California Foreclosures Surge 19% in 4Q2005

Dataquick reports that new foreclosure starts during the fourth quarter of 2005 rose 19% from the third quarter of 2005 and 15.6% from the fourth quarter of 2004 caused, in part, by declining real property appreciation rates. Over the past several years, default rates have trended lower because home values have been rising, fueling the demand for refinancings and home equity lines of credit. However, the "annual home appreciation rate in the state hit 22.8 percent during the second quarter of 2004. Since then it has come down and in fourth-quarter 2005 it was 14.5 percent. The appreciation rate is expected to fall below 10 percent sometime this summer." Default activity is expected to rise due to slower home appreciation rates, rising interest rates and scheduled resets in option ARMS and interest only loans that became so popular during that last couple of years.