San Diego Real Estate 2010 Forecast

San Diego Real Estate 2010 Forecast

The year of the strategic mortgage default

 

2010 real estate outlook

 

It would be easy to write a 2010 real estate forecast by repeating the industry line that “the new year will mark a turnaround for real estate values; those who act fast will be able to get the best buys.” Real world facts, at least in San Diego, seem to indicate otherwise.

There are reasons why another, more vicious, down-leg may be in store for the San Diego real estate market in 2010. Remember, many of the adjustable home loans were designed with five and seven year interest adjustments. The top of the San Diego real estate market occurred in the summer of 2005, so a huge number of loans are set to adjust next year. The saving grace is that interest rates are near all-time lows and interest rate shock will not be a negative factor. The downbeat with these mortgage adjustments will be the ‘reality check’ factor. How many homeowners will suddenly wake up to the fact that their home is now worth tens of thousands of dollars less than their mortgage balance? Only the naive will believe that their San Diego home’s value will snap back soon.

A study by researchers at Northwestern University of Chicago found that as many as one in four defaults may be strategic.  Driving this phenomenon is the rising number of households that are deeply “under water,” owing much more than the current value of their homes. First American CoreLogic, a real-estate information company, estimates that 5.3 million U.S. households have mortgage balances at least 20% higher than their homes’ value, and 2.2 million of those households are at least 50% under water. The problem is most severe in Arizona, California, Florida, Michigan and Nevada.

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