Anchor ads are not supported on this page.

4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs

Another Wave of Foreclosures Imminent?

Cue the contrarian opinions on the local housing market: investment group Blue Sky Capital released a statement yesterday predicting another wave of foreclosures will soon hit San Diego County, this one even worse than the first round of massive foreclosures in the late 2000s.

The culprit, Blue Sky says, is the so-called “Option ARM,” or adjustable rate mortgage. These loans, designed to give borrowers affordable payments on large mortgage balances, allowed consumers to make payments based on a “teaser” interest rate, often as low as 1 percent. Although the rate adjusted upward several points as soon as one month after the loan was funded, borrowers were allowed to keep making the lower payments, with the unpaid interest being added to the principal balance each month.

So while loans remained current, borrowers owed more each month on houses that were simultaneously declining in value.

But there is a limit to how far homeowners can allow their debt to balloon – when the loan balance hits a predetermined maximum, usually between 115-125 percent of the original amount borrowed, the loan is “recast” and borrowers have to begin making payments equivalent to the amount necessary to repay their loans in the time remaining on the original 30 year term. For many, this means a monthly increase of $1,000 or more.

Blue Sky has singled out one neighborhood in particular likely to feel the wrath as these loans come due.

“While these Option Arm and Alt-A loans exist throughout the county, areas like Carmel Valley are filled with them. During our tracking of distressed properties in the county we found many homes in areas like Carmel Valley were purchased with zero, or a small amount down, so there is very little equity in these properties," says CEO Chris Williams. “While higher end families have been able to withstand the initial housing meltdown, things are about to change.”

The affluent Carmel Valley area in northern San Diego has a median income of $90,000, Williams says.

While recent reports have indicated slight gains in home values overall, as many as a third of San Diegan homeowners remain “underwater,” owing more than their homes are worth.

Here's something you might be interested in.
Submit a free classified
or view all

Previous article

Temperature inversions bring smoggy weather, "ankle biters" still biting

Near-new moon will lead to a dark Halloween
Next Article

The danger of San Diego's hoarders

The $1 million Flash Comics #1

Cue the contrarian opinions on the local housing market: investment group Blue Sky Capital released a statement yesterday predicting another wave of foreclosures will soon hit San Diego County, this one even worse than the first round of massive foreclosures in the late 2000s.

The culprit, Blue Sky says, is the so-called “Option ARM,” or adjustable rate mortgage. These loans, designed to give borrowers affordable payments on large mortgage balances, allowed consumers to make payments based on a “teaser” interest rate, often as low as 1 percent. Although the rate adjusted upward several points as soon as one month after the loan was funded, borrowers were allowed to keep making the lower payments, with the unpaid interest being added to the principal balance each month.

So while loans remained current, borrowers owed more each month on houses that were simultaneously declining in value.

But there is a limit to how far homeowners can allow their debt to balloon – when the loan balance hits a predetermined maximum, usually between 115-125 percent of the original amount borrowed, the loan is “recast” and borrowers have to begin making payments equivalent to the amount necessary to repay their loans in the time remaining on the original 30 year term. For many, this means a monthly increase of $1,000 or more.

Blue Sky has singled out one neighborhood in particular likely to feel the wrath as these loans come due.

“While these Option Arm and Alt-A loans exist throughout the county, areas like Carmel Valley are filled with them. During our tracking of distressed properties in the county we found many homes in areas like Carmel Valley were purchased with zero, or a small amount down, so there is very little equity in these properties," says CEO Chris Williams. “While higher end families have been able to withstand the initial housing meltdown, things are about to change.”

The affluent Carmel Valley area in northern San Diego has a median income of $90,000, Williams says.

While recent reports have indicated slight gains in home values overall, as many as a third of San Diegan homeowners remain “underwater,” owing more than their homes are worth.

Sponsored
Here's something you might be interested in.
Submit a free classified
or view all
Previous article

Local Couple Sues Bank of America Over Improper Penalties

Next Article

Bauder recommends to go short in San Diego real estate

Sophisticated buyers can get 30 to 40 percent off
Ask a Hipster — Advice you didn't know you needed Big Screen — Movie commentary Blurt — Music's inside track Booze News — San Diego spirits Classical Music — Immortal beauty Classifieds — Free and easy Cover Stories — Front-page features Drinks All Around — Bartenders' drink recipes Excerpts — Literary and spiritual excerpts Feast! — Food & drink reviews Feature Stories — Local news & stories Fishing Report — What’s getting hooked from ship and shore From the Archives — Spotlight on the past Golden Dreams — Talk of the town The Gonzo Report — Making the musical scene, or at least reporting from it Letters — Our inbox Movies@Home — Local movie buffs share favorites Movie Reviews — Our critics' picks and pans Musician Interviews — Up close with local artists Neighborhood News from Stringers — Hyperlocal news News Ticker — News & politics Obermeyer — San Diego politics illustrated Outdoors — Weekly changes in flora and fauna Overheard in San Diego — Eavesdropping illustrated Poetry — The old and the new Reader Travel — Travel section built by travelers Reading — The hunt for intellectuals Roam-O-Rama — SoCal's best hiking/biking trails San Diego Beer — Inside San Diego suds SD on the QT — Almost factual news Sheep and Goats — Places of worship Special Issues — The best of Street Style — San Diego streets have style Surf Diego — Real stories from those braving the waves Theater — On stage in San Diego this week Tin Fork — Silver spoon alternative Under the Radar — Matt Potter's undercover work Unforgettable — Long-ago San Diego Unreal Estate — San Diego's priciest pads Your Week — Daily event picks
4S Ranch Allied Gardens Alpine Baja Balboa Park Bankers Hill Barrio Logan Bay Ho Bay Park Black Mountain Ranch Blossom Valley Bonita Bonsall Borrego Springs Boulevard Campo Cardiff-by-the-Sea Carlsbad Carmel Mountain Carmel Valley Chollas View Chula Vista City College City Heights Clairemont College Area Coronado CSU San Marcos Cuyamaca College Del Cerro Del Mar Descanso Downtown San Diego Eastlake East Village El Cajon Emerald Hills Encanto Encinitas Escondido Fallbrook Fletcher Hills Golden Hill Grant Hill Grantville Grossmont College Guatay Harbor Island Hillcrest Imperial Beach Imperial Valley Jacumba Jamacha-Lomita Jamul Julian Kearny Mesa Kensington La Jolla Lakeside La Mesa Lemon Grove Leucadia Liberty Station Lincoln Acres Lincoln Park Linda Vista Little Italy Logan Heights Mesa College Midway District MiraCosta College Miramar Miramar College Mira Mesa Mission Beach Mission Hills Mission Valley Mountain View Mount Hope Mount Laguna National City Nestor Normal Heights North Park Oak Park Ocean Beach Oceanside Old Town Otay Mesa Pacific Beach Pala Palomar College Palomar Mountain Paradise Hills Pauma Valley Pine Valley Point Loma Point Loma Nazarene Potrero Poway Rainbow Ramona Rancho Bernardo Rancho Penasquitos Rancho San Diego Rancho Santa Fe Rolando San Carlos San Marcos San Onofre Santa Ysabel Santee San Ysidro Scripps Ranch SDSU Serra Mesa Shelltown Shelter Island Sherman Heights Skyline Solana Beach Sorrento Valley Southcrest South Park Southwestern College Spring Valley Stockton Talmadge Temecula Tierrasanta Tijuana UCSD University City University Heights USD Valencia Park Valley Center Vista Warner Springs
Close

Anchor ads are not supported on this page.

This Week’s Reader This Week’s Reader