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Coming Up For Air

— Real estate geeks say people who owe more for their home than it's worth have “negative equity.” But the rest of us just say they’re underwater. The degree of submersion in San Diego will determine how long it will take for the housing market to return to normal and stop being a drag on the local economy.

The latest numbers from the real estate data bank Zillow.com show a modest percentage of San Diego homeowners are underwater: Just over 20 percent. If one-in-five actually sounds like a lot to you, click the “Zillow” link above and see what’s up in some other metro areas.

In Las Vegas nearly three quarters of homeowners are underwater. In Riverside, CA about half of homeowners are submerged.

Some local real estate professionals think Zillow’s numbers underestimate San Diego’s problem. Matt Battiata, CEO of Battiata Real Estate Group, works with lots of owners of distressed properties who are trying to convince their lenders to take a loss and allow a short sale. He thinks the percentage of local folks underwater is more like 40 percent.

“If you look at a chart of the market over the last 50 years, it’s a roller coaster,” he said. “We had a peak in 1990, a bottom in ’96. We had a peak in 2005 and now we’re on the way down. There are a huge number of people in San Diego County who owe at the top of that last peak.”

And if they are forced to get out of their homes today – maybe they have to move or they decide they can’t make the mortgage payments – they’ll have to do a short sale, at best, or suffer a foreclosure, at worst.

The median price of homes has gone up in San Diego over the past year. Battiata calls that a “dead cat bounce.” Lots of people in real estate say it will take at least another year for San Diego sell off its distressed properties and that will drag down the market yet some more.

Please leave a comment below if you’re got a story to tell about being underwater on a home. Or call me at 619-594-3154.

Thanks,

TomF

Comments

Avatar for user 'dylanmann'

dylanmann | October 8, 2010 at 9:14 a.m. ― 3 years, 10 months ago

My wife and I are slightly underwater with our condo. Because of my career, we are going to probably have to move within the next year. It seems like the best thing to do though is refinance and rent the place. This presents a bit of a logistical challenge, but it's something I think we can handle it. By renting, we avoid the negative hit to our credit that short-selling would give us. We won't see any cash either way, but by renting, we have the chance to gain equity in our home over time. Even a tiny bit of equity would be huge because it would get us back in the black and preserve our credit -- I think there's potential for significant appreciation if we hold it for at least five more years. Also, renting is not permanent. If the value doesn't recover (which I think is unlikely), we can still short-sell at any time.

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Avatar for user 'Tom Fudge'

Tom Fudge, KPBS Staff | October 13, 2010 at 3:58 p.m. ― 3 years, 10 months ago

Deciding whether to rent may depend on charging a rent that's comparable to your mortgage payment. A friend of mine who will remain nameless (though he used to work at KPBS and is now the NPR White House correspondent) still owns a home in University Heights that he bought at the 1990s market trough... about 1994 I think. He's renting that place, now that he lives in D.C., and his mortgage payments on the San Diego home are just over $800 a month. I don't know what he's charging in rent but he's definitely making a profit. Renting your underwater home sounds like a good idea, provided you're willing to hang on to it long enough to get some equity and make a bit of money on the sale. You'll have to figure out what it will cost you in time or money to manage the property. And if you live near SDSU, just don't turn your house into a mini-dorm!

PS I don't think a short sale would hurt your credit. It's the foreclosure you really want to avoid.

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