By David Tal
Published Oct. 1, 2010 in My Hometown Magazine
As Broker of Home Reach Real Estate, it is my job to keep my clients and agents well educated on the local real estate climate. Having a clear and realistic picture of the market gives our clients a competitive advantage when it comes to making their home buying and selling decisions.
To get a clear understanding of where we’re going, it is important to identify where we’ve been. 2009 was a tough year for most. Thousands of San Diegans lost their homes, we can’t ignore that. Home values continued to drop in many areas throughout San Diego County and it was still difficult to get approved for a loan. But with home values depreciated, many buyers and investors jumped back into the real estate market. The US government also stepped in with the FHA loan, a government backed mortgage, making it much easier to get a loan, and with only 3.5% down. Also, many banks started refinancing their clients to stem the flow of foreclosures. In addition to all of those incentives, the government stepped in with an $8,000 Tax Credit for first time homebuyers, a smashing success that helped tens of thousands of people buy homes.
Total sales volume in 2009 increased 22% compared to the year before.
The tides have turned. Many areas of San Diego have now seen home values increasing. Chula Vista, for example, has seen almost 8% in home value appreciation over the last 12 months. It seems every desirable property has multiple offers on the table. On top of that, the rental market has been strong. This has brought many investors into the housing market because they can get good investment returns on properties they pick up.
Another Wave of Foreclosures may be on the horizon.
Homebuyers have had a hard time grabbing a bank owned home or condo in recent months. One reason is buyers surged in the first two quarters of 2010 because of the $8,000 tax credit offered to first time homebuyers and the slew of government backed incentives. Though buyer demand is high, however, it’s equally true that inventory has slowed down. A lot of inventory has been bought in the last 12 months, but that still doesn’t account for it all. The truth is, the banks have been holding on to a lot of their REO foreclosure assets, in hopes of stabilizing the housing market and protecting the values of their current and future inventory of homes they will throw on the market. The idea is if they flood the market with foreclosures it will only hurt home values further. Although many people agree with their strategy, everyone is wondering how long they can continue to trickle homes on the market before they need to start paying back government and taxpayer loans and need to start liquidating these homes faster. They can’t hold on to them forever. Timing is everything too. If it isn’t seamless, it could potentially create another little dip for home values that could trigger another scare in the housing market, further fueling the problem.
An estimated 3,000,000 loans are in default, and many of them are not receiving loan modifications. When they can’t get a loan modification, homeowners are left with two options. They can attempt to “short sale” their home, but if that doesn’t work out, they will usually end up losing their home to foreclosure.
In summary, it’s very hard to predict how the housing market will perform later this year and into 2011, but many signs are looking up. San Diegans are buying homes and with far more stable loans. The government has stepped in with incentives and programs to boost lending. Further, the economy seems to be slowly turning the corner. At the end of the day, it’s job creation and economic stability that will guide the housing market upward once again.
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