San Diego Real Estate and Mortgage Report – Q4 2010

Welcome to the San Diego real estate report for the fourth quarter of 2010. This guide is intended to educate San Diego home buyers on mortgage trends, housing statistics, and other pertinent information. In this report, we will talk about current mortgage rates in San Diego, the local foreclosure scene, home prices and more.

san diego skyline

Disclaimer: Our real estate report for San Diego was published on October 18, 2010. Please note that the mortgage rates and other information contained in this report may have changed by the time you read it. We recommend that you seek out the most current information about the San Diego housing and mortgage market, especially if you are planning to buy a home there.

San Diego Mortgage Rates

At the time this report was published, the average mortgage rates in San Diego were as follows:

  • 30-year fixed – 4.19%
  • 15-year fixed – 3.62%
  • 5/1 ARM loan – 3.47%
  • 1-year ARM loan – 3.43%

The mortgage rates listed above are only averages. They are based on information reported by Freddie Mac for the time frame of this report.

When shopping for mortgage rates in San Diego, keep in mind that the rate you get has a lot to do with your own qualifications. You might qualify for a lower or higher interest rate than those listed above, based on your qualifications. One of the most important factors is your credit score. Lenders will use your credit score and loan-to-value ratio to determine the interest rate on your loan.

You may also have to pay points at closing, in order to qualify for the types of mortgage rates listed above. This is where the borrower prepays a certain amount of money up front, in order to lower the interest rate over the term of the loan. Depending on the difference in the long-term rate, this could work out in your favor.

Foreclosure Homes

As one of the hardest-hit states during the housing meltdown, California has a large inventory of foreclosure homes. The same goes for San Diego and surrounding areas. At the time this report was published, we found the following data relating to San Diego foreclosure homes. Data was supplied by RealtyTrac.com:

  • Pre-foreclosure homes * – 2,451
  • Auctions – 3,547
  • Bank owned homes – 3,910

* Pre-foreclosure means the homeowner is delinquent on the mortgage payments, but the bank has not yet foreclosed.

If you are thinking about buying a foreclosure property in San Diego, you need to educate yourself about the process. There are different stages of foreclosure, and the buying process is different for each of them. For example, if you want to buy a pre-foreclosure home through a short-sale process, your offer will be reviewed by the homeowner and the lender alike. On the contrary, if you are buying a bank-owned home in San Diego, you will submit your offer directly to the lender. You should also educate yourself about the foreclosure laws in San Diego, and find a real estate agent who is familiar with the process.

Home Prices And Pricing Trends

According to data reported by Trulia.com, the median sales price for San Diego homes (July 2010 – September 2010) was $322,500. Sales prices in San Diego have dropped nearly 35% over the last five years, but they seem to be stabilizing at present. The average listing price for the same period was significantly higher, suggesting that homeowners are overpricing their homes when listing them for sale.

According to Zillow.com, home prices in San Diego have increased by more than 8%, year over year. Their data reflects home sales and prices up to August of 2010. This is one of the few positive signs since the San Diego real estate market collapsed several years ago.

San Diego Real Estate Trends

Here are some of the things that are making news right now, with regard to the San Diego real estate market.

As you’ve probably heard, there has been a partial moratorium on foreclosures in the area. In fact, Bank of America recently halted foreclosures in all 50 states. We feel this stoppage will be temporary in nature, and that foreclosures will resume their normal pace in the near future.

Still, any slowdown in foreclosure activity means there will be an increase in inventory. If homeowners in the San Diego area are defaulting at the same rate, but the banks are foreclosing at a slower pace than before, there will eventually be a larger inventory of San Diego foreclosure homes. This would likely have a negative impact on home prices in the San Diego area. Some people are even predicting an average price reduction of 20% or more over the next year. This has yet to be seen, but there will almost certainly be a price drop of some kind. It’s something to keep your eye on, if you are planning to buy San Diego real estate in the near future.

We have also seen a rise in FHA home loans in San Diego. It’s no secret that the FHA has increased its market share since the housing bust. Borrowers who get turned down for a conventional mortgage loan can often get approved for an FHA loan. We also conducted a survey on the Home Buying Institute website recently, wherein the vast majority of respondents said they were planning to use an FHA home loan. This was a national survey, and was therefore not specific to the San Diego real estate scene. But the message is clear. FHA loans are more popular than ever.

If you wish to pursue this type of mortgage financing, you will need to apply through an FHA-approved lender in the San Diego area. You can find a list of these lenders on the HUD website.

Lastly, we would warn home buyers in the San Diego area that many homeowners are overpricing their homes. The reason for this is fairly obvious. Home prices in the San Diego area have dropped considerably in recent years. So many homeowners find themselves in a negative equity situation, where they owe more than their homes are currently worth. This is referred to as being upside down or underwater in the loan — two phrases you’ve probably heard a lot lately.

What does this mean to a home buyer? It means you need to scrutinize the asking price like never before. There is a very good chance the home you are considering is overpriced. So you need to look at comparable sales in the area to get a feel for what the market is doing. The value of a home is not determined by what the homeowner needs to get out of the deal. Nor is it determined by what the homeowner paid for the home when they first bought it. The value of a home is based on current market trends, and nothing else. Keep this in mind as you shop for homes in the San Diego real estate market.

Closing Quote

We like to close our real estate reports with an insightful comment relevant to the local market. We scour the Internet for such comments, and we choose one or two of the most useful comments to share with you. Here are some timely quotes about the San Diego real estate and mortgage scene:

  • “Lynn Reaser, an economist at Point Loma Nazarene University, said the latest figures provide further reassurance in a housing market that has experienced wide fluctuations in the last few years…” –San Diego Union-Tribune
  • “Demand builds back for housing in better neighborhoods: more buyers with cash want to take advantage of market bottom near Pacific coastlines … Public-company homebuilders buy relatively cheap residential land to prepare for an eventual upturn.” -Urban Land Institute’s Emerging Trends report

We hope you have found this San Diego mortgage and real estate report helpful. If you would like to learn more about any of the topics discussed in this guide, you can use the search tool located at the top of our main website. We have thousands of articles related to home buying, mortgages, and other topics discussed in this report.