More borrowers are getting behind on their mortgage payments in San Diego County.
More than 8 percent of the county's mortgages were at least 90 days past due in September, according to new numbers released today by First American CoreLogic, a California-based housing and finance information firm.
That delinquency rate rose sharply from the same month last year, when just 5.1 percent of county mortgages were at least 90 days delinquent.
The percentage includes all loans for which borrowers are at least 90 days behind on payments, including homes that are already in foreclosure and homes that banks have already repossessed.
California's delinquency rate reached 9.6 percent, up from 6.1 percent in September 2008.
I looked at delinquencies broken down by loan type for this story.
I hit the airwaves this afternoon for our weekly Survival in San Diego segment with Prof. Robert Shiller's sense that some housing markets in the country are poised for another bubble and the proposed extensions for the homebuyer tax credits. Here's the clip:
The local housing market observers I talked with last week for this story were watching a couple of key topics to gauge the health of San Diego's market going forward:
the future of the Federal Housing Administration, the agency that requires low 3.5-percent down payments and has captured a hefty chunk of the loan business here lately, and
the looming deadline for the first-time homebuyer tax credit, set to expire Nov. 30
Both have big news coming this week.
Tomorrow, the FHA will announce the findings of its annual audit, which will show the agency's reserves have dipped below their mandated level. That's in large part because many of the loans they made to pick up the slack from the pummeled private sector have gone bad. Some economists eye the giant housing agency's health pessimistically, projecting the agency will need a taxpayer bailout. For tomorrow's paper, The Wall Street Journal's Nick Timiraos takes this excellent look at the agency's issues.
The tax break to incentivize home-buying may be extended until April 30, among other extensions reportedly close to passing. The OCRegister's housing blog has a good roundup of the pieces that might make it in the new program, including:
extending the tax break to all homebuyers, not just first-timers, until April 30. Move-up homebuyers would get a maximum of $6,500, compared to the $8,000 tax credit for first-time buyers. (via UPI)
extending the income limits to $125,000 for individuals and $225,000 for couples (via BusinessWeek)
"We would help first-time home buyers, and we would also help homeowners looking to move up to a new home, but we would exclude from the credit speculators who may have recently purchased a home intending to flip it for a fast profit," said Senator Max Baucus, Democrat of Montana and chairman of the (Senate) Finance Committee.
Last week I got to test my musical merits in a drum circle and listen in on a lunchtime blues jam as I learned about Sundiata Kata's job at the San Diego Center for Children for this month's installment of People at Work.
While I was back for my second visit on Thursday, I pulled Dave Hall, another teacher, aside to chat about Kata's work. I learned the kids at the center aren't the only people Kata has reached with his music therapy.
Hall is 57 and began work at the center eight years ago. He grew up playing clarinet and saxophone, studied music in college, even toured Europe in the 1970s with a U.S. Army band.
But he got in some trouble and lost track of his former life -- including music -- for 25 years. When his "path changed back to better again," Hall came to the center as a child development counselor.
Kata learned Hall had once been musical and tapped him to help with the programs. Now Hall instructs the drum circle and some other music classes. On Thursday, he jumped on the drum kit and played the famous drum rolls in the Beatles' "Come Together."
I asked him what it meant to have music back in his life.
"It's tough to even say," he said. "My life has gone full circle. These are lost dreams reawakened."
Hall attributes that revival to Kata's persistence.
"He rescued me and brought music back into my life," he said.
In honor of tomorrow's festivities, here's a little housing downturn humor from editorial cartoonist Ed Stein at the Rocky Mountain News, the Denver paper that shut down earlier this year. Stein contributed this in 2007:
I came across this item in the Chicago Tribune business blog this morning and would love to hear what you think.
Robert Shiller, the Yale economist and half of the namesake of the famed home price index, used the word "bubble" this week to talk about August's home price increases:
In an interview on Reuters Television, Shiller said home prices have shot up in recent months to levels that may be unsustainable, and in some parts of the country approach "bubble territory." How could a market down and out for three years suddenly re-inflate into a bubble?
... In San Francisco or San Diego -- bubble territory, by Shiller's reckoning -- prices have advanced firmly past the January level.
Basket-case markets Detroit and Miami, meantime, still clock in well below where they stood in January. As Mr. Bubble well knows, all real estate is local.
Here's some more from Reuters' interview with Shiller.
Mark Goldman, a local mortgage broker and SDSU real estate lecturer, passed along some thoughts about the newest Case-Shiller numbers. Read his take, then let me know what you think:
My take - This is a positive sign, but we are not out of the woods yet on home prices. Positive Signs - Strong affordability - a function of price, income and interest rates. ...
