California Foreclosures Hit Lowest Level Since 2005

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The number of default filings against California homeowners in the first quarter of 2013 was down 67 percent from the same period a year ago, hitting the lowest levels since the fourth quarter of 2005.

The 18,567 homes that entered the foreclosure process was a 51.4 percent drop from the previous quarter, according to Dataquick, a research firm.

"The unusually sharp drop in the number of mortgage default notices filed by lenders stems mainly from rising home values, a strengthening economy and government efforts to reduce foreclosures," the firm reported.

A package of new foreclosure laws--the Homeowner Bill of Rights--may also have impacted filings. The laws went into effect January 1 and default notices "fell off a cliff," before edging up in February, the firm reports.

"In recent years we've seen temporary lulls in foreclosure activity after new laws kick in and lenders adjust," said DataQuick president John Walsh in a statement. "It's certainly possible foreclosure starts will pick up at some point this year if lenders need to play a lot of catch-up."

Rising home prices are the key to the "final mop of the foreclosure mess," Mr. Walsh said. The median home price for a home in California was 28.2 percent higher in March than a year ago, the California Association of Realtors reported last week.

"As values rise, fewer people owe more than their homes are worth, and more people can refinance into a more favorable loan," Mr. Walsh said. "It also means more who fall on hard times can sell their homes for enough to pay off the loan."