Friday, May 11, 2007

Ground Zero In California

Reuters reports from California. "Twice a day, would-be real estate moguls gather on the local courthouse steps for the latest can't-miss opportunity in California's land rush: the foreclosure auction. Veterans and 'newbies' crowd around auctioneer Gary Oberdalhoff as he lists a property whose owners couldn't pay the mortgage, one of thousands to go on the block in this sprawling, arid region 50 miles east of Los Angeles."

"'Do I have any opening bids?' Oberdalhoff asks. Several step forward to show him cashier's checks worth hundreds of thousands of dollars, and the bidding begins. It might be a scene straight out of the Great Depression, if you ignore the Bluetooth wireless headsets."

"As the nation's real-estate boom curdles, speculators who a year ago might have camped out in front of new housing developments are now hoping to find a bargain among the thousands of houses emptied by foreclosure. But veterans say true bargains are becoming harder to find as the number of homes on the auction block swells."

"Many of these new homeowners couldn't afford their mortgages, or fell behind when their adjustable monthly payments shot up. Two years ago, they might have been able to sell the house for a healthy profit. But that's not an option now that prices have stopped rising."

"After three months of missed payments, homeowners receive a default notice. Three months after that, the bank can repossess the house and auction it off to pay off the loan. Foreclosure and default filings in the region quadrupled from February 2006 to February 2007, according to research firm First American LoanPerformance."

"During the first three months of the year, 1 in 68 houses in the Inland Empire was in default or foreclosure, a rate surpassed only by Detroit and Las Vegas, according to RealtyTrac."

"'This is ground zero; this is where it's all happening,' says Juan Cruz. Cruz has his eye on a four-bedroom house in nearby Corona offered at $131,000. That figure represents the unpaid balance on the previous homeowner's foreclosed mortgage. Like the other bidders, Cruz has never seen the inside."

"When the bidding starts, Cruz has plenty of competition. The speculators bid steadily in hundred-dollar increments with cell phones pressed to their ears, keeping their bosses up to date on the action. Twenty minutes later the house is sold to a heavyset man for $286,000."

"That's less than it would have fetched last year. But veteran home buyers have grown more cautious as the market has cooled."

"More houses are on the market now than at any time in the past eight years, according to the Multi-Region Multiple Listing Service database. At the current pace it would take more than 13 months to sell them all, compared with 7 months at this time last year."

"Bargains are scarce on the auction block these days. Houses purchased in the last two years are often saddled with steep mortgages that can exceed the house's market value. Sales are down from last year and prices have risen less than 1 percent, according to DataQuick."

"'Now your house has to be underpriced and spectacular to sell,' says foreclosure investor David Schultheiss."


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