Foreclosure activity plunged last quarter to the lowest levels in five years in California and Los Angeles County, a sign the residential real estate recovery is continuing, a market tracker said Monday.
The number of homes foreclosed on by lenders fell 48.5 percent across all of California and dropped 47 percent in the county during the second quarter, compared to 2011, said San Diego-based DataQuick. Foreclosures are now at their lowest levels since the second quarter of 2007.
Lenders also filed fewer default notices compared to a year earlier, but that percentage decrease was relatively smaller.
It's another positive development for the long-suffering housing market, said Robert Kleinhenz, chief economist at the Kyser Center for Economic Research at the Los Angeles County Economic Development Corp.
"I think this is good news because one of the woes for the housing market was the foreclosure overhang," Kleinhenz said. "This doesn't mean that the story line is over, but we are moving to the end stage of it."
The big drop in foreclosures may send a signal to prospective buyers that housing prices are pretty much at their low point and this is a good time to buy.
Owners may now get a bump up in equity, too, he said.
DataQuick analyst Andrew LePage agreed.
"From the perspective of a lot of homeowners and people in the industry, this is good news," he said.
The unknown at this point is whether
lenders are taking their time dealing with distressed properties, LePage said, which could lead to a future spike in foreclosures.
DataQuick's report showed that:
--Statewide foreclosures fell to 21,851 in the second quarter from 42,465 a year earlier. The three-month total is the lowest since 17,458 foreclosures in April-June 2007.
Lenders filed 54,615 default notices in the April-June period, down from 56,633 a year ago. The second quarter total was the lowest since 53,943 notices recorded in 2007.
--At the county level, foreclosures fell to 3,553 during the quarter from 6,733 a year ago. Lenders issued 10,568 default notices, down 6 percent from 11,250 a year ago.
Most California home loans going into default are still from the 2005 through 2007 period, an indication that the weak underwriting standards that capsized the housing market peaked in the 2006 third quarter, DataQuick said.
Banks with the biggest portfolios of bad loans in the second quarter included Bank of America with 8,299, JP Morgan with 7,497 and Wells Fargo with 7,131.
The decline in both foreclosures and defaults is encouraging.
"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 (notice of default) numbers mean that there's less distress to process, or if we're just seeing distress get processed at a slower pace," DataQuick president John Walsh said in a statement.
"Obviously the economy has been on the mend -- however slowly."
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