Scary Convergence

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Two trends that are being seen here in the Orange County, CA market are revealed in two separate blog posts from the Orange County Register.

The first is from its real estate blog titled O.C.’s New Home Inventory Doubles.

Inventory – finished properties for sale plus residences under construction but not under contract – were 113 percent higher than a year ago.

The cancellation rate – deals buyers didn’t close as a share of all deals – was 14 percent, vs. 17 percent in the same period 12 months earlier.

The second is from its mortgage blog titled Banks Foreclose on More OC Homes.

Bank foreclosures in Orange County rose for the third straight month in February, said DataQuick today. There were 164 foreclosures, up 7.2 percent from January and a whopping 1,071 percent jump from a year ago. They, however, remain well below levels seen in the housing slump of the 1990s.

This is convergence that no one wants to see – especially home owners in high LTV loans that will see any equity wiped out by the reduction in home prices that will occur across the county. There will be many homebuyers who end up "upside down" in their properties because they bought on the idea that all OC real estate would continue to appreciate at the breakneck rates of the last decade. It will be interesting to see how much these home prices slide in the next 6 months as these two trends converge even closer.