San Diego real estate – 2009 the Option ARM resets
Many local mortgage lenders feel that San Diego & Southern California were the prime locations for the adjustable Option ARM loans. Now, just when many believed the mortgage crisis was winding down, San Diego real estate will be facing another major obsticle.
Our first post on this problem was San Diego Real Estate … The Coming Next Wave of Foreclosures, published on 7-17-08. It took a little while, but now the major media outlets have picked up on this problem. San Diego Realtors
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San Diego Real Estate … Will Low Interest Rates Help?
Will historically low interest rates be the key to turning around or putting a bottom in place for the San Diego housing bust?
Mortgage rates are near their lowest levels in nearly 40 years. Plus, the government wants to offer new borrowers a 4.5% mortgage rate as an incentive.
Ivy Zelman, chief executive of housing-research firm Zelman & Associates, estimates that nationally, even with such a low rate, only about 67% of U.S. households can afford a house. Homeownership was nearly 68% in the third quarter, according to the Census Bureau, implying there is virtually no untapped demand for homes.
San Diego Real Estate – It Could Get Really Ugly
Did you see Fortune magazine's article (12/22/08) regarding their picks for the worst 10 real estate markets in the nation for 2009? Eight of the 10 worst markets they've called are here in California. Fortune's article projected valuation losses in the eight California cities of 21-25% for 2009 and additional 2-5% losses for 2010. Really, not what you want to hear anytime, but especially at new years.
Related other blogger's posts:
- San Diego Real Estate Bubble Caused Local Recession : The Real …
- Housing Analysis: Real Estate Prices fall again in December 2008
- The Housing Chronicles Blog: Investors returning to California's …
- The Housing Bubble Blog » Bits Bucket For January 6, 2009
- San Diego real estate blog » San Diego Real Estate Bust of 1945?
- Bubble Markets Inventory Tracking: More On the Purchase
– San_diego San Diego’s local economy was largely real estate driven in the early part of the century. The real estate bubble fueled an economy that fed real estate agents, mortgage brokers, and construction workers, and fed off itself. …
– VANCOUVER, B.C. – January 5, 2009 – The record-breaking real estate market cycle in Greater Vancouver, longer than normal at seven consecutive years, ended in 2008 amidst global economic challenges. The change brought relief from rising …
– A blog from a real estate industry writer, public speaker, and consultant with MetroIntelligence Real Estate Advisors, a division of Beacon Economics; providing commentary and news citations on regional, national and international real …
– Motivated sales, which include foreclosure auctions and banks selling homes taken over for non-payment, increased 193 percent from January to October 2008 from a year earlier, New York-based real estate data company Radar Logic Inc. …
– San Diego Real Estate Bust of 1945? by bob711 — published on December 10th, 2008. This is a must watch video, with a lot of solid points. This real estate bust is NOT fair! Already the California legislature is considering a four month …
– Number 2, it is typically still ok to buy at the peak of a "normal real estate cycle." Recall a few years back during the bubble peak a lot of folks were using the prior cycle and said, "well, we bought at the peak then and we did ok. …
San Diego Home Values Drop Over 30%
MDA DataQuick just reported median price of all homes sold fell nearly 6 percent from October to November, dipping to a 6-1/2 year low to $305,000. Since November 2007, the median price of all homes sold was off more than 30 percent. Plus, the median price was off more than 41 percent from the market peak of $517,000 in November 2005.A San Diego 2009 Real Estate Market Recovery?
San Diego real estate appreciation will never be the same without insanely-loose credit. Where will the spending for a housing recovery come from? People are tightening their belts, and it's not a temporary thing. Our lifestyles have to change, and it's going to be ugly combined with all the other factors (like $51 trillion in unfunded government liabilities).
If a San Diego housing recovery means getting back to 2005 highs, that seems unlikely in the next 2 to 3 years; maybe in 8 to 10 years. Stimulus packages and bailouts may allow the San Diego housing recovery pipe-dream to continue a little longer, but confidence is broken and mortgage lender responsibility is out the window.
I know this forecast is not something that any San Diego homeowner wants to hear right now, but it's a harsh possibility that we all have to accept.
It would be better for the news outlets, politicians, pundits, realtors, et al., to start telling people the truth, rather than filling their heads with pipe dreams, whilst they attempt to thwart reality and prolong the inevitable.
Needless to say, I hope I’m wrong and 2009 is the long awaited return to San Diego annual real estate appreciation.
Prior related posts:
San Diego Real Estate to Drop 20% in 2009?
San Diego Home Mortgage Lenders … Hardball or Common Sense?
Existing Home Sales Increase … Prices Fall
Commercial Real Estate Slump Possible in 2009
San Diego Real Esate Sales Increase
Next … Direct Housing Bailout?
New Home Construction Falls
California Home Prices Forecast to Fall 6% in 2009
San Diego Condominium Sales Price Appreciation
Emergency Rescue Package – The Devil’s in The Details
Is this a mess or what?
