On L.A.'s edges, soaring repossessions could set off a downward spiral

The L.A. Times reports:

Major lenders are repossessing homes in Southern California much faster than they can sell them, a development that could set off a downward spiral of price cuts and more foreclosures.

At some point -- maybe this fall, maybe in 2008 -- the lenders' inventories will grow so large that they will have no choice but to start aggressively cutting prices, many agents and analysts predict.

That, in turn, will put more pressure on individual sellers, who will have to reduce their own prices if they want to find a buyer.

As values fall, more people could lose their homes, which would swell the lenders' inventories anew.

"We're going to have a bear market in housing for a while," said Christopher Cagan, director of research for First American CoreLogic in Santa Ana. "It's going to be bad to be a seller or someone forced to refinance in the impact zone."

Lenders' inventories in the counties of Los Angeles, Riverside and San Bernardino grew by 5,829 during the second quarter, according to data compiled for The Times by First American, a real estate tracking firm.

Cagan said Southern California's hardest-hit areas -- the impact zone -- will be the Inland Empire, the high desert and the northern reaches of L.A. County. These are where foreclosures are the greatest and, as a result, the market is weakest.

You might say the high is in for a while.