California’s Pre-Foreclosure Spike: A Worrying Sign for Strained Homeowners

On a quiet cul-de-sac in Riverside County, Maria Gonzalez sits at her dining table, sifting through a stack of late notices. The house she bought with her husband eleven years ago—the one where they raised their two children—is in danger of slipping away. Maria is a childcare provider whose income has been squeezed by rising food and utility costs. has fallen behind on her mortgage. If she can’t pull together the overdue payments soon, her home will become one of the 3,267 in California that entered pre-foreclosure this past September.

Maria’s story is not unique. Across the state, a combination of high inflation, rising unemployment, and steep housing costs have left many homeowners in a precarious position. The number of pre-foreclosures in California jumped 34.4% from August to September—a worrying sign that financial strain is growing. However, compared to the same time last year, pre-foreclosures have declined by 12.4%, suggesting that while the current economy is placing pressure on homeowners, the overall crisis is not as severe as in previous years.

A Disturbing Monthly Increase

In August 2024, 2,431 homes in the state entered pre-foreclosure. By September, that number had surged to 3,267, a significant spike for a single month. For homeowners behind on payments, pre-foreclosure marks a critical turning point—when a lender formally notifies the borrower that they are in default and that foreclosure proceedings could begin if they don’t catch up.

This rise in pre-foreclosures has coincided with persistent economic headwinds. Although inflation has come down from its 2022 highs, the cost of living in California remains among the most burdensome in the country. Wages have not kept up, and pandemic-era safety nets—such as mortgage forbearance programs—have largely disappeared.

Real estate experts suggest that rising interest rates are also playing a role. After years of historically low mortgage rates, many homeowners who took out adjustable-rate loans are now facing higher monthly payments. For those who were already balancing on the financial edge, this increase can be disastrous.

A Longer-Term Perspective: Better Than 2009, But Far From Safe

Even though pre-foreclosure numbers have climbed in recent months, they remain well below the catastrophic levels seen during the 2008 housing market crash. In 2009, at the height of the foreclosure crisis, 837,142 homes in California entered pre-foreclosure. During that period, the state’s housing market teetered on collapse, property values plummeted, and entire neighborhoods were gutted by bank-owned properties.

By comparison, 2023 saw 46,776 pre-foreclosures, and in 2024, California had recorded 27,050 from January through September. While this is significantly lower than the crisis era, the numbers indicate that financial instability among homeowners is far from over.

The Bigger Picture: A Crossroads for Housing Stability

While California’s pre-foreclosure rates remain below recession-era peaks, the month-over-month increase is a warning sign. The affordability crisis, mounting financial stress, and lingering economic uncertainty have created conditions that could push more homeowners to the brink.

For those teetering on the edge, the challenge is twofold: Banks and financial institutions are less willing to renegotiate mortgage terms than they were in the aftermath of the Great Recession, and many struggling homeowners don’t qualify for relief programs that once provided a temporary safety net.

Despite these challenges, there are signs of resilience. Nonprofits and legal aid groups have ramped up efforts to provide foreclosure prevention counseling.

Still, for families like Maria Gonzalez’s, the future remains uncertain. She has until the end of the year to negotiate a repayment plan with her lender. If she can’t, her home—the place where her daughter takes prom pictures and her son draws on the walls—may become part of next year’s foreclosure statistics.

What Happens Next?

The next few months will be critical in determining whether California is facing a temporary economic shock or the beginning of a larger housing crisis. If the trend of rising pre-foreclosures continues, it could trigger a new wave of distressed sales, impacting home values and destabilizing communities.