San Diego Housing Bubble News and Analysis

Even within Mira Mesa, there are sub-markets that are behaving differently. Many single story 1100-1400 sq-ft house in MM have dropped about 200k, from 550k to 350k. This are the houses that I say "are taking a beating". Houses like yours, around 1800+ sq-ft on the west side of Mira Mesa are so far hanging on better. There are 2 houses (without view) ~1800 sq-ft around your area asking for $470k-$485k. They've been listed for 40-60+ days and they're still not sold. I'm a prospective buyer in MM and I wouldn't pay that kind of premium sellers are asking for those houses vs the 1300-1400 sq-ft single story one in the same area.

I think that type of houses in MM will have a lot more to fall than the 1100-1400 sq-ft houses. I personally don't think MM will rebound in 2 years, especially when we haven't even hit bottom yet. The last time it crashed in the 90s, it stayed around the bottom for ~2 years. So I don't expect to see a recover for probably another 4-5 years.

This all assume interest rate doesn't rise. All bets are off if it does. If it doesn't rise, the max I'd pay for your type of house would be $400k and I'd only pay $450k for those 2000+ sq-ft house north of Calle Cristobal. That's just my 2 cents as a prospective buyer.

92126 Guy,

You've made a good point about your location (West MM), but I don't think you've taken into consideration your immediate neighborhood. As AN pointed out, there are units for sale for over 40 days w/out much activity. These might change the comps in your area. You don't know right now how many of your neighbors have either (1) refinanced into a bad loan, (2) HELOC the hell out of their houses, and/or(3) their mortgage is about to reset.

If I were you, I woudn't stress about it too much if you purchased your place the right way: money down, fixed mortgage, in it for the long term, no flipping.....or have wealthy parents :)

Needless to say, check out the today's UT paper which makes San Diego a winner again (in the foreclosure sector)

http://www.signonsandiego.com/news/busin...

In conclusion, with foreclosure topping records, unemployment at the highest since 1995 (I've heard 5.7% for SD county), and poor prospects for high paying jobs.........there isn't much recovery anywhere.

P.S. I lived in Mira Mesa for 13 years....I remember back in 1995 my landloard use to beg me to buy his place ( just to get rid of it - that was my 1st bubble lesson). We're pretty much turning back the clock - I wonder for how far back?. Prices are wayyyy out of wack and the pendulum may swing negatively for many years and by many RE investment formulas, as GRM comes to mind.

SD Transplant, 92126_Guy did say that if things get worse, he'll need to foreclose/short sale because that's when his loan reset. No one really know when we'll start turning back up again. Only time will tell.

Just an FYI, a property is generally worth what you pay for it, no more or less. You got it for mid-500's, so that's what it was worth at the time, regardless of agent claims and appraisals.

At a wild, fairly educated guess, I believe your place and comps will see the mid-to-high 200's in the next few years, and several more years after that to recover SOME of what you paid. Don't expect to see $500k again for a very long time.

Thanks for the input all, yeah my story is a standard one. Borrowed way too much, stated income, 0% down, interest only, first time buyer, etc etc. But if I didn't get into the market in 06 I would be priced out soon, and I could always refi in 2 years right loan officer? Ha. I'm not passing the buck though, I accept responsibility as time goes on I'm slowly succumbing to the fact I will probably have to take the credit hit and leave, which is depressing.

My wife and I like our cul-de-sac house and our combined salaries have increased form 85k to 120k through hardwork so maybe the bank will give us a break in 2011. Although, I've already dealt with the "workout dept" and their first and second answer is NO. I guess the trick is to convince the bank it's cheaper for me to stay in then get kicked out, I foresee many hours of hold music in my future.

Anyway, I guess only time will tell.

PS It's funny the poster mentioned 400K max for my house, I remember thinking as I went through the process, this house really should only be worth what the guy I bought it off paid in 03 (about 380k). But then I promptly signed the papers. School of hard knocks I guess.

It's a valuable lesson. Thanks for sharing. BTW I live not far from you, off Calle Cristobal west of Windy Ridge Way. It's a nice neighborhood.

I would think it's much better for the bank to have you stay in the home (at some reduced payment workout) than foreclose. Yet who knows what our government will do; my wager is they're not going to bail you out. They'll help the banks out though.

... our combined salaries have increased form 85k to 120k ...

So, your salaries have increased by 40%. As long as you didn't overstate your income by more than 40% you might be OK, right ?

Of course, this depends on your existing loan terms since refinance is not an option.

What is your reset date, margin and index ?
How much owed on the 1st ?
Is there a second ? if so, how much owed ?

E.g. A loan based on 12-month LIBOR, with a 2.25% margin, would reset today at 5.5%.
Of course with 100% LTV you probably may not have the best terms on your loan(s).

