By Linda Stern | May 5, 2010

Housing indicators all are pointing to a recovery in the housing market, but buyers shouldn’t have to worry about massive bidding wars breaking out anytime soon. The combination of relatively low mortgage rates, still sticky real estate prices, and a hidden inventory of homes not yet on the market could make the rest of this year an opportune time to buy a home. On Tuesday, the National Association of Realtors reported higher than expected sales in March, but simultaneously revised their sales predictions down for the rest of the year. The group now expects that bigger boost in home sales to wait until 2011.

Home sales rose 5.3 percent in March, beating analysts expectations significantly.  Earlier, the Commerce Department had reported that new home sales, which make up a small percentage of the entire housing market, had surged 27 percent from February to March, and were up 23 percent from a year ago. And in March, the median existing single family home cost $170,700, up from February’s $163,900. But prices are still well below last summer’s levels, when the median home cost $181,900.

Of course, that $8,000 homebuyers tax credit, which expired last week, propelled those March sales, particularly after a bad-weather February. (Buyers who signed contracts by April 30 have until June 30 to close on their deal to qualify for the credit.) “In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” said Lawrence Yun, chief economist of the National Association of Realtors. His group now expects existing home sales to be up 4.3 percent in 2010 and 5.1 percent in 2011. A month ago, they had expected 2010 sales to be up 6.5 percent and 2011 sales to be up 3.7 percent.

This year, the early signs of recovery can be expected to bring many more homes to market, keeping prices from leaping. At the same time, the continued weakness in the economy is keeping mortgage interest rates near all-time lows.

The bottom line for buyers? More choices, cheap mortgages, and the rest of the year to take your time shopping for the just-right house. And here’s a bonus: That federal homebuyer’s credit might have expired, but some places — Washington, D.C. and the whole state of California, for starters — offer their own credits for homebuyers. Shop carefully and strategically, and you can still get paid to buy that home.

Photo courtesy of thetruthaboutmortgage.com

On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.To learn what the new tax credit means to you, take a look at the concise overview below.

ho Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligibleJoint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.What is a Tax Credit?A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.According to the IRS, factors that would demonstrate the ownership of the property would include:1. Right of possession,2. Right to obtain legal title upon full payment of the purchase price,3. Right to construct improvements,4. Obligation to pay property taxes,5. Risk of loss,6. Responsibility to insure the property, and7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Revised FHA Appraisal Guidelines in Effect
for Appraisals Done after April 1, 2009

Last Updated March 26, 2009

I wanted to reach out to you to keep you informed of some revised federal guidelines that outline 10 things that appraisers must do or provide for all FHA appraisals done after April 1, 2009:

1. The Market Conditions Addendum (Fannie Form 1004MC/Freddie Form 71).

2. At least 2 comparable sales within 90 days of appraisal date.

3. A minimum of 2 active listings or pending sales in addition to the 3 closed comparables.

4. Bracketed listings using both dwelling size and sales price when possible.

5. Adjust active listings to reflect the List To Sales Price Ratio.

6. Adjust pending sales to reflect contract sales price when possible.

7. Include original list price and any revised list prices.

8. Reconciliation of adjusted values of active or pending sales with adjusted values of closed comparable sales.

9. Absorption Rate Analysis.

10. Known or reported sales concessions on active and pending sales.

FHA also is restating its warning that…”Direct Endorsement Lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible equally with the appraiser for the integrity, accuracy and thoroughness of an appraisal submitted to FHA.”

If the above appraisal guidelines look foreign to you, that’s okay, because this update is intended for Appraisers and Underwriters. I sent this to you so you can take the following actions below to make yourself an FHA resource in your market.

Different Ways to Buy Foreclosures - you can buy foreclosures a number of different ways. Below are the 3 most common with some perspective on my experience with 30+ years in the real estate business.

