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.
Bank owned and priced to sell. This is a great buy in upscale Palazzo, a gated community with low HOA dues, and is conveniently located close to new hardware shops and grocery store and the Golf Club at Terra Lago Resort. This immaculate 5 bedroom, 4 bathroom home, including a casita, shows very well and has many custom features. The gourmet kitchen has stainless steel appliances, granite countertops and lots of cabinets. Very private backyard which is ready for you to build your own pool. Take advantage on this bank owned property that is aggressively priced.
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.
GREAT OPPORTUNITY BANK OWNED, REO, BEACH FRONT CONDOS IN ROSARITO, BAJA CALIFORNIA. MINUTES AWAY FROM THE SAN DIEGO, USA BORDER. Beautiful fwy sceneries to drive and enjoy. 1, 2, and Penthouse models available. All new! easy to show all. Enjoy the breathtaking 180 degree views. Newer construction. California style. Multiple amenities include: pools, tennis courts, jacuzzi, spa, lockers, showers, b-b-q and entertain your friends and family, underground parking, massage,restaurants or shops on site. Neighborhoods: Vista Del Mar Equipment: Range/Oven Other Fees: 0 Topography: LL
BACK TO THE MARKET!!!! Short Sale approved, New asking price!! Curb Appeal, South Redlands Community, South Facing Victorian Style Home ready for INVESTOR or a BUYERS , who bring their Imagination and make this home a Move In Condition HOUSE. Please see the photos conditions of the house but the Hero Program change the New Roof, Coat Paint Exterior, New/Installed Wood Windows, Re framed half walls, New electrical wiring and 2 electrical panels, New waste plumbing, New copper piping all with permits. Circular driveway, Concrete porch with ceiling fans, high ceiling in living area, family room, dining room with double doors that lead to backyard, upstairs landing all bedrooms. Great Opportunity!!
Distressed property with great potential. Four bedrooms, 2-1/2 baths plus bonus room and loft (4th bedroom has no closet). Good location in desirable Melinda Heights neighborhood. Property is in poor condition with significant plumbing issues and requires a cash buyer. Currently an REO but there is an unsatisfied first trust deed which will likely result in a short sale.
SHORT SALE BPO IN AT 440000 ALL CASH. Clean property located on an excellent area of Carson, walking distance to Figueroa and 110 Fwy. Extremely conforming neighborhood. Sellers extremely cooperative. Agent has City of Carson residential property report correction check list, available upon request. There is a City Inspection Report indicating that the cost to bring the property in compliance is $20K at a minimum Please see Supplement