San Diego County home sales rose to their highest point in more than a year last month, but prices, depressed by growing foreclosures, continued to fall, MDA DataQuick reported Monday.

There were 3,431 sales in July, the highest since May 2007, while overall median prices dropped to $364,000, down 1.6 percent from June and off 25.6 percent from year-ago levels.

The median price of single-family resale houses dropped to $399,000, the first time the price has dropped below the $400,000 mark since June 2003. The latest figure was $6,000 less than in June and $151,000 or 27.5 percent below July 2007's $550,000. The all-time resale single-family peak was $574,000 in May 2006.

The median condo price stood at $257,000 down $2,000 from June and off 31.9 percent from July 2007's $377,250. The median price in the new-housing category, including both new construction and new condo conversions, was $364,000, down from $370,000 in June and $489,000 in July last year.

The local pattern was generally repeated throughout Southern California, where sales were up as prices dipped. San Diego fared better than the five other counties in having the lowest downturn in year-over-year prices, but had the second lowest year-over-year sales improvement.

In a statement, MDA DataQuick President John Walsh labeled the trend a “fire sale of properties in newer affordable neighborhoods.”

He said the level of distress was not spreading to more expensive or established neighborhoods.

However, in North San Diego County coastal ZIP codes, where foreclosures and defaults have been relatively few, the overall median price on a resale home slid the most in July of any of the five subregions – down 31.1 percent from $697,000 in July 2007 to $480,000 last month.

After factoring in resale condos and new construction, the North County coastal area median price was down 19.8 percent, nearly 10 percentage points less than the worst-hit market, South County, down 28.9 percent, where foreclosures have been rampant for more than a year.

I just read this and loved it.  I know some of you have wondered if you should have waited…  This is a fun story that re-affirms that you made the right decision!  And, by the way, I don’t drive a Mercedes!

 Loving your house againForget the doom and gloom about a tanking market. You made a smart investment.By Chris Ayres
August 17, 2008 First, let me say this: Of course I have regrets. After all, the purchase of our family home in Hollywood with an adjustable-rate mega-jumbo mortgage closed a mere 119 days before Countrywide Financial Corp. announced that -- whoops! -- it had, uh, run out of money. Of all the financial horror stories of last summer, this was the one that seemed to mark the official start of what is now commonly referred to as the "credit crunch" -- the symptoms of which, if you're an L.A. homeowner at least, include weeping openly in front of CNN real estate bulletins and waking up three or four times during the night to check the tumbling digits next to the satellite image of your home on Zillow.com.

So yeah, I have regrets. Like wishing I'd borrowed more money and bought a bigger house.No, there's no asterisk here, no small print, no catch. And yes, I'm aware that if I tried to sell my house now, I'd probably have to pay the buyer and throw in both my kidneys. Yet, this weekend, as we mark the one-year anniversary of Countrywide's implosion -- and by extension the end of the era when a real estate agent could add half a million dollars to an asking price just by installing a stainless steel refrigerator (sorry, I mean "chef's kitchen") -- it seems appropriate for me to make a rather bold statement: Those of us who purchased nonspeculative property from 2004 to 2007 for the gratuitously self-indulgent purposes of raising a family and investing in our neighborhoods will ultimately have the last laugh.

OK, maybe not the last laugh -- that pleasure is almost certainly reserved for New York hedge fund manager John Paulson, who made a handy 10-digit profit in a matter of months after finding a way to short-sell subprime mortgages.

But if you're a boom-time buyer who can still pay the mortgage (not only do we exist, we're in the majority), you have more than you think to feel happy about. You certainly shouldn't harbor any envy toward the likes of Peter Y. Hong, author of an article in this very newspaper earlier this year with the headline, "How we cashed in before the crash; a Times reporter just couldn't ignore the warning signs" -- which, it has to be said, set a new standard for the sheer quantity of smugness that can be contained within a mere 2,000 words.I can tell you're not convinced, so let's do some arithmetic. Say a real estate agent with a particularly reassuring grin talked you into buying a home in a decent neighborhood for $1.2 million in 2005, using $200,000 of your own cash and a million-dollar mortgage given to you by some dude you found on Craigslist. This is the higher end of the market, to be sure, but not out of the ordinary during the mortgage mania of the go-go Greenspan years. Now let's pessimistically assume that the credit crunch has destroyed a third of your home's value, so it's now worth a paltry $800,000.

