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More Short Sales In Process As Defaults Fall

The road to economic recovery has been rocky at best, but the good news is that the real estate market, around which the crisis evolved, seems to be rising back to its feet, based on reports from research and data firm DataQuick.

Default notices in California - the first step towards foreclosure - were counted at 70,051 last quarter, down 44% from a year ago. This is the lowest it has been since 2007, when only 54,000 notices were given out.

In California, one of the hardest-hit states in the housing crash, mortgage defaults reached a three-year low last week. This is accompanied by a rise in short sale closures, which is likely a result of the Home Affordable Foreclosure Alternatives (HAFA) program launched last April.

Another information provider, RealtyTrac, reported that certain areas have an increased short sale ratio. For instance, in Stanislaus County in Central California, two out of three homes sold since the start of the year were short sales or bank-owned properties - about twice the national average.

Stanislaus had one of the highest percentages of distressed sales in the state in the first quarter of 2010, along with San Joaquin, Merced, and Imperial.

Experts take the figures as a positive sign of recovery, albeit a slow one. Some have attributed it to tighter lending standards, which have kept borrowers from taking out loans they couldn't afford anyway.

Warren Adams of Fair Oaks real estate firm Security Pacific said that the market has gone through riskiest loans of the sub-prime boom. Mortgages taken out in 2008, he said, have a lower chance of defaulting than those taken two years earlier.

Nonetheless, experts warn that the foreclosure wave isn't over. Some 1 million homes are still likely to go into foreclosure this year, most of them from mortgages that have gone into default during the past few months.