San Diego's real estate market will most likely have another down-turn in the year 2010, and there are many reasons why. Remember, many of the adjustable home loans were designed with five and seven year interest adjustments. Many home loans are set to re-set next year since the San Diego real estate market boomed in the summer of 2005. The saving grace is that interest rates are near all-time lows and interest rate shock will not be a major factor. The downbeat with these mortgage adjustments will be the 'reality check' factor. How many homeowners will suddenly wake up to the fact that their home is now worth tens of thousands of dollars less than their mortgage balance? Only the naive will believe that their San Diego home's value will snap back soon.
The Northwestern University of Chicago has found that as many as one in four defaults may have been strategic. Driving this phenomenon is the rising number of households that are deeply "under water," owing much more than the current value of their homes. First American CoreLogic, a real-estate information company, estimates that 5.3 million U.S. households have mortgage balances at least 20% higher than their homes' value, and 2.2 million of those households are at least 50% under water. The problem is worst in Arizona, California, Florida, Michigan and Nevada.
So, whether or not you think the San Diego real estate market has bottomed, the reality is, it will take numerous years to recoup equity losses many have endured. 2010 may go down as the year of the strategic mortgage default because of this homeowner awakening.
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