The Breakdown

Explaining Southern California's economy

The shift from foreclosures to short sales in California continues

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43195 full

It looks as if the foreclosure crisis in California is ending. At the same time, the real estate market is developing a definite appetite for short sales.

Foreclosures in California have dropped to levels not seen since 2006, the real-estate tracking firm DataQuick reported on Wednesday.

So homeowners finally have a financial leg to stand on, as rising prices and a gradually improving economy have thinned the ranks of people losing their homes.

That doesn’t mean the market is healthy again. As foreclosures have declined, short sales — in which lenders allows homeowners to sell for less than they owe on the mortgage — have edged up.

They represented more than a quarter of all sales in the state in the final quarter of 2012. And they're getting more popular with one important constituency. 

Banks have come to like short sales because they lose less money on them than on foreclosures and are now better set up to manage the short sale process, a relatively rare event before the financial crisis.

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