Simple principles of supply and demand affect home sales. When buyers buy prices rise. When buyers retreat so do prices. Defaulting home owners are having job or money troubles or both. That signals a weakening economy.
Foreclosures signal even deeper consumer money troubles and a worsening economy.
It also signals dropping home prices. We may be close to a peak in California real estate prices. Some of my key indicators are now flashing warning signs. For example, new home building permits is one of the most accurate leading indicators you can follow to determine what's likely ahead for both the real estate market and the economy. And as both history and market indicators have shown, as goes California, so goes the nation.