Foreclosure activity in California showed a year-over-year increase during the last quarter for the first time in more than three years, the result of lower appreciation rates and riskier loans, a real estate information service reported.

Lending institutions sent default notices to 12,568 California homeowners during the July-to-September period, up 0.8 percent from 12,465 for the second quarter, and up 3.5 percent from 12,145 for last year’s third quarter, according to DataQuick Information Systems.

The last time default notices increased year-over-year was during first-quarter 2002 when the 30,225 count was up 5.2 percent from 28,724 a year earlier. Defaults peaked in 1996’s first quarter at 59,897. Last year’s third quarter was the low. DataQuick’s default statistics go back to 1992.

“Current foreclosure levels are extremely low and this increase is a step towards more normal activity. Foreclosures decline when home prices go up. As home appreciation rates come down, we expect the foreclosure numbers to go up. They could double by the end of 2006,” said Marshall Prentice, DataQuick president.

The statewide median home price rose 17.6 percent during the third quarter to $454,000 from $386,000 a year ago. The year-ago rate of increase was 19.5 percent.

Southern California saw a year-over-year increase in foreclosure activity of 19.9 percent, while the San Francisco Bay Area saw a 13.1 percent decline, and the Central Valley a 22.5 percent drop.

On a loan-by-loan basis, mortgages are least likely to go into default in San Francisco and Santa Barbara counties. The likelihood is highest in the Central Valley and Inland Empire.

Only about 10 percent of homeowners who find themselves in the default process actually lose their homes to foreclosure. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying home loan(s) off.

While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today’s market is negligible, DataQuick reported.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

***

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