Posted on 04/06/2006 3:14:09 PM PDT by ex-Texan
The area's home prices have a 60-percent chance of dropping, one of many factors making San Diego the riskiest real estate market in the nation, according to a quarterly report put out by a California mortgage insurer.
The report, put out by the Bay Area insurance company PMI Group, is well-respected by experts, who said it usually gives an accurate picture of the state of the nation's 50 largest home-buying markets. However, they stressed that the report is merely the latest in a long line of analyses that point to something the industry already knows: The nation's housing market is cooling, and San Diego is ahead of the curve.
"You guys are leading the nation -- congratulations," remarked Chris Thornberg, a senior analyst at the University of California, Los Angeles Anderson Forecast.
Last year at this time, the quarterly report ranked the San Diego region as the fifth-riskiest market in the nation. That report put Boston as the riskiest.
The report bases its ratings for each individual market on three factors: How well the local economy is doing; how much and how quickly home prices are appreciating; and the affordability of housing in that market.
San Diego's took a hard knock because of the third criterion. The area's homes are among the least affordable in the nation, according to PMI's data, and that means the people who buy them are more likely to default on their mortgages despite the relatively strong local economy. Hence San Diego's high-risk rating.
The area is also suffering from a slowed price appreciation.
In the last few years, San Diego's risk factor has been tempered by consistent price increases. But those increases dropped dramatically from last quarter, compounding the poor score the area received in the report.
Gary London, president of The London Group Realty Advisors in San Diego, said the report adds to the "parade of statistical indicators" showing that the real estate market is slowing. However, he doesn't think that slowdown is going to affect most homeowners, but only people on the fringes of the market.
That means people who have bought in the last year and who need to sell this year, or people who have entered into mortgages that they simply cannot afford, London said. Those people should probably be concerned at the signals the market is giving off, he said.
Indeed, even if prices do drop, London said, that's only going to open the door to a lot of people who have been watching the market from the sidelines, unwilling to get into the action. If prices drop, even slightly, he said, there are a lot of people waiting to buy.
Stephanie Corns, a spokeswoman for PMI, said the purpose of the report is to better inform home buyers and sellers about the real estate market. She said that people looking to buy a home need to consider how risky an area is before buying there. That's especially important when a buyer is considering buying their home using a non-traditional loan such as an interest-only mortgage, she said.
"Some of the exotic (loan) products transfer a lot of the risks to the borrower, so you really need to gauge what amount of risk you are comfortable taking on. Are you comfortable having a lot of risk in your mortgage and a lot of risk in your market area?"
However, Corns stressed that PMI still considers buying a home to be a safe investment on the whole, even in risky markets like San Diego. She said the company's research has shown that real estate prices always increase in the long term, so buying a house is always a sensible long-term strategy.
Alan Gin, a professor of economics at the University of San Diego's Burnham-Moores Center for Real Estate, said the report is certainly worth considering for home-buyers before they take out a mortgage, but he pointed out that the riskiness of a market is not likely to be the defining factor for a potential buyer.
"It gives you more information, but you probably shouldn't base your decision exclusively on this information," Gin said.
Topping out the top five riskiest markets in the nation were Santa Ana/Anaheim/Irvine; Boston; Nassau/Suffolk, New York; Riverside/San Bernardino; and Sacramento.
"Some of the exotic loan products transfer a lot of the risks to the borrower, so you really need to gauge what amount of risk you are comfortable taking on. Are you comfortable having a lot of risk in your mortgage and a lot of risk in your market area?"
Yes or No, people? Are you willing to take a lot of risk in your mortgage by electing an exotic option?
Choise like picking an interest only loan or refinancing on a cheap teaser ARM rate being offered by slick radio advertising spokesmen with deep voices?. [Check the facts?] More to the point: Wait a few months before pledging your life away with a lifetime obligation to repay a lender. The choice is yours.
When are you going to stop advertising your personal website through doom and gloom real estate articles?
30 year, 20 year, and 15 year fixed mortgages are your friend.
Anything else is like playing Russian Roulette.
Never!
Blog pimps never change.
"Wrong.
Cash is your friend.
Locking yourself into a mortgage in this volatility is nuts."