First time home buyer tax credit set to sunset at the end of November. Even if it is extended, it will not indefinitely support home prices and sales activity.
NOD and Trustee Sales (homes in foreclosure process) continue at similar paces adding "must sell" inventory to market. Although, ForeclosureRadar.com guys do not think there is a lot of shadow inventory, I think it is a factor to keep in mind.
The seasonally adjusted increase is 1.5% for the month. That is 18% per year, and that will not be sustained.
I expect home prices to moderate in the near term.
I had a couple of other pieces I couldn't fit in the story last night:
Marigold Hernly, a real estate agent in City Heights whose clients are mostly first-time homebuyers, said the tax break's Nov. 30 deadline was the driving force for the market lately.
"From the standpoint of keeping things moving, it's huge," she said. "It may just all be psychological but, you know, it's the only thing going."
Frustration and frenzy were at the forefront of my chat with Jim Klinge yesterday about the housing market. He told me a fascinating tale of a buyer he's working with who offered more than $100,000 over the asking price -- all cash -- and still lost. He blogs about that situation today.
Sheldon Ruckens, the somewhat bearish mortgage consultant I quoted, has a radio show on AM 1000 KCEO where he discusses the housing market.
And here are some other stories to check out for local housing/economic news:
The North County Times (with new housing reporter Eric Wolff) looks at the impact on traditional buyers of the intense competition in the market.
The U-T's Dean Calbreath breaks down the newest USD economic index, which showed its sixth straight monthly gain yesterday.
What do you make of all of this? Leave a comment below (head to Survival if you're not already there).
San Diego County home prices rose between July and August, according to data released Tuesday morning.
The 1.56 percent increase marked the fourth straight month the Standard & Poor's/Case-Shiller index reflected rising home prices compared to the previous month.
A version of the index adjusted to account for typical seasonal trends captured a similar change from July to August, showing a 1.52 percent increase.
From the market peak in November 2005, the most recent index showed a local price drop of 38.75 percent.
The prices paid for resale houses in August, as captured in the index, were still off 8.85 percent from their level in August 2008.
That year-over-year gap has been shrinking for 11 months. August's 8.85 percent change is the first time the price difference from the same month a year earlier has been in the single digits since October 2007's index.
Broken by price tier, the index showed the following trends for August:
Low tier (Under $281,769): Prices up 2.45 percent from July; down 13.31 percent year-over-year; down 50.2 percent from the tier's peak in June 2006.
Middle tier (between $277,598 and $427,404): Prices up 1.6 percent from July; down 7.37 percent year-over-year; down 38.29 percent from the tier's peak in November 2005.
High tier (Over $427,404): Prices up 0.26 percent from July, down 10.36 percent year-over-year; down 30.07 percent from the tier's peak in June 2006.
(All tiers showed very similar monthly gains in the seasonally adjusted version of the index, too.)
One big question about the future of the housing market's apparent solidifying is whether the $8,000 tax credit for first-time homebuyers will be extended past the Nov. 30 deadline. From the AP this morning:
The real estate industry is lobbying Congress to extend the credit past the Nov. 30 deadline. Top Democrats in the Senate are pressing a plan that would prolong the credit but gradually phase it out over the next year.
The New York Times included perspective from Standard & Poor's vice president for index services, Maureen Maitland, about
The credit is pulling forward sales from next year, which is leading some analysts to forecast a bleak 2010.
"Everything is up for grabs this winter," Ms. Maitland said.
I feel like I'm learning a ton about the housing market from reading the comments under this post. If you haven't had a chance to read the ones that came in over the weekend, they lend a lot of perspective from would-be buyers about how crazy this market is right now.
One commenter summed it all up:
i was being to think I was alone.
Feel alone no longer! If you have tips from a successful house hunt, or ideas about anything these commenters have mentioned, please chime in.
Reader BK wrote in to offer his frustrating house-hunt take. He said he was lied to for seven months by a broker who never submitted his offer to the home’s seller, a bank.
He said other buyers should ask for a written response from the bank staff member managing the property, the REO asset manager, to make sure the sales agent submits the offer for the foreclosure. He also suggests that buyers just walk away from short sales when they're soliciting "back-up offers." Typically that means a bank is already in the negotiating phase with somebody else and you'll just be waiting for an eventual no.
I'm telling you it's an absolute nightmare, between the moratorium (dwindling stock of foreclosures for sale) and market manipulation it is probably the worst time to buy a home aside from the low interest rate. ...
