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Real Estate

Foreclosures at second-lowest level since 2005

More homeowners are making their monthly mortgage payments and avoiding foreclosure, as fast-rising home prices are easing the number of underwater loans.

Mortgage lenders filed 25,747 notices of default during the second quarter, a 38.7% increase from the first quarter – but also the second-lowest filings in seven years, according to DataQuick. The just-completed quarter is off 53% from second-quarter 2012.

First-quarter filings were the lowest since fourth-quarter 2005, according to the San Diego-based industry tracker.

“At this point in the cycle, it’s fairly straightforward to see what’s going on,” says John Walsh, president of DataQuick. “Just do the math, it’s not calculus, it’s fourth-grade arithmetic. A foreclosure only makes sense when the home is worth less than what is owed on it. As home values rise, fewer homeowners owe more on their homes than the homes are worth.”

California’s median-home price climbed 14.7% to $344,000 during the second quarter, compared to $300,000 in the first quarter, according to DataQuick (the California Association of Realtors has a much higher median price for the quarter). And current home prices are up 27.4% from the $270,000 a year ago.

The state’s median price peaked at $485,000 in second-quarter 2007, and bottomed at $235,000 in second-quarter 2009, according to DataQuick.

San Francisco, Santa Clara and San Mateo counties boasted the lowest percentage of homes falling into foreclosure, while Fresno, Riverside and Solano counties were the highest.

Counties with the most-affordable homes – below $200,000 – were the most likely to endure foreclosures, according to DataQuick.

About 2.2 homes per 1,000 homes entered foreclosure in the most-affordable ZIP codes. Only 1 per 1,000 homes entered foreclosure in homes priced from $200,000 to $800,000, and a paltry 0.3 per 1,000 homes in neighborhoods of $800,000-plus properties.

Categories
Real Estate

Foreclosures plunge to lowest level in seven years, thanks to higher home prices

Foreclosures fell to the lowest level in more than seven years during the fourth quarter in California, the latest evidence of a better housing market and an improving economy.

Notices of default declined to 18,567 notices of default from January through March, a 51.4% percent drop from fourth-quarter 2012 – and off 67% compared to a year ago, according to DataQuick. Notices of default – the first step in the foreclosure process – peaked at 135,431 in first-quarter 2009.

The just-completed quarter’s default notices were the lowest since fourth-quarter 2005, the final months of the housing boom and just before the housing market slide. However, foreclosure activity remains higher than the historic average.

“Foreclosure starts were already trending much lower last year because of rising home prices, a stronger labor market and the settlement agreement between the government and some lenders,” says John Walsh, president of DataQuick. “But it appears last quarter’s drop was especially sharp because of a package of new state foreclosure laws – the Homeowner Bill of Rights – that took effect January 1. Default notices fell off a cliff in January, then edged up.”

Fast-rising home prices definitely helped curb foreclosures. California’s median-home price – meaning half the homes sell for more, the other half for less – increased to $297,000, a 22.7% gain from a year ago, according to DataQuick.

Default notices were higher in the state’s most affordable neighborhoods, with the average homeowner almost nine months and $14,300 behind on their payments.

Most of the loans entering default are from the 2005-2007 period, when weak underwriting was at its peak.

As expected, coastal communities – where home prices are higher and have rebounded faster – report fewer foreclosures than inland areas, such as the Inland Empire and central San Joaquin Valley, at least based on the percentage of filings

Despite the dramatic drop, Walsh adds foreclosures could increase, especially with home prices and refinancing critical to the turnaround.

“It’s certainly possible foreclosure starts will pick up at some point this year if lenders need to play a lot of catch-up,” he says. “Rising home prices will be key to the final mop-up of the foreclosure mess. As values rise, fewer people owe more than their homes are worth and more people can refinance into a more favorable loan. It also means more who fall on hard times can sell their homes for enough to pay off the loan.”