SAN FRANCISCO – Economists cannot determine the particular impact of foreclosures in the world’s eighth largest economy, California. They reckon it’s either merely a disturbance caused by the subprime issue of the mortgage lending industry or the state is indeed headed for a downturn. Los Angeles-based Beacon Economics’ Christopher Thornberg anticipates California’s economy to worsen as more households cut their spending to adapt with increasing mortgage payments particularly on the subprime and adjustable-rate loans that were availed by borrowers with weak credit.

Furthermore, DataQuick Information Systems’ report shows that 17,408 homes in California are due to foreclose in the second quarter. The foreclosures have spiked to about 800% from a year ago. A portion of California’s 8.4 million residential properties is also pushed by markets that are soaked in subprime loans.

The largest mortgage lender in the U.S., Countrywide Financial Corp. has cut down its 2007 forecast due to an anxiety over delinquencies also coming from borrowers with more stable credits and will no longer be contained within subprime borrowers. On the other hand, president of TheHomeBuyingCenter.com Patrick McGilvray is optimistic towards the market. Sacramento-based firm TheHomeBuyingCenter.com corresponds troubled homeowners with investors and homebuyers. Some experts also contradict Countrywide’s anticipation as they believe the troubles will remain among weak-credited borrowers and their lenders. They also have no worries on potential recession or decline on consumer spending.

Chief economist for the state Department of Finance Howard Roth finds California overcoming the turbulent foreclosures after going through the worse housing market state in early 1990s brought about by gutted aerospace payrolls. More than 500,000 jobs were lost in those years. In June, the state’s unemployment rate was 5.2% far from the almost 10% rate between 1992 and 1993. Roth believes that the housing market in the state will soon recover.

This entry was posted on Monday, June 9th, 2008 at 3:03 pm and is filed under real estate. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.