October 14, 2006

San Diego?s real estate market is experiencing mortgage foreclosure rates not seen for the past eight years, two monitoring companies reported yesterday.

Locally based DataQuick Information Systems said foreclosures in San Diego real estate totaled 171 last month, more than 10 times what they were a year ago and the highest since 1998. Similarly, the number of default notices ? the first step lenders take toward foreclosure ? was 872, nearly triple the 334 filed in September 2005.

Meanwhile, RealtyTrac, based in Irvine, reported San Diego real estate default notices totaled 1,236, up from 287 a year ago, and notices of trust-deed sales ? the final notice before foreclosure ? were at 247, up from 56 over the same period.

Although the rising trend reported by the two companies is the same, the raw numbers reported by each differ because they track foreclosure rates differently, executives at each firm said.

But median home prices for San Diego real estate has been raising at a slower rate in the past two years and last month they actually declined on a year-over-year basis for single-family resale homes, DataQuick reported earlier this week.

Foreclosures posted last month typically followed up with notices of default, filed by lenders last December after three months of nonpayment. The percentage of those December defaults going to foreclosures last month was 35.6 percent, more than seven times the 5 percent rate a year ago.

The latest default and foreclosure figures in San Diego real estate still represent a fraction of the number recorded a decade ago during San Diego's last economic downturn. The highest number of foreclosures during that period, 420, occurred in January 1997, just as housing prices were starting to rise. The highest number of default notices, 1,794, was filed in January 1996.

RealtyTrac said California posted the biggest increase in foreclosure activity of any state last month and nearly three times the number reported a year ago. The total ? including all levels of foreclosure short of the actual sale ? was 14,806, 13.2 percent of the total nationwide of 112,210.

RealtyTrac also said few defaults end up in foreclosure, with homes ending up in the hands of lenders. The recent increases reflect the first wave of defaults and foreclosures stemming from the rise in adjustable-rate mortgages whose interest rates are rising too fast for some borrowers to afford.

In San Diego last month, for example, only 62 properties were classified as REO or real estate owned by banks. Still, that was six times the 10 REOs counted in September 2005, according to RealtyTrac. At the peak of the buying boom, as many as 35 percent of borrowers nationally, were signing up for ARMs. In San Diego real estate the figure sometimes exceeded 70 percent, DataQuick has reported.

October 16, 2006

October 4, 2006

With San Diego home sales slowing and inventories of unsold homes rising, a new report predicts that housing prices will fall in about a third of the metropolitan areas in the United States, including San Diego.


But the forecast by Moody's Economy.com, a private research firm, doesn't predict a crash in housing prices in a vast majority of the nation's cities, including San Diego?s real estate.

The report, released yesterday, projects prices for new and resale single-family homes to drop 8.5 percent in San Diego from the market peak at the end of 2005 to the first half of 2008, when the real estate market is predicted to hit bottom.

Prices have already declined locally in the first and second quarters of this year, said Brian Carey, an economist with Economy.com who worked on the report.


Sellers, particularly new-home developers, have been cutting prices as homes have lingered on the market and buyer demand has slowed.

Condos were excluded from Economy.com's forecast because it lacked good data, Carey said.

In areas like San Diego, however, condos may be more vulnerable than single-family homes to steep price declines because of the unprecedented construction of new units downtown and elsewhere, as well as a glut of condo conversions either for sale today or planned in the near future.

?We realize the condo market could be hit harder,? Carey said.

The median home value for San Diego homes, adjusted for inflation, rose to $567,000 from $249,000 between 2000 and 2005, according to the U.S. Census Bureau. It was the largest increase among the country's biggest cities.

Nationwide, Economy.com projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression of the 1930s.

The report projected that 133 of the nation's 379 metropolitan areas would suffer price declines.

That is quite a contrast from the past five years when low mortgage rates pushed sales to five consecutive annual records, and prices in the hottest sales areas skyrocketed.

The forecast is included in a 195-page report, ?Housing at the Tipping Point.?

Some analysts are worried that the slowdown could become so severe that it could drag the entire country into a recession, much like the bursting of the stock market bubble in 2000 led to the 2001 slump.

October 6, 2006

October 4, 2006

With home sales slowing and inventories of unsold homes rising, a new report predicts that housing prices will fall in about a third of the metropolitan areas in the United States, including the San Diego real estate market. But the forecast by Moody's Economy.com, a private research firm, doesn't predict a crash in housing prices in a vast majority of the nation's cities, including San Diego.

The report, released yesterday, projects prices for new and resale single-family homes to drop 8.5 percent in San Diego real estate from the market peak at the end of 2005 to the first half of 2008, when the market is predicted to hit bottom. Prices have already declined locally in the first and second quarters of this year, said Brian Carey, an economist with Economy.com who worked on the report.

