Explaining Southern California's economy

California foreclosures and short sales are a smaller part of October market

Reed Saxon

A foreclosure sign in Pasadena. Foreclosures and short sales are a smaller part of the market in October, according to the California Association of Realtors.

California’s real estate market has been anything but healthy since the housing bubble burst. But there are now signs that the patient is on the mend. And really, what a difference a year makes! Last October, so-called “distressed sales” made up half of all monthly transactions in California real estate.

In this case, "distressed" means foreclosures and short sales. Short sales in particular have become popular. That's when the lender accepts less for the house that what the borrower owes.

A year later, the numbers have been reversed. The California Association of Realtors now reports that in October, distressed sales fell to just over a third of the market. Los Angeles County mirrored this statewide trend.

One reason why distressed sales are falling is that there simply aren’t as many of them on the market. There was only a 2-month supply of foreclosures in September and a 3-month supply for short sales. Those inventories could rise as banks put more foreclosures in the market and borrowers who remain underwater on their mortgages, just not as much as a year ago, decide to go for a short sale.