San Diego Home Sales Prices
San Diego real estate median sales prices in June for both detached and attached homes decreased, although modestly, in most neighborhoods.
The San Diego home price data was derived from data published by the San Diego Association of Realtors and the graphs were produced by www.websitetrafficbuilders.com
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San Diego Home Sales Uptick
San Diego June real estate sales for both detached and attached homes increased, although modestly, in most neighborhoods.
If one considers seasonal factors, mortgage rates hovering around 5%, and the $8,000 Federal tax credit, the modest upticks should not be considered as conclusive proof that our San Diego real estate market has bottomed.
The San Diego sales data was derived from data published by the San Diego Association of Realtors and the graphs were produced by www.websitetrafficbuilders.com
San Diego home sales
San Diego condominium sales
San Diego Homes – WHEN IT PAYS TO LET THEM FORECLOSE!
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A recent research report from the University of Chicago’s Booth School of Business and Northwestern University’s Kellogg School of Management reports that of the large number of mortgage defaults across the country, 26% were what they call strategic. This report defines strategic as one in which the mortgage default was a calculated, done by homeowners who have the money to make the payments. The owners decided that the homes negative equity position indicates to them it would be economically wiser to let the property go back to the lender.
According to another nationwide study, 22% of all homeowners had negative equity positions during the first quarter of 2009. This means the homeowners owed more on their mortgage, than the current resale value of their homes. In some parts of Southern California, Nevada and Florida, it’s speculated that more than half of all homeowners now have negative equity.
Currently, we are just beginning of prime adjustable-rate loan activity called mortgage resets. The number of these mortgage resets far exceeds the number of subprime loans. The findings from Northwestern University’s study seem to indicate that the U.S. housing market is on the brink of another substantial rise in home foreclosures.
Keep in mind, that these are prime loans made to the middle and upper end of the housing market. The people can afford to make the reset payments on their mortgages. A main reason that these people can afford the new reset payments is because of today’s low interest rates hovering at around just 5%. In a post, dated 1-20-09, titled ‘San Diego Negative Home Equity’ on my San Diego real estate market blog, I speculated about this exact situation. The post was well in advance of this study’s findings and all the more prophetic today.
I believe the importance of the mortgage reset will wake up homeowners to the harsh reality, and extent, of their negative equity position. Will they want to keep making mortgage payments? Would you, if the current value of your home was $50,000 less than the balance of your mortgage? What if your home value was $100,00, $200,000 or even $300,000 less than the balance on your mortgage? Would you continue to make payments or let the bank take it over?
I recently sold only in La Jolla. That was purchased new in 2005 for approximately $1.6 million. My buyer, was able to buy this home for just $1.1 million. So, in just about three years, from the time this home was purchased, the original seller’s home value had declined by $500,000, or just over 31%. Now just imagine if this home was originally purchased with a 10% down payment. The original owner would have had $160,000 invested in the property at the start. Plus would have made three years of substantial monthly mortgage payments, plus upgrades and then found out that his original $160,000 equity position had deteriorated into a -500,000 position. Now, should the original purchaser, with the loan balance of $1,440,000 continue to make mortgage payments or let the bank take the property back?
In the Northwestern University study, among those without moral reservations, 63% of those homeowners with a negative equity of $300,000 or more would let the property go into foreclosure. For the other group in the study who had moral issues with letting their home go into foreclosure, if they could make the payments, 38% would let their properties foreclose if their negative equity position reached $300,000.
Another finding in the study showed that the higher number of foreclosures in the zip code, the higher the homeowners’ willingness to walk away from their properties. Plus, 82% of homeowners in the study were likely to have a strategic default when they were aware of others who had defaulted.
The bottom line from this study seems to show that the traditional assumptions that homeowners default on their mortgages because they can’t afford their monthly payments, needs to be re-examined. Even with the new Fannie Mae and Freddie Mac 125% refinance mortgages, will these deep in negative equity homeowners really be enticed to refinance their homes, when financially, it looks like a foolish decision?
Commercial Real Estate Downturn
Moody’s/REAL Commercial Property Index shows that the nation’s commercial real estate markets are now firmly experiencing a tremendous downturn with prices plummeting a whopping 28.53% on a year-over-year basis and a stunning 34.83% since the peak set in October 2007.
commercial real estate
Existing Home Sales Up 6.4% in West
home sales
The National Association of Realtors (NAR) reported today that existing home sales were up for a third month in a row. Nationally, existing home sales increased 3.6 percent to a seasonally adjusted annual rate1 of 4.89 million units in June from a downwardly revised pace of 4.72 million in May, but are 0.2 percent lower than the 4.90 million-unit level in June 2008. Plus, home inventories eased and home prices were declining less sharply in June.
Existing-home sales in the West improved by 6.4 percent to an annual rate of 1.16 million in June, and are 11.5 percent higher than June 2008. The median price in the West was $214,800, which is 24.9 percent below a year ago.
NAR President Charles McMillan, said: “Despite some of the challenges, the housing market continues to demonstrate signs of recovery. The temporary first-time buyer tax credit is clearly helping people make a decision and is contributing to the overall stimulus impact, but since it’s taking longer to close transactions, many would-be beneficiaries may not be able to take advantage of the credit before the December 1 expiration date. As a consequence, consumers need the expertise of Realtors® more than ever to navigate both the obstacles and opportunities in today’s market.” San Diego home sales
San Diego Home Foreclosures Up 66%
San Diego home foreclosures
Dataquick of La Jolla, reported that San Diego County June notices of default were up 66% over May. But, the number of default notices were down 11% from June 2008.
John Walsh, President of DataQuick said: “There is a perception that the housing market is dragging along bottom, that it probably won’t get much worse, and that the lenders need to get serious about processing the backlog of delinquencies, either with work-outs or foreclosure. We’re hearing that some lenders and servicers are doing just that, hiring more people to do the necessary paperwork. That means the foreclosure numbers will probably shoot back up during the third quarter.”