Notices of default in San Diego County hit their lowest level since December 2006 last month.
With 1,360 notices of default filed in September, the county saw a 57 percent decrease from the prior month.
Alan Nevin, director of economic research at MarketPointe Realty Advisors, said he is “mildly optimistic” about the economy and a pending turnaround.
He said MarketPointe predicted the number of foreclosures would go down significantly in the third quarter.
“All the hurt isn’t over yet, but I think it is temporarily,” he said, adding that waves of foreclosures could occur within the next few years due to taxes on debt forgiveness on short sales and more adjustable-rate mortgages resetting.
A large part of the decline can be attributed to a change in the California civil code, which now requires loan servicers to contact and speak with borrowers 30 days prior to filing a notice of default, said Mark Riedy, executive director of the Burnham-Moores Center for Real Estate at the University of San Diego.
Though some may see the decrease as a sign the market is recovering or that the new code is helping to stabilize the market, Riedy said the decline is actually a “log jam” in the foreclosure process.
He added the market should expect an increase in NODs at some point.
“Whether it is one month, two months or three months, I think the point is that it’s an artificial decline,” he said, “and if you’re really looking at trying to asses if market conditions have improved, the answer is ‘no.’”
While the numbers show a 34 percent decrease from September 2007, the total number of notices of default year to date is up with 27,990 defaults from January to September compared to last year’s 15,582 in the same period.
Additionally, trustee deeds -- also known as notice of trustee sales and are one of the final steps before a home goes into foreclosure -- were down nearly 10 percent from August.
However, the 1,981 filed last month were still more than double the number of trustee deeds filed in September 2007.
Reidy said the 10 percent decrease is “not significant.”
Another surge of adjustable-rate mortgages resetting in 2010 and 2011 could add to the number of foreclosures in coming years, said Fred Eckert, vice president of Chicago Title, who cited data from Credit Suisse (NYSE: CS), a financial services company.
He said the market has a long way to go before recovery.
“I think we’re in for a pretty rough ride,” he said about enduring foreclosures throughout the next few years.
He added he wasn’t a supporter of the recent $700 billion bailout, and said he does not think it has made and may not make a positive impact on the economy or the foreclosure market.
“If it’s based on fear; money doesn’t make much of a difference for people. So I really think we’re going to be in this for the long run,” he said.
Reidy agreed, and said government funds will probably not fix the problem.
He used the analogy of pushing on one end of a string expecting it to move the entire thing rather than having just one end bunch up.
“(The federal government is) pumping more and more liquidity into the system and it’s just like pushing on a string,” he said. “If lenders aren’t willing to lend because they don’t have the confidence, and borrowers can’t borrow, the federal government can push all the money into the system they want until it gets to a ridiculous point, but they’re pushing on a string.”
However, he added that compared to other regions, San Diego’s local economy is “resilient” due to the “generally good shape” of smaller local banks and businesses that have borrowed money from them.
“Things are still humming along relatively decently in San Diego,” he said. “Not to say that we’re not limping a little bit, but we’re still walking forward.”
Nevin said he expects the market in San Diego to correct by spring 2009 because of sellers receiving multiple offers on homes with prices he said have “become palatable again.”
He added that is not the case for all areas with a high number of foreclosures.
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