San Diego Real Estate Trends
September 1st, 2010Lenders Delaying Deals
August 26th, 2010Since the major dip in the housing market over the past few years we have seen strict policies put on mortgage lenders. The influx of foreclosures and short-sales has forced a change in the lending market and scared many lenders into a by-the-book process. Where previously buyers simply had to state their income, they are now required to provide documentation dating back years. In recent months, a typical application requires your W-2, pay-stubs dating back for minimum of two years, proof of assets, and good credit. Some lenders require even more documentation that may not even seem relevant to the transaction.
These federal lending guidelines demanding more documentation are causing rising frustration in buyers. Lenders are denying loans to buyers for seemingly the most arbitrary reasons. In one incidence, a doctor making over $400,000 a year was denied a loan because they were unable to provide income documents dating back more than one year and a half. They were forced to wait six months to purchase a home in order to qualify for a loan. Another family was denied a loan for $180,000 on the purchase of a $680,000 home, after they were willing to put $500,000 down. It is not just the strict requirements for qualification that are making the mortgage process difficult, but the reluctance of lenders to make exceptions for the rules.
The mortgage lenders claim that if their processes and requirements seem more formal and rigid, it is only because they are following the rules of Fannie Mae and Freddie Mac. These government-owned lending giants buy mortgages from lenders and therefore determine what is necessary for approval. Local agents in San Diego County are more frustrated that the rules are not applied uniformly even throughout institutions. In the same company one underwriter may require a lot more documentation and take much longer to process then others. The extra documentation requires more processing time, forcing agents to extend escrow.
If you are looking to purchase a home over the next few months, be prepared for these stipulations. Have your documentation available and expect a slightly longer process for loan approval. Recently the average time for loan processing is 30days and more documentation means more delays.
Should Government Back Mortgages?
August 19th, 2010Yesterday, the Obama Administration invited banking executives to offer advice on changing the government’s role in the mortgage market. While the executives disagreed on the level of support needed, the group overwhelmingly advocated that the government should maintain a large supporting role. Some executives are campaigning for automatic refinancing of millions of homes currently backed by mortgage giants Fannie Mae and Freddie Mac. The idea behind the stimulus being lower mortgage rates means lower payments and more money in consumer’s pockets for spending. That hope is that this would boost spending by $50 billion to $60 billion and lift housing prices by as much as 10 percent. They are concerned that without another stimulus in the next six months, the economy will now recover at a quick enough pace.
Skeptics are offering other solutions and accusing the Obama Administration of excluding critics of the government’s role in the mortgage system from the conference. Opposing options to the stimulus are a fundamental change to the structure of Fannie Mae and Freddie Mac where the government insures loans, or the consolidation of the companies into one government agencies. The government has already taken steps towards restructuring the problematic industry spending over $148 billion. According to Inside Mortgage Finance, the two mortgage giants backed 90 percent of loans made in the first half of the year, making this a prominent issue in the industry.
Those advocating low level of government involvement suggest guaranteeing that investors in mortgage-backed securities get paid even when borrowers default. Replacements by private sectors of Fannie Mae and Freddie Mac, could pay the government to insure loans. If the housing market were to collapse, this insurance would make certain that taxpayers are not hit with losses in the future. Another solution is to consolidate the two companies into one government agency that issues mortgage-backed securities, encouraging the greatest amount of government involvement and regulation. Supporters of this option believe it will guarantee that mortgage rates will not soar.
While there is a great dispute on the level of government involvement in the mortgage market, industry executives and experts agree that they should maintain a role in the industry. The support of both Republicans and Democrats is necessary to resolve the issue, no matter what solution is decided on.
Rising Interest in Local Apartment Buildings
August 12th, 2010Local San Diego County observers are noticing a rising interest among investors of the multifamily segment for apartment and condo complexes. In many situations properties are receiving offers from several well-qualified buyers. Potential sellers of well-located San Diego County apartment buildings are expected to see a recovery, outpacing that of other segments for 2010. This increase in activity can be attributed to the low financing rates, quicker recovery, and the high demand for apartment rentals.
