San Diego County foreclosures have plummeted to a nearly seven-low year — in light of rising home values, the effects of government intervention and new protections for California consumers, said real estate tracker DataQuick on Tuesday.
A total of 175 trustee deeds, which signal a foreclosure, were recorded countywide in May. That’s the lowest level since September 2006, when 172 homes were foreclosed upon and the local housing market began to see troubling declines in prices and sales.
“We’ve pretty much gone back to normalcy in foreclosures,” said Alan Nevin, a housing analyst with the London Group in downtown San Diego.
The most obvious reason for the foreclosure drop is that notices of default, the first step in the foreclosure process, also have fallen drastically. A total of 642 default notices were filed in May, down 52 percent from a year ago.
That figure tends be sporadic month-to-month, due to sudden hikes or drops in filings from major mortgage servicers, Nevin said. Still, defaults have generally been trending down. May’s total is about 28 percent lower than the one-year average of 887, DataQuick numbers show.
How did we get here?
A mix of factors — from an improving housing market to multibillion-dollar mortgage settlements — have played roles in cutting real estate distress throughout the county, said DataQuick analyst Andrew LePage.
The median price for a home sold in May rose past the $400,000 mark, the first time in five-plus years. May also marked the ninth straight month of double-digit annual gains in prices. That has been instrumental in lifting homeowners out of negative equity, especially those on the brink of defaulting on their mortgages, LePage said.
Those market dynamics give more hope to consumers, who now have “far greater incentive to hang on” to their properties, he added.
Troubled homeowners in the past year also have had more access to foreclosure alternatives through government settlements with major banks accused of foreclosure abuses.
Those deals required companies such as Bank of America, Wells Fargo and Chase to provide more homeowner aid. That help has included loan modifications, principal reductions and short sales, deals that let homeowners sell their homes for less than what they owe on their loans.
Also helping consumers are new protections, nicknamed the Homeowner Bill of Rights, which went into effect in California at the start of the year. A key feature of that set of laws prevents banks from starting the foreclosure process while a loan modification has been submitted or being reviewed by the bank, also called dual process.
San Diego’s housing comeback has come quicker than expected, Nevin said, because the county didn’t overbuild like other major metros including Phoenix and Las Vegas, where the foreclosure issue was more severe and prices have taken longer to recover.
Also, foreclosed properties in San Diego County did not remain on the market long because investors, many of them seasoned, snapped them up, Nevin said.
Discussion of a “shadow inventory,” a buzz term describing a spate of homes on the brink of default, has waned among real estate experts and in news reports. Fears of an imminent foreclosure wave, one that has been predicted for years, are over, Nevin said.
“We’re pretty much over it,” Nevin said. “Once again, it isn’t uniform across the United States, but in coastal California all the way up to Seattle, there is no hidden inventory of foreclosures.”
Lily Leung • U-T June 18, 2013