San Diego real estate – The effect of “qualifying” on prices in higher priced markets.
I'll detail here what I think is going to be one of the most significant issues affecting the San Diego market. This is the issue of the tighter mortgage qualifying guidelines on prices. This will be an issue in two different ways.
1) The issue will impact the number of properties on the market. In August the MLS reported approximately 1850 closed sales. At the same time, there were over 4800 NODs (notice of default) filed in August. That means that there were over twice as many NODs as closed sales. If you extrapolate even just a little bit, you can see that the excess in inventory that already exists will be growing pretty significantly with the short sale and outright foreclosed properties that are likely to come on the market in the next several months.
Qualifying is an issue here because many people think that some government intervention or program will "bail out" these borrowers who are going to lose their homes. Don't think for a second that that is true. There has been a lot of posturing and there have been a lot of statements made, but VERY little in the way of any actual, meaningful legislation. The government has encouraged lenders to "work with" buyers in different stages of foreclosure, but made no "mandates" of any kind.
Most servicers of delinquent loans are not the actual lender of the money anyway, and they have little incentive to modify the terms of a note. What we are seeing is that many of them are trying to get the foreclosed properties on the market as quickly as possible, thinking that they'll be able to get a higher price now than they will be able to in the future.
The government has added a provision to the FHA loan program called the FHAsecure. This program has the stated intention of refinancing people who are behind on loans that have adjusted into fixed rate FHA loans. Let me show you the numerous ways in how this will not work. The borrower must have had an adjustable rate loan that is adjusting. They must have made payments on time for at least the prior 6 months before the adjustment. The expiration of the program is December 31, 2008. There are currently NO investors who will buy an FHA secure loan. The maximum loan amount in San Diego County is approximately $363,000. The maximum that can be financed is 97% of the CURRENT value of the property. (Do you think many people who bought a home with 0 down 2 years ago have even 3% equity today?). The borrower MUST QUALIFY for the new loan payments. You get the idea; these loans WILL end up in foreclosure.
The second way that the tighter qualifying guidelines will impact the San Diego real estate market will be discussed in a following post. The author, GB811 is a top San Diego mortgage broker. email Bob Schwartz if you would like to contact GB811. [tags]San Diego real estate, San Diego mortgages, San Diego home loans, San Diego real estate market[/tags] San Diego California real estate agents
If you enjoyed this post, make sure you subscribe to my RSS feed!
Very good mortgage insights! Thanks for the informative post.
San Diego hotels
I agree with you. I personally believe we will not see the ‘real’ bottom to the San Diego real estate until 2009. I hope I’m wrong and the bottom sets up for the end of 2008, but, don’t think it will be that soon. cosmetic dentist San Diego