Distressed mortgages continued to put a drag on the troubled economy in June as 1,838 homes in San Diego County went into foreclosure, an 18 percent increase over the previous month and a 180 percent increase over June 2007, DataQuick Information Systems reported Tuesday.
June marked the 39th consecutive month of year-over-year increases for both foreclosures and notices of default, the start of the foreclosure process. June notices of default reached 3,083, a drop of nearly 2 percent from May but a rise of 93 percent from a year earlier.
Analysts say the market is caught in a cycle in which falling prices and surging foreclosures have caused lenders to tighten credit. That's made it difficult for distressed homeowners to refinance and fueled the rise in mortgage failures.
“It is impossible for anyone to know when the foreclosure problem will peak,” said DataQuick analyst Andrew LePage. “There is too much uncertainly over job losses and a continuing credit crisis .”
Rick Sharga, vice president of marketing for the RealtyTrac research firm, doesn't expect foreclosures to bottom out until next year. Many risky adjustable mortgages that were taken out during the housing boom won't reset at higher interest rates until next year.
“When prices fall as dramatically as they have, we should have seen more buying activity,” Sharga said. “Buyers are reluctant to jump in for fear that they will be buying into a market that will be devalued further.”
Foreclosures in the second quarter increased 31 percent over the previous quarter and 180 percent over the second quarter of 2007. Notices of default in the second quarter increased 6 percent over the previous quarter and 117 percent over the second quarter of 2007. Entry-level neighborhoods where risky subprime lending was widespread during the recent housing boom have taken the brunt of the blow from mortgage failures.
Neighborhoods hit hardest in the second quarter of 2008 were North Oceanside with 215, Nestor with 211, Chula Vista/East Lake/Otay Ranch with 189, East Escondido with 174, and Spring Valley and South Chula Vista, each with 163.
Communities with fewer than 5 mortgage failures in the second quarter included Coronado, Rancho Santa Fe, Sorrento Valley, Pauma Valley, Julian and Descanso, DataQuick reported.
Kelly Cunningham, economist with the San Diego Institute for Policy Research, said the market eventually will correct itself. There is a shortage of homes in San Diego County that should bring buyers back to the market sometime next year.
“I think San Diego will be one of the first (regions) to hit the bottom of the housing market,” he said. “There is a lot of pent-up demand still and there are some bargains to be made as investors jump into the market. We won't be seeing prices like this in the future.”
Emmet Pierce: (619) 293-1372; emmet.pierce@uniontrib.com
