There has a been a big drop in the number of foreclosed homes in Southern California, and this has homeowners breathing a big sigh of relief.   The significant decrease is helping to drive the median home price higher

Reports indicate that sales are up 7.5 percent in the Southland.  The median home price for the same area is also up 5.3 percent from the same month last year

Record low interest rates and low home prices are encouraging would-be homebuyers to enter the market.  The lack of homes available for sale has contributed to bidding wars for desirable properties.  But even more importantly, the decrease in foreclosures is stimulating the market as most foreclosures sell cheaply, which drives overall prices down

Foreclosures accounted for 24.5 percent of the resale market last month.  This was the lowest percentage the area has seen since December 2007.  While still a relatively high rate, it doesn't even compare to the 56.7 percent rate the area saw in February 2009.  Experts are optimistic that the market will continue to see fewer foreclosures

California has systems in place that help the state deal with foreclosures in an efficient manner.  The state requires no court order for a home to be foreclosed by a lender.  This helps California recover faster from the downturn than other states, such as Florida, that do not have the same system in place

Lenders are also beginning to explore other options for homeowners who are in trouble, such as home loan modifications or short sales.  Banks are facing stronger scrutiny and tighter restrictions from government officials about foreclosure practices

Local officials are getting creative in how they are dealing with borrowers who are having trouble making payments.  In San Bernardino County, for example, officials are using the practice of eminent domain to take control of mortgages that are problematic.  In Los Angeles, where foreclosed homes are magnets for criminal activity, and many homes stand vacant, the city is suing U.S. Bank for the neglect of homes it has repossessed

Reports indicate that foreclosures in California remained flat in June, with a decrease of 0.9 percent from the month prior and down 3.1 percent from this time last year

Investors looking to purchase foreclosed homes are finding a shortage in the market in Southern California.  This is helping the housing market recover, but over time could hinder the market

Experts predict that home sales could fall in the next year if something in the market doesn't shift.  While there is record low inventory of distressed properties owned by banks that are for sale, by this time next year we'll have half that amount inventory.  Since these types of sales make up a big percentage of overall sales, unless that inventory is made up for somewhere else the market could suffer

An additional factor that is helping Southern California see an increase in prices is that more expensive homes in coastal regions are seeing a boom in sales