There were 20,314 default notices filed from July through September, down 58.6 percent from 49,026 the same period last year, DataQuick said.
It was the lowest level since 18,568 notices were filed in the first quarter of this year and the second- lowest since 18,856 filed during the first quarter of 2006.
A sharp rise in home values has left fewer Californians owing more than their properties are worth and less vulnerable to foreclosure, DataQuick said. The state's median sales price was $360,000 during the third quarter, up 26.3 percent from $285,000 a year earlier.
Government measures to rein in lenders have also slowed foreclosure activity, the San Diego-based company said.
Defaults remained concentrated in lower-priced areas. Zip codes with a median sales price below $200,000 saw 3.4 notices filed for every 1,000 homes, while the rate fell to 2.2 notices for every 1,000 homes in areas with a median sales price between $200,000 and $800,000 and 0.9 notices for every 1,000 homes in areas with a median sales price above $800,000.
Default notices are the first step in the foreclosure process. There were 8,030 foreclosures completed during the third quarter, down 65 percent from 22.949 a year earlier to the lowest level since the fourth quarter of 2006.
Foreclosures peaked at 79,511 during the third quarter of 2008.