California's foreclosure activity fell dramatically last year, a positive sign for the state's housing market and broader economy.
During the past 12 months, the owners of more than 300,000 homes in the Golden State received foreclosure filings - default notices, scheduled auctions or bank repossessions - representing one out of every 43 housing units. That was a 25 percent drop from 2011, according to data released Thursday by RealtyTrac, an Irvine-based company that compiles housing data.
By comparison, the nation as a whole saw foreclosure filings drop only 3 percent, hitting 1.8 million homes. That represented one of out every 72 homes.
Over a two-year period, California's foreclosure filings fell 42 percent, compared with a 36 percent drop for the nation.
"We're definitely seeing fewer foreclosures," said Ray Burch, an agent with Golden West Realty in San Pedro.
Foreclosure activity is an important indicator to gauge the health of the housing market, which is gradually recovering from the nation's financial meltdown in 2008.
California was one of 25 states that saw a decline in foreclosure activity last year. Most of the states that experienced a rise go through what is known as a judicial foreclosure process, in which a lender must file and win a lawsuit for the right to foreclose, a time-consuming procedure.
"I think that's the primary reason that California was able to work through its foreclosure problem more quickly," RealtyTrac Vice President Daren Blomquist said.
Another reason is California's improving economy, said Robert Kleinhenz, chief economist at the Los Angeles County Economic Development Corp.
For example, U.S. nonfarm job growth was 1.4 percent last year, compared with about 2 percent in California.
"Part of it is that we finally saw the California economy really pick up the pace in 2012," Kleinhenz said.
In addition, because home prices have stabilized or even risen in many areas of California, banks are increasingly attracted to short sales - where a home is sold for less than the value of the mortgage. That has helped reduce foreclosures, which could lead to a bigger loss for banks, Kleinhenz said.
Despite California's improving economy, the Inland Empire still was stuck with the nation's second worst foreclosure rate, with nearly one in four homes receiving a filing last year. However, that was still down from the 2009 peak, when more than half of homes in San Bernardino and Riverside counties received such a filing.
Blomquist warned that California's sunny foreclosure trend may have been skewed by the California Homeowner Bill of Rights, which went into effect this month.
The decrease in California foreclosures started a sharper acceleration in the final three months of 2012.
"That was a warning flag to us that maybe this law was holding back some foreclosures," Blomquist said.
The state's Homeowner Bill of Rights creates guidelines that make it more difficult for lenders to foreclose.
However, with more understanding of the new laws and regulations, lenders will "start pushing through more foreclosures," Blomquist said. As a result, California may see a jump in foreclosure activity later this year or early next year, he said.
However, Blomquist added that the long-term trend continues toward fewer foreclosures.
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