With many still in trouble, California foreclosures fall

SAN DIEGO - Home foreclosure activity in California has fallen to five-year lows, easing concerns there might be a flood of distressed sales to slow or reverse the housing market's recovery.

There were 54,615 default notices filed on houses and condominiums from April through June, down 3.6 percent from 56,633 during the second quarter of last year, according to research firm DataQuick. It was the lowest tally since the second quarter of 2007 and down 60 percent from the peak of 135,431 in the first quarter of 2009.

The numbers provide more evidence that California's housing market is on the mend even as doubts persist that foreclosures may rise again.

"The big caveat is there are still a lot of people in trouble, and it's not clear how many will be foreclosed upon," said DataQuick analyst Andrew LePage.

Foreclosures may spike for six to nine months if lenders got "really aggressive about flushing all the distress through the system," LePage said.

Eric Sussman, of University of California, Los Angeles' Anderson School of Management, said banks are unlikely to unleash a new wave of foreclosures, partly because they would face political backlash in an election year.

The governments of San Bernardino County and two of its cities are considering a plan to condemn properties with troubled mortgages, preventing bank-forced defaults.

The California Association of Realtors' index of unsold inventory stood at 3½ months in June, down from 5.1 months a year earlier. The represents how long it would take to sell all existing single-family homes at the current sales clip. Supply in a normal market is considered to be six to seven months.

Foreclosures totaled 21,851 in the second quarter, down 48.5 percent from 42,465 for the second quarter of 2011, DataQuick said. It was the lowest since the second quarter of 2007.

Default notices, the first step in the foreclosure process and a leading indicator, dropped sharpest in the San Francisco Bay area during the second quarter, plummeting 13.4 percent from last year in the nine-county region.

Notices in seven counties of Southern California fell 1.8 percent, as improvements in coastal regions were nearly offset by struggles in foreclosure-battered inland areas.