The foreclosure crisis that overwhelmed the greater Sacramento area for the past seven years has ended, figures released Tuesday suggest.
Notices of default, which start the foreclosure process, and trustee deeds, which complete it, fell across the region this summer to levels not seen since the crisis started in 2006, said DataQuick, a San Diego-based real estate information service.
Both key indicators are now in line with median levels over the past 20 to 25 years, said DataQuick analyst Andrew LePage. They also resemble foreclosure figures from the last time Sacramento’s wild boom-and-bust market was relatively stable, from 1999 to 2002, he said.
“We’re in the vicinity of what might be called normal, though in boom-and-bust states normal is a hard thing to define,” LePage said.
In Sacramento County, for instance, there were about 1,100 notices of default sent to homeowners in the third quarter of 2013. That was the lowest number since the first quarter of 2006 and a fraction of the peak in mid-2008, when more than 7,300 default notices were mailed by lenders in one three-month period. Since 1992, 1,400 default notices were issued countywide in a median quarter, LePage said.
Trustee deeds – indicating the actual number of homes lost to foreclosure – fell to 538 in the third quarter of this year in Sacramento County, DataQuick said. That’s still higher than the median quarterly figure of 402 since 1988, but declines in foreclosures typically lag months behind declines in defaults, LePage said.
A strengthening job market, steadily rising home prices, and government programs to help struggling homeowners are among the factors that have pushed down the number of defaults and foreclosures, the DataQuick analyst said.
“The closer you are to having equity in your home, the less likely you are to throw in the towel,” LePage said. “A few years back, many homeowners were underwater by 30 or 40 percent. Now they are underwater by 5 to 10 percent, and there’s light at the end of the tunnel.”
Economist Jeffrey Michael, head of the Business Forecasting Center at the University of the Pacific in Stockton, said it may still be too early to declare the foreclosure crisis over though it is “winding down,” he said.
“There’s still a lot of problem mortgages working their way through the system, but it’s indisputable that progress has been pretty amazing over the past year,” Michael said.
The speed of California’s nonjudicial foreclosure process, which allows homes to be foreclosed on without a judge’s review, helped rapidly clear out the backlog of foreclosed homes. Investors scooped up thousands of cut-price houses as the market bottomed out, slashing inventory and pushing up prices.
“The state of California is now below the national average for all (foreclosure) indicators after being one of the leading foreclosure states,” Michael said. “We’re moving out of it more quickly than other states are.”
Florida, for example, is still weighed down by a huge number of foreclosures because each one must be reviewed by a judge, he said.
Short sales and loan modifications, virtually unheard of until the past few years, have become commonplace alternatives for families seeking to avoid foreclosure, he noted.
In the Sacramento area and elsewhere in California, quickly rising home values have allowed families to regain equity in their homes for the first time in years, he said. But the lingering fallout of the foreclosure crisis will likely stick around.
“We’ll still be dealing with the impact on families and communities for some time to come,” Michael said. The latest DataQuick figures showing a return to some kind of normalcy are “encouraging data and encouraging news,” he said.