Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years, a CoreLogic DataQuick report said.

This is the result of a recovering real estate market and the shrinking pool of toxic homes made in 2006 and 2007, the report added.

There was a total of 16,833 Notices of Default recorded at county recorders offices during the July-through-September period, a 3.9% drop from 17,524 for the prior quarter, down 17.1% from 20,314 in third-quarter 2013.

In addition, last quarter's NoD tally fell to the lowest since fourth-quarter 2005, when 15,337 NoDs were recorded.

To put this into perspective, NoDs peaked in first-quarter 2009 at 135,431, while the low was 12,417 NoDs in third-quarter 2004. The NoD statistics go back to 1992. 

"This home repo pipeline isn't exactly drying up, but it sure is diminishing. Its negative effect on the overall market is only a fraction of what it was several years ago, and is really only still noticeable in some pockets of the hardest-hit markets of the Inland Empire and Central Valley," said John Karevoll, a CoreLogic DataQuick analyst.