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Tuesday, Sep 27, 2022
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Homebuyers’ Fear of Commitment Affects Market

San Diego’s housing market continues to seek some kind of equilibrium but as buyers remain cautious, there’s signs the bottom has yet to be reached.

According to a report from MDA DataQuick, a La Jolla real estate research firm, in March, residential transactions here fell 5 percent from March 2010, and the median price of those sales was $325,000, down 1.5 percent from the prior March.

Another respected analysis provided by Standard & Poor’s/Case-Shiller released last month showed San Diego home prices gaining a measly 0.1 percent over the year to this January, but declining by 1.2 percent from December 2010.

Local housing analysts and brokers concur that while prices are at nearly historic affordability levels and mortgage rates are certainly cheap, many buyers aren’t stepping up to take advantage of the situation.

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“There’s a lot of buying power still sitting on the sidelines,” said Rick Ungar, a broker associate with Keller Williams Realty Inc. in Carlsbad. “A lot of people who would like to buy just don’t have the confidence to pull the trigger.”

Economic Uncertainty

Uncertainty about the economy combined with a sluggish growth in jobs have dampened demand, but another factor affecting the psychology of buyers is the ongoing overhang from distressed properties, many analysts said.

Notices of default and foreclosures in San Diego in the first quarter both declined but are still fairly high by historic standards. As of the first quarter, default notices in the first quarter here were 4,758, down 23 percent from 2010’s first quarter.

The region saw 2,902 foreclosures, down 6 percent from the same period of 2010, according to DataQuick.

In an analysis of more than 68,000 defaulting mortgages in the state during the first quarter, DataQuick found that most of the loans were made in 2005-07, the same time frame which has produced the preponderance of defaults during the past two years.

Sales of distressed properties, including both bank-owned and short sales, or transactions in which the accepted price is below the outstanding mortgage, made more than half of all sales in California, according to the latest reports from both DataQuick and the California Association of Realtors.

But those numbers deal with sales, not with what’s happening on a real-time basis as far as problems involving borrowers who may not be officially in default (less than 90 days delinquent in payment) and those borrowers that are defaulting on payments, sometimes for more than a year, but have yet to be foreclosed on.

Inventory of Distressed Properties

Steve Hundley, chief executive of 1parkplace Inc., a San Diego marketing firm serving real estate brokers, said an analysis he did on the existing inventory of homes for sale in San Diego found that 82 percent were either bank owned or being offered as short sales. Hundley, who organized a forum on a variety of housing issues April 21 that featured Rep. Duncan Hunter, said banks are partly to blame for the lack of any real recovery in the housing market.

In many instances, instead of facilitating sales of properties to willing buyers, the banks are purposely withholding them because they often stand to make larger profits through loss sharing agreements with federal regulators, Hundley said.

Lenders are also making it extremely difficult in extending financing to qualified borrowers, he said.

“The fact is that (the banking industry) are now over-correcting and that is causing a dramatic impact on the recovery of the housing market,” he said.

Leonard Baron, a lecturer on real estate at San Diego State University, said the amount of distressed property on the market isn’t affecting it that dramatically, and the key reason behind any discernable traction is buyers’ general reluctance to commit in the face of a good number of options, low interest rates, and lack of confidence in their own jobs.

“It’s tough to get properties under contract these days,” Baron said. “More people are making multiple offers … I think a lot of people are scared, but they shouldn’t be because this is one of the best times to buy property.”

Financing Hurdles

Baron said financing remains a big hurdle for many as lenders have tightened underwriting standards and are now requiring buyers to put down at least 20 percent of the purchase price.

Also, potential buyers who are self-employed and may have past dings on their credit are having a much tougher time getting financing, he said.

Baron thinks for those interested in buying there is no better time to invest in residential real estate here. Even if the market drops 5 percent to 10 percent more, they will benefit as long as they hold on to the property for at least five years. “If you can get the financing, you should be out shopping.”

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