California default notices are up more than 10% over July of last year. A notice of default is a recorded document and the first step in the foreclosure process. In California, a lender cannot file a notice of trustee’s sale until 90 days after the notice of default has been recorded.

On the other hand, repossessions are down more than 35% for the same month. A repossession of the home by the lender is the final step in the foreclosure process.

Foreclosed homes scheduled for sale are up more than 90% during the same period. These are homes that have been repossessed by the lender and are scheduled for auction. In California, there are more than 120,000 foreclosed homes that are currently scheduled for sale.

What This Means For You, “Golden” State Resident

Overall, the housing market in California is still bleak. More homes are going into default, but lenders are reposing the homes at a slower rate. In the near term, this means that fewer foreclosed homes will be hitting the market in the third and fourth quarters of 2009, which is good for home prices.

On the other hand, it means that a huge inventory of distressed properties is building up. And those properties will eventually hit the market hard.

If you are behind on your payments, this is all good news as the above numbers indicate that lenders may give you more time to catch up on your payments, enter into a loan modification, or simply stay in your home rent free.