Lenders are foreclosing homes in southern California much faster than they can sell them, leading to an oversupply that will, sooner probably than later, force substantial price drops. Falling prices will then trigger more foreclosures.
Right now, lenders don’t want to drop prices because that means they’ll have to mark down all their properties. But the first to sell at reduced prices will probably get the highest prices, wait too long to sell and prices may be sharply down, not just a little.
I work for CurrentForeclosures.com, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 7 months. I believe it is a combination of not only sub-prime and ARM mortgages, but also the high number of people who have gotten loans with interest rates at an all time low… in addition to the rapid depreciation in some areas and the difficulty some are experiencing in selling their homes.