For almost two years now, there have been serious rumblings and grumblings in San Diego real estate circles about Option ARM and interest-only loans that could put a number of buyers in default–resulting in a big spike in San Diego short sales and foreclosures. We call them bouncing mortgages.
I initially gave the issue detached interest, because our clients tend to be a conservative lot when it comes to borrowing. We deal with few real estate speculators and most of our clients are solid buyers of San Diego primary and secondary homes.
My interest in these instant gratification loans is no longer a detached one, because the fallout from these ARMs is contributing to market weakness. Some of our conservative clients are seeing their San Diego home values stagnate or decline, in part due to these lending practices. It has been reported that 7 out of 10 option arm borrowers are sticking to the minimum payment schedules and in so doing, are stacking up substantial additional debt.
Many now owe more than their homes are worth. In San Diego County, short sale advisories on listings are appearing within our MLS on a daily basis, and will ultimately affect appraisals and valuations. In short sale transactions, the lender agrees to accept less than what is owed on the property (and obviously less than the prior appraised value).
In his Nations Housing column, Kenneth Harney writes that John G. Walsh, senior official at the Federal Comptroller of Currency, is sounding a quiet alarm:
We’ve had consumers tell us they didn’t know after 60 minimum payments on a (payment-option loan), they would owe more than they did when the loan was brand new. They should certainly understand the basic bargain: The price of a low payment now is a much higher one later. I think it goes without saying that someone, at some point, should have explained this to borrowers with these loans.
In defense of lenders, I am sure many did explain the consequences and hazards of these loans. I am also certain that many of these borrowers were counting on their homes appreciation to more-than-cover the accumulated debt on their negative ARM loans. ((Why does this so remind me of the investors who were slaughtered by margin calls during the stock market wipeout just a few years ago? Are these the same people who turned that same mentality to real estate?))
The fallout has begun. Once again, San Diego and Southern California are on the bloody edge of the real estate envelope. There are people getting wiped out in this market, and there will be those who make fortunes. We are advising our clients to sit tight if they do not need to sell and if they do, to price their property aggressively. With buyers, we use the same caution, negotiate strongly, and advise them to stick with blue chip properties and locations (usually coastal San Diego and singular luxury properties). We cant help but remind them of that dictum in the securities market:
Don’t try to catch a falling knife.
Nothing is permanent, except for change.
By the time the masses have turned their real estate investment and speculation dollars to unappreciated geographical markets, smart money will already be moving back to our balmy coastal climes proving once again that nothing can take the place of location, location, location.
2016 Note: There are few short sales, foreclosures or bouncing mortgages in San Diego these days. However, any we can find are listed below. If you have any questions, please feel free to call Roberta or Scott Murphy at either 760-942-9100 or 760-613-6190 or email firstname.lastname@example.org
Fabulous Short Sale Opportunity! Ventana on Mountain View's premier street bordering The Polo Estates! Panoramic mountain, fairway and lake views. Entertainer's backyard with palm groves, pool, spa, waterfalls, firepit and BBQ kitchen island. The courtyard entry leads into the 18' high, skylit rotunda foyer, huge 43' Great Room, huge 35' Master, big 17' office/den/library - 4449 sf. of spacious luxury. Courtyard casita plus two guest rooms with their own sitting room (or media room or family room). Highly upgraded, this elegant home is move-in ready! Dramatic 12' soffited ceilings in the living areas, sound systems, custom european cabinets including a wine cellar center, granite counters, gourmet kitchen, elegant window treatments, Jacuzzi whirlpool tub and huge walk-in dual shower in master bath, recirculating hot water, eight-foot high patio doors, security system with smoke, fire and motion sensors. This home is truly feature rich.
Cash offers only for a quick sale. Need offer immediately for this short sale. House needs new kitchen, new bathrooms, air conditioning. Pool filter does not work. Jacuzzi is also not operational. Great opportunity for a contractor. 3 bedrooms, 2 bath, on cul-de-sac street. Home backs to shopping center on Thousand Oaks Blvd.