Ren: I hear you, but I think what we were saying is the 550K was inflated relative to the value of the house in maybe more historic average terms. I bought more out of excitement of owning a home and tired of Mesa Village Apts. Not the best way to make a financial decision huh.

FormerSanDiegan: I consider myself an expert at this loan stuff from what I knew in 06. But I still didn't understand all your questions. I'll tell you what I know about my loan, but I don't want to assume this is a forum for free mortgage help or anything. Just trying to talk to others who've been around longer then me.

So I have good credit (780+) never been late on anything, including my current mortgage. I got an 75/25 1st 420k @ 6.85% then a 2nd 140k @ 8.65% with 2yr prepay (which is over now). I haven't paid down more then a few thousand on the second and none on first as it's interest only (fixed for 5yrs, IO for 10yrs). I'm not sure what you mean my "margin" and "index," but hell 5.5% sounds good to me, but as I understood it the loan’s rate when it resets is not the advertised 20% down rate you see everywhere, it's always way higher?

Id had this whole long post ready for this when you first posted, then my boss's boss came in with the equilivant of a nucular bomb for my project and droped it on me. Anyways, I closed the window on accident and lost it all. I am lazy, and not gonna retype the whole thing, so here is the gyst.

1) There will always be demand for houses in good neighborhoods with good schools that are close to work. Assuming you are in one, you are correct that your location will help you.

2) The hits taken in MM are for older, smaller, SFR's on small lots in buisy locations. Those have fallen by 25% or more. Your area has fallen about 10-12% (your numbers), but is also nowhere near a bottom. Hoping for only a 6% drop or so is pie in the sky. If I had to guess, 26% is prob closer to reality, putting your values back to what they were in nominal terms in 2003.

3) Job losses are accelarating, Interest rates are ~6.5, banks are lending even less and still cutting, inflation is higher than in a long time and accelerating, REO's at unheard of levels, wages are stagnent, Middle class population dynamics are negative (pop outflow). It'll be alot longer than 1 year before things start to get to the point where a house that hasnt hit bottom yet can start to appreciate.

mira mesa is convenient for qualcomm workers given high gas prices

Depends on how you think people will act. Let's say the household income is 100k, at 20% down (30 yr, 6.5%) a mortgage of about $2200 monthly is doable (~28% of gross income), which leads to a house price around $440k, but if only 10% down then to stay at that monthly mortgage the house would have to be about $390. Basically this is what would be "affordable" with that income at those down payments. It could always go lower of course.

92126_guy ...
Your 1st is fixed for 5 years, then adjustable. Ever wonder what rate it goes to after 5 years ?
The "margin" and "index" define the rate to which it will adjust. Find your loan documents. You should be really curious as to what your loan rate will reset to since it could mean the difference between losing your home or keeping it.

For example, some adjustable rate loans are tied to the 12-month LIBOR index (that's the "index") plus 2.5% (that's the margin. The current value of this index is about 3.4%. Meaning that a loan based on this index and margin would reset to 3.4% + 2.5% = 5.9%. The LIBOR has varied between 1.2% and 5.8% over the past 5 years and tends to trail short-term treasury rates.

The fact that your 1st is IO for 10-years may buy you some valuable time.

Is the 2nd a fixed rate ? If not, it's an adjustable at a fairly high margin (prime plus 3.65%). If your second is variable, I would try to concentrate on paying it down first.

Assuming the second is fixed rate, you currently pay 2400 (1st) plus 1100 (2nd) plus taxes and insurance.

If your 1st resets to 7% for example your payment would go up by $50 per month. Not a huge deal. If it resets to 8% your payment will go up by $400 per month (starting to feel some pain, but doable).

interest rates will exceed 7%

FSD: Thanks, I should have mentioned that on my second, it's fixed for 30 due in 15 (I think that's the lingo).

I looked at my documents for the 1st.
ARM: Yes
Margin: 5.5%
Index: 3.5%
Periodic Cap: 1.0
Lifetime Cap: 6.0
Rate Floor: 3.5

I have to say none of this was talked about during the loan process, just that it was 10 years before I had to pay principal and that was a long time. No worry about the "reset thing" I would refi in 2 yrs. Doh. From my understanding this means when it resets I'm going to pay 9%? And that I'm not attached to the Libor?
Ouch, if the house isn't worth over 500k at that time, there's no way I will keep making payments, even if I could. Hopefully things will get worked out before 2011 though. I'm going to start exploring my options throughly, and will not make any rash decisions.

PS I have no idea what the mortage company said was my income, they just "took care of that"

Sounds like you could use more information to get a true sense of what your payments could look like when they reset. There is a poster on here that is in the mortgage biz that might be willing to explain all the "fine print" to you. He goes by HLS, do a search for him and you can find his email. You also have the issue of your second coming due in 13 more years, I don't have a clue what home values will be in 13-15 years, but there is a chance that even by then prices will not have returned to the peak of 2005...who knows??

