In more bad news, the number of mortgage defaults surged dramatically statewide in the first part of the year, according to the Chron. That likely means the number of foreclosures will rise significantly as well. Experts credited the default increase to a California law that slowed down the process of foreclosures, but likely has not curtailed them. That law also is probably why the state's home prices stabilized in the first part of the year. In short, it looks like foreclosures were delayed by the new law, but now will start hitting California in a destructive flurry. If that happens, expect property values to take another serious nosedive.