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For months we've been bombarded by headlines blaring across every form of media imaginable; “Home Foreclosures at an All Time High!!” and “Property Foreclosure Reaches Epidemic Proportions!” Are these dire bits of journalistic bombast the truth, or are they just dedicated to selling more ad space in an election year, possibly both?

According to a report released at the end of last month by RealtyTrac, the nation's leading information source on foreclosures, there were 215,749 foreclosure filings in the month of December. This represents an increase of 97 percent over December of 2006. RealtyTrac reports the total for Q4, 2007 was 642,150 filings. This is 86% above the foreclosure total for Q4, 2006. Nationwide total filings for the year 2007 was 2,203,295. Almost 22% of these, 481, 392, were in California alone, although due to the large number of properties in California, this only equates to 1.9% of households in the state.

The state with the dubious distinction of having the highest property foreclosure rate in number of properties in some stage of foreclosure per population falls to Nevada, at a rather stratospheric 3.4%. Because Nevada is a rather sparsely populated state that only equates to 66,000 foreclosure filings. Another state experiencing foreclosure woes is that peninsula of bluehairs in the Caribbean, Florida. Florida reported 279,325 foreclosure filings in 2007, a foreclosure rate of a little over 2%.

Why are these areas experiencing such high foreclosure rates? Part of the reason may be because they also had major price run ups over the previous 5 years, with some of the highest real estate appreciation rates in history. In some cases properties in areas of California, Nevada and Florida were climbing over 30% per year for a few years in a row. This all started in during the end of the 1990's or early in this decade. By a year or two ago, the trend had reversed itself.

Florida, California, and Nevada were 3 of the states experiencing the highest rates of property appreciation in 2001 and negative or very low appreciation from 2006 - 2007. The top 13 real estate markets ranked by average annual appreciation in 2001-2 were all in California, according to Realtor.com's house price index. They also had number 20, with San Francisco occupying that slot in the survey for 2001. California also grabbed numbers 24 and 35. Florida had 3 of the top slots, numbers 17-19. They also had numbers 26, 31, and 37. So between them Florida and California had over half the top 40 metro areas with the highest property appreciation rates early in this decade.

Looking at real estate appreciation rates between 2006 and 2007 we find that oh, how the mighty have fallen! In fact, many of the same areas that were flying highest in 2001 - 2002 have experienced drastic property depreciation in the last 2 years. Between Q4 2006 and Q4 2007 the state of California as a whole saw property values decline an average of 6.6% according to the U.S. Office of Housing Enterprise Oversight. Some areas in California fared even worse.

The LA Times reported 3 weeks ago that home sales in southern California fell to their lowest levels in over 20 years, with the number of homes sold down over 44% from this time last year. The median home price in the 6 county region has eroded 18% in the last year, and of the homes that did sell, 25% were in some stage of foreclosure. Riverside County experienced the largest decline in home pricing of the 6 at -20.1%, while San Diego homes only lost an average of 9.1% of their value for the 12 month period. In 2001, Riverside had the 35^th highest real estate appreciation rate in the country, at 10.9%, while Orange County was in 42^nd , with a 10.5% appreciation rate.

The National Association of Homebuilders Housing Opportunity Index, which ranks the affordability of housing in metropolitan areas, shows that in Q4, 2007 California cities occupied 24 of the bottom 25 slots in the affordability index. This means that the median home price is higher as a percentage of the region's median income. 23 of the 26 areas had a median income higher than the national MSA average of $59,000. Many of the least affordable areas of California were actually in the Bay area, where real estate values have yet to implode, although incomes there are relatively high. In Florida, the Miami area ranks highest, reaching number 12 nationally on the list of the least affordable housing, with Naples – Marco Island coming in at number 33. Remember, California didn't leave much room for anyone else at the top.

So is the level of foreclosure as bad as it's being reported? In some areas, yes, while in others not so bad. California is dragging the national average way down, with their large number of foreclosures. This is partially due to the continued unaffordability of residential real estate despite declining home values. The lack of relatively affordable housing has led many prospective homeowners to go the unconventional financing route. The dropping home values have left many people with the more aggressive ARMS unable to refinance, and so, here we sit.