Buying directly from the homeowner - You can purchase foreclosures directly from the homeowner prior to it going to sale and back to the bank to be sold as a “Bank Owned” property. I am not a fan of this option for one simple reason. Homeowners are being taken advantage of and deeding their homes over to crooks who promise to bring their mortgage payments current and never do anything. This is the option that all of the late night infomercials are always talking about. It’s unfortunate that when someone is in a difficult situation that these crooks come out of the woods to steal equity away and convince homeowners to deed the property to them. If they really did what they say they will do then great, but it’s too often I hear horror stories about homeowners that were taken advantage of. What typically happens is a number of different things, including renting out the home to collect rent payments for 6-12 months while never make any single mortgage payment. The end result in many of these scams is that homeowners are sold on the idea that they will avoid a foreclosure showing up on their credit. If you have equity in your home then you should try to sell it with a local real estate agent. Your lender will give you some time to sell the property if you show them you are making an effort to sell it.

Buying at a real estate auction - not a big fan! These homes that are being sold at auction are homes that didn’t sell via OPTION 3 of this article. They were listed with local real estate agents as “Bank Owned” homes and as a result of them not selling in a timely manner the bank turns them over to an auction company for sale. Would you go purchase a foreclosure amongst hundreds, if not thousands of other buyers when you could have purchased it a month earlier with no other competition? Auctions are not my favorite, you are in a room with people that do not take the time to research the property and they are sold on this slogan. “Buy this previous valued home of $450,000 with a starting bid of $275,000!!!” I have news for you, take the time and go to one of these auctions and you will see that by the time it actually sells you really aren’t getting a good deal compared to the foreclosures available for sale in the local MLS.

Buying from a local Realtor - my favorite option because it makes the most sense. You find a local real estate agent who specializes in selling bank owned real estate. I would recommend that you do a Google search for “bank owned real estate for sale CITY NAME” and you should come up with some options. Buying from a local real estate company will allow you time to do your inspections on the home you are buying; you will get a clear title with title insurance. If you purchase your home listed with a real estate company that is “Bank Owned” you do not have to worry about the title history because you will be provided with a title insurance policy when you close escrow. You will have typically a 30 day escrow which will allow you to purchase with financing.

Other things to understand about buying foreclosures - One big misconception is that you deal directly with the bank. Let me tell you that it doesn’t happen. Banks don’t sell real estate. They find local real estate agents who know the local market and pay them a commission to get the property sold. Don’t waste your time trying to work out a great deal directly with the bank or insist that your low offer at 50% of the listing price should be considered. Banks want to sell these foreclosures but they are not stupid.

Things to do after you purchase a foreclosure property - Get the locks changed as quickly as possible, many banks use the same key cut for all of their listings because they have so many vendors to deal with they have the locksmith re-key all of their foreclosures with the same cut key. You should really invest $100 to have your new home re-keyed.

If you would like any San Diego Foreclosure Information please feel free to contact us.

une 9 (Bloomberg) — The number of Americans signing contracts to buy existing homes unexpectedly rose in April as the first nationwide decline in prices since the 1930s lured buyers back into the market, a private report showed.

The index of pending home resales rose 6.3 percent to 88.2, the highest level in six months, following a 1 percent drop in March, the National Association of Realtors said today in Washington.

The drop in property values may be starting to lure some buyers who are able to qualify for loans, signaling purchases will improve in 2009. Still, stricter lending rules, the recent increase in mortgage rates and continued pressure on prices from mounting foreclosures will probably keep some buyers away for much of the year.

“There are some signs that sales are close to a bottom, although the level of inventories is so high that there is going to be continued pressure on prices and housing starts,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who had the highest forecast in the Bloomberg News survey. “We’ll need to see more than this report to suggest housing is really rebounding.”

Economists projected the index would fall 0.4 percent, according to the median forecast in a Bloomberg News survey of 32 economists. Estimates ranged from a drop of 1.5 percent to a 1 percent gain.

Stocks Rise

Stocks extended gains following the report and Treasury securities dropped. The Standard & Poor’s 500 index rose 0.6 percent to 1,368.4 at 10:27 a.m. in New York. The yield on the benchmark 10-year note rose to 4.02 percent from 3.91 percent at the end of the day on June 6.