You live in a San Diego new housing development where all homes were sold out in 2004. You and your neighbor paid $750,000 for your identical homes. You have been paying your mortgage on time, but your neighbor is facing foreclosure. As we all know, most San Diego home values are way down from their 2005 highs. So, let's say the homes in this example are now worth $525,000 each. What happens when your neighbor gets his loan modified to $525,000 simply because he can’t afford his house?
Actual clause in the government rescue package:
Sec. 109. Foreclosure Mitigation Efforts
CONSENT TO REASONABLE LOAN MODIFICATION REQUESTS – Upon any request arising under existing investment contracts, the Secretary shall consent, where appropriate, and considering net present value to the tax-payer, to reasonable requests for loss mitigation measures including term extensions, rate reductions, principal write downs, increases in proportion of loans within a trust or other structure allowed to be modified, or removal of other limitation on modifications.
Also, be sure to read these related posts:
Are the Rating Agencies at The Cause of Our Financial Mess?
Housing Bailout – The Real Cause?
The Paulson Plan – Still Wrong
Government Bail-Out – Risk & Reward
Housing Bail-Out … Pass or Depression
#1 Key To Purchasing Real Estate in the San Diego Market
If you were listening to the real estate "rose-colored glasses "crowd, in 2006 you would have heard "It's not a slowdown and there is NO bubble. The San Diego market is just going back to 'normal.' It's an excellent time to buy with out the market frenzy of multiple offers & buyers paying over the asking prices."
In 2007 you would have heard, "It's a normal correction to a buyer's market. Many great San Diego home buys, compared to the past year or two, are available if you act fast.
In 2008 (early August '08) the headline in the San Diego Buying Guide read: "Buyers are out in record numbers." Question: Record numbers compared to what time frame? Perhaps a more appropriate headline would have been: "San Diego buyer’s activity increasing because of demand for foreclosure & short sale properties at 40 to 50% below their 2005 highs."
Therefore, in my humble opinion, the #1 key for buying a home in San Diego today, is waiting patiently for the market to tell you that it has bottomed. I'm not talking about a one or two month blip here, or the Industry talking heads saying to act fast, but real, documented facts of a bottoming process occurring.
Sure, you might lose some of the upside, but you would be able to sleep at night. Buying simply because property looks cheap as opposed to last week, last month or the last year, is the majority thinking. With that reasoning, you would be have been buying all the way down in 2006, 2007 & 2008.
I would venture to say the vast majority of San Diego home buyers in the first quarter of this year have seen their 'great buys' suddenly not looking so great. Not considering closing cost, I'd guess the majority who purchased property in the last quarter of 2007 or first quarter of 2008 who had to sell today, would suffer a significant loss. As just one example, the July '08 condo average re-sales for the San Diego Zip code 92115 showed a value drop of over 50% vs. July 2007.
A few of our recent past posts on the state of the San Diego real estate market were:
San Diego California Home Sellers Lose Big
The San Diego California Real Estate Great Depression
Believe the local San Diego ‘experts’ that subprime delinquencies are slowing?
San Diego County Foreclosures up 125% from 2007
Jumbo Financing and the Impact on The San Diego Real Estate Market
Another Look at the June Rise in Pending Home Sales
San Diego real estate home sales
The San Diego California Real Estate Great Depression
San Diego California real estate property values in many neighborhoods have now surpassed the average nationwide 30% drop seen during the1930's.
San Diego California resale condominium appreciation
In the table below, www.brokerforyou.com looked at selected San Diego neighborhoods that
had 10 or more closed sales in July 2008 & 2007.
The sales data was compiled by DataQuick Information Systems & published in the 8-24-08 edition of the San Diego Union-Tribune.
One should keep in mind the above chart is just for a one year period (July 2007 vs. July 2008) and
San Diego home values topped out around the Summer of 2005!
Below is a similar chart Brokerforyou.com produced and published in 2007 & comparing San Diego condo values from July 2006 to July 2007.
When one compares the condo value drops from the above chart with our latest chart for 2008, the magnitude of the real value loss can be clearly seen. As an example, in Clairemont for the latest one year period the value loss was 36.2%. Now add that to the approximately 20% loss show directly above, and we have a two year loss of just over 56%! The college area condo value drop from 2006 to 2007 was very modest. But, for the latest one year period alone it was down a starraging 51.6%!
Lastly, I would note that these figures do not take into account the very prevalent seller concession (usually payment of thousands in the buyer's closing costs) necessitated by an ultra strong buyers market place.
A few of our related prior posts were:
Yale Professor … House Price Decline Could Be Worse than Great Depression
Survey Says Home Values Must Fall Another 14%
Jumbo Financing and the Impact on The San Diego Real Estate Market
Believe the local San Diego ‘experts’ that subprime delinquencies are slowing?
More homeowners than ever are selling at a loss!
San Diego County Foreclosures up 125% from 2007