The Orange County Register is reporting today that California is the nation's "hottest home market" with home prices increasing by as much as 7.9% in the year ending May 2010 (6.1% when sales of distressed homes are removed from the calculation).  Compare that number to a national average increase of only 2.9% (.9% when sales of distressed homes are removed from the calculation) and it seems California is gearing up for a recovery in the housing market.  The data comes from CoreLogic, "a leading provider of information, analytics and business services."  According to CoreLogic's chief economist Mark Fleming, “Home price appreciation stabilized as home buyer tax credit driven sales peaked in late spring."

However, Fleming went on to add, "given that the labor market and income growth remain tepid we expect prices to moderate and possibly decline the rest of the year.”  In California, it is likely that prices will decline.  On the same day that the Register ran this story about the increase in California home prices, they also ran a story about foreclosures spiking in the month of June.  According to Marilyn Kalfus, "After being down across the board in May, the filing of new foreclosure notices in California rose in June, while foreclosure sales dropped, reports ForeclosureRadar.com."  The article attributes the spike in foreclosures to action by J.P. Morgan Chase which, while acquiring Washington Mutual, cancelled the sale of a number of foreclosures.

So what does it all mean?  Banks are beginning to crack down on individuals defaulting on their loans.  They are taking foreclosures more seriously and focusing their energies on addressing that problem.  Federal incentives may have breathed some life into the housing market, but the troubled national economy (and especially the troubled California economy) as well as bank action against individuals defaulting on their loans means that housing prices will likely take another dip in coming months.  In cities such as Aliso Viejo, distressed homes make up as much as 53% of all listings!  Across the board in Orange County, distressed homes account for a significant percentages of listings in most cities.  No doubt those distressed home sales will contribute significantly to a drop in home prices in the coming months.

If you're facing a tough situation with your mortgage payment and you're unsure what to do next, it may be time to consider selling or even short selling your house before the market takes another dive in home prices.  Mark, Whitney, or Blake at Fitzpatrick and Prince Real Estate, ShortSaleABC.com's partner company, can help you out.  Give them a call at (800) 829 5158.