There’s quite a bit of fear amongst San Diego residents in regards to the current state of the San Diego real estate market. This fear is even more predominant amongst those home buyers who signed up for an adjustable rate mortgage (ARM). The fear is further perpetuated by the news media with all the stories about the possibility of mortgage rates going up even more, the increase of foreclosures in the area, and all the general talk and gossip amongst local residents. What’s going to happen? Will my mortgage double next month? Will the market plunge down even more? These questions and more seem to be the hot topics these days. However, what’s really going on here?
As a former real estate agent and a long-time resident of San Diego, I can say that the real estate market is not experiencing a “collapse” or “housing bubble burst”. The market is simply correcting itself. We have to remember that just like any business, the real estate and mortgage industries experiences their own cycles. The San Diego real estate market went through this same phase back in the early 90’s, but by the mid to late 90’s, it came back strong.
For those San Diego residents who can afford to keep up with their mortgage, the best thing to do is just wait out this cycle. Other residents, however, are not so fortunate. Some people who do have an adjustable rate mortgage and want to refinance their mortgage have been met with frustration because the value of their home has gone down and no mortgage company will refinance their home. Furthermore, these people are beginning to see their mortgage rise and have had to work longer hours or take on another part-time job just to make ends meet. My advice for people in this predicament would be to talk to the mortgage company and explain the situation to them. Perhaps a lower rate could be negotiated or maybe they’ll allow you to put off paying the principal and just pay the interest for a few months.
On the flip side of all of this, home buyers view this change of events in the marketplace as a breath of fresh air. There are now many opportunities for them to own a home in San Diego. Ben Francois of Barry Estates (www.barryestate.com) says, “This flat/down cycle coupled with the sensational media coverage has created an opportunity for today’s buyer. Many sellers are impatient with the market and are scared by the media’s predictions. These sellers have reduced the prices of their homes to levels that are attractive to buyers, and they are much more motivated to negotiate than in past years. If you are planning to purchase real estate in this area in next few months, you are in a unique position to take advantage of the current sentiment and you will put yourself in a position to capture significant appreciation when the market comes back.”
Oh, if we all had a crystal ball, life would be so much easier, wouldn’t it? This is certainly a lesson for those new home buyers out there: Don’t get into an adjustable mortgage rate unless you know for sure that you can afford the payments if the market changes. Sit down, read the fine print, and make sure you know all the fees, terms and conditions that you are signing your name to!