Stockton, Calif., was hit hard by the housing bust, and many people lost their homes to foreclosure.
But now, "[t]he foreclosure pipeline is drying up," said Leslie Appleton-Young, chief economist for the California Association of Realtors.
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While bank-owned properties still account for more than half of all sales, it's a vast improvement from the first years of the bust when they accounted for 80% or more, she said.
The shift means that house hunters won't find quite the bargains of a few years ago, and listing prices are up more than 16% in the past 12 months.
"The market still has a long way to go, but it's healing," she said.
NEXT: San Jose, Calif.