A couple of months ago, I wrote a pieceabout the number of foreclosures in San Diego County. A foreclosure occurs when a homebuyer is not able to keep up their mortgage payments and the bank seizes the property from them.

Traditionally, increasing foreclosure rates are a bad sign for the real estate market as they equate to higher numbers of homes for sale, which has a dampening effect on prices.

As I wrote in that story:

Though there’s no doubt that default and foreclosure rates have been climbing in San Diego, there’s considerable debate going on in the real estate world about what those rate increases mean and what effect they might have on property values.

Most analysts agree that foreclosure rates have been extraordinarily low for the past few years, and that an increase in the number of people who are unable to keep up their payments is a natural result of the cooling real estate market. The upward trend in foreclosure rates is likely to continue, they said.

“I anticipate that we’re going to have substantially more foreclosures in the future, that’s going to continue for a couple of years,” said Erik Weichelt, owner of San Diego REO Realtors, who specialize in buying and selling foreclosed and distressed properties.

Weichelt was right on the money.

In May, there were 363 foreclosures. That’s a 29 percent increase over April. There were also 695 defaults on mortgages – a default is when borrowers fail to make a payment – up from 536 at the beginning of the year.

Overall, there were about twice as many defaults and more than three times as many foreclosures in May 2006 compared to a year earlier.

WILL CARLESS

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