It was a little like the Gold Rush. House prices climbing so fast, people were giddy with all their equity. Some cashed out and bought bigger and more expensive homes. Some cashed in, bought new cars and went on vacation. Others bought for the first time – even when they couldn’t afford to. That was only a couple years ago. Now, the number of foreclosures is rising at a record rate.
Tonight, we’ll take a closer look at foreclosures in San Diego County. We’ll find out how the wildfires will affect the depressed housing market. We’ll learn more about sub-prime mortgages – and how some people were targeted by lending agencies. And we’ll meet a San Diego man who gained and lost in the housing game.
First, we take a tour of some foreclosure properties with a realtor who now specializes in them. They range anywhere from the one bedroom condo to the million dollar mansion.
Eric: Hey Heather, this is Eric.
This little condo in south bay was someone’s American dream. When these apartments were converted into condos, many of the renters bought in. Now, so many are trying to get out.
This is one of Eric Weichelt’s listings. He has 500 listings – all foreclosed homes in San Diego County.
He’s selling this one-bedroom for under $100,000. Less than half what the original owner paid.
Weichelt: If your intent is to not move, who cares if it goes down to $100,000, you still need a roof over your head. If you can afford it, that’s the thing, whoever purchased this could they afford it, I don’t know, but apparently not.
Weicheldt says a few years ago he didn’t have a single forclosure listed. Now, he can barely keep up with business.
According to La Jolla Based DataQuick, there were 2,157 foreclosures in San Diego county in the last quarter. That’s nearly a 400 percent increase over the same period last year.
Weicheldt: Did I think it was going to get this big, not at all, because we were completely caught off guard in our staffing. I knew it was coming but I didn’t know it was going to be like this.
Weicheldt: I get all sorts, I get newer homes, I get older homes.
Here’s a 1950’s ranch in the college area. The owner didn’t live here, renters did. And the renters continued to live here even after the bank foreclosed. In fact, it took months before the bank could formally evict them.
The scene in the kitchen tells most of this story. There’s food in the fridge. In the cupboard. Dishes drying. And clothes all over the bedroom – they didn’t even bother to pack. There’s even a car in the driveway.
Weicheldt says it’s common for people to remain in the home even after the bank has foreclosed. Sometimes, the bank offers them cash for keys. That means they’ll pay them to get out.
Weicheldt says some homeowners used their equity to buy rental properties as investments. But if they got in too late, their investment became a huge liability.
Weicheldt: When your double-digiting appreciating for five years you can’t sustain it, so the tail end of the purchasers who may have gone in over their head, and started feeling the crunch and then all of sudden they said we can’t handle this.
In San Diego county, nearly 6,000 Notices of Default were sent to home owners in the last quarter, as compared with 2,300 in the third quarter of 2006. That means they were behind in their mortgage payment. According to statistics, half of those defaults will lead to foreclosure.
Weicheldt: We’re here. Realtor.
This house looks pretty good right now, it’s clean, a new paint job, even carpet. But it didn’t look this way when Weicheldt inspected it just after the foreclosure. The previous owner spray painted “civil matter” all over the walls.
Weicheldt: We don’t get the full story, we only hear parts of it, but we knew they were foreclosed on another home.
Like so many homes that sold a couple years ago, this house was 100 percent financed. The buyers paid no down payment.
Most of the loans that went into default last quarter originated between July 2005 and September 2006. And the loans median age before default was just 18 months.
Weicheldt says many people with shakey credit bought into high interest or subprime loans, loans they couldn’t afford – loans they never should have been given.
Some of the subprime standards, they accept FICA scores really low, which is high risk loans and they charge more, they know what they’re doing, that’s why they charge more, but they don’t anticipate they’re going into foreclosure. I think they’re partially to blame for some of those programs that are obviously not suited for the majority.
Weicheldt: I think the homeowner that goes in and says yeah I can buy this $600,000 house at a neg am loan and I make 40 grand a year, I think that’s really what it is. So I think it’s a mix of the two.”
But at the end of that day, a foreclosure only happens when you don’t pay the mortgage.
As soon as you walk into this stately home in Chula Vista, you notice something unusual. There are no doorknobs, no light fixtures.
Weicheldt: They took all the fixtures and they took all the knobs, they took the doorknobs, they took the queen palms that are outside, it’s like what you do. Not clear – at least on paper.
Even the chain was cut to remove whatever light hung here. Weicheldt says he’s seen this before. The previous homeowners were either so mad at the bank, they took what they could or so desperate to hang on to what little they had left.
Weicheldt: You see some sad stuff you really do, but the one thing, if anything can be looked at in appositive light, at the end of the day, this house was probably a burden on this person and their family, you know what, start fresh, get your stuff, don’t take stuff, that’s yesterday news.
Weicheldt says so many people who bought homes in 2006 owe more to the bank, than what their homes are worth today.
Weicheldt: So this one’s going to sell for $900,000 but they probably owed more than $900,000, there’s a good chance they probably did or they owed just about that, so just walk away
