In a few key areas Orange County is a leader in foreclosure statistics, but that's good news, according RealtyTrac, an Irvine-based foreclosure-tracking firm.
Orange County is one of the few spots in the nation where short sales are outpacing foreclosure sales, according to RealtyTrac. Most agree it's better for homes to sell at reduced rates and to be occupied until sold than to sell at reduced rates and to sit vacant all that time.
Orange County's 20 straight months of year-over-year decreases in foreclosure activity also set it above most other counties, according to RealtyTrac.
The county's 20-straight-month improvement string is far better than the 11 consecutive months of decreasing activity seen nationwide, some of which was attributable to the robo-signing scandal, during which some banks were improperly filing foreclosure paperwork. Noteworthy is that Orange County's string began nine months ahead of the robo-signings.
Orange County is "kind of leading the path to recovery," said RealtyTrac's Daren Blomquist. "I think if we begin to see what's happening in Orange County in other counties, that's a good sign."
A few counties across the nation may be nearing a point where they will be able to look back at some point and say this is when they turned the corner, according to Blomquist.
"Even though there's a lot of bad news in this market, there are markets that will look back and see that in 2011 that they were starting to see signs of life," he said. "And Orange County is one of those. A lot of it with Orange County comes down to location. But also jobs, there are good job numbers here, and there is petty healthy demand for property in Orange County. I think we are seeing some glimmers of hope in the Orange County market maybe before we are in other areas of the market."
Tony Bartos, who specializes in foreclosed properties in the Orange County area for Coldwell Banker Previews International, acknowledged the Orange County market is healthier than the region's other counties, not only due to lower unemployment, but because the county had a smaller number of sub-prime mortgages that resulted in the huge foreclosure volumes in the first place.
"However, just because Orange County did not experience as large a wave of foreclosures as other areas, does not mean the market is on the mend," Bartos said. "It's far too soon to say. I would expect increased foreclosures as lenders settle lawsuits with the California attorney general and other states."
While the foreclosure statistics may appear favorable, they are not what would be considered a healthy in any case.
From when RealtyTrac began tracking foreclosures in 2005 to now, foreclosures in Orange County peaked in July 2009. In that month, the county saw 7,286 properties receiving a notice of foreclosure.
In September 2011, 2,761 foreclosure notices had been handed out.
"We've come down pretty dramatically for that peak," Blomquist said.
However, in 2005, when the market was in much better shape, the average number of properties receiving notices in Orange County was 276 per month.
"We're still a ways from what we would consider a normal, healthy real estate market," he said. "We're on the right path to getting back to a normal, healthy market, but we still got a ways to go before we get there."
One indicator of the foreclosure scenario heading the right way in Orange County is the number of short sales versus foreclosures, according to RealtyTrac.
A short sale is preemptive strike to avert foreclosure when homeowners and lenders negotiate to sell the home at a lower rate rather than having the bank take outright possession of the home.
In Orange County during the second quarter, the most recent data available, there were nearly twice as many short sales as bank-owned, or foreclosure, sales — 2,286 short sales versus 1,368 bank-owned sales, according to RealtyTrac.
Nationwide, the opposite is true. In the second quarter of the year, there were just more than 100,000 short sales recorded compared with 162,000 bank-owned sales.
"We think that's significant, because to us, short sales are more indicative of a market that has stronger demand and is able to more efficiently dispose of these distressed properties," Blomquist said.
An added advantage short sales have over bank-owned sales for a community is the average sales price, which for bank-owned sales tends to be lower than the average price of short sales.
The national average was $145,211 in the second quarter for bank-owned sales. For short sales the average was $192,129. In Orange County, the average bank-owned sale was $395,550, and the average short sale price was $427,008.
But Bartos argues that doesn't necessarily mean the market in Orange County is getting healthier.
"The market is not healthier because there are more short sales," Bartos said. "Instead it's an indication that lenders would much rather see borrowers pursue that option than foreclosure. It's still indicative of a distressed market as both are distressed sales."
The reason for Bartos' pessimism?
"There are still too many delinquent mortgages. State lawsuits and government intervention has prevented many homeowners from being foreclosed upon despite no payments being made for years in some cases," he said. "(Bank-owned) inventory that we would have seen is not entering the market as lenders look to foreclosure as a last resort."
While avoiding foreclosures is a good thing, Bartos said, it won't be until the area sees "substantive declines in foreclosure filings combined with a decline in distressed property selling, which includes short sales and (bank-owned sales), then perhaps a case might be made to say that the broader market is improving.
For Blomquist, it all goes back to the consecutive drops in foreclosure numbers.
"It's not just a one- or two-month trend," he said. "We've seen 20-straight months … every single month we've seen a year-over-year decrease in foreclosure activity. I think we're past the peak."
He added, "I think we're seeing these glimmers of hope in the market."
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