With the availability of land and new construction funds limited, many investors are finding themselves increasingly attracted to San Diego’s apartment market. Prospective buyers are looking to San Diego as one of the nation’s healthiest investment markets for multifamily real estate. Also, financing rates at their record lows are becoming a key factor for investors, and there is much less distress properties in San Diego.
Other factors investors are taking into consideration are the demographics and locations of potential purchases. Apartment complexes located near hubs of job growth, such as universities and military facilities, are most desirable. This region of Southern California has improved employment prospects as well as a scarcity of new apartment development as the population grows.
The rise in demand for apartment rentals has created intense competition between investors with as many as 20 bids on one property at a time. According to research firm MarketPointe Realty Advisors, the local multifamily vacancy rate has risen from 2.58 percent in September 2007 to 4.75 percent in March 2010. Even with the increase, it still puts us below the national average of 9 percent for major U.S. metro areas. Specifically, North County coastal area has a local vacancy of 3.59 percent.
As the real estate market begins to stabilize and financing rates continue to remain low, investors are seeking out their income properties and finding them here in San Diego County.
Foreclosures in San Diego are Lowest in 3 Years!
July 22nd, 2010According to a report released today by MDS DataQuick, countywide, 5,458 homes went into default during the second quarter, bringing mortgage defaults and foreclosures down by forty five percent during the same period last year in San Diego. This is the lowest number since the second quarter of 2007 just as the county was slipping into recession. In the second quarter of 2009, foreclosures dropped six percent from 3518, to 3,315.
This same trend is showing up throughout California, with the number of defaults decreasing for five consecutive months, resulting in a forty four percent year-to-year drop. However, due to relatively high priced neighborhoods such as Orange County, Santa Barbara, and San Francisco, foreclosures rose slightly by four percent.
The decline in defaults can be attributed to many positive implementations over the past three years. A combination of motivated sellers and more accommodating lenders helps the number of defaults and foreclosures, along with the short sale policies that move the process along. Tax incentives and the rise in prices over the past year have also facilitated improvements. With a continual rise in prices, fewer homeowners will find themselves under water, which is a significant factor in letting a home go.
Local areas such as Carmel Valley have also seen an increase in the median home sales price. Currently the median home sales price is $592,250, up 11.7% from last year, with 180 foreclosures in the city. Del Mar’s median sales prices is significantly more at $1,058,250, increased by 18.6% from last year. Currently there are only 37 homes in foreclosure and 182 homes for sale. With foreclosures in San Diego at the Lowest in three years, mortgage defaults down, and median home prices continuing to rise, the real estate market in San Diego is beginning to look optimistic.
PACE Program Faces Obstacle
July 19th, 2010Currently, thirteen of the eighteen cities in San Diego County and the unincorporated areas are set to take part in PACE, with nearly 1,000 residents signed up to take advantage of the program. Some of the local cities that have adopted the program are Carlsbad, Cardiff By-The Sea, Del Mar, Encinitas, and Solana Beach. Under PACE, residents are given financial assistance to install solar energy systems, and the money is to be paid back in property tax assessments that are spread out over a decade or more. Yesterday at a San Diego news conference, it was announced that the state of California is suing federal mortgage lenders Fannie Mae and Freddie Mac for blocking the implementation of the PACE program.
State Attorney General Jerry Brown said officials with the mortgage lending giants, Fannie Mae and Freddie Mac, have interpreted the Property Assessed Clean Energy Program as a loan instead of an assessment, making PACE impermissible under their rules. Brown also announced that he sent a letter to President Obama, asking the nation’s chief justice to intervene so that problem may be solved without litigation. Since a lawsuit could take years to resolve, there is hope that the president could influence the companies to reverse their decisions. There are also claims that the actions of both Fannie Mae and Freddie Mac violate federal and California law.
According to San Diego Mayor Jerry Sanders, the risk to mortgage lenders is practically nothing. The PACE program makes it feasible for homeowners to install solar energy on their properties even if they do not plan to stay in the residence for the long-term. It aims to create more jobs, foster energy independence, lower utility bills and improve the environment. Supporters are optimistic that members of the local congressional delegation would join the effort, as well as the attorney generals in the twenty-nine other states hoping to put in PACE programs.