Chances are, you feel like impaling yourself on the three-pointed star on your real estate agent's Mercedes. Before you do that, however, consider inflation. At its current unbowdlerized rate of 5%, inflation alone will devalue your million-dollar loan over the next decade to the "real money" equivalent of about $600,000, while at the same time causing your home to appreciate to $1.3 million (according to online inflation calculators).

Here's another reason to pat yourself on the back: You got a mortgage before banks stopped lending to anyone other than the king of Saudi Arabia, which means your interest rate is almost certainly much lower than the rate that will be offered to the likes of Mr. Hong when he tries to get back into the market on the cheap.

Indeed, interest rates are just as important as the asking price in calculating the true cost of a house. When foreclosure vultures whine about how even post-crunch house prices are too high compared with the growth in American wages since the 1970s, they conveniently fail to mention that interest rates have moved in the opposite direction since then and even now are cheap by historical standards. In the darkest hours of the Carter administration, a loan at 20% wasn't unheard of.

Aha, I can hear you say, but what about the dreaded A-word? Aren't we all doomed to bankruptcy because our mortgages will adjust? In a word, no. The payments on most pre-2007 adjustable-rate mortgages would go down if they reset today, because the indices on which they're based remain in the low single digits. Sure, if you have an interest-only loan, the payments will go up when you start paying off the principal -- but by then, inflation almost certainly will have started to work in your favor. Of course, you'll also have to pay property taxes, but thanks to California's Proposition 13, your property taxes won't change dramatically until the house is sold; and as with your loan, inflation will reduce the real-money burden over time. And let's not forget that property taxes can offset your income tax. Which brings me to my final point: the glorious all-American institution that is the home mortgage interest tax deduction.

Say you're paying 6% -- fixed for 10 years -- on that eye-watering million-dollar loan. This allows you to deduct $60,000 from your taxable earnings, thus saving about $20,000 a year in the 33% tax bracket. In a decade's time, that's a potential saving of $200,000. Throw in another $30,000 of savings from your property tax deduction; the $200,000 you'd be theoretically saving over the same period on the difference between a pre-crunch 6% rate and, say, the 8% rate you might be offered now; and the $700,000 of equity you'll potentially end up with after inflation's gone to work on both your loan and the value of your home: Net result? The penalty for having bought at the height of the worst real estate bubble in history adds up to a potential $1.1 million gain.

Feeling better? Thought so. And if you ever meet someone who brags about having gotten out when times were good, ask them what inflation's doing to their rent, how much tax they're saving on that home-office deduction (a few hundred bucks, woo-hoo!) and, more important, where they parked all that filthy boom-time lucre they made. If they put it anywhere near the stock market, give them a hug. They'll need all the sympathy they can get.

Chris Ayres is the Los Angeles correspondent for the Times of London and the author of "Death by Leisure: A Cautionary Tale."  Best wishes, 

Ranjitha Kurup

Prudential California Realty

M:  619.723.7641

F:  858.552.0701

E:  rkurup@rkurup.com

W:  www.rkurup.com

  

In an effort to reduce the potential of future foreclosures, Fannie Mae has instituted new guidelines that may hurt some potential home buyers. Effective 7/31/2008, buyers who want to convert their existing residences as investment properties must:   1.   Have 30% equity in their existing home based on a current valuation. 2.   To count rental income to offset property debt, borrower must have a fully executed rental agreement and receipt of a security deposit from the tenant.  

If the above two requirements can not be met, you will need to have 6 months of PITI (princ, interest, taxes, insurance) for both properties as reserves and sufficient income to qualify for both properties.

The lending market is changing so fast it does make your head spin...stay in discussions with your professionals!

