August 2009

Price declines are still happening in our San Diego home market, but Zillow has reported a slow down in the record depreciation. Home depreciation is still at record levels, hovering around 12% annually in San Diego.  Home prices in San Diego have decline over 50% in some markets hard hit, and homeowners are finding their homes to be upside down, with more than $200,000 in negative equity.  Short sales for those homeowners in San Diego are a great option to get out from the surmounting debt.  Each day the homeowner holds the home, the house is worth less and less.  For San Diego residences a loan modification only reduces the payment, not the amount owed.  To become financially free many San Diego residences are choosing to sell their house through a short sale, whereas the home is sold and the bank takes the loss.  Upside down San Diego residences may find they are unable to sell their home for years to come due to their negative equity situation unless the bank agrees to take the loss.  Short sale experts are now finding themselves busier than ever, as homeowners choose to move on.   The article below presented by Zillow discusses home price declines in various markets, including in San Diego.

If you need to sell your house contact us at 1 (619) 631-4546 to get started today!

Some Good News Finally…But Will It Last?

 By: Stan Humphries, Chief Economist | August 11, 2009

After peaking in the second quarter of 2006 and reporting its first year-over-year decline in January of 2007, the US Zillow Home Value Index turned in 27 consecutive months of increasingly larger annual depreciation rates between 2007 and the end of the first quarter 2009.  That all changed in the second quarter of 2009 when the annual depreciation rate of the national ZHVI changed direction for the first time since turning negative back in 2007.  From 12.4% annualized depreciation in March 2009, the depreciation rate moved to 12.3% in April, 12.2% in May and 12.1% in June.  Anyone who ever doubted that 12% annual depreciation would be a possibly hopeful sign clearly never experienced a real estate market that has seen a total drop in values of more than 22% from their peak.

Not only that, but several hard-hit markets like Los Angeles, Riverside, San Francisco, San Diego and Stockton have now reported between five to eight months of consecutive monthly improvements in their annualized depreciation rates.

 There are, unfortunately, some markets that still show no signs yet of slowing depreciation, such as Las Vegas (-34.6%), Phoenix (-26%) and Fort Myers (-29.4%).  And these are hard-hit markets too, with peak-to-current value declines of 45.8%, 53.8% and 57.9% respectively.  Of course, all of these peak-to-current value declines pale in comparison to that seen in Stockton where values have dropped from a high of $411,227 in February 2006 to a current value of $160,794 – a decline in real estate values of 61%.  The New York metro region is also in this list of areas where annual depreciation has not yet started to improve.  There values have already fallen more than 21% from peak and Manhattan only started chalking up negative year-over-year depreciation in the latter part of 2008, joining the rest of the metropolitan region which had been turning in negative annual growth rates much earlier. The strongly negative depreciation in Manhattan (-20.2%) will likely continue to weigh down the overall metro region which overall reported an annual depreciation rate of 12.3%.

So why not an unalloyed optimism about the current second quarter performance?  As noted previously, there are still numerous substantial downside risks to home values. These include:

•    Continued high levels of for-sale inventory. Sales volumes have undoubtedly bottomed but lots of new supply is being put on the market to take the place of those homes that are selling, keeping overall inventory levels high. This number may prove a stubborn one to move as all the homeowners who’ve wanted to sell in the past three years but either couldn’t or didn’t even try (i.e., pent-up supply) will start dipping their toes back into the market now.

•    High rates of negative equity.  We currently estimate that 23% of single-family homes with mortgages are in negative equity.  High negative equity is a fertile breeding ground for foreclosures, particularly during a recession with high unemployment such as we are experiencing now.

•    Large numbers of foreclosures and possibly even more coming down the pipe as many areas are reporting increases in notices of default and notices of foreclosure sale, the precursors to actually foreclosures.  Foreclosures equal more supply and cheaper prices, both which push down values on non-distressed sales.

•    Increasing mortgage rates, particularly if the Fed stops buying Treasuries as they are likely to do in mid-September.

For now, enjoy some less depressing real estate news and keep a keen eye near-term on foreclosure rates and for-sale inventory levels.

San Diego has seen a surge in short sales and foreclosures.  Home prices have dropped almost 50 percent from peak of market in some San Diego cities, including Oceanside, Escondido, Chula Vista, and parts of other cities such as Vista and San Marcos. 

One lender, Deutsche Bank, says that currently 14 million homeowners owe more than their house is worth, and this number may rise to 48 percent of all homeowners! 

As prices continue to decline in San Diego, short sale experts believe that more homeowners will choose a short sale over a loan modification in San Diego because of the negative equity position.  Deutsche Bank believes that prices will decline another 14 percent, which may leave even more San Diego homeowners needing a short sale to sell their house.  Short sales in San Diego are increasingly becoming popular as homeowners do not want to remain tied to the surmounting debt of their house.  See the article below for futher details.

If you need a short sale or loan modification, or to understand other alternatives call us for a free consultation at 1 (619) 631-4546.  

“Underwater’ Mortgages to Hit 48%, Deutsche Bank Says”

By Jody Shenn

Aug. 5 (Bloomberg)  

Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.

The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.

As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.

“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote.

Seven markets in states with the fastest appreciation during the five-year housing boom — including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas — may find 90 percent of borrowers underwater, according to the report.

The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen.

Home prices will decline another 14 percent on average, the analysts wrote.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

Last Updated: August 5, 2009 15:32 EDT