A new study from MDA DataQuick showed the number of mortgaged houses entering the foreclosure process in California in the second quarter of 2010 dropped for the fifth consecutive quarter and is now at the lowest level since the second quarter of 2007. This is a good sign that the California real estate market, which has been battered by the recession and unemployment, is starting to show some signs of life.
Just over 70,000 notices of default were filed in the second quarter, which is a 13.6 percent decline from the previous quarter and a whopping 43.8 percent decline from the second quarter of 2009.
Some of the decline can be attributed to sellers dropping their prices to bring their demands more in line with the market, and some of the decline can be attributed to programs such as the Home Affordable Foreclosure Alternatives (HAFA) program that incentivizes lenders to allow borrowers to sell their homes in short sales rather than going into foreclosure. 22,000 foreclosures have been cancelled in California in June alone, many of these becoming short sales through HAFA.
Foreclosures in California are most dominant in areas with lower-priced houses. Areas with median home prices of less than $300,000 experienced foreclosures at a rate about 3.5 times higher than areas with median home prices of more than $800,000. Foreclosure sales made up 36 percent of all resales in California last quarter, which is the third straight quarter that number declined.
While this is good news for California’s housing market on its face, it is important to realize these numbers are still very high from historical standards, and if we see significant price declines over the next year, we could see defaults tick back up.
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