Southern California Home Prices Will Remain Low As Foreclosures Increase With Unemployment Pressures; Wells Fargo Will Be Writing Down Value Of Wachovia Home Loans It Purchased

 “We’re entering into an economic cycle where unemployment is likely to drive foreclosure activity,” said Sharga, executive vice president at the Irvine, California-based seller of default data. “With what’s going on with the auto industry, we could see a pretty nasty trickle affect.”

Wells Fargo Chief Executive Officer John Stumpf said as recently as Dec. 10 that Wachovia’s $482.4 billion loan portfolio will produce $60 billion in losses over the next three years, with about 60 percent coming from option adjustable-rate mortgages. Wells Fargo, based in San Francisco, is the second- biggest U.S. mortgage lender, behind Bank of America Corp.

California Risk

Wachovia brings added housing risk in California, home to its Golden West Financial Corp. unit, and Florida, which claims the second-highest foreclosure rate in the country.

Unemployment rates  in California and Florida were 8.4 percent and 7.3 percent, respectively, in November, compared with 6.7 percent nationwide. Among economists surveyed by Bloomberg, the highest estimate for U.S. unemployment in the third quarter is 9.5 percent, a level not seen since 1983.“There are a lot of unanswered questions that will take time to play out,” said Jennifer Thompson , an analyst at Portales Partners in New York, who recommends holding Wells Fargo shares. “How quickly will they be able to write down the value of loans, how aggressive are they going to be and how are the loans that they’re acquiring going to perform in this type of environment?”


Home Prices In Southern California End 2008 In A Down Trend With More Weakness Seen In First 6 Months Of 2009 As Increased Short Sales And Foreclosures Will Keep Qualified Buyers On Sidelines


    • Rates on mortgage loans are the lowest in the 37-year history of the Freddie Mac Primary Mortgage Market Survey
    • The average 30-year, fixed-rate loan issued to borrowers declined to 5.1%, with 0.7 up-front points, for the week ending December 31, according to the survey.
    • The rate dropped from an average of 5.14% last week, which was the previous 37-year low.
    • Freddie Mac began surveying lenders back in 1971.
    • The 30-year fixed was at 6.06% a year ago.
    • The average for a 15-year, fixed rate loan was just 4.83%, its lowest level since March 25, 2004, when it hit 4.70 percent.