Pending resales were still down 13 percent from April 2007, today’s report showed.

The measure increased 13 percent in the Midwest and 8.3 percent in the West. They rose 4.6 percent in the South and decreased 1.9 percent in the Northeast.

“Bargain hunters entered the market en masse, especially in areas that have experienced double-digit price declines, but it’s unclear if they are investors or owner occupants,” Lawrence Yun, the real-estate agents group’s chief economist, said in a statement.

Yun also said the drop in consumer confidence and stricter lending rules make the immediate outlook “unclear.”

The pending resales measure is considered a leading indicator because it tracks contract signings. The existing-home sales report reflects closings, which typically occur a month or two later.

Record Low

The Realtors group will release its May existing home sales report on June 26. Purchases in April dropped to a 4.89 million annual pace, matching the weakest rate since records began. It would take an all-time high of 11.2 months to sell all the houses on the market at the current sales pace.

The lack of demand is rippling through the economy. Sherwin-Williams Co., the largest U.S. paint retailer, slashed its 2008 profit forecast last week because of the decline in the domestic housing market and rising costs for petroleum-derived raw materials.

“The market is deteriorating dramatically,” its Chief Financial Officer Sean Hennessy said on a June 3 call with analysts and investors. Chief Executive Officer Christopher M. Connor during the call also said demand probably won’t improve for the rest of the year.

Other measures have showed sales may continue to decline. The Mortgage Bankers Association’s index of applications for loans to purchase homes has fallen 13 percent since the beginning of May, ending the month at the lowest level in five years.

Price Declines

Values were down 3.1 percent in the first quarter compared with the same period last year, the second quarterly decline after 13 years of increases, the Office of Federal Housing Enterprise Oversight said May 22.

“What people are most scared of is looking like a schmuck,” Toll Brothers Holdings Inc. Chief Executive Officer Robert Toll said at a conference in New York last week. “What do I want to buy a home for and next year be looking at 10 percent less asset?”

Toll predicted the housing slump may last another two to three years. On June 3, the company reported its third straight quarterly loss.

More Foreclosures

The number of Americans in danger of losing their homes to foreclosure rose to the highest in almost 30 years in the first quarter, the Mortgage Bankers Association said June 5. The total inventory of homes in foreclosure increased to 2.47 percent and the delinquency rate, or loans with one or more payments overdue, grew to 6.35 percent. These were the highest since 1979.

Still, the decline in prices is making homes more affordable. The Realtors group’s affordability index stood at 129.8 in April. A reading of 100 indicates a family with the median income could afford a median-priced house at current interest rates.

The collapse of the subprime mortgage market has led the world’s biggest banks and brokerages to report more than $386 billion in losses and writedowns.

Banks will probably report “weak earnings” and write down more assets while operating with insufficient reserves to cover bad loans, Federal Reserve Vice Chairman Donald Kohn said to the Senate Banking Committee June 5.

The economic slump may increase problem loans for consumers, credit-card holders and corporations, Kohn. He also said losses for homebuilders and developers are “bound to increase further.”

