Even as the economic recovery sputters, the mortgage crisis that helped trigger the recession appears to be easing.
Mortgage defaults in California have fallen to their lowest level in three years, market research group MDA DataQuick said Wednesday.
Some of the drop-off may reflect an increase in short sales, in which troubled homeowners sidestep the foreclosure process but still lose their homes. But experts said it's also a sign of a housing market that's genuinely improving.
In Stanislaus County, for example, two of every three Stanislaus County homes sold this year have been bank-owned or "short sales" to avoid foreclosure, according to RealtyTrac, another real estate research firm,
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That's more than double the national average, showing how foreclosures continue to dominate the region's real estate market.
Merced, San Joaquin, Stanislaus and Im- perial counties had the highest percentage of bank-owned and pre-foreclosure sales in California of homes sold during January, February and March.
A tightening of lending standards also means fewer buyers are taking out loans they can't repay.
"The bad loans have kind of worked their way through," said Warren Adams of Security Pacific Real Estate in Fair Oaks. He said mortgages issued in, say, 2008, are far less likely to go into default than those made in 2006.
Statewide, MDA DataQuick said lenders issued 70,051 default notices in the second quarter, down 44 percent from a year earlier. It was the lowest number since almost 54,000 were issued three years ago.
In the valley, there was a decline in foreclosure filings this January, February and March compared with the same months last year.
Notices of default -- the first step of the foreclosure process -- dropped 41.6 percent in Stanislaus County, 46 percent in Merced County and 43.4 percent in San Joaquin County.
In the same period, the number of homes lost to foreclosure plunged 9.7 percent in Stanislaus, 33 percent in Merced and 7.3 percent in San Joaquin, MDA DataQuick found.
Still, more than 1 million U.S. households are likely to lose their homes to foreclosure this year, as lenders work their way through a huge backlog of borrowers who have fallen behind on their loans.
Since 2007, nearly 52,500 Stanislaus, Merced and San Joaquin county homes have been lost to foreclosure. That includes 12.7 percent of all houses and condos in Stanislaus, 15.5 percent in Merced and 13.9 percent in San Joaquin.
"The market has stabilized in most areas," said MDA DataQuick analyst Andrew LePage. "We're moving further and further beyond the initial problem, which was the subprime loans."
However, LePage and others said the pool of distressed homeowners remains deep.
He said the weak economy is continuing to pressure homeowners. California's unemployment rate sits at 12.3 percent, Sacramento's at 12.4 percent. Stanislaus County's is 17.3 percent.
Fears of another wave
Because of those numbers, some are concerned that more homeowners may default on their loans and trigger another wave of foreclosures.
Some people manage to avoid defaulting merely because lenders are allowing more short sales, enabling the borrowers to get out of their homes while avoiding the painful foreclosure process. In a short sale, the lender takes purchase offers for less than what's owed on the property.
The valley has led the nation in foreclosures for three years, and those repossessed homes have pulled down all property values.
There was only a 9 percent price difference in Stanislaus County between foreclosure properties and those bought from owners who were not in mortgage trouble. That's evidence of how foreclosures have reduced home values throughout the region.
Bank-owned homes and those in mortgage default typically are priced lower because their owners are motivated to sell quickly, and often foreclosure homes are damaged or have maintenance problems.
The median sale price for Stanislaus County homes dropped to $139,000 in June, according to the most recent report from MDA DataQuick.
The figure had jumped to $148,000 in May, raising hopes that prices were rising again after plunging by two-thirds from 2006 to 2009. That report followed 18 months in which the median mostly stayed at $133,000 to $140,000.
The June report suggests that the region could be in for a long, uneven recovery from the housing slump.
Nonetheless, "there is a sense that the housing market in general is healing," said Dustin Hobbs, spokesman for the California Mortgage Bankers Association.