San Diego is built out.

Notices of default, trustee deeds down more than 15%
By JEN LEBRON KUHNEY, The Daily Transcript
Notices of default and the amount of new foreclosures entering the San Diego County market slowed in August.
After a spike in June and July, notices of default (NODs) fell by 18 percent while trustee deeds, which are filed when a home goes into foreclosure, were down 15 percent.
According to MarketPointe Realty Advisors’ Director of Economic Research Alan Nevin, there is a three-month supply of housing on the market.
Nevin said he is optimistic about the coming months due to strong 2009 home sales combined with declining foreclosure rates.
“Every month the listings and the sales lines are coming together faster, so it’s really fascinating to see what’s happening out there,” he said. “There’s almost nothing for sale.”
According to Lynn Reaser, chief economist at Point Loma Nazarene University and former Bank of America chief economist, the mortgage defaults occurring now are due to unemployment rather than high-risk or adjustable-rate loans.
However, even with unemployment in the region over 10 percent, she said 90 percent of San Diegans still have jobs and are potential homeowners. The unemployment and employment rates do not include the thousands of active-duty military personnel in the county.
“There are some positive signs in housing,” Reaser said. “Affordability has improved dramatically and that is causing some first-time buyers to consider and qualify for housing. We’re also seeing more people encouraged by the possible stabilization of home prices.”
While there were reports of some homeowners walking away from their homes because they were under water earlier in the downturn, Reaser said people are beginning to think their homes have a chance of appreciation over the next few years.
That perception makes them more likely to stay in their homes, resulting in fewer NODs and foreclosures.
However, banks are finding new ways to rid themselves of foreclosed properties.
Some banks are selling properties in packages to investors. The deals can be relatively small, but some can be for dozens of homes worth millions of dollars.
Reaser, said banks selling homes in bulk to investors happens “quite often.”
“This is a very opportune time (for the banks) because investors see this (market) as a candy store -- a once-in-a-life-time opportunity to buy homes in tracts of, what will be over the next 10 years, very attractive homes to buyers,” she said.
The properties are purchased after they have gone into foreclosure, but before the banks put them onto the multiple listing service, where real estate agents can view the properties.
The disconnect between foreclosure and inventory figures has led some to believe there is “shadow” inventory waiting on the sidelines.
Banks are likely not releasing some of their inventory in order to improve the appearance of their balance sheets, meaning there are fewer homes for individual sale, Reaser said.
New-home construction has been significantly down for the past two years and once the foreclosure inventory is off the market, Nevin said there will be a housing “crisis.”
“A situation where the job market comes back and there are no homes being built creates a traditional imbalance and we are going to be one of the few areas that has that imbalance,” he said.
Areas like Riverside, Phoenix, Dallas and Las Vegas will not experience a similar boom due to the cities’ still high amounts of inventory on the market, he said.
Also, unlike the other cities, San Diego is mainly built out with the exception of a few master-planned communities in which there will be high-end homes.
He said San Diego can expect the shortage to occur within the next three years or so.