California foreclosure sales increased during March this year, both month on month and year on year.

One reason may be that last March many lenders had placed a temporary hold on foreclosures while waiting to learn the details of HAMP. A year later this is history, although it inevitably provides an odious comparison for last month’s figures.

The bald facts are that in March 2010, foreclosures went up by 24.2% from the previous month, and a whopping 92.3% from March 2009. These figures may come as a surprise given the latest initiatives that include short sales, and loan modifications involving principal balance reductions. However the figures do not necessarily mean that the rate of foreclosure actually increased – the process currently takes months, meaning that the current data actually represents decisions taken months ago.

This point is reinforced by the fact that March default filings in California were actually down quite substantially from March 2009, when lenders made up a backlog caused earlier by uncertainties around the implications of California Senate Bill # 1137. This does however need to be balanced against the fact that March 2010 filings were still 3.5% up on February.

By contrast, third party foreclosure sales in California last month breasted over 4,000 for the first time and equated to a value of $840 million. This was 11.4% greater than February and 266% more than the same month one year ago.

Just what, exactly, is happening in the State of California?

One explanation is time-lag. Lenders are said to be catching on earlier filing errors, and time lags caused by new HAMP regulations. Another reason could be that banks have given up waiting for the market to turn, and are offloading stock before it falls further.

Third party buyers are currently averaging 15.8% below current value – their true return is likely to be far better, especially when compared to the likely future value of their purchases.

Available data on future inventories of foreclosed properties in California does not paint a clear picture either. During March 2010 there were approximately 157,500 filings. This was 12.6% up on February, but down 12% from the previous year. Although during March properties entering the foreclosure cycle equated new ones put out for sale, the total number scheduled for sale was 72% up from the same month last year.

These figures are confusing because they are driven by a combination of market forces, time lags in the system and shifting policies.

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