Foreclosure Activity Down in California
Following promising reports of increased sales in California’s Southland Empire, analytics company DataQuick issued another release revealing that foreclosure activity is down in the state.
According to the company’s data, the number of California homes entering the formal foreclosure process dropped in the year’s second quarter to its lowest level since early 2007.
During the period between April-June, a total of 54,615 Notices of Default (NODs) were recorded on houses and condos, a 2.9 percent decrease from the first quarter and a 3.6 percent decrease from the same period in 2011. This total is the lowest since second-quarter 2007, which saw 53,943 NODs.
The most noticeable year-over-year drop was in the Bay Area, which saw a 13.4 percent drop in NODs from 2011.
The fall in activity is attributed to several factors, including an improved housing market, growth in short sale activity, and the falling number of egregious mortgages originated between 2005-2007.
However, DataQuick president John Walsh said that the decrease in foreclosure activity could just be a brief lull.
“The foreclosure process has always been the sanitation department of the housing sector. It’s where financial distress is processed. The question is whether these lower NOD numbers mean that there’s less distress to process, or if we’re just seeing distress get processed at a slower pace,” said Walsh.
According to DataQuick, most of the loans going into default are from the 2005-2007 period. The median origination quarter for defaulted loans is third-quarter 2006 for the third straight year, indicating a peak in weak underwriting standards at that time.
DataQuick’s findings showed that mortgage defaults tended to remain concentrated in the state’s most affordable neighborhoods. Zip codes with median sales prices of $200,000 or less had a ratio of nearly nine NODs filed for every 1,000 homes, while zip codes priced between $200,000 and $800,000 had a ratio of 5.6 NODs filed per 1,000 homes.
In the state’s larger counties, mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties. Tulare, San Joaquin, and Sacramento counties had the highest probability of foreclosure.
As the economy slowly regains its strength, Walsh said the housing market may start looking to other options to avoid foreclosure activity.
“Obviously the economy has been on the mend – however slowly. But because housing is widely seen by economists as the biggest drag on growth, some interesting alternatives to the foreclosure process are being discussed, such as the use of eminent domain to buy and restructure mortgages. Needless to say, we’re all watching closely,” he said.