Foreclosure Starts, Completions a Pre-Recession Levels in California

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Foreclosure starts in California during
the fourth quarter dipped to an eight year low, returning to levels last seen before
the beginning of the Great Recession and the housing crisis.  DataQuick says that Notices of Default (NOD),
the first step in the foreclosure process, dropped 10.8 percent from the third
to the fourth quarter of 2013, from 20,314 to 18,120.  The fourth quarter total was 52.6 percent
below the total of 38,212 in the fourth quarter of 2012.  Although 18,120 default notices were filed
last quarter, they involved 17,773 homes because some borrowers were in default
on multiple loans. 

DataQuick said the last time so few NODs
were filed in a given quarter was the fourth quarter of 2005 when 15,337 were
recorded.  NODs peaked in the first
quarter of 2009 at 135,431. 

“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. 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,” said John Walsh, DataQuick president.

Completed foreclosures totaled 8,205 in
the fourth quarter, up 2.2 percent from the 8,030 recorded in the third quarter.  The third and fourth quarters recorded the
lowest and second lowest numbers of completed foreclosures respectively in the
last seven years.  Foreclosures in the
fourth quarter were down 61.2 percent from the fourth-quarter 2012. The
all-time peak was 79,511 foreclosures in third-quarter 2008.

Both NODs and foreclosures remained most
concentrated in the more affordable communities. Zip codes with 2013 median
sale prices below $200,000 collectively saw 2.0 homes foreclosed on in
fourth-quarter 2013 for every 1,000 homes within their borders, and NODs filed
on every 3.1 homes. That compares with 0.8 foreclosures and 2.0 NODs per 1,000
homes for zips with $200,000-to-$800,000 medians, and 0.2 foreclosures and 0.7 per
1,000 homes for the group of zips with $800,000-plus medians.

Lenders are still working through loans originated
from 2005 to 2007
.  DataQuick said the
median origination quarter for loans on which NODs were filed is the third
quarter of 2006.  This has been the case
for more than four years

Homeowners were a median of 8.7 months
behind in payments on senior liens for which NODs were filed during the quarter
and owned a median of $20,066 or a mortgage with a median size of
$302,000.  NODs were filed on home equity
loans and lines of credit with a median past due of $5,491 on a median credit
line of $68,770.  No information was
available on the outstanding balances on those credit lines.

On average it took lenders 9.0 months from the NOD until the foreclosure process
was completed in the fourth quarter. 
This timeline was virtually unchanged from the prior quarter and one
year earlier.  The most active “beneficiaries”
in the formal foreclosure process last quarter were Wells Fargo (3,287), JP
Morgan Chase (1,182) and Nationstar (1,096).

Sales of homes that were foreclosed
within the previous 12 months accounted for 6.7 percent of all California
resale activity last quarter and short sales for 12.5 percent.  That was down from 7.7 percent and 13.5
percent respectively in the third quarter and 16.6 percent and 25.8 percent a
year earlier.   An estimated 40.0 percent
of foreclosed properties bought at auction during the quarter were bought by
investors or others that don’t appear to be lender or government entities. That
was down from an estimated 48.0 percent the previous quarter and 41.8 percent a
year earlier.

The median price paid for a California
home was $364,000 in the fourth quarter, up 22.1 percent from $298,000 a year
earlier. The median has risen more than 20 percent 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 reported.

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