**SHORT SALE* 5 Bedrooms and 4 Bathrooms***GREAT LADERA HEIGHTS OPPORTUNITY***Large Living Room,family room has Dual fireplace, Breakfast BAR, Large Kitchen granite counter top, Master Bedroom, Main Bathroom, Heated Pool,Large Back Yard and side yard. Lots of Indoor and Garage Storage, 3 car garage.Home is located close to future LA RAM'S STADIUM.Inglewood FORUM for Concerts,Shopping Centers,and only a 20 min drive to LA Live in Downtown Los Angeles. SELLER DOES NO REPAIRS.THERE IS A DECK IN BACK YARD, HAS NO VALUE NOT INCLUDED IN SALE PRICE, BUYER CAN RESTORE.
This large estate is located on a prime cul-de-sac in Nellie Gail Ranch. The home has 5 bedrooms, 5 full baths, and 2 half baths. This elegant floor plan is over 6000 square feet, with a grand entryway and 2 story high ceilings leading to a sweeping staircase. The gourmet kitchen has granite counters, large center island,and top-of- the- line appliances. It sits adjacent to the sun room that has built-in nook seating. The family room has a grand fireplace and entertainment center. The master suite has coffered ceilings, fireplace and balcony, which looks over private rear yard which has pool.spa, and waterfalls. A covered patio with barbecue center, fire pit, and nice lawn area, makes this the perfect home for entertaining. Buyer to contribute up to $60,000 towards additional liens not covered in the Short Sale.
Short Sale Approved! Take this Opportunity with this 5 Bedroom Home in Amberly Lane of Oak Knoll Village! A Spacious Family Room with Gas Fireplace and Built-In Entertainment Center opens to the Kitchen with Breakfast Bar, Dining Area and Built-In Desk Office Area. Kitchen includes a 6 Burner Viking Stove and Oven, Sub-Zero Refrigerator. Relaxing Fenced Backyard with Covered Patio. Pantry and Mud Room between Kitchen and Garage. Formal Dining Room with Vaulted Ceilings. Covered Courtyard just outside of Kitchen and Dining Room. Formal Living Room just off of Entry. Surround Sound System and Hardwood Floors on Main Level. Huge Master Bedroom Suite with Dual Closet Suites, a Garden Tub, Enclosed Shower, Dual Sinks and Retreat Room currently being used as an Office. 5th Bedroom has an Abundance of Built-In Custom Closet Cabinets in Hallway to Bedroom. Two Other Secondary Bedrooms on Upper Level both with private balconies and a Jack & Jill bathroom. Main Floor Bedroom and Bathroom. Convenient Full Sized Laundry Room on Upper Level close to Bedrooms. Attached 3 Car Tandem Garage with a Long Driveway and Direct Access into Home. Large Front Porch with Neighborhood Views. Enjoy accessibility to Ladera Ranch Village Clubhouses, Pools, Water Parks, Spas, Barbecue and Picnic Areas and Skate Park. Walking distance to the Oak Knoll Pools and Clubhouse and Community Garden and a Pocket Park. Trails just beyond the Neighborhood. Virtual Tour loaded in Media Section for your Viewing.
GREAT SHORT SALE OPPORTUNITY ON THIS NORTH UPLAND EXECUTIVE HOME! LARGE OPEN FLOOR PLAN ON HUGE 1/2 ACRE LOT W/RV PARKING ON PEACEFUL CUL-D-SAC CLOSE TO SHOPPING, AWARD WINNING SCHOOLS, TRANSPORTATION, PARKS AND MUCH MORE! 4 LARGE BEDROOMS, 1 BEDROOM AND FULL BATH DOWNSTAIRS, TRI-LEVEL STAN SIEVERS BUILT HOME. GATED POOL/SPA IN GOOD CONDITION BUT DOES NOT HAVE WATER. BUYER STRONGLY RECOMMENDED TO COMPLETE ALL INVESTIGATIONS AND INSPECTIONS PRIOR TO CLOSE OF ESCROW.
Corner lot three bedroom two bath home located in the highly desirable west-side neighborhood. Christopher High School boundaries. Walking distance to schools, parks, shopping and freeways and much more. Needs some TLC.. Short sale, lenders approval required..