The San Diego Real Estate Cloud Has a Silver Lining: The Default and Foreclosure Rates Are Gradually Declining
Aug 6th, 2010 by Kathleen Behrens
Houses for Sale in San Diego – The San Diego real estate market fared significantly better in terms the number of mortgage defaults on San Diego County homes during the first half of 2010 when compared to the number of defaults which occurred during the same period in 2009. According to two recent studies by MDA DataQuick and RealtyTrac, the number of defaults on homes in San Diego declined by more than 40 percent. January through June of 2010 now represents the lowest number of defaults on San Diego homes for a six month period since the first half of 2007.
However, the San Diego real estate market still ranks 31st among 206 metropolitan areas in the U.S. for home foreclosures and mortgage defaults. On the positive side, the San Diego real estate market and the entire California real estate market appear to be recovering and improving at quicker rates than the majority of the nation. The default and foreclosure rates for loans and homes nationwide increased 8 percent over the past year. Default and foreclosure filings for homes in California declined 13 percent over the past year, and the rates of foreclosure and default for homes in San Diego decreased 14 percent in the last year.
The San Diego real estate market has also witnessed declines in the numbers of REO properties and trustees’ deeds. REO stands for “real estate owned”. REO properties are homes which have been repossessed by the bank. The number of REO properties in San Diego has decreased by 12 percent according to RealtyTrac. Trustees’ deeds are filed by the bank after they have foreclosed on a home. MDA DataQuick reported trustees’ deeds for San Diego homes have declined by 6 percent. Local real estate analysts predict these rates will continue to decline for the San Diego real estate market, but caution the decrease in rates will occur slowly and gradually over time. Gary London, a local expert for the San Diego real estate market, has predicted the average default rate per month this year for homes in San Diego County will be 33 percent.
The drop in the number of foreclosures in the San Diego real estate market has largely been attributed to an increase in the number homes which have been sold as short sales instead. In a short sale the bank agrees to the sale of the home for less than the amount due on the mortgage. Banks have revised their policies and become more cooperative in the short sale of San Diego homes because they lose less money when a home is sold as a short sale than when the home goes to foreclosure. However, the high number of short sales for homes in San Diego County still indicates weakness in the San Diego real estate market. The California Association of Realtors (CAR) reported 44 percent of the homes sold in San Diego County in June 2009 were distressed sales, which includes both short sales and foreclosures. CAR has estimated a figure of 25 percent for the number of distressed homes sold in San Diego County for the first half of 2010.
Although the forecast for the San Diego real estate market is not all bright and sunny, it is not dark and stormy either. It seems the housing market in San Diego has weathered the worst of the storm. But as the sunlight returns one can’t help but wonder, “What about the inventory of San Diego homes lurking in the shadows?” Shadow inventory is a reference to homes in San Diego such as homes in delinquency, homes which should be in default but are not, and REO properties. Homes are considered in delinquency when the mortgage is past due by 30 days or more. Homes normally enter into default when the mortgage payments are 90 days past due. However, there are homes in San Diego which meet the definition of default due to non-payment on the loan, but until the lender files a notice of default the home is not technically in default.
Real estate analysts and experts suggest banks have been strategically filing notices of default and gradually adding REO properties to the San Diego real estate market to control the supply, increase the demand, and raise the selling prices of home in San Diego. It is unlikely banks will flood the market with REO properties because that would increase supply, create less demand, and result in lower San Diego home values. In a restaurant, it is well known by the chefs that a host or hostess should not seat all of the parties at once. A steady flow, rather than a flood of orders all at once, is the desired timing. Banking industry experts are employing this strategy as well. A study flow of the release of shadow inventory will allow for the sun to break though the clouds rather than unleashing another violent storm upon the San Diego real estate market.
Another silver lining for buyers of houses for sale in San Diego is there never been a better time to buy homes in San Diego. With record low interest rates and low home values, now is an excellent time to enter the San Diego real estate market. Search independently for houses for sale in San Diego or contact San Diego Broker and Realtor Russ Petrone of Petrone Properties Real Estate Associates at 858-259-1000 to have a customized search of the houses for sale in San Diego created specifically for you based upon the criteria you require for your San Diego home. With 25 years of experience in the San Diego real estate market, Russ has the experience, knowledge, and skills to help you find and purchase the perfect San Diego home for you, whether it’s a short sale, a foreclosure, a resale, or a new home purchase. Don’t delay – the San Diego real estate market won’t always be this way!
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