In turn it is hurting and postponing the economy and stopping a lot of sales for the agents. A lot of times none of the offers are submitted just talk to manipulate the purchase for more money. Someone in politics needs to step in and stop the short sale scams that are hurting the consumers.
A couple of you wondered why there are so many more issues with FHA and VA loans. A lot has changed about those programs in the last year or so but I wrote about some of the headaches associated with those loans last fall.
As of a couple of days ago, all phone calls in North County must include a 1 plus the area code when you're making a phone call. For background on the area code switch, click here.
Last one: Visit Survival tomorrow for the newest Case-Shiller numbers that will show us how San Diego home prices fared in August. Most of the folks I've talked to are expecting prices to continue rising. We'll keep you posted in the morning.
I came across this message on Piggington this morning, and found it quite apt for the market right now:
OMG I just want to buy a freaking house!
Folks, I'm just having a really tough time buying a house in San Diego. Just about everything that we come across is a short sale or it's bank owned, or the seller will only take cash.
We've been trying since December to make something happen and it's just a big black hole when it comes to getting our offers accepted. Honestly, I'm beginning to think that nobody in this town will accept a VA loan offer. Our offers are serious, over list and at the top end of the comps in the areas we wish to buy in but still no luck. ...
Seriously, what's it going to take besides a mattress full of cash to buy a house?
This poster is not alone. Every buyer I've talked to lately is frustrated in today's market, putting in 10 offers and getting beat out over and over. Remember our blogger-buyer, David Cleveland? We chronicled his search for a house earlier this year. The frenzy seems to have picked up even more since then.
North County broker Jim Klinge has had a bunch of posts this week trying to catalog the reasons for all of the frenzy -- summed up in this one.
Kris Berg posted last week about some of the urgency showing up in the market while first-time buyers scuttle to close their deals by the end of next month.
She broke the squeeze down by price segment:
But, all price ranges are not created equal. What I am seeing is the big squeeze. Put another way, homes at the lower price points being more affordable and therefore enjoying the greatest demand are the stuff we are hearing about, with their attendant multiple offers and feeding frenzies. The problem with so many of these properties is that they are dead-end streets. Buyers are moving in but no one is moving out (think short sale or bank-owned), which leaves us one moving van short of a normal market.
This has become a problem for the mid- and high-priced homes. Demand is less, and a smaller buyer pool can wreak havoc on prices and market time. Fortunately for these sellers, inventory is low, but it is low for all of the wrong reasons; too many would-be sellers don’t have the equity position to make the move they might otherwise have, so they stay put.
It's not clear where Berg draws the line for low-, mid- and high-priced homes, but I've been hearing about that frenzy showing up most dramatically on listings priced lower than about $350,000.
I'd love for you to chime in. If you're selling, how many offers have you seen? How have you had to adjust your expectations in this market? If you're buying, what has your house hunt been like? How many offers have you written? Has it been enough to deter you from trying? Leave a comment in Survival if you’re not already there.
San Diego State University announced yesterday a new department for researching and teaching real estate, named The Corky McMillin Center for Real Estate.
The center's director is Michael Lea, a Cardiff-based mortgage industry veteran who was a former chief economist for Freddie Mac. I first ran into Lea when I interviewed him for the second part of our "A Staggering Swindle" investigation earlier this year, the piece that showed the vulnerabilities of the real estate financing system:
Lea, the mortgage industry veteran, said he wasn't shocked to see the system's susceptibility to the efforts of a mastermind and more than 20 individuals to get these loans through.
"Certainly there have been and were at that time and probably ever shall be ways of gaming the system if you're smart enough, particularly if it relates to fraud," Lea said.
I caught Lea on e-mail last week to ask his thoughts about the potential need for a bailout for FHA, an issue I've been writing a bit about recently. He said the insurance on the loans that FHA is too low, and doesn't effectively take into account the fact that borrowers are putting just 3.5 percent down payments on their purchases. Here's more of his analysis:
I believe FHA will face significant difficulties going forward. ... The economics support a significant increase in premiums to maintain solvency in the future but the politics of raising insurance rates in a severe recession are difficult.
I'll be looking forward to sharing with you what research comes out of the SDSU center. Seems they might be trying to give USD's Burnham-Moores Center for Real Estate a run for its money. I wrote about some of the research and analysis coming out of USD's center last fall.
