NOD’s

[sdrealtor]

Notice’s of Default are starting to rise dramatically. I just checked the database and here’s what I found. The vast majority are in the outlying areas like Lakeside, Ramona and the affordable blue collar areas like Escondido, Oceanside, San Marcos, Chula Vista. These areas are going to get pretty ugly soon as many of these people should never have bought their homes in the first place. Never understood how a lender could finance a 500K home at 100% stated income to a landscaper and 7-11 clerk claiming an annual income of $150,000.

The nicer areas in SD still have very very little activity. If you are expecting to see a huge p/u in the REO market in one of the places tha tpeople on this board have mentioned as nice places you would actually want to live in plan on a wait of 2 years or more.

Best Advice-Make sure your landlord will not be selling, Lock in your lease for at least another two years and resign yourself to being satisfied where you are for the next 2 to 5 years.

[lostkitty]

It is going to be really difficult for a lot of people. Quite sad actually.
Thanks for the info sdrealtor.
KK

[sdrealtor]

Particularly the most vulnerable who tend to be the most exploited.

[powayseller]

Good reminder on locking in the lease. And thanks for starting a thread. I hope to see more threads from insiders.

What do you think about the possibility of lower rents? I’ve read that as housing prices decline, rents go up. Susan Bies, Fed Res governor, said the rising rents will show up in the CPI.

My landlord wants to be in it for the long term. He will rise out any declines in the market. So if rent goes down, I will be better off to go month-to-month. But if he thinks of selling, I’m better off with a lease.

[sdrealtor]

Everything I hear says higher rents in desireable areas…much higher rents. The exception is if you are great tenant that takes care of the place and always pays early, the landlord will want to keep you because the risk of a vacancy (1 month will kill there profits) or a bad tenant isnt worth rocking the boat. If you are in a nice place I wouldnt plan on rent going down.

[powayseller]

My landlord really wants to keep me as a tenant. We’re working on a deal now, where he installs A/C, and bumps up the rent. Amount to be determined. I’m even going to start automatic rent payment into his checking account. So from what you say, that gives me leverage? I don’t know if this area is highly desireable…it is to us.

What happened last time to those foreclosed on? Did they leave the area? If they have jobs, they can stay. Yet, they need $4K – $5K cash to pay deposit and 1st months rent. Not everyone has that much cash laying around, esp. those in foreclosure.

[4plexowner]

Rents – Up or Down?

All of the projections for housing demand are based on long-term trends / demographics. Projections are useful because they allow us to plan.

Projections don’t, however, take into account what happens when the trend changes. I think we are in the midst of a significant trend change for housing demand.

IMO, we are headed into an economic decline that will cause people to double and triple up in existing housing. The kids will stay at home (or move back in) and the new wife or husband will move in with the rest of the family.

I have a hard time seeing rents rising unless we are talking about the very top end of the rental market. Perhaps view properties and Coronado properties – the kind of places that people with real money rent (they won’t be as significantly affected by the coming economic challenges).

But the single-family house in Clairemont? I can’t believe that rents will increase for basic housing. Why would I pay $2000 to rent a house in Clairemont if I can rent the same SQFT downtown for half that amount? (I’m assuming the downtown condo market will depress rental market in coming years.)

[sdrealtor]

I agree with most of what you say except you miss the part of the market I’m talking about and what most of the people on this board have been talking about. The areas I’m talking about are Carmel valley through Carlsbad, Tierrasanta Through SW Escondido and the other nice suburban areas where most young professional families seem to reside.

[sdrealtor]

A lot of this demand comes from current renters and new movers to the area. The foreclosed upon will be in apartments which is an entirely different market than renting a nice single family home

[powayseller]

Let’s think this through from the supply and demand sides.

Supply: Currently, a large number of SFH are for rent because owners are banking on appreciation. Owner moved and kept house (either as investment or to move back to SD some day), owner moved up to larger home and is renting the former home, owner made investment. Most SFH rentals are the last category. These homes were purchased in the last 3 years, and financed with money from the owner’s other investment properties or primary residence. The glut of these homes has depressed rental prices somewhat.

The owners may be cash-flow negative, but obviously can afford to hang on, or they would have sold by now. If the market turns, these owners, will either get cold feet and cash out, or ride it out.

Any owners with an ARM, may not be able to ride it out. Once the payment adjusts up, they may be forced to sell. Let’s assume 1/3 of SFH rentals will go on the market by 2007, because owners are worried about price drops, or they cannot afford the mortgages any longer.

DEMAND: Demand won’t come from new families to the area, because as we already know, SD has a net loss of people (except illegals). Rental demand comes from people who lose their homes to foreclosure. Two categories come to mind: people who lost their RE related income (realtors, title officers, carpet installers, Home Depot salesperson, appraiser, granite fabricator, plumber). When they lose their job, they will leave San Diego for a cheaper area of the country, or one where construction is still going. Perhaps Texas? Then there are those losing jobs because MEW slows down: retail, restaurants.

The second category of foreclosures is people whose mortgages adjust. They still have their jobs, and will stay in San Diego. Most of those folks just will not have the $5K they need to put a deposit and 1st month’s rent on a house. If you had the $5K to put down a deposit and 1st month’s rent, you wouldn’t be in foreclosure. So how can that group possibly get into a house? Or even an apartment? Do any realtors know what happens to people in foreclosure?

Summary: Supply will go down at the same time that demand goes down. I have no clue which goes down more, and thus, where the price balances out.

[ocrenter]

very interesting stuff. Goes to show in real estate, its location, location, location. Nice areas appreciate first and depreciate last. In not so hot areas, you have a very small window of opportunity to get rid of your property at the top.

sdrealtor, thanks for putting this up. what’s your thoughts about those San Marcos Via Del Cabello properties now?

[sdduuuude]

Foreclosed houses get taken over by the bank. The bank won’t rent them out and may not be able to sell them. These sit empty, unavailable to rent.

I’m wondering if the number of empty homes will have an significant effect on supply. My intuition says “no” but it’s a thought.

Your assumption of 1/3 seems high to me – how did you come up with that?

It’d be nice to know how many SFRs are there in SD and what % are rented out.

[sdrealtor]

A logical case but the vast majority of your assumptions are wrong. Most owners fall in the first two categories not the last one. As for demand, you are also off the mark. Regardless of whether the net population is growing, there are tons of professional families relocating here every day. many cant/dont want to buy because of pricing or not knowing how long they will stay.

Your assumptions are typically swayed by your negative attitude. If you kept a more open mind and werent so negative you would do better by trying to understand reality which lies in the middle of your extreme views.

[sdrealtor]

some are still selling in the high 500’s. there will be winners and losers. Dont expect a complete melt down.

[powayseller]

I just guessed that 1/3 of rentals are owned by speculators with ARMs, who won’t try to hold on to the house when the payment goes up. They won’t fight to keep the rental house. It’s more likely that all speculators/investors got ARMs. How many will refinance into a 30 yr fixed to keep the rental? Most likely, they’ll unload it.

[Author]

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