Housing Bubble

California foreclosures down

May 05, 2003

La Jolla, CA.—— The number of California homes going into foreclosure declined during the first three months of the year, the result of strong demand for housing and steadily rising home values.

Lending institutions started foreclosure proceedings on 20,093 homeowners during the January-to-March period. That was up 4.5 percent from 19,225 for the prior quarter and down 14.2 percent from 23,406 for last year`s first quarter, according to DataQuick Information Systems.

An increase from fourth quarter to first quarter is normal for the season. The January-to-March total was the lowest for any first quarter since 18,806 default notices were filed in 1992. The peak occurred during first quarter 1996 when lenders started foreclosure proceedings on 44,665 homeowners. The numbers count Notices of Default, the first step of the formal foreclosure process.

"Foreclosure activity is actually a bit low right now relative to the number of loans at risk, and we expect defaults to increase slightly throughout the rest of this year. If for no other reason, there are simply more fresh home loans out there than ever before," said Marshall Prentice, DataQuick president.

Because of record home sales and record refinance activity, lending institutions made 3,176,648 home loans totaling $626 billion last year, a record. Default rates are generally higher for relatively new loans.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

Eighty percent of the homeowners who find themselves in default are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the mortgage off. In the mid 1990s only half of all distressed homeowners were able to do that. While foreclosure properties tugged property values down almost ten percent in some areas seven years ago, the effect on today`s market is negligible, DataQuick reported.

In addition to the decline in foreclosures, there is unremarkable activity among other market stress indicators including loan-to-value ratios, seller financing and other unconventional financing usage, shifts in market mix, turnover rates and non-owner occupancy rates, DataQuick reported.

Tulare, Madera and Kern counties had the highest relative foreclosure rates, while Marin, Napa and Orange counties had the lowest, DataQuick reported.

Source: DataQuick