I was just putting some pieces together for the next installment of People at Work and came across this list of the past stories we've run in the series. There's something cool about reading all of these job titles in a list like this:
Star of India painter Legoland builder tuna taste testers tree farmer/cemetery worker all-night drive-thru worker meter maid tree trimmer/expert witness school bus driver cafe server courtroom artist beach can collector funeral director drywall apprentice fried chicken mobile restaurant pizza delivery guy Geico phone-answerer costume designer condo concierge crane operator CEO of a major company bouncehouse company owner code enforcement officer dessert shop owner camp counselor paralegal flight attendant guitar builder unemployed financier tortilla maker shears sharpener paleontologist opera stage manager Balboa Park horticulturist disease researcher hot air balloon pilot/insurance agent gas station attendant inventor
And I can't resist: Here's a 1970s-era version of the classic song from which I stole the headline of this post:
You can read past stories from the series from the People at Work index page. And some of the best ones have come from your tips. Pass ideas for future installments along to me: kelly.bennett@voiceofsandiego.org.
Leonard Baron, an SDSU real estate prof, local real estate investor and our first guest host for Savvy & Sage blog series, appeared in the Wall Street Journal this weekend.
Baron shared some tips on buying a condo in this climate, where the purchase prices look attractive but the homeowners association's budgets may be pinched by delinquent payments. (I've written about some of that HOA trouble locally.)
Baron recommends would-be buyers do a bit of reading before buying, including asking for a document from the homeowners association called the reserve study. Here's why, from the WSJ:
Not every state requires these, but they are becoming more common. For such a study, the association will hire an outside firm that will look at all long-term anticipated repairs and replacements over a period of 30 years, add up the costs, and put together a payment and maintenance schedule. The monthly dues you're charged should reflect the amount of money that needs to be put away to pay for these necessities, but you shouldn't simply assume that's happening. "Many times the boards, under pressure by the owners, will hold the line on raising fees, to the long-term detriment of the property," he says.
You can read the rest of Baron's tips here. Have you recently bought, or considered buying, a home in a community with a homeowners association? Leave a comment below with your own tips. (If you're not reading this in Survival, head there now.)
San Francisco's ABC 7 has another piece in its continuing coverage of Jim McConville, the guy who's received a ton of media attention, including from us, for his complicated real estate deals-gone-sour all over the state. In the piece, reporter Dan Noyes tours the foreclosed, gutted 80-acre ranch in Castro Valley that used to belong to McConville.
Noyes posted more information on the station's I-Team blog, including some court documents that described some of McConville's possessions:
... among them, two Lamborghinis, a Hummer and various classic cars; an expensive art collection, antiques, pool tables, arcade machines, a comic book collection and "a life-size rubberized statue of the 'Predator' character" from the movie.
I did my weekly spot with our media partners at NBC 7/39 this afternoon, chatting about some of the trouble with FHA loans and the delays in picking a winning bid for a permanent homeless center. Here's the clip:
Near the end of the clip, I mentioned the City Council's decision yesterday to put up its annual winter tent shelter at a site downtown, after much debate. My colleague Adrian Florido covered that decision in this excellent story.
I told you last night that the unveiling of a new permanent homeless facility is taking longer than expected. Maria Velasquez said she couldn't share any specific information, just that the committee was "doing their due diligence."
But this morning, I received a much more detailed memo explaining why the decision is delayed, and offering more specifics about the selection timeline.
Originally hoping to announce a winning proposal by September, the committee now expects the selection process to last through the end of this year, and expects not to recommend a winning proposal until first quarter 2010, according to the memo.
The committee said the land and development costs involved in the proposals "far exceeded" the budgeted amount of local funding for this project, according to the memo. So the committee asked the respondents to submit some more information on their proposal by Nov. 13, taking into account the following objectives from the memo:
Likely completion and occupancy of the project within two years
Use of funding sources that are reasonably available, and
Flexibility in the location of permanent supportive housing (onsite or available in nearby affordable housing developments)
Based on these objectives, bidders were encouraged to focus on site acquisition and building rehabilitation rather than new construction in the development of a one-stop service center for the homeless. Bidders were also offered the opportunity to respond to the viability and reliability of their originally proposed funding sources.
The number of homes sold inched up in September in San Diego County and across Southern California, an increase analysts at MDA DataQuick partly attributed to "late-closing summer transactions, low mortgage rates and buyers hoping to take advantage of a soon-to-expire tax credit."
September's 3,454 home sales in San Diego County marked a 2.6 percent increase from September 2008, and a 4.5 percent increase from August.
All property types experienced a year-over-year sales increase:
Resale houses: 2,091 sales in September, up 0.4 percent year-over-year.
Resale condos: 1,032 sales in September, up 2 percent year-over-year.
