Now here is where the numbers get tricky: In spite of the year-over-year increase in the overall numbers, foreclosure sales as a percentage of the housing market declined. In Q4-2009, 40.7% of the resales in California were foreclosure sales. However, in Q4-2008, 54.4% of resales in California were foreclosure sales.

The first set of numbers (the overall number of foreclosure sales) seem to be telling us that foreclosure sales are becoming more prevalent. But the second set of numbers (the number of foreclosure sales as a percentage of the total sales) seem to be telling us that foreclosures are becoming less prevalent.

In addition, more conflicting numbers exist:

DQNews states that the number of NODs declined between the third quarter and fourth quarter of 2009. And John Walsh, DataQuick president, had this to say about the foreclosure market:

Clearly, many lenders and servicers have concluded that the traditional foreclosure process isn’t necessarily the best way to process market distress, and that losses may be mitigated with so-called short sales or when loan terms are renegotiated with homeowners.

But many analysts are predicting a sizable increase in defaults when the terms for many outstanding loans adjust upward in the coming year. For example:

Amid falling home prices and a nasty labor market, roughly 1 in every 7 mortgages was either past due or in foreclosure by the end of the third quarter-the highest delinquency rate in the 37-year history of the Mortgage Bankers Association’s National Delinquency Survey. Two factors are expected to drive delinquencies even higher next year. First, nearly 1 in 4 homeowners currently owes more on their mortgage than the property is worth, which increases their odds of default. And secondly, the national unemployment rate-which already stands at 10 percent-will peak at about 10.5 percent in the first quarter of 2010, says Patrick Newport, an economist at IHS Global Insight. Additional job losses mean more borrowers won’t be able to pay their mortgage bills-”10 Things to Know About Real Estate in 2010,” Luke Mullins, U.S News & World Report

This quote from U.S. News & World Report is referencing the national housing market, but this would apply to Southern California as well.

Here are the most recent Orange County foreclosure numbers from DQNews:

Notice of Defaults (NODs)–This is the first step in the foreclosure process; however, this does not necessarily end in the home being taken back by the lender.

Fourth Quarter 2009 Year-Over-Year Numbers:

• 2009–5,555
• 2008–4,481
• This is a 24.0% year-over-year increase. However, the quarter-to-quarter number of NODs deceased.

Third Quarter 2009 Year-Over-Year Numbers:

• 2009–7,436
• 2008—5,692
• This is a 30.6% year-over-year increase.

Trustee Sales Recorded–This is the last step in the foreclosure process. The home is sold to a new owner at a trustee auction or taken back by the lender in this stage of the foreclosure process.

Fourth Quarter 2009 Year-Over-Year Numbers:

• 2009–2,235
• 2008–2,088
• This is a 7.0% year-over-year increase. In addition, the quarter-to-quarter number of trustee sales is approximately the same.

Third Quarter 2009 Year-Over-Year Numbers:

• 2009–2,238
• 2008—3,997
• This is a 44.0% year-over-year decrease.