- UNION-TRIBUNE - September 19, 2007
There were nearly 4,900 San Diego County foreclosure filings in August, an 80 percent increase from the previous month and the first of several waves of mortgage failures anticipated by real estate analysts.
“What we are seeing in San Diego we are seeing across the Southern California region: an increased number of bank repossessions,” said Rick Sharga, vice president of marketing for Irvine-based RealtyTrac, which released foreclosure numbers yesterday from across the United States.
“That will be important to watch because there will be at least two or three more waves of subprime adjustable loans due to reset in the next 15 months,” Sharga said. “If real estate conditions don’t change, each of those could deliver another spike in foreclosure activity.”
San Diego County recorded 4,845 foreclosure filings in August, a year-over-year increase of 247 percent.
“Given that is twice the national increase, it seems to indicate that the region is not performing as well as other parts of the country,” Sharga said.
Nationwide, RealtyTrac reported 243,947 foreclosure filings in August, increases of 36 percent from July and 115 percent from August 2006.
The San Diego region ranked 24th among metro areas in foreclosure rates, said Sharga, with one foreclosure filing locally for every 230 households in August. The national rate was one filing for every 510 households.
When the county’s home buyers chased rising home prices during the recent housing boom, many used adjustable subprime loans with low “teaser” interest rates, Sharga said. Now they’re running out of options as their mortgage payments reset at higher amounts.
Gabe del Rio, president of the nonprofit Housing Opportunities Collaborative of San Diego, counsels homeowners trying to avoid foreclosure.
“What we are seeing is people have purchased their homes at 100 percent financing,” he said. “They have an adjustable-rate mortgage and they can’t afford their adjustable payment, nor do they qualify for a refinance. They don’t want to hear the bad news we have to tell them.”
Del Rio said such owners are told that they need get their lender’s approval to do a short sale, “in which they sell their home for the current market value, which is often less than they owe.”
Lenders frequently are willing to accept less than a full loan repayment to avoid the expense of foreclosure, del Rio said.
University of San Diego economist Alan Gin said weak loan-underwriting standards are a major reason for the spike in foreclosures. Many adjustable mortgages issued in recent years required little or no down payment, making homeowners more likely to walk away when the going got tough.
“It just made it easy for people to give up,” Gin said.
Bank repossessions in San Diego County rose 684 percent in August from one year ago, Sharga said.
“That is an indicator that homes going into foreclosure have little or no equity,” he said. “The homeowner doesn’t have the option of refinancing or selling. Banks don’t have much alternative but to take possession of the house and try to resell it.”
Advice for Buyers & Sellers
Buyers, after the Federal Reserve cut their benchmark interest rate by one-half percentage point this month, obtaining credit to purchase property should once again become easier. I forecast that this will give buyers, including investors, the opportunity to take advantage of lower rates and simultaneously get great deals on properties purchased in this current soft real estate market. If you have friends who are thinking about buying, I suggest that they stay on top of the market by viewing all properties for sale in their neighborhood on my website at SanDiegobythesea.com
Sellers, the Federal Reserve has helped to lower mortgage rates for buyers, in an effort to give the market a boost. Unfortunately, immediate relief is still a ways away. I forecast that sellers will not see any signs of prices holding until the beginning of next year. Marketing continues to be more crucial then ever. If you know anyone who is thinking about selling, please let me know how I may be of assistance so their property stands out from all the rest.
Sellers, the Federal Reserve has helped to lower mortgage rates for buyers, in an effort to give the market a boost. Unfortunately, immediate relief is still a ways away. I forecast that sellers will not see any signs of prices holding until the beginning of next year. Marketing continues to be more crucial then ever. If you know anyone who is thinking about selling, please let me know how I may be of assistance so their property stands out from all the rest.
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