From sddt.com (SDCo. homes that have no mortgage = 20%):
Nearly one in three mortgage holders in San Diego owe more than the value of their home, according to a CoreLogic report.
Of residential properties with a mortgage in San Diego County, 29.2 percent, or 173,139, were in negative equity at the end of the fourth quarter of 2010, the report said.
Negative equity in the county fell from 29.5 percent at the end of the third quarter. An additional 5 percent, or 29,450 homes, were in near-negative equity, defined as 5 percent equity or less.
Together, mortgages with 5 percent equity or less accounted for 34.5 percent of all homes with a mortgage in the county.
While the percent of San Diego mortgages in negative equity declined on a quarter-to-quarter basis, the percent of homes in near-negative equity increased from 4.8 percent to 5 percent during the same period.
This suggests that the decrease in negative equity came from the foreclosure of underwater mortgages, rather than price increases pushing borrowers above water.
Nationally, negative equity increased in the fourth quarter to 11.1 million, or 23.1 percent of all homes with a mortgage, from 22.5 percent in the third quarter.
Prices declined in the last quarter of the year, leading to lower home values and an increase in the rate of negative equity.
An additional 2.4 million borrowers had less than 5 percent equity nationwide, bringing the total of negative equity and near-negative equity mortgages across the country to 27.9 percent of all residential properties with a mortgage.
“Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties,” said Mark Fleming, CoreLogic chief economist. “Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish.”
Of those mortgages in near-negative equity or negative equity nationwide, nearly 10 percent had negative equity of 25 percent or more; California had the third largest share of these severe negative-equity mortgages, with nearly 20 percent of all residential properties with a mortgage.
CoreLogic used public record data to calculate its mortgage debt outstanding, which includes first mortgage liens and junior mortgage liens and is adjusted for amortization and home equity utilization.
The Santa Ana-based company estimated the current value of homes using its proprietary automated valuation models.
Thank you Jim for posting this. Roughly 1/3 of SD is underwater or near underwater yet there are almost NO foreclosures happening.
If there was a way to figure out the number of homeowners in SD. All you have to do is take out 1/3 and you’d know how many underwater and near underwater “homeowners” were out there. This would also show clearly if banks are or are not holding foreclosure properties off the market.
According to city-data:
362,087 homes with mortgages
95,177 homes without.
362,087 x 34.5% = 124,920
NOD + NOT list = 13,957
Hang in there San Diegans!
The minute they hear that prices have stabilized, they’ll think “hey we came this far, might as well wait!”
Maybe the one surprising thing is our estimation of how likely people would default if they are underwater. Seems like we initially overestimated the number of people that would default just because the house is worth less than what they paid. I was thinking at least 50% of the homes sold in the 2004-2007 window would default eventually, but that doesn’t appear to be the case so far. Looks like people are just coming to the conclusion that if they can afford to pay, they will and just stay put.
Seems like the biggest threat to the housing market right now would be the loss of good paying public sector jobs which seems to be coming.
cali,
You have an incredible imagination to be constantly thinking of all the ways that the real estate market will implode. Thanks for at least acknowledging the times that you’ve been too pessimistic.
I wouldn’t under-estimate the unions though, there’s a fight a-comin’ there.
From HW about BofA’s HAMPs:
BofA monitored the 100 loans as they went through the HAMP waterfall. In the first phase, 28 loans fell out of the program because the bank could not get in touch with the borrower, according to a presentation for investors held Tuesday.
“We conduct extensive outreach activity to these including 110 phone calls and eight customized letters,” BofA Executive Vice President Terry Laughlin said, “in addition to door-knocking in hard hit markets and hundreds of outreach events across the country.”
Of the 72 borrowers that did provide financials to BofA, 52 did not pass the HAMP underwriting guidelines. Roughly half of those that did not pass already had mortgage payments at or below 31% of their monthly income. Another 23% did not have enough monthly income to qualify, and 17% did not submit their hard ship documentation.
Then, of the 20 that made to a trial stage, 14 completed the trial process by making three consecutive mortgage payments under the new terms.
cali,
I don’t mind you having a “cautious” outlook, but in the face of recent trends, are you getting more optimistic?
My impression is that there is 3+ buyers for every quality house listed today for an attractive price in NSDCC.
I welcome lower prices, which would give more people a chance to be in the running, but the competition is already stiff now.
Well, a couple months ago, Zillow marked down my house 20%, to my purchase price, and this week, they claim it went up 1.8%.
QE2, baby… I guess my Zestimate makes up for the fact that it costs $72 to fill up my gas tank.
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I don’t mind you having a “cautious” outlook, but in the face of recent trends, are you getting more optimistic?