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

The headlines report that Half-priced homes are attracting a bevy of buyers. But, you don’t want to sell your home. However, the balance of your mortgage is greater than the value of your home. What to do?The first question to be answered is how much more is that balance: 5%, 10%, 20%… It may boil down to strictly a financial decision on whether it is a prudent move to stay in or move out of your home, and let the chips fall where they may. Today’s Economic Update will present those two alternatives with the steps for you to follow. If you want to stay in your home1. Review the loan documents you signed when you purchased or refinanced your home to ensure that the lender dotted all the “i’s” and crossed all the “t’s” from a compliance perspective. If there were errors (e.g. 3 day right of recession, lack of other disclosures…) then the lender will be at your mercy to negotiate a change in the terms of your loan to your benefit. 2. Refinance. The FHA is now offering the FHASecure loan program. Even if you are delinquent in your current mortgage payments, you may be able to refinance 97% of your home’s value under this government insured loan program. And, if your current mortgage balance is greater than 97% of your home’s value, the lender may forgive the difference. Call me for more information, to see if this refinance option is doable for you.3. Modifying the terms of your loan. The cost to a lender to foreclose on your loan can be 20%-25% of the principal balance. Use this to your advantage. If there were no errors in your loan documents and you cannot refinance your mortgage, then you should write a compelling letter to your lender explaining why you cannot continue to make the mortgage payment. Sit down, face-to-face, with your lender to come to a mutual agreement in modifying the terms (monthly payment) of your mortgage. You would be surprised at how receptive your lender will be. In addition to avoiding the costs of foreclosure, with the unfortunately large number of potential foreclosure lenders are facing at this time, they are in a much more favorable mood to negotiate with you. If you are behind on your mortgage payments, you should ask the lender for some forbearance on the amount past due (add the delinquent payment amount to the mortgage balance). However, you still want to pursue a loan modification to reduce the monthly payment, so as you do not continue to get behind (forbearance is a one-time option). If your decision is not to stay in your home, then your choices are:1. A Deed in lieu of Foreclosure. Asking the lender to take the home (the security of the mortgage), and release you from the mortgage obligation. 2. A short sale. Trying to sell your home by taking an offer on it for less than the mortgage balance. When you receive an offer on your home the real estate agent would open negotiations with the lender to persuade them to accept this lower purchase amount. This will take some time (60+ days) to complete. 3. Foreclosure. If you cannot afford to make the mortgage payments any longer and a notice of default is issued, then the lender may elect to foreclose on your home and take it from you. I know none of these options sound simple. If you are having problems with your current mortgage then the first thing you should do is contact a HUD Approved Housing Counselor (1-888-995-HOPE). There is a unique office set up in San Diego to help distressed homeowners. It is the Housing Opportunities Collaborative (www.housingcollaborative.org) where I attending a seminar just last week. Don’t be shy to call me or them for assistance.

“I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN.” ~ Yogi Berra A record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February’s Jobs Report delivered an additional loss of 67,000 jobs - that’s on top of the previously reported loss of 85,000 jobs for that two-month period.

And…the story might be even a bit gloomier than it already appears. The Labor Department uses a lot of averaging to help it come up with its numbers more quickly, but this practice can skew the current picture significantly. Think of it this way - and because it’s now baseball season, here’s a Baseball analogy - let’s say that mid-way through the season, a red-hot hitter with a batting average of 340 declines into a bad slump for several weeks. While he now can’t even hit a basketball thrown underhand to him, his average - while lower to 300 - is still very strong due to his previous hot performance. So someone looking at just the statistics may think that this batter is still absolutely terrific, but he is really someone the fans are booing as he approaches the plate. This is not very different from current numbers being reported by the Labor Department - previous averaging is likely causing an understating of the ACTUAL number of job losses…which somewhat masks how bad the job market really is.

This bleak Jobs Report greatly boosts the odds of not only a first-quarter recession, but perhaps a worse economic downturn than many economists fear. The Federal Reserve may respond to this increasing trend in job losses with additional interest rate cuts when they next meet to determine monetary policy on April 30 and June 25. As we’ve seen in the past though, such rate cuts do not translate into lower long-term rates for mortgages, so there is no better time than right now to refinance an existing mortgage or to structure a new one. Let’s work together to make sure your current financing is a home run!

NEW YORK : Wall Street stocks rocketed on Tuesday as hopes mounted that stressed banks are starting to put housing-related investment losses behind them and come clean about outstanding mortgage loan write-offs.

Stocks gained after the US investment bank Lehman Brothers said it had raised fresh capital totalling four billion dollars and as Swiss banking giant UBS divulged fresh losses, but raised hopes it was getting a grip on its stricken balance sheet.
The leading blue-chip Dow Jones Industrial Average closed up a large 391.47 points (3.19 percent) at 12,654.36.

The Nasdaq tech-heavy composite index jumped 83.65 points (3.67 percent) to 2,362.75 while the Standard & Poor’s 500 index surged 47.48 points (3.59 percent) to close at 1,370.18.

