Thanks to an improving economy, foreclosure prevention efforts and higher home prices, the number of foreclosures in California has dropped to an eight-year low, according to DataQuick.
About 18,120 defaults were recorded in California during the fourth quarter of 2013, according to the real estate information service. That's down 10.8% from the 20,314 defaults recorded in the third quarter and down 52.6% from the 38,212 recorded in the fourth quarter of 2012.
The state's default rate hit a record low in the fourth quarter of 2005, when 15,337 notices of default were recorded. The state's default rate peaked in first quarter of 2009, at 135,431, according to the firm's research.
‘Some of this decline in foreclosure starts stems from the use of various foreclosure prevention efforts – short sales, loan modifications and the ability of some underwater homeowners to refinance,’ says John Walsh, president of DataQuick, in a release. ‘But most of the drop is because of the improving economy and the increase in home values. Fewer people are behind on their mortgage payments. And of those who do get into trouble, many, if not most, can sell and pay off what they owe. Also, those who are underwater and close to slipping into foreclosure are far less likely to give up their homes now that appreciation has returned to the housing market. There's a strong incentive to hang on.’
The median price paid for a home in California was $364,000 in the fourth quarter, up 22.1% from $298,000 in the fourth quarter of 2012. The median has risen more than 20% on a year-over-year basis for the last five quarters. It peaked in second-quarter 2007 at $485,500 and hit bottom at $235,000 in second-quarter 2009, DataQuick reports.
Most of the defaults are concentrated in the state's most affordable neighborhoods – and most are in connection with loans originated during the 2005-2007 period.
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