Study Sees State’s Foreclosures Dropping : Housing: A slowly rebounding California economy is cited. But the defaults are expected to worsen in the East.

A slow rebound in California’s economy and gradually rising home prices should push home foreclosures in the region lower over the next five years, according to a report released Tuesday, but foreclosures in New Jersey and many other parts of the Northeast will rise more than twice as fast as the national average.

New York-based Fitch Investors Services Inc., which rates the safety of bonds backed by home mortgages, said an average of 65 out of every 10,000 home loans in California will wind up in foreclosure over each of the next five years, compared to the projected U.S. average of 74 in 10,000.

Fitch said the expected improvement in California will stem largely from a gradual recovery of the region’s battered aerospace and construction industries.

“The recession has probably hit California worse than all the other states, so it has the most room for improvement,” said Byron Klapper, Fitch’s president. “Also, it will benefit from its diversified economy because there’s no way that all of its key industries can remain in a long slump.”

New Jersey will see the highest foreclosure rate in the next half-decade as its struggling manufacturing sector continues to worsen and home prices turn soft. Foreclosures in New Jersey could zoom to 170 out of every 10,000 loans, more than twice the national average, the report said.

Foreclosures should also rise in New York and most New England states, the report said, as well as in Florida and several Oil Patch states such as Louisiana and Oklahoma.

The fewest foreclosures should occur in the Washington-Maryland-Virginia corridor, as well as in the states of Washington and Delaware, Fitch said.