Lehman Brothers said it had raised fresh capital of four billion dollars in a special share offering to help bolster its finances which have been squeezed by mounting mortgage investment losses and a related credit crunch.

“The significant oversubscription for this deal demonstrates the confidence that investors have in Lehman Brothers,” Lehman’s chief financial officer, Erin Callan.

Lehman executives said they had increased the number of special shares offered to four million because of heightened demand from investors seeking to snap up the shares.

Lehman’s shares spiked 10.8 percent to close at 41.64 dollars.

UBS, the biggest Swiss bank, meanwhile revealed further hefty write-downs of 19 billion dollars on mortgage investments tied to sub-prime US home loans granted to Americans with poor credit.

The bank wrote off 18.4 billion dollars in such investments last year, but said on Tuesday it plans to raise almost 15 billion dollars in fresh capital as it ousted its embattled chairman, Marcel Ospel.

Market analysts said investors were looking further ahead and expressed increased confidence that the banking sector might be regaining its footing.

“The equity markets continue to be hit almost daily with some new worry over the sub-prime fallout and its impact on the housing industry and the economy in general,” said John Wilson, a co-director of equity strategy at Morgan Keegan.

“The market appears to be looking through the trough, though, if the behaviour of the housing and transportation stocks is any indicator,” Wilson said.

Although the two-year-old US housing downtown is showing scant signs of stabilising and many economists believe the economy has fallen into a recession, some investors are hopeful that the worst may soon be over particularly as the Federal Reserve has slashed three percentage points off interest rates in recent months.

Such rate cuts, under more settled economic times, would be expected to spur economic growth.

Other banking and financial shares also surged as hopes mounted that the industry was beginning to put its mortgage losses behind it.

Citigroup, which has also seen its finances buffeted by mortgage-related losses, closed up 11.3 percent at 23.84 dollars.

Merrill Lynch was 12.9 percent higher at 46.02 dollars and JPMorgan Chase finished up 9.4 percent at 47.00 dollars.

Bond prices dropped as money flows moved back into equities.

The yield on the 10-year US Treasury bond rose to 3.545 percent from 3.432 percent on Monday and that on the 30-year bond increased to 4.382 percent from 4.306 percent. Bond yields and prices move in opposite directions.

European share markets also benefited from a confidence boost as overseas investors also bet that the global financial crunch could be nearing an end.

In London the FTSE 100 index gained 2.64 percent, the Paris CAC 40 shot up 3.38 percent and the Frankfurt Dax added 2.84 percent. - AFP/de

 Max Jarman

The Arizona Republic

Feb. 9, 2008 10:24 PM

For Zonies with serious San Diego addictions, there could be an upside to falling real-estate prices.

 

A condo-market meltdown has put the dream of owning a piece of downtown San Diego within the reach of more Valley residents.

 

Tightening credit and pain caused by rising payments on subprime loans have put the brakes on new-condo sales, sending prices plummeting and strapped buyers running for the exits. 

 

While still lofty, prices for some units are now more than 30 percent below previous highs and still falling.

 

A new 725-square-foot “bank-owned” studio, two blocks from the San Diego Padres’ ballpark, is listed at $189,900, down from $289,900 at the end of September.

 

“Prices are at least starting to make sense,” said Stanley Paul Cook, a former Phoenix resident who is now a San Diego real-estate consultant.

 

He noted that real-estate speculation over the past few years pushed average San Diego home prices near $700,000, making it one of the nation’s most expensive housing markets.

 

 

 

But the deals probably won’t last. Construction of new condos has dramatically slowed, and when the existing units are sold, prices are expected to creep up. After all, it is San Diego, still one of the country’s most desirable places to live.

 

Falling mortgage rates and a possible increase in the size of loans that can be sold to government-backed agencies also could help jump-start the stalled market. And there is increasing interest from foreign buyers who get an additional discount due to the weak dollar.

 

But for now, terms like “short sale” and “lender-owned” have become the bywords of the real-estate market downtown, along with “desperate” and “make offer.”

 

Lockboxes for real-estate agents cover railings outside buildings. Inside, residents come home to find foreclosure notices on their neighbors’ doors.

