The suburban communities of Riverside County, located between Rancho California and Perris and near the Moreno Valley, are viewed as at risk of turning into communities of foreclosed homes as formerly financially able homeowners lose jobs and lose their abilities to refinance loans.

From 2004 to the last months of 2007, most of the owners of foreclosed homes were borrowers of subprime mortgage loans, according to the North County Times. Starting 2008, homeowners being foreclosed are borrowers with good credit ratings but who took on highly risky loans such as Alt-A and flexible rate mortgages with options. Even if the other homeowners are still employed, they are faced with loan balances usually 50 percent higher than the current values of their homes.

In February, a total of 1,550 housing units in the southwestern part of Riverside County became foreclosed homes, in addition to the 1,441 units already added to foreclosure listings in January, as compiled by ForeclosureRadar, a housing tracking firm based in Northern California.

Meanwhile, several housing tracking companies report a total number of 16,000 foreclosed homes in the county’s southwest part since January 20.

Unemployment is the major factor of rising foreclosures, according to Bruce Norris, head of Norris Group. He said the area bounded by Riverside and San Bernardino counties has a jobless rate of nearly 12 percent. He also expects a higher level of state foreclosures as jobless residents leave California to find jobs.

The rate of California foreclosures in February continue to put California among the three states with the highest foreclosure rates, based on RealtyTrac’s report for 2008. It had 80,755 foreclosed homes in February and posted a foreclosure rate of one unit in every 165 homes receiving a foreclosure filing.

Mason Gaffney, professor of economics at the University of California in Riverside, said large numbers of foreclosed homes will continue to batter the books of mortgage banks and will reduce their ability to offer mortgage and commercial loans.

According to North County Times, there are about 700,000 foreclosed houses for sale across the country which are listed in the records of lenders but not yet forwarded to brokers for sale.

According to Andrew LePage, analyst at San Diego housing research firm MDA DataQuick, more and more people are deciding to buy a home as more foreclosure properties are being sold at bargain prices. Large inventories of bank-owned foreclosure properties and predictions of more foreclosures have put home prices at levels very attractive to first-time homebuyers and investors.

In RealtyTrac’s chart of foreclosures by state, California is among the top three in foreclosure rates and in number of foreclosure properties in 2008 and in the first two months of 2009.

The first of several factors contributing to increased home sales in the Bay Area is the low median price of homes. Because of the glut of foreclosure properties in the state, the median home price in February dropped to $295,000, staggeringly much lower than the $720,000 median price in 2007. More than 50 percent of all houses sold in February in the Bay Area were priced below $300,000.

Another factor is the availability of financing backed by the U.S. Federal Home Administration. Previously, FHA loans were not popular in the Bay Area because these loans were only for lower-income buyers and low-priced homes. But after FHA increased its loan limits to $729,250, numerous buyers applied for FHA-backed loans, accounting for almost one-fourth of all mortgage loans in the Bay Area in February.

The availability of foreclosure properties and existing homes priced at $200,000 has also increased sales, according to Peter Harris, an agent with Novato-based Bradley Real Estate. The low down payments and the FHA loans have been encouraging low-income first-time homebuyers to grab price opportunities in the housing market.

LePage said FHA loans have been significantly reducing excess inventories of bank-owned foreclosure properties by rejuvenating the first-time home buying sector. Large numbers of first-time homebuyers attracted by FHA loans will ultimately contribute to the stabilization of the mortgage and housing sectors.

Another big reason for the Bay Area’s increased home sales is the investor factor. In February, the number of people buying homes for investment purposes has increased from 10 percent in 2007 to 18.7 percent.

Lastly, the tax credits offered to first-time homebuyers have also rejuvenated home buying. Just like in other areas of the country, people in the Bay Area who have been delaying their home purchases waiting for further home price decreases and lower-priced foreclosure properties have decided to buy a home because of the tax credit.