The Southward Group

Southern California and Los Angeles Real Estate

Faith is taking the first step, even when you don't see the whole staircase. — Martin Luther King Jr.

Home Prices: Stablizing or heading up?

After five months of year-over-year declines in foreclosure activity, it looks as if the worst of the crisis in Southern California is behind us, according to a company that has been keeping records.

The picture seems to be brightening faster in Inland Southern California than nationally.

In April, the nation saw the third straight month of year-over-year declines in notices of mortgage default, the initial step in the foreclosure process. It was the fifth consecutive month of such improvement in Los Angeles, Ventura, San Bernardino and Riverside counties.

"Part of it is because the Inland Empire was one of the first places to crash and experience extremely high foreclosure rates. It led the way into the housing crisis and appears to be leading the way out," said Daren Blomquist, an analyst with RealtyTrac, which on Wednesday released its April report.

Riverside and San Bernardino counties combined last month reported 5,042 notices of mortgage default filed, 53 percent fewer than in April 2009. All types of foreclosure filings -- including defaults, trustee sales and repossessions -- were down 33 percent in Riverside County and 35 percent in San Bernardino County compared with a year earlier.

Blomquist and other industry experts caution that the volume of foreclosure activity continues to be high and that other reports show the number of people late on their mortgage payments is on an upswing.

"Definitely the decline in notices of default is welcome news," said Chapman University economist Esmael Adibi. "Having said that, I still think the number of defaults is relatively high and we still are going to be dealing with this problem for at least this year and next year."

Many homeowners continue to struggle to pay their mortgages, a situation blamed on high unemployment and exotic mortgages popularized during the housing boom that are resetting to higher monthly payments.

Corelogic, a real estate research company, reported that in March more than 19 percent of mortgages in the two-county Inland Southern California region were at least 90 days delinquent, up from slightly over 14 percent a year earlier.

The Obama administration's new program encouraging short sales, allowing homeowners to avert foreclosure by selling their homes for less than they owe on their mortgages, probably drove the drop in default notices, Blomquist said.

Demand for homes, including short sales, also got a boost from the federal tax incentive for first-time homebuyers, Blomquist said. He added that Riverside and San Bernardino counties further benefit from extremely affordable home prices as a result of the crash.

Blomquist called short sales "bad news for the homeowner who no longer has that place to live in and the bank has to take a loss. ... But it is probably a better overall outcome for the market. You avoid having vacant homes with lawns dying."

Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said the short-sale program that went into effect in April has streamlined and standardized the short-sale process. Most important, Hobbs said, the program gave holders of subordinate mortgages on the houses incentive to participate by promising them a portion of the short-sale proceeds in return for releasing their liens to allow the sales to be accomplished.

But Kevin Stein, associate director for the California Reinvestment Coalition consumer advocacy organization, said it would be preferable for people to keep their homes by improving the success of loan modification programs.

Stein complained that since the Obama administration's loan modification program was launched more than a year ago, only 227,922 loan modifications have been completed, although the U.S. Treasury Department estimates there may be 3.4 million delinquent homeowners who qualify for help.

He said that while he welcomes a decline in defaults, he was disturbed by RealtyTrac's finding that in April the number of homes that reached the final stage of the foreclosure process nationally and were repossessed by the banks reached a monthly high.

Also the 3,624 bank repossessions last month in Riverside and San Bernardino counties, while less than half the peak of 7,337 bank repossessions in August 2008, was 526 more than a year ago.

A slowdown in the flow of bank-repossessed houses to the market last year has been credited with preventing the further collapse of home prices.

Blomquist said banks may be starting to push to foreclosure the large backlog of houses with delinquent mortgages that have been languishing in the process.

"The market has a lot of distressed properties to work through, either that have already gone into the foreclosure process or are on the brink," said Blomquist. "We believe a certain percentage of those will end up foreclosed on when all is said and done."

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