Sellers, particularly new-home developers, have been cutting prices as homes have lingered on the market and buyer demand has slowed. They do have a lot of excess supply right now, Carey said of San Diego?s real estate market. The region, however, wasn't among the cities where prices are forecast to decline the most, it ranked 37th in the report. Danville, Ill., was projected to see the biggest percentage drop in home prices at 18.7 percent. It was followed by Fort Myers, Fla.; Reno, Nev.; Merced and Stockton.

Condos were excluded from Economy.com's forecast because it lacked good data. In areas like San Diego, however, condos may be more vulnerable than single-family homes to steep price declines because of the unprecedented construction of new units downtown and elsewhere, as well as a glut of condo conversions either for sale today or planned in the near future.

Nathan Moeder, an analyst with San Diego real estate consultant The London Group, said it's not surprising that home prices would be falling now that buyers are being cautious. But he doubted that any forecast could accurately predict how much prices might drop. That's because it's difficult to say what the future holds for interest rates, job growth and other factors that contribute to housing demand. We've already seen adjustments by developers, not only with incentives but also price decreases because they have to sell their units, said Moeder. But is it going to drop zero or 10 percent? Who knows? Moeder added that if Economy.com is correct, an 8.5 percent decline would not be significant for most homeowners given the sky-high appreciation in San Diego real estate since 2000.

The median home value for San Diego real estate, adjusted for inflation, rose to $567,000 from $249,000 between 2000 and 2005, according to the U.S. Census Bureau. It was the largest increase among the country's biggest cities. Think about how much equity and paper wealth has been created for these people over the last five years, Moeder said. So an 8 percent decrease is not a big deal.

Nationwide, Economy.com projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression of the 1930s. The report projected that 133 of the nation's 379 metropolitan areas would suffer price declines. That is quite a contrast from the past five years when low mortgage rates pushed sales to five consecutive annual records, and prices in the hottest sales areas skyrocketed. The forecast is included in a 195-page report, Housing at the Tipping Point.

Some analysts are worried that the slowdown could become so severe that it could drag the entire country into a recession, much like the bursting of the stock market bubble in 2000 led to the 2001 slump. The 133 areas with slumping prices are concentrated in the states of California and Florida and the Northeast corridor from southern Maine to just south of Washington, D.C., as well as boom areas of Nevada and Arizona and some depressed sections of the Midwest, such as Detroit. Of the areas with falling prices, 72 were forecast to hit their low point by the end of this year, with the rest seeing a trough for prices in 2007, 2008 or even as late as 2009. But even in areas that have already hit a low point for prices, the rebound isn't expected to occur quickly.

Prices are going to go down and stay down for a while. It will take at least a couple of years to work off the excesses of the last decade, said Mark Zandi, chief economist at Moody's Economy.com and the principal author of the report. The report described the current environment as a correction and not a crash, but it cautioned that there were downside risks that could make the slowdown more serious. We believe the housing downturn will weigh on the economic expansion, but will not break it.

October 6, 2006

For the second straight month, local single-family home values failed to appreciate in September when compared with a year earlier, and home sales plummeted 34 percent from the same month in 2005, according to a new report compiled for the North San Diego County Association of Realtors.

The total amount of dollars changing hands in the single-family San Diego real estate market fell almost as much, by 32 percent, from $721.8 million in September 2005 to $494.4 million last month, the report showed. The median price of a single-family home in September was $620,000.

The San Diego condominium market didn't fare much better. Both the number of sales and the dollar volume plunged 36 percent year over year, the North County Realtors group reported. The median-priced condominium was $395,000 in September.

But North County condo values did manage to hold their value much better than the rest of San Diego County, appreciating 3 percent year over year while elsewhere the median price sank by more than 10 percent.

Chuck Smiar, president of the North San Diego Association of Realtors, said the market is going through a watch and wait period where both buyers and sellers are watching and waiting to see which direction prices are going to go.

Gus Faucher, director of macroeconomics at Moody's Economy.com in West Chester, Pa., said San Diego?s cooling real estate market is something that national analysts have been expecting. Faucher said his company has predicted county home values to decline by 8.5 percent by the second quarter of 2008. San Diego real estate has never been particularly affordable, but it has gotten much worse, he said. There has been such a huge run-up in prices that the market can't support it, and that's going to put downward pressure on prices.

Faucher said that between 1985 and 2000, a family making the median income in San Diego County could afford a home with a price tag equal to 80 percent of the median home value. Now, he said, the median-income family can afford a home priced at only 47 percent of the median. That means that your average family just can't buy a house there, he said. And that's a problem.

So, is the bubble bursting? No. Is there a little air coming out of it? Yes.

October 13, 2006

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