The ripple effect from the new housing bill that President Bush just signed into law is now underway. One of the provisions in the new legislation gives an unlimited line of credit to Freddie Mac and Fannie Mae to prop them up to stabilize the economy. Freddie Mac has now allocated an unprecedented amount of money to pay banks for each successful Short Sale!

Banks are not really the “lenders”. They are what we in the industry refer to as the “servicer” or the “loan servicer” . Bank of America, Countrywide, Wells Fargo, HSBC, etc. – these institutions merely “service” the mortgages for other investors by collecting payments, sending notices, processing foreclosures, and working out forbearance plans, loan modifications, and Short Sales. Up until recently the Banks hands have been tied. The actual lender of the real money is the investor. So they are the ones that really make the decisions. You’ve heard a lot of talk about them in the news recently. I’m talking about the nations largest investors Freddie Mac and Fannie Mae. These companies are referred to as GSE’s (Government Sponsered Enterprises).

Just a little bit of background on GSE’s…The government sponsored enterprises (GSEs) are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital market more efficient and transparent. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the 3 primary borrowing sectors: agriculture, home finance and education. Well, the residential mortgage segment is by far the largest of the borrowing segments in which the GSEs operate. Together, the three mortgage finance GSEs (Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks) have several trillion dollars of on-balance sheet assets.

Freddie Mac has told the banks that they will now pay them $2,200 for each short sale it successfully negotiates.

But the great news is that the banks – the Servicers - will have more incentive to work a Short Sale and there will now be more resources available to staff loss mitigation departments appropriately because the value to the Bank of doing a Short Sale just increased dramatically.

It is absolutely beautiful news that proves that the workout solution of a Short Sale is not only seen as valued, but the preferential method of a pre-foreclosure solution. These changes will undoubtedly translate to shorter processing times and better transactions for all parties involved.

The drawback for approaching short sales till now has been how long it takes to hear anything and that banks take their time.  Now, they are motivated to move quickly!  Between the tax credit and the faster response time of the banks, this is incredible news for people that have been waiting...

On July 30, 2008, President Bush signed a major housing bill into law.  As part of the housing bill, Congress has created a new, TEMPORARY tax CREDIT to provide an incentive for first-time homebuyers.  The $7500 credit will be available for the purchase of a principal residence on or after April 9, 2008 and before July 1, 2009.

 That means first-time homebuyers could get a "refundable" credit of up to 10% of their first home purchase price, to a max of $7500, if they meet certain criteria.  First-time homebuyers include people that have not owned for the previous 3 years so if you've been sitting on the sidelines waiting for that golden opportunity, here is your chance! 

Yes, there is an income restriction of (75K/150K) with a phaseout up to (95K/170K).  And, this tax incentive must be paid back over 15 years. You can't get the credit prior to filing your 2008 taxes, there are other restrictions but...

The US govt is trying to help you purchase a home.  This is on top of having a mortgage interest deduction and all else that is available.  So, now what...  What else do you need to see that this will start encouraging people to purchase and maybe the housing market will get the "kick-in-the-pants" it needed!!

 

Sales of new homes fell in June for the seventh time in the past eight months, but the decline was less than had been expected, raising faint hopes that the nation's severe housing recession could be approaching a bottom.The Commerce Department reported Friday that sales of new single-family homes dropped by 0.6 percent last month to a seasonally adjusted annual rate of 530,000 units. That was less than half the decline that had been expected and the May performance was revised up a bit.Even with the changes, new home sales were down by a sharp 33.2 percent from a year ago, showing how severe the slump in housing has become.But some analysts said they saw cause for optimism that the worst of the decline could be drawing to a close, especially if a sweeping housing rescue package now pending in Congress can slow a flood of foreclosures and spur sales to first-time home buyers.

Analysts noted that not only was the overall decline in June from May less than expected but sales were up in two of the four regions of the country.

The House just passed a sweeping rescue package designed to halt the slide in home prices by helping more homeowners avoid mortgage defaults. It also provides a new tax break for first-time homebuyers and throws a lifeline to mortgage giants Fannie Mae and Freddie Mac.