 

Tiny ‘treasures’

 

The building boom, spurred by an aggressive downtown redevelopment effort and the construction of the Padres’ Petco Park, brought thousands of new condominium units to downtown San Diego in the past few years.

 

Real-estate speculators fueled the frenzy, flipping (selling, often before taking occupancy) properties from building to building while creating an artificial demand that sent prices through the roof. “The market was so good and prices were going up so fast that we were oblivious to any kind of a peak,” said Ken Baer, an agent with Willis Allen Real Estate in San Diego. “We knew things were high but thought they would keep going up.”

 

Unit 211 in Discovery at Cortez Hill, for example, sold in 2002 for $409,000 and in 2004 for $699,000. The unit sold to a Phoenix couple in December for $470,000.

 

Downtown, there are more than 1,000 condominiums on the market in a roughly 125-block area. That is up from 700 last year and 500 in 2005.

 

Of the 1,000 units, about 400 are in new buildings that are just being completed.

 

Most of the others have been built within the past few years, and many, bought by speculators, have never been lived in.

 

They are generally small. One-bedroom and studio units, some under 500 square feet, make up the largest category of unsold condos on the market.

 

“An entry-level condo that sold for $400,000 a year ago is practically impossible to sell at that price in this market,” said San Diego real- estate agent Mark Mills. As a result, prices are dropping fast for the small condos, and many are landing in foreclosure.

 

Some frustrated owners, now struggling to sell their properties, blame the developers for building so many small units.

 

But with the high cost of land and construction, Mills noted the tiny condos were the only way some developers could make their projects make economic sense.

 

The Centre City Development Corp., a non-profit agency that is spearheading the redevelopment of downtown San Diego, reported that the agency has assisted in the development of 7,200 condominium units in more than 50 projects downtown since 2001.

 

That has helped push the downtown population to 30,000 from about 10,000 at the start of 2000. Another 60,000 are forecast to move downtown, bringing the population to 90,000 by 2030.

 

“You can’t beat it. Everything is close by,” said Gary Smith, a longtime downtown resident and president of the Downtown San Diego Residents Group. “You drive to the golf course on weekends but walk to everything else.”

 

Although new construction has fallen off dramatically, more than 1,300 units are expected to be completed in the next two years. Thousands more have been approved and are waiting to be built.

 

Arizonans’ views

 

Susan and Michael Markowitz of Scottsdale spent three years studying the downtown San Diego market before buying a bay-view condo in April.

 

“Our timing wasn’t the greatest, but we weren’t looking to make money and couldn’t be happier,” Michael Markowitz said.

 

On his last visit, he walked to his condo from the airport.

 

“It took about 40 minutes, and it was a beautiful walk,” he said. “I never imagined it was even possible to walk home from an airport.”

 

Scottsdale real-estate agent Bob Sutton has owned a second home in San Diego since 1997.

 

“It was a great way to experience the whole Southern California lifestyle thing without having to pick up and move,” he said.

 

Sutton started out with a $73,000 condominium in Pacific Beach and moved up to a downtown high-rise four years ago. He bought another unit as an investment at the peak of the market and has been trying to sell the one-bedroom, 800-square-foot unit since. He’s hoping to break even or take a small loss on the property.

 

“It hasn’t turned out to be such a great investment,” he said.

 

Converted to hotels

 

While some condo projects are being abandoned or put on hold, others are being reinvented as hotels, apartment houses and office buildings.

 

“Before, they were all condominiums,” said Sherm Harmer, chairman of the Downtown Residential Marketing Alliance, which promotes downtown housing. “Now, it’s a mix.”

 

The Centre City Development Corp. plans to use the lull in condo construction to catch up on infrastructure improvements. That includes the development of 10 new parks, a new public library and waterfront improvements, among other projects.

 

Upside down

 

The downtown condo market peaked in late 2006 when sales slowed and prices started to fall.

