Can we make the case that short sales are the precursor to foreclosures?

Those underwater probably won’t sell unless pressure is being applied through the foreclsoure process.  The ‘waterfall’ of banker events starts with a loan-mod attempt, and if that doesn’t work, then a try at short selling before getting foreclosed.

Here are the counts of SD County short-sale listings that have hit the MLS between Jan 1-9 (there will be a few added to this year’s number):

2011: 395

2012: 337

2013: 148

2014: 38

It doesn’t look like the foreclosure machine is back in business yet. Many thought that the dropoff was due to banks having to re-tool due to the newly passed CA Homeowners Bill of Rights causing the 148 last year.

The decline has been steady on the graph below. It’s hard to believe that the defaulters just started making their payments all of a sudden: