As 2013 came to a close the rate of foreclosures plunged more than 60 percent across Southern California. In the final three months of the year the number of property owners losing a home in the region dropped 62 percent (from 10,604 in 2012 to 4,005). According to La Jolla-based DataQuick, this marked a seven-year low. Default notices, which are the first step in the foreclosure process, fell 50 percent.
The numbers are dropping as a result of foreclosure prevention efforts, higher home prices and values, as well as an overall improvement in the economy. Between December 2011 and 2014 the median home price in Los Angeles County increased $125,000.
“That improved the position of a lot of people who might have been underwater. The low level of foreclosure activity we’re seeing now is certainly a good sign. It’s an important development for the California housing market as it continues to improve,” said Robert Kleinhenz, chief economist at the Kyser Center for Economic Research in Los Angeles.
For California, foreclosures plunged 61 percent to 8,205 from 21,127 and defaults dropped 53 percent to 18,120 from 38,212.
Default Loans from 2005-2007 Period
According to DataQuick, most of the loans going into default are still from the 2005-2007 period. Third-quarter 2006 is the median origination quarter for defaulted loans and has been for more than four years. This indicates that weak underwriting standards peaked then.
“Too many people got trapped in risky, exotic loans that were never meant to be permanent. But when prices dropped they were stuck,” said DataQuick analyst Andrew LePage.
It’s estimated that the drop in foreclosure activity will continue through 2014, but that the percentage decreases will likely shrink as they get back to a more moderate level.
“I wouldn’t be surprised to see a quarter or two when activity trends up a just a little bit. It just depends on how the lenders handle their remaining distressed inventory,” LePage said.
Source: Los Angeles Daily News, Southern California foreclosure activity plunges again, 1.21.14