New homes: 331 sales in September, up 22.1 percent year-over-year.
The share of purchases in September financed with an FHA loan was 28.8 percent, up from August's 28.2 percent rate I included in my post Friday about some FHA-related issues.
Foreclosures were 35.3 of the resales in September, up from a revised 34.5 percent in August but down sharply from 47.2 percent in September 2008.
The foreclosure sale percentage was the second-lowest, behind August 2009, for any month since April 2008, when foreclosure resales were 35.1 percent of resales, according to MDA DataQuick.
The winning proposal for a one-stop center in San Diego where homeless and extremely low-income residents could be linked to housing and services has yet to be announced -- and doesn't appear likely to be unveiled anytime soon.
In July, I reported on a number of different regional plans for combating homelessness. This intake center was one of them. Here's what I wrote then:
The city of San Diego is a month away from picking a plan for a new one-stop center. ... The city also wants emergency shelter beds and permanent supportive units built as part of the proposal. The city is mum on the proposals that have come in but expects to send one on for review by September.
No decision came in September.
In August, the Housing Commission's rep on the selection committee, Cissy Fisher, spoke on a panel about local homelessness and mentioned the center:
...(she) said today to "cross your fingers for October."
Now, it's nearly mid-October. I checked in with the Housing Commission today to see when they're expecting to make a decision.
I heard this afternoon from Maria Velasquez, spokeswoman for the Housing Commission, who said she checked in with Fisher.
"It's probably not going to be October," Velasquez said. "They're reviewing the proposals. I guess you could say they're doing their due diligence."
She said the nine-member committee has met four times, once a month in June, July, August and September. Because of the delicate nature of real estate negotiations, the committee is not divulging the number of proposals that have come in.
I asked if we could expect a decision from the committee sometime next month on a winning proposal. Velasquez wouldn't say.
"We're not even supposed to be talking to the media, because it is what it is," Velasquez said. "They're still meeting, reviewing proposals."
The winter tent shelter -- the city's controversial stopgap measure -- opens on December 2.
The deadline came last week for Little Italy developer Moe Siry to address the city of San Diego's order to make clear the existence of apartments alongside the hotel rooms at his Porto Vista Hotel & Suites.
I heard this morning from Bob Vacchi, deputy director in the city's Neighborhood Code Compliance Division, who said he'd received an e-mail on Friday from the developer's attorney. It appears that the developer is making "good steps towards compliance," Vacchi said.
Vacchi said the e-mail stated that the developer is putting together a design for a permanent sign for the building labeling the existence of apartments. The city is expecting to see that design sometime this week for approval.
In addition, the developer is making modifications to the company's websites, Vacchi said. The Porto Vista website had already been changed to include a mention of "Staying for more than 30 days?" and announcing the availability of furnished studio units for month-to-month leasing.
"But I wanted something a little more direct," Vacchi said. So the developer will be adding the Porto Vista's studio apartments to his existing apartment rental website, he said.
"So I think those are good steps towards compliance," Vacchi said.
Siry developed the project from a Super 8 Motel several years ago, getting approval in 2004 for a complete remodel. At that time, neighborhood zoning rules mandated that while Siry could permissibly expand the number of hotel rooms available from the original 84 motel rooms, he also must develop some residential living space.
The hotel/apartment mix was approved in accordance with the neighborhood's own blueprint for its growth.
The city had sent Siry a notice on Sept. 23 identifying several violations, including some related to the fact that the developer had yet to make it clear that there are apartments available in his building, despite being asked to do so more than a month ago. And on some of the units that are technically apartments, Siry told the city this summer that he has been renting them out for less than 30 days, which is not permitted without first requesting permission from city planners.
Vacchi is expecting to have more information about the developer's progress later this week. We'll keep you posted.
It takes a lot to make it here. Some of our most important decisions -- where to live, whether to buy or rent, what to do for work, how to imagine the future -- are tied inextricably to the ebb and flow of the local economy, no matter where we fit in the continuum. In Survival in San Diego, reporter Kelly Bennett reports the latest about these issues, tells stories about the people affected by them and gives you a chance to weigh in on some of the hottest topics of the day.
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North County broker Jim Klinge has had a bunch of posts this week trying to catalog the reasons for all of the frenzy -- summed up in 
Baron shared some 
It takes a lot to make it here. Some of our most important decisions -- where to live, whether to buy or rent, what to do for work, how to imagine the future -- are tied inextricably to the ebb and flow of the local economy, no matter where we fit in the continuum. In Survival in San Diego, reporter Kelly Bennett reports the latest about these issues, tells stories about the 
