The rate of real estate mortgage defaults has dropped in San Diego County, and nationwide, in April 2010. Short sales of San Diego homes, successful loan modifications, and an improved outlook for the San Diego real estate market are all contributing factors. San Diego foreclosures rose slightly during the month, but the number of San Diego foreclosures for sale remained low.
In April the rate of defaults in San Diego fell to its lowest level since January. A total of 2,105 homes went into default in April, down from 2,263 in March, and 3,371 in April 2009. That’s a 37.5 percent drop from a year earlier. Nationwide, defaults dropped by just two percent compared to a year earlier, and this is the first annual decrease in mortgage delinquencies for the nation as a whole since January 2006. So once again, the San Diego real estate market appears to be leading the trend toward stabilization and recovery.
More about the several explanations for the drop in delinquencies: First, the number of approved short sales has increased. Banks have streamlined the short sale process, and more home owners who are under water with their properties are completing sales prior to foreclosure. (Contact Anne-Marie Schiering, Certified Distressed Property Expert (C.D.P.E.) for San Diego County, with questions about short sales of homes in San Diego. Call 619-857-7203).
Second, many home owners are finally having success with refinancing their mortgages. The mortgage workouts have typically taken months to accomplish, but the loan modifications are coming through in large numbers. Kudos to the Obama administration, Fannie Mae and Freddie Mac, for coming through with the Hope for Homeowners. Private banks are also stepping up with reasonable offers of loan mods and refinancing of high interest rate mortgages. This is a reasonable move by the banks, given the fact that interest rates for conforming home loans are again below five percent.
Third, it is becoming more apparent that real estate prices have stabilized, so cooler minds are prevailing and home owners and investors are no longer rushing away from their mortgage obligations in haste to exit the market.
But while defaults are dropped, the number of San Diego foreclosures increased. There were 1,212 foreclosures in April 2010, which is a 6.6 percent increase from March, and a thirty eight percent increase from April 2009. Banks are catching up with defaults and reclaiming the properties. But the increase of foreclosures has not increased the number of foreclosure properties for sale. In fact, the foreclosure inventory has dropped from a year ago.
The consensus among San Diego real estate professionals is that the banks have made it a policy to sell their foreclosure inventory at a very slow and steady pace. Some note that banks have made profits on their purchases of mortgage-backed-securities, and therefore are not in a hurry to sell the non-performing assets. Bank of America, for example, paid less than thirty cents on the dollar for the CountryWide Home Loan portfolio, and now that portfolio is performing above expectations, valued at closer to sixty cents on the dollar. The banks are making money from loan payments, so they are in no hurry to sell San Diego homes at the bottom of the market. They expect home prices to rise over the next few years, and are willing to hold, or rent, the foreclosed properties in the interim.