 

“Everything went into the crapper the same time I bought this place,” Vern Scholl said of his 1,550-square-foot penthouse in the Park Place complex downtown. Scholl paid $1.9 million for the unit in 2006 and had been trying to sell it ever since. He originally asked $2.3 million but was trying to negotiate a short sale for $1.65 million prior to its sale for $1.5 million at a January foreclosure sale.

 

“What do you do when you owe more than it’s worth?” he said.

 

Lew Breeze, a number cruncher and real-estate agent, estimates that there were 20 foreclosure properties on the market a year ago and now there are more than 100. There are even more short-sale deals.

 

A short sale occurs when a lender agrees to take a loss on the sale of a property in order to avoid the foreclosure process and the possibility of a greater loss.

 

Short sales also allow owners to get out from under properties they can’t afford without incurring the stigma of foreclosure.

 

An Aqua Vista penthouse that sold for $2.1 million in 2004 is now on the market as a short sale for $1.2 million.

 

Turnaround ahead

 

A slowdown in new construction eventually is expected to lead to a short supply, particularly if a ramp-up in new construction lags behind the falling supply of units.

 

Baer added that foreign investors, particularly from Canada, are beginning to snap up the units, gaining deeper discounts with the declining value of the dollar.

 

He believes there is also considerable pent-up demand out there from people who have always wanted to live in San Diego but were put off by the high prices.

 

 

 

While sellers scramble, civic officials remain pragmatic about the situation.

 

Barbara Kaiser, vice president of real-estate operations for San Diego’s Centre City Development Corp., said the city is still processing design review and zoning changes for new residential projects.

 

“People are positioning themselves for the next boom,” Kaiser said.

 

 

 

Reach the reporter at max.jarman@arizonarepublic.com or (602) 444-7351. 

By Rex Nutting, MarketWatch

Last Update: 9:40 AM ET 2/26/08

WASHINGTON (MarketWatch) — Home values in the U.S. fell 8.9% in 2007, the largest decline in at least 20 years, Standard & Poor’s reported Tuesday.The Case-Shiller National Home Price Index fell 5.4% in the fourth quarter alone, S&P said.“Wherever you look, things look bleak,” said Robert Shiller, chief economist for MacroMarkets LLC and co-inventor of the index.Prices in 17 of 20 major cities were lower at the end of 2007 than at the beginning, with eight cities falling in double-digits. After adjusting for inflation in other consumer prices, home prices were lower in all 20 cities.For the fourth straight month, nominal prices in all 20 cities were lower than in the previous month.The biggest annual declines were seen in the former bubble areas in Florida and the Southwest. Home prices in Miami were down 17.5% in the past year, while prices fell 15.3% in Phoenix and Las Vegas.National home prices were down 10.2% from the peak reached in late 2006. Some economists say home prices will fall about 20% to 30%.Between 2001 and 2006, home prices rose an unprecedented 63%.The 20-city index fell 2.1% in December and 9.1% for the year. The original 10-city index fell 2.3% in December and 9.8% for the year.Phoenix had the largest decline in December, falling 3.5%, followed by San Diego at 3.4% and San Francisco at 3.2%The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metropolitan-area real-estate values. Its major flaw is that it may overemphasize the coastal regions that had the biggest bubbles.But even in non-bubble cities, such as Atlanta, Cleveland, Chicago, Dallas, Detroit and Minneapolis, prices are dropping.Here’s a list of price changes over the past year for the 20 cities in the index:Miami, down 17.5%; Las Vegas, down 15.3%; Phoenix, down 15.3%; San Diego, down 15%; Los Angeles, down 13.7%; Detroit, down 13.6%; Tampa, down 13.3%; San Francisco, down 10.8%; Washington, down 9.4%; Minneapolis, down 8%; Cleveland, down 6.3%; New York, down 5.6%; Chicago, down 4.5%; Denver, down 4.5%; Atlanta, down 3.4%; Boston, down 3.4%; Dallas, down 2.4%; Seattle, up 0.5%; Portland, Ore., up 1.2%; and Charlotte, N.C., up 2.3%.

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Rex Nutting is Washington bureau chief of MarketWatch.

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