Foreclosures Are On The Rise

Notices of default - the first step toward mortgage foreclosure – jumped 60 percent in the San Diego region in the first quarter of this year. This is a sign that homeowners are struggling to pay their adjustable-rate mortgages that now dominate lending in San Diego County’s residential real estate market.

Those at greatest risk of default are recent buyers (last three years) who used adjustable-rate mortgage products (3/1 and 5/1 interest only loans) to buy properties that otherwise would have been beyond their financial reach. Now their rates are starting to adjust upwards and they are required to make the full principle and interest payments. This combination is causing severe payment shock to the homeowners who are still caring these loans. Thus, many of them are now putting their homes up for sale, hoping to sell before the foreclosure process is complete (generally about 6 months). This is one small reason why there are so many homes for sale in San Diego County. Real estate listings have doubled over the last year. Unfortunately, the problem is only going to worsen, because mortgage rates are still on the rise and probably will continue rising throughout the year.

What to do if you’re in this situation? 1.) Put your home up on the market and hope it sales within 4-5 months, or 2.) Refinance your home into a stable fixed rate.