A sagging real estate market and tighter lending standards are exacting a growing toll on Californians, forcing them from their homes in record numbers, figures released Tuesday show.
Foreclosures soared to 17,408 for the three months ended June 30, an increase of 799% from the same period last year. The current rate handily exceeds the previous foreclosure peak set in 1996, when the state was in the final throes of a six-year slump.
Separately, Countrywide Financial Corp. -- the nation's largest mortgage lender -- reported a sharp rise in delinquencies, even among customers with good credit. That sent shivers down Wall Street, helping to trigger a 226-point plunge in the Dow Jones industrial average.
Although a relatively small fraction of homeowners face eviction, the concern is that a flood of foreclosures will further weaken housing prices -- and make people less willing to spend money.
"The economy will bend further under the weight of the mounting housing and mortgage problems, but it will not break," said Mark Zandi, chief economist at Moody's Economy.com.
That's what passes for optimism these days. Others are more downbeat.
"All the artificial stimulus housing gave the economy is going to go away," said Rich Toscano, a financial advisor with Pacific Capital Associates in San Diego who runs the popular Piggington.com real estate website. "There will be individual pain for people who made the wrong decisions. We all may end up in a recession."
The good news, as seen by Toscano: "I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."
Paula Walton said the Carson house she bought in 2003 was due to be foreclosed today. She first asked her lender for leniency, pointing out that she has endured a series of personal setbacks that included ovarian cancer, her mother's illness and her partner's walking out.
"I was begging and pleading, 'Please lower the payments so I can get back on my feet,' " said Walton, 43, a clerk on the Long Beach docks.
The lender didn't budge, Walton said, so she filed for bankruptcy protection to keep, at least for the moment, her house.
Ester Cadavid of Los Angeles Neighborhood Housing Services, a not-for-profit lender and counselor that is trying to assist Walton, said the first-time home buyer was an example of how default woes were spreading.
