanying overbuilding was most common, saw the highest price spikes, the steepest declines and the sharpest surges in foreclosures.
But in localities where prices have dropped more precipitously, as in Los Angeles, the rate of increase in foreclosures is slowing. "Buyers will be there at the right price," Staniford said.
October's foreclosures in Los Angeles are still up year over year, but only 10.9 percent versus an increase of 338 percent to 2,155 between October 2007 and October 2006. In Miami, however, foreclosures increased 34.9 percent to 861 from October of 2007. Between September and October, foreclosures in the city rose 93.5 percent.