I was reviewing new data from DataQuick Information Systems. There were 111,689 California Notices of Default (NODs) during the third quarter. While this is down from 124,562 in the second quarter, it is still an enormous number, see the chart below. Foreclosures rose from 45,667 to 50,013. There is massive heterogeneity across the state with San Francisco City/County at about 7 NODs per ten thousand people compared with more than 55 NODs per ten thousand people in Riverside County. The state average is 29 defaults per ten thousand people.

While the increase in foreclosures in the third quarter was over nine percent from the prior quarter, the potential increase in 2009 quarter 4 might be much larger. To see this, we look at time to foreclose and foreclosure rate. If it takes nine months from NOD to foreclosure, and if the turnover rate from NOD remains as it was nine months ago, then these two assumptions imply 90,000 foreclosures in quarter 4. This is because nine months ago, there was very large jump in NODs. This admittedly simple calculation presumes that government programs in place to keep people in their homes despite default do not change appreciably from quarter 3 to quarter 4. A key factor in this case includes government programs to keep people in their homes. Working against that are the ongoing unemployment levels combined with continued household sector debt-unwinding. Unfortunately, we do not see how California’s foreclosure level could be any lower than about 50,000 during the next few quarters, and they could be higher than that.