If I may — NO.
NCSD may be hot (due to an extremely constricted supply) but overall the macro outlook has dimmed even further (e.g., I share Jeeman’s pain)
Jeeman – Maybe the government will now start subsidizing gasoline as well as mortgages. After all, high prices are good, right?
I tend to look at more macro trends than just North County Coastal. I’ll defer to you view of NCC, if it’s hot it’s hot. I can’t deny the fact that it’s hot right now. I could try to come up with reasons why it’s hot (stock market gains, inflation fears, overseas money, cash flow yield, etc.)
The bottom line for me is the math just doesn’t pencil out for all the debt this country is accumulating. I just don’t see how down the road the productive younger generation in this country is going to be able to afford college debt, increased taxes for entitlements, and million dollar homes. It feels like something will have to give.
It’s just the reality of the game that when we reach a top of an economic cycle everyone is pretty optimistic. There’s nobody left to buy into the speculation. If you think I’m too bearish and getting optimistic about the market then we should probably be getting nervous. Who would be left to convince.
Optimistic? In nominal terms, yes. In real terms, no. This is big for me, since I was a deflationist since 2008. Now I forsee big inflation.
Folks can focus all they want on the macro picture, national revert to the mean analysis, political hokey pokey, and our unprecedented level of debt.
But when you find the house you want at a price that makes sense for you, or an investment property with the right cap rate and ROI that is a fit for you, its all kind of meaningless.
Genius,
This commentary, blaming both sides, is spot on:
http://www.youtube.com/watch?v=PNP8tf78pXc
I can see the massive inflation/hyper inflation argument. It really has the same effect of wiping out stored wealth. The theory being asset prices will eventually appreciate slower than consumable goods. At first everything appreciates and then as inflation gets worse durable goods start lagging. It’s what happened in Weimer Germany where initially the stock market went on a tear with inflation but then started to lag badly when inflation took over.
That scenario does favor using leverage to buy houses and other assets. If people believe the fed is capable of creating that inflation scenario including wages then you can see why people would be aggressively buying homes. It really hurts if you’re wrong and we get deflation, but right now the odds say the fed will find a way to inflate.
We are going to wake up (soon) and find out that the whole world does NOT want to lend us any money and Fed. can’t print for ever. Bill Gross from Pimco has sold out ALL of his US treasuries and is in cash. The biggest question is “who will by our debt” after June.
“But when you find the house you want at a price that makes sense for you, or an investment property with the right cap rate and ROI that is a fit for you, its all kind of meaningless.”
I agree.
That’s what makes a market. Everybody has a different set of priorities and opinions. You have to do what you think is right for you. It’s impossible for everybody to be right.
This thread reminds me of that old saying — “economists correctly anticipated 12 of the last 5 recessions.” 🙂
“Bill Gross from Pimco has sold out ALL of his US treasuries and is in cash.”
Unless Pimco is about to buy several tons of Gold, Silver et al. to hedge against hyper-inflation, that move indicates the World’s BIGGEST bond fund expects a liquidity crisis and deflationary event on a LARGE magnitude.
During deflation, cash is scarce so rates rise to attract it. Buyers name their price and get it. Therefore, rates rise.
Gross is doing the right thing.
Inflation = cash is trash (low yield and falling currency)
Deflation = cash is king (high yield and rising currency)
I am, and have been since 2007, betting on a severe deflationary reset, and then?
Good luck…
FWIW, I agree with livinincali. Have also been anticipating the “great deflation,” which hasn’t happened, at least not yet. While we haven’t lost any money in all of this, we certainly have lost purchasing power in the past couple of years (I pay attention to asset prices as much as — or more than — CPI numbers to determine if inflation is present or not). IMHO, inflation has been rampant ever since the PTB stepped in to “fix” things in late 2008/early 2009; but I think things are about to turn again.
@ Shadash, “Thank you Jim for posting this. Roughly 1/3 of SD is underwater or near underwater yet there are almost NO foreclosures happening.” I still just don’t get why you’re angry about this. Lenders are acting rationally. And we’ve established that banks are not getting all kinds of taxpayer handouts.
@ JTR, as for a hot NCC market… absolutely, in the low/middle end of the market (e.g., $1 mil). It’s dead at $2 mil and above. Same deal up here in the SF area, except you just add about $500K to $1 mil to those ranges to reflect the higher prices up here.
@ Livinincali, “If people believe the fed is capable of creating that inflation scenario including wages then you can see why people would be aggressively buying homes.” You are vastly overestimating the intelligence and forecasting power of “people”. Maybe a teensy proportion think that way, but most are just seeing lower prices, “feel” a bottom, and are buying.