Defaults on the Rise as Pacific Coast Housing Starts to Cool.

Sacramento-Pacific Coast housing markets were slowing, with price declines in some formerly hot markets in California, and that foreclosure activity was poised to increase. Because in the gradual shift in the market towards a buyer's market in this sector, defaults are expected to rise, according to investment advisory firm Foreclosures.com.

Actually, Foreclosures.com is reporting that the home buying market is becoming a buyer's market in various areas all over the country, though for different reasons.

Foreclosures.com is seeing reduced price appreciation in the Pacific Northwest and Alaska despite strong population growth and strong job growth. According to the advisory firm's president, Alexis McGee, while the pace of home price increase in Hawaii had slowed slightly, annualized price appreciation year-over-year was still above 20%.

Slowing markets produce a buildup in the inventory of unsold homes, an increase in time on market, and make it more difficult for financially distressed homeowners to sell their way out of foreclosure. "As these markets cool down, we'll begin to see mortgage defaults increase in 2006," said Ms. McGee.

Personal bankruptcy filings have also increased in Washington, Oregon and Alaska toward the end of 2005. Since filing for bankruptcy is a common tactic used by financially distressed homeowners to forestall foreclosure, the consequences can be disastrous for their credit profile, and while it won't prevent a foreclosure, it does delay it.

Forcelosures.com, which has been publishing foreclosure information and assisting investors since 1992 and went nationwide with foreclosure listings of distressed property in late 2005, said that overheated California markets were beginning to correct with prices declining slightly in the North and slowing sales and less price appreciation in the South and that defaults were rising.

"A great many risky loans were issued in California as home prices reached the stratosphere," ...