An uptick in home mortgage defaults and trustee sales in Kern County since April may suggest foreclosures stemming from the COVID-19 economic slowdown could slow an otherwise strong local single-family housing market.
The rebound in local foreclosure-related activity has been modest and totals remain well below levels reported just a year earlier. It's likely the situation would be worse if not for a moratorium on certain foreclosures.
In the context of mounting concerns around the country, observers say the data likely points to a reckoning that could force more families out of their homes in the year ahead. But for now, they add, it doesn't appear the local home market faces anywhere near the volume of foreclosures seen during the Great Recession.
"The (projected) increase in foreclosures will increase the (local home) supply and drive down prices," Bakersfield appraiser and market observer Gary Crabtree said by email. But, he added, "This (jump) should be 'mild' compared to 'The Bubble'" that led to a jump in foreclosures in 2008 and 2009.
The local home market is otherwise seen as being in good shape, evident in rising median sale prices and multiple purchase offers on in-demand homes priced between about $200,000 and $400,000. The sellers market has been aided by a shortage of homes for sale and low interest rates on mortgage loans.
DEFAULTS, TRUSTEE SALES
Notices of default, which lenders typically send to borrowers when mortgage payments are 30 to 45 days past due, bottomed out in April at 22, county records show. The total rose steadily to reach 54 in July before declining to 36 in August. For comparison, there were 125 notices of default issued in Kern in August 2019.
Trustee sales — public auctions that can take place after a homeowner is in default for two months or more — have more than quadrupled in Kern after hitting a multi-year low of seven in May.
National statistics add weight to the notion that people who have lost their jobs because of the pandemic are struggling to keep up with their mortgage payment schedule.
Irvine-based financial information company CoreLogic Inc. reported Wednesday that the share of U.S. loans three to four months in arrears quadrupled between May and June, when it reached a 21-year high of 2.3 percent.
The company went on to say millions of families could end up losing their home, which could put downward pressure on home prices and subtract from the equity property owners have built up in their houses.
Foreclosures are not expected to jump soon thanks to provisions contained in the federal CARES Act, passed by Congress as a lifeline to U.S. consumers hit by the COVID-19 crisis.
Under that legislation, mortgage borrowers can put off making payments to their home lender for up to 12 months, as long as the pandemic is the reason for the delay.
Late last month, the Federal Housing Finance Agency announced Fannie Mae and Freddie Mac, which buy mortgages from lenders, extended a moratorium on single-family foreclosures until at least Dec. 31. It said the extension will protect more than 28 million homeowners.
Bakersfield real estate agent Jeanne Radsick noted that not all homeowners who exercised their right under the CARES Act to delay making mortgage payments necessarily needed the extra time. That means the situation, though challenging, may not be as bad as it looks, she said.
Radsick, who serves as president of the California Association of Realtors, added that the association has projected that 60,000 California homeowners could be foreclosed on. That's a lot, she said by email, "but many of those in forbearance (delaying paying their mortgage) won't be ultimately foreclosed on."
"Our current project is for less than 10% of sales next year to be foreclosures compared with 30-40% back in 2008," she wrote.