san diego real estate market

San Diego Real Estate Market: HAMP Failure

The following is a post on the San Diego real estate market from Astoria Oregon Real Estate. Are you are looking to move to our beautiful area? Are you looking to sell your property in Clatsop County and upgrade? Kyle and Alex have the answers you need!

The treasury department’s Home Affordability Modification Program is an antibiotic to the growing foreclosure pathogen. Lenders give a modest incentive to modify the failing loans and keep borrowers in their homes. While certainly a lofty goal, the HAMP modifications do nothing to address the underlying, systemic problems facing the San Diego housing market.

Recently we were given the opportunity to look at purchasing several hundred loans. These loans are both performing and modified under HAMP. The way these loans are rewritten is absolutely staggering. It can be interpreted as little more than political grandstanding to delay the inevitable.

San Diego Real Estate Market Reeling

Imagine that a homeowner owes $100 on their home. They borrowed the money in 2004 – 2007, in the height of the housing crisis. Now their home is worth $50 in 2010. The HAMP modifications rewrite the loan to a 2% interest rate accruing on a $50 principal balance for 60 months. After that time the loan essentially returns to the original payment structure with the full $100 principal balance.

In essence, in five years, the homeowner’s payment quadruples. Homeowners owe everything they owed at the height of the market. Do you see the problem? For these to be successful in the long run, housing prices must return to near their bubble levels.

Unfortunately for homeowners in the San Diego real estate market, that seems a dubious claim. Voice of San Diego reported that home prices fell again in October. Albeit by a scant 1.6%, any decrease in prices raises the HAMP homeowner’s troubling problem.

Why the Market is Double Dipping

While nothing is certain, the San Diego housing market may be in the midst of a double dip. If the market is experiencing the early signs of a double dip, the reality is bleak. It says that at the end of the five year period, those homeowners who went above at the height of the bubble will default again.

What this means is that the foreclosure “crisis” has a real possibility of becoming something chronic that the market is simply going to have to get used to. When foreclosures continue because of these types of artificial market operations it seems likely that housing prices over the next decade will have a difficult time rebounding in any meaningful way.

The better option available for homeowners is not to modify into a loan they can’t afford now and won’t be able to afford in five years, but to bite the bullet and sell the home now. Resetting housing prices in San Diego in the short term needs to be a priority for San Diego real estate professionals, politicians and citizens alike.

Astoria Oregon Real Estate is the premier location for properties and information in the Clatsop County, Oregon area. Lead realtors Kyle Uchitel and Aleksandr Vasser are ready and waiting to assist new buyers or sellers. They help get the most out of your property purchase or sale. Let Astoria Oregon Real Estate guide you on your journey!