San Diego Real Estate Market Statistical Update July 2010
July 8, 2010 by admin · Leave a Comment
Updated Real Estate Statistics, July 2010*
Avg time it takes for a homeowner in default to lose their home has gone from 251 days in Jan 2008 to 438 days in April 2010 – a 75% increase.
40% of all mortgages issued in 2010 are FHA (gov insured) – up from 20% in 2009, and 2% in 2005 & 2006
Because FHA loans only require a 3.5% down payment (“a subprime loan in sheep’s clothing”), 25% of 2007 & 2008 FHA loans have defaulted.
David Stevens, current FHA Commissioner, “This is a real estate market purely on life support, sustained by the federal government. Having FHA do this much volume is a sign of a very sick system.”
New Home Building Permits fell 10.9% in April & 5.9% in May, to its lowest level in over 50 years. Historically, new home building permits are the best leading indicator for the overall US economy.
New Home Sales dropped by 33% from April to May to their lowest point since WWII
As of mid June, mortgage purchase applications are down 42% since the April 30 end of tax credits (a 13 yr low).
The Pending Home Sales Index, a forward looking indicator, dropped 30% in May compared to April, the worst decline in 9 years.
The Bottom Line
Now that federal and state government tax credits have expired, the real estate market is beginning to face reality. The only saving grace is that 1) The US government is still insuring FHA loans and will likely continue to do so for the foreseeable future & 2) Lenders have learned that they are better off doing short sales vs. foreclosing, and thus are postponing foreclosure sales in favor of short sales.
As I said in my January 2010 San Diego Union Tribune Op-Ed Piece, and contrary to what realtors, newspaper columnists, real estate “experts” and economists have claimed over the past year, the San Diego real estate market has not “hit bottom” and is unfortunately not on the road to recovery. Far from it.
We are a solid 24 months from the bottom of this market. We still have a veritable tidal wave of defaults coming, both in the form of foreclosures (worst case) and short sales (best case). We still have a huge number of homeowners who owe more than their home is worth. And we have a huge number of people who will not be able to afford their payments once mortgage rates go back up to “normal” levels (i.e. not at the historic lows we are at now).
To quote my aforementioned January 17 2010 SDUT Op-Ed piece:
“The truth, unpopular as it may be to say it, is that the market in San Diego County is not ‘at the bottom’ as many would like to believe. There are an unprecedented number of foreclosures and short sales that will be hitting the market here and in other parts of the country over the next few years. Until banks take action to modify mortgages, facilitate short sales, prevent foreclosures and start lending again, these homes will continue to hang over the market, preventing any meaningful improvement.
The public looks to real estate industry experts to evaluate the data and advise them in order to make informed decisions. Speaking in platitudes and ignoring the realities of the market doesn’t do anyone any favors.”
*Real estate statistics source Robert Campbell Real Estate Timing Newsletter July 2010
