California foreclosures set to surge
California default notices spiked 55% in August, and the number may keep rising in the coming months as mortgage servicers shake off the robo-signing freeze, according to RealtyTrac Senior Vice President Rick Sharga. In August, servicers filed 28,961 default notices in California, the first stage of the foreclosure process in the state, RealtyTrac showed. Another filing tracker ForeclosureRadar found a similar boost in foreclosure starts along the West Coast and said Bank of America (BAC) led all major banks with a 116% jump in August alone. "The industry has not yet returned to normal or necessary foreclosure activity levels, but progress is certainly being made," a BofA spokesperson said. In an interview with HousingWire, Sharga said gave some idea on where that "necessary" level might be. "It wouldn't be a stretch to say that we might see NODs in the range of 30,000 per month in California for a few months, but it's difficult to predict that they'd get anywhere near the record levels we saw back in 2009," Sharga said. From January 2010 through September 2010, California NODs averaged 28,000 per month. That dropped to 26,000 per month for the rest of 2010 after the robo-signing scandal broke in October, when servicers were found to be signing affidavits en masse and without a proper review of the loan files. The slowdown continued into the early part of this year, with the NOD average dropping to 22,000 for the first seven months of 2011. These filings peaked in March 2009 at 58,858 and averaged roughly 42,000 per month that year, the highest average since RealtyTrac began reporting the numbers, Sharga said. A restarted foreclosure process means prices in California are set for possibly more drops, but the effect will not be seen immediately, according to Michael Simonsen, co-founder and CEO of the data analytics firm Altos Research. "The price implications for the foreclosure spike are further down the road," Simonsen said. "August prices did indeed lose their steam from the first half of the year, but it's largely seasonal." Analysts expect house prices nationally to double-dip in the winter ahead and finally hit bottom in the spring of next year. JPMorgan Chase (JPM) analysts long said the fall could be as much as 5%. According to the California Association of Realtors, the median home price in the state reached its highest level this year in August to $297,060, though it is still down 7.4% from the year before. Prices could face other challenges such as the expiration of the conforming loan limits in October and the ongoing deficit struggle, CAR said. With the foreclosure timelines pushed to historic lengths, Simonsen said these properties will begin reaching an already bloated inventory during the height of the selling season of 2012. "Look for the price impact of newly initiated foreclosures to be seen in the spring of next year, as they add to the spring inventory," Simonsen said. Write to Jon Prior. Follow him on Twitter @JonAPrior.