Unless of course you purchased both your primary dwelling and rental property (which, btw on which I am generating a POSITIVE cash-flow) below 6% in anticipation of just these events wea are currently experiencing.
:-)
Ahead of the curve by 9 months and 20 months respectively.
Agreed, only wish I put all my cash in gold a year ago :(
Riskiest place to buy a home?
Easy. That town in Connecticut the Supreme Court said could use eminent domain for any dang reason.
Justice Souter is loosing his house by the same device.
Gold....
(((((((SHUDDER))))))
When I see the gold commercials on TV I want to scream and run in the other direction. If these guys are pushing gold, we're probably on the brink of a gold bubble meltdown and these bozos want to dumps their holding and stick the poor schnooks with the goods..
NOOOOOOOOOOT me
San Diego is never going to become real estate quicksand, there's just way too many people that want to move here.
Amen brother.
I'm glad I'm not in that position.
If you're taking up a petition to complain about his abuse, I can think of half a dozen folks who'd like to take part.
This crap makes the whole site look nutty.
Please count me in!
That is such a ridiculous statement. Do you seriously think that there is never a situation where an ARM or Balloon Loan is smarter than Fixed?
http://www.boston.com/news/local/new_hampshire/articles/2006/03/22/house_and_senate_back_eminent_domain_constitutional_amendments/
"Those people are only too happy for someone like me to come along, who will pay off their bills and give them moving expenses to go anywhere in the U.S. they want, in exchange for the title to their home. They get a new start without having to file bankruptcy, and I get a house for almost nothing. Then I pay it off, toss in some GOOD tenants, and count my money."
Excellent plan.
Mind if I employ it?
:-)
San Diego is never going to become real estate quicksand, there's just way too many people that want to move here.
Having a transient military doesn't hurt either. The military is huge there.
It happened to Willie, perhaps Ex-T is next. Did enjoy when his account was suspended in December though...
Guess what? According to that report, I own a home in a town with the LOWEST risk of depreciation. Well, actually, tied for lowest with three other locations. Guess I better sell now.
Blogpimpus maximus ping.
Interesting link you posted: www.seizedrealestate.com/?hop=newspundit.
So, Free Republic is sending traffic to that web site, but Newspundit is getting paid / credit for the referral. Highly inappropriate if you ask me. Perhaps right fraudulent actually.
OMG, we're doomed.......oh wait, never mind!!
We were lucky when we bought our new home in Chula Vista about 6 years ago. We could not even hope to afford the same house now, or smaller, more expensive brand new ones, now..
I see you used the "Check the fact" gag this time to promote your website on JimRob's dime. How original.
How's the doom-and-gloom news business anyway?
Don't forget the new 40 year fixed.
San Bernardino: Got Meth?
Palmdale: Like South Central, but in a desert!
Oildale: And you thought Deliverance was fiction?
Ontario: Mexico's second most dangerous city.
Santa Ana maybe ,Irvine No Way Jose......
I've taken a 30 year fixed mortgage on 3 properties in my life. Lived in each of them less than 3 years each. Stupid waste of money, especially when the military transfers you each 2-3 years..
Don't forget to hit abuse to that effect. ;O)
hey Pukin,
are you in the San Diego area?
I've got a son in S.D. that works his butt off, and would love to get into the business.
Lurking'
Click "Abuse" if you think anyone is promoting an outside blog contrary to forum rules.
I hadn't noticed that.
I'm on the other side of the country (Tampa) and haven't seen that many foreclosures/folks in distress yet - But I'm a-waitin' and keepin' a look-out....
Thanks for gouge.
You gonna start an ex-T ping list? Put me on it...
No need for a pinglist.
Just click on in whenever you see alarmist panic headlines about bubbles.
hahaha!
Get out of San Diego now, and GIVE your house to me when you go!
:-)
If I didn't already own a condo, I'd be renting. The rent is quite a bit less than the mortgage would be for a new home, which is nuts.
Considering one of the homes was in Gulfport, MS, I'm glad I sold! If I could focus on one part of the country, I'd keep them, but I'm so all over the place that management would be difficult...One house in MS, one in CA, one in VA. Plus, I made pretty good money on the CA and VA one, was happy to take the $$$ and run.
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