California Pre-Foreclosure Rates Rise Sharply: A Glimpse Behind the Numbers

A New Wave of Housing Strain Hits California’s Struggling Homeowners

In the sun-washed suburbs of southern California and the far-flung exurbs of the Central Valley, a new anxiety is creeping back into mailboxes: the Notice of Default. While not as seismic as the collapse of the 2008 housing crisis, California is once again seeing a troubling uptick in pre-foreclosures, a sign that, for thousands of homeowners, the edge between financial stability and disaster is vanishing.

According to the latest data, California recorded 3,267 pre-foreclosure properties in September 2024. That marks a sharp 34.3% increase from August 2024, when the state saw 2,431 filings. It’s a jarring month-over-month jump that signals more than just a seasonal trend. However, the picture becomes murkier when you widen the lens: pre-foreclosure filings are down 12.4% compared to September 2023, when 3,731 homes entered early foreclosure proceedings.

But numbers alone cannot tell the story of what’s happening inside those homes.

Behind Every Data Point: Families Walking a Financial Tightrope

For Rosa Ramirez, a single mother of three in Fresno, the pre-foreclosure notice she received this month wasn’t unexpected, but that didn’t make it any less painful.

“I’ve been juggling two jobs and still can’t keep up with the mortgage,” she said. “Groceries cost more. The light bill is higher. There’s nothing left at the end of the month.”

Rosa is not alone. Inflation has been stubborn, especially in California, where essentials like food, energy, and housing continue to outpace wage growth, particularly for lower-income households. While wealthier Californians have seen their investment portfolios recover post-pandemic, and in some cases, thrive, many middle- and working-class families have struggled under the weight of rising costs and static incomes.

When mortgage rates ticked above 7% earlier this year, the pain deepened. Refinancing became less viable; adjustable-rate mortgages reset to higher monthly payments. For homeowners like Rosa, those few hundred dollars per month became the difference between being current or being delinquent.

A Temporary Spike — or a Harbinger of Trouble?

It’s tempting to write off the jump in pre-foreclosures from August to September 2024 as a statistical blip. After all, isn’t this the nature of the housing market, to ebb and flow with the seasons?

But September’s numbers arrive amid a larger story that’s still unfolding. After an unprecedented lull in foreclosures due to pandemic-era moratoriums, the past few years have seen a gradual resurgence. In 2021, California recorded just 23,588 total pre-foreclose filings, a historic low. That number nearly tripled to 63,401 in 2022 before dipping slightly to 46,488 in 2023. So far, through September 2024, the state has recorded 29,831 pre-foreclosures. That puts 2024 on track to close at a level similar, or slightly lower than last year.

But perhaps more important than the totals is who is slipping behind. Today, the face of foreclosure has changed. It’s not just speculative investors or owners of luxury condos. It’s families who secured what seemed like affordable homes during the low-rate years of 2020 and 2021. It’s retirees surviving on fixed incomes eroded by inflation. It’s essential workers, grocery clerks, nursing assistants, rideshare drivers, whose sacrifices during the pandemic are now being met with rising debt and shrinking safety nets.

A History of Housing Volatility

California has long worn the badge of housing volatility. The scars of the Great Recession, when the state saw pre-foreclosure filings peak at over 891,000 in 2009, remain fresh in many communities where boarded-up windows and abandoned properties once dotted entire neighborhoods.

Government interventions and stronger lending regulations helped tame that wildfire. Total pre-foreclosures dropped year by year: 456,288 in 2012, 203,627 in 2013, and just over 70,000 by 2018. But wages didn’t keep pace with the cost of living, and the affordability gap only widened.

The pandemic provided an unexpected but unsustainable pause. Mortgage forbearance programs, stimulus checks, and rock-bottom interest rates created a buffer. Now, that buffer is gone, and for tens of thousands of homeowners, the financial reckoning is back.

Conclusion: The Numbers Are People

The data out of California this month sends a clear signal: while 2024 may not rival the worst years of the past, the steady climb in pre-foreclosures is a flashing yellow light.

A 34% month-over-month increase demands attention. And while a 12% year-over-year drop may seem reassuring, it belies the volatility in today’s economy, and the toll that instability takes on the most vulnerable.

What lies ahead depends on a mix of policy, market forces, and resilience at the household level. But if the trends continue, and if personal stories like Rosa’s multiply, September may be remembered not as an anomaly, but as the reawakening of a long-sleeping crisis.