I am sure that you know this, but just in case - right now since you haven't refinanced your loans you are under non-recourse protection from the bank and the IRS, meaning they can not come after your other assets in case you do foreclose. Be very careful to preserve this protection when considering any kind of work-out with the bank. I am sure that you have read about the new bill in the Senate. If that actually does pass and could be an option for you, one of the stipulations is that this new "loan" is not "walk-away-able", meaning there is no way out - that's scary IMO.

Finally when thinking about what you might want to do and a potential time line, right now Fannie Mae has changed some of the rules regading people qualifying for new mortgages with a foreclosure on their record. I can't find the link, but I believe it's something like : you must wait 2 years to buy with a short sale on your credit report, 4 years if you have a deed in lieu, and 5 years if you have a foreclosure on your report. Of course that can always change. Just something to be aware of when timing things if you do plan on "sending in the keys".

I wish you the best of luck.

The index you list (3.5%) was probably the value of the index at the time you took the loan. You'll need to know what index it refers to (e.g. LIBOR or Treasury). But regardless, a margin of 5.5% is fairly large. Consider most prime and Alt-A loans typically had margins of 2.25% to 2.5% above LIBOR or treasuries.

A 5.5% margin is not good. Your loan will likely reset at 8-10% or more. But make sure you know your terms in detail before doing anything.

seattle-relo gives good advice regarding recourse.
You are coreect that ultimately you are in a bind. Do not refinance if you think there is a possibility you will have to walk away (likely).

If I were you, I'd plan on living there until reset time, while keeping my eye on government bailout options. On the bright side, if in the unlikely event your income continues to grow at the same rate (10-20% per year) as it has the past 3 years, who knows, you may find yourself in a position to eat the higher payment and bail yourself out (depending on where prices settle).

92126_guy we were more then likely neighbors when I lived down on Cheryl Ridge Court. DW summarized the specifics of your loan. It is unfortunate that none of that was explained to you when you signed your loan docs. Conversely you get the on line finger waggle for not reviewing it thoroughly on your own because you more then likely were blinded by the "appreciation will take care of everything" thoughts and that you would refinance out of the loan you are in.

So my first piece of advice would be to find out EXACTLY what your payments will be. You mentioned above what your margin and index were and if they are what they said, then yeah you are looking at a pretty harsh rate jump at your 5 year anniversary. So just to make sure you have a COMPLETE understanding of the situation, look at your statement and there should be a number for you to call to find out more information. Get the exact story and when you are talking to them have your loan docs in hand.

Once you know what your payments will reset to then you can start charting out what your monthly budget will be come reset time so that you can make informed decisions.

As for the depreciation off of Calle Cristobal homes, I do believe they will continue to ride down. Much of it will depend on employment and interest rates. There is a strong demand for these homes because they are the largest in Mira Mesa and they are close to the golden triangle. If they were in a different school district they would have an even stronger demand. (AN I am not banging MM schools but just giving you the perception that most people have of them)

Anyways hang in there, gather info and be informed.

SD Realtor, I could be wrong, but I don't think 92126_guy live north of Calle Cristobal. I think he lives around the canyon north west of New Salem, west of Montongo, south of Calle Cristobal and east of Camino Santa Fe.

I know you're not bagging on MM schools and I'm fine with the perception people have w/ MM schools. At least it'll keep MM price more reasonable for me :-). It's funny to me how kids living in Sorrento Valley also goes to MM schools, yet price there are so much more per sq-ft than MM.

Yep I hear ya. Thanks for the correction on where he lives.I I agree with you on the perception thing as I hear it all the time.

this thread shows the state of mind of this forum.. I think a year or two ago, this would have been a butchering where everyone would tell him he's S.O.L. and cry somewhere else, but now he's being helped, kind of cool.. I think the attitude of the poster really helped also.

Often times people come in here and point the finger at us as a bunch of ornery bears that are just sour because we missed the boat, I would say this thread suggests otherwise..

Thanks everyone, so much going on at work with the much hyped internet DNS flaw I can't spend too much time here. I really appreicate everyone's comments and attitude as ibjames points out, I could have gotten hammered, and truth is I deserve some of it. I remember thinking, man these banks are lending me over half a million dollars on my salary alone (wife was K1 from Phils and had no credit) I guess I can pay it back because they know what they are doing. So naive.

I in fact didn't know about the "non-recourse" you may have just saved my butt. I will call CW tomorrow and get the low down. I'm paying enough "rent to the bank" so if rate jumps 8%+, that will be unacceptable. Sorry mortgage people.

I'm trying to be a bit vauge on my exact location but you're right its not on Calle Cristobel that was in the 700's at the time and not doable. But I'm sure I could be tracked down with a few zillow searches on the info I gave already, for anyone really interested.

Thanks again....gotta go for today...