The number of trustee deeds, the public documents filed when a foreclosure… (Paul Sakuma, Associated…)
California's foreclosure crisis appears to be ebbing as fewer home loans enter default and its once-troubled housing market heads into recovery.
The latest evidence of improvement came Monday when real estate firm DataQuick reported that the number of California homes entering the foreclosure process slipped to the lowest level since mid-2007. The number of homes lost to foreclosure plummeted.
Many economists believe the worst of the foreclosure mess is over, although the number of bank-owned homes will remain significant for a long time.
DataQuick reported that 54,615 notices of default were filed on California homes and condominiums in the second quarter, a 2.9% decline from the first quarter and a 3.6% drop from the same period last year. Default notices are the public filings used to initiate foreclosures.
The relatively slight decline could mean that there are fewer homes in trouble, DataQuick President John Walsh said. Or, viewed less optimistically, the easing could indicate that "we're just seeing distress get processed at a slower pace," he said.
Whether that slow pace will continue remains to be seen, although many economists now say a second wave of foreclosures is unlikely.
"The housing market has bottomed, but there is still a lot of inventory," said Kenneth Rosen, an economist with UC Berkeley's Haas School of Business. "The worst numbers are certainly over, but that doesn't mean there still isn't a lot to work through."
Foreclosures began slowing more than a year ago after several states and federal authorities launched investigations into foreclosure improprieties. In California, investigators targeted the runaround that troubled borrowers often get when trying to get a loan modification.
With increased scrutiny of lenders in the Golden State, including recent legislation dubbed the Homeowner Bill of Rights, some experts expect that banks will increasingly look for other ways to deal with their inventories of troubled properties. That should help keep foreclosures in check, they said.
At the same time, fewer borrowers are falling behind on their mortgages. The percentage of California borrowers who were at least 120 days behind on their mortgages was 2.9% at the end of the second quarter, down from 4% a year earlier, according to Equifax andMoody's Analytics.
"We have been eating away at that big pile of bad loans, and now we are at the far end of things," said Christopher Thornberg, a principal at Beacon Economics and one of the first to call the housing crash. "Obviously, there is no big second wave."
Another factor sure to improve the foreclosure picture: Employers are hiring again in the Golden State. Although the national economy remains weak, California's job market appears to be picking up. California employers added 38,300 net jobs in June, with gains in most industries, including construction and professional services.
Paul Herrera, government affairs director for the Inland Valleys Assn. of Realtors, said the change in the Inland Empire, still one of the most troubled markets in the country, was palpable.
"We haven't seen any new wave of foreclosures," Herrera said. "You drive around these streets, and it's not like what it was four years ago, where there were dead lawns sprinkled around every block."
Notices of default were clustered in California's most affordable neighborhoods, DataQuick said. In the state's largest counties, mortgages were most likely to go into default in Tulare, San Joaquin and Sacramento counties and were least likely in San Francisco, Marin and San Mateo counties.
The number of trustee deeds, which are the public documents filed when a foreclosure is completed, fell to 21,851 in the second quarter, down 27.8% from the first quarter and off 48.5% from the same period last year.