The volume of notices of default to San Diego homeowners was down 39% in the first quarter of 2010 compared to the same period last year.
If the trend continues, this potentially bodes well for local home prices. We’ll have to wait and see. We still want to see a large decrease in the numbers of foreclosed-on homes.
A comparison of foreclosed-on properties for the two periods shows relatively no change.
When a homeowner is “upside-down” or owes more than their property is worth and they don’t want to or can’t find a way to continue owning the property, they and the bank have three options:
- Short sale. Bank approves a sale for less than what is owed.
- Foreclosure. Bank goes through the courts and takes the home away.
- Deed-in-lieu. Owner gives the property back to the bank in a simpler transaction.
For the past few years, short sales and foreclosures have been the banks’ solutions of choice. Now many large banks are gearing up to take the deed-in-lieu route.
Deeds-in-lieu can sometimes be a better solution for troubled homeowners and the banks. They can be less expensive for the banks and less stressful for the homeowner. Bank of America is even offering cash payments of $3,000+ to some homeowners to as an enticement to take this route.
How does this affect the market? Expect less short sales on the market and probably more bank-owned properties again. Also I’m hoping this means that the banks are ready to move their inventory, which would result in fewer abandoned-looking, scrappy-yarded homes in our neighborhoods. That would surely be a benefit to neighborhood values.
July 1 UPDATE
Last night Congress passed a bill extending the Homebuyer Tax Credit closing deadline to September 30, 2010. The extension applies only to transactions that had ratified contracts in place as of April 30, 2010, and have not yet close
—– Margot
Congress is considering and will likely extend the first-time homebuyer ($8000) credit.
Apparently the extension would only apply to buyers who are currently in escrow on transactions that were opened before April 30, 2010.
The credit currently applies to qualified buyers who opened escrow prior to April 30, 2010 who close before the end of June.
More info on this as I get it.
For a short period of time, homebuyers may qualify two tax credits, totaling up to $18,000.
Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.
More info on the CA Buyer Credit
More info on the Federal Buyer Credit
Frequently Asked Questions
About the $8,000 First-Time Home Buyer Tax Credit
Frequently Asked Questions
About the $6,500 Move-Up/Repeat Home Buyer Tax Credit
It’s the lower end of our price range that’s selling.
Check out the chart below and you’ll see that over 60% of the single family detached homes that sold in San Diego last year sold for under $400,000.
This means that if you are a buyer looking for deal in the under $400,000 range, you can expect competition. And if you are a seller in this market, you will do best if your property is in this lower price range.
All in all, it’s still true that the really low-priced and the very well cared for, super-cute properties are the most popular with buyers.
This lovely chart is compliments Charles Hoskowicz, my co-worker.
San Diego 2009 Single Family Detached Property Sold Prices
Lately we’ve seen fewer bank-owned properties hit the market while there has been in increase of listed short sales.
We’ve all been hearing about a “shadow inventory” of foreclosures - a supposed chunk of bank-owned homes, waiting to be released in one big barrage. At this point, no sign of it. Some think it’s still coming. Some don’t believe it exists. We will see.
So for now with the onslaught of short sales, what does this mean to you?
If you are upside-down on your mortgage and you have been unable to get a loan modification, chances are higher now than last year that your bank(s) will approve a short sale that will let you sell and help you to avoid foreclosure.
If you are a conventional seller, selling with equity in your home, you will still need to prepare to compete with lower priced homes as short sales are tending to sell very low.
If you are a buyer, looking for a great deal, you may find one in a short sale. Just be sure to bring loads of patience with you as look for a home. Some short sales are starting to be processed faster, but many (including properties with B of A/Countrywide loans) are taking up to five or six months to process.
I’ve said that I believe 2010 will be the year of the short sale. More short sales are being approved and making it to actually close, but it is still taking most banks far too long. Buyers, sellers and the entire real estate market need Bank of America to follow Well Fargo/Wachovia’s lead and gets moving on their short sales!
Look for next year in real estate to be the year of the short sale.
Banks are being encouraged by the government to do short sales rather than foreclose. This is good. Short sales are better for neighborhoods than foreclosures.
Even though banks are leaning towards short sales now, they are still very overloaded with short sale files and are taking way too long to process them. The end result is the market is loaded with short sale listings that can take four, five or six months to process and that may or may not close. This leaves sellers in the stressful position of not knowing what is going to happen with their financial situation and buyers wondering whether they are actually going to close escrow or should they continue shopping for a suitable property.
Some banks are working to pre-approve short sales before they actually hit the market and these banks say they can close approved short sales in about the same amount of time as a conventional sale. This is good news and I’m looking forward to actually coming across one of these transactions.
So in 2010, the year of the short sale, lets hope that banks devote even more resources to making the short sale process faster and easier on sellers, buyers and everyone involved in the transactions.
So the President of the California Association of Realtors is predicting an increase in home values next year. You may think to yourself that this Association is biased and might lean towards a positive prediction - right? Whether or not that is true, doesn’t really matter. What matters is that the predictions are being made and that the media is putting this message out to the world.
If tv and newspapers tell us to feel afraid, we do. If the media tells us that things are going to be ok, we can feel confident again. Since real estate price trends are caused by supply and demand, a confident bunch of buyers, means an upward trend in prices.
That’s my opinion. Here’s the article regarding the house price prediction from Bloomberg.com.
California House Prices Forecast to Rise in 2010, Realtors Say
For buyers who have the time and the patience, short sales can be a good way to scoop up lower-priced properties.
I’ve said in the past that short sales are not for all buyers and I still say that, but things have changed some in the right direction. Banks are figuring out how to process the loads of short sale requests, the government is encouraging them and many short sale agents and teams have their systems in place. This means that more short sales are actually getting approved and making it to close.
I still recommend that not all buyers should make offers on short sales. If you have a strict time-line to buy, if you need to close relatively fast (within 30 to 45 days) or if for any reason you don’t have the flexibility to wait for a bank response, then stay away from short sales. But if you are perhaps an investor who is are willing to wait an undetermined amount of time and you won’t be discouraged if you get rejected, then include short sales in your search for San Diego real estate.
