San Diego mortgage defaults dip to lowest in four years
With recent reports indicating significant drops in foreclosures for real estate in San Diego, it may come as no surprise that mortgage defaults are following suit. A recent article in the San Diego Union-Tribune detailed that the number of people living in San Diego who are defaulting on their mortgages is the lowest it has been in almost four years.
The Union-Tribune cited a DataQuick report that indicated that in August, the number of notices of default that went out in San Diego amounted to 1,216. The report further revealed that the last time this number was so low occurred nearly four years ago, in October 2008, in which 1,112 notices of default were recorded.
The DataQuick report detailed that while foreclosures increased 12.2 percent in August compared with July, foreclosures still remain 40 percent lower than they were in August 2011. As notices of default are the first step in the foreclosure process, it makes sense that mortgage defaults would be in line with foreclosure data. The number of mortgage defaults in San Diego in August declined 17 percent from July and was 42 percent lower than in August 2011.
Lily Leung wrote in the Union-Tribune, "The dip in foreclosures and mortgage defaults are occurring as more and more homeowners are completing short sales, a type of deal in which a lender agrees to accept a payment less than the outstanding mortgage amount."
DataQuick said that short sales are soaring in San Diego County, and one out of every five homes resold in the market in August was a short sale. Short sales made up 19.6 percent of total sales in San Diego in July and 19.2 percent in August 2011. With short sales an increasingly popular alternative, foreclosure activity could continue to plummet.
The Union-Tribune reported that Leslie Appleton-Young, a chief economist for a local industry association, reminded people at a recent conference that not all mortgage defaults lead to foreclosure auctions. She said, "In general you have a significant amount of cancelations after an auction is scheduled. What tends to happen, the main culprit is a short sale."
A recent article in Bloomberg News detailed that distressed homes add to the market inventory as foreclosures proceed and homes are put up for auction and made available for purchase. With foreclosures dropping significantly in San Diego, the already low inventory of available homes can't expect to see much assistance from foreclosure activity. However, this could also mean good news for home prices. Reduced inventory typically drives home value up and spurs market recovery.