Where's the beach? The gray areas of market recovery.

Green beachpavilion
Creative Commons License photo credit: Pingu1963

 If, like me, you are living in Scripps Ranch, you are living in a gray area. All things considered, that is a good thing.

The San Diego Union Tribune published a heat map this morning showing foreclosure activity by zip code for San Diego County communities. Make no mistake, we are all effected to some degree by distress sales and while this map reflects bank-owned properties, it excludes another, arguably larger component of the distress sale market – the short sale.

Having said that, most of the “gray areas” (areas with the lowest percentage of foreclosures during the first quarter of 2008) are intuitively obvious. Coastal communities always tend to hold their value better than their inland counterparts when the pendulum swings. This has to do with their proximity to that big blue wet thing. It has long been a local mantra that “there’s no life east of I-5.” Admittedly, this is the battle cry of those living to the west, and the poor inland cousins (among which I proudly count myself) will tell you that life is just duckie, thank you, even though we can’t exactly smell the salt air from our driveways.

Or can we? Notable in the graphic is that Scripps Ranch and Tierrasanta stick out like a couple of proud thumbs up, gray areas of relative stability amid a sea of more challenging markets. We are still feeling the pinch of declining prices, and sellers in these communities are not immune to the negative influences of bank-owned and bank-controlled sales, but it could be worse.

And, it just may be before it is all over. From DataQuick’s Marshall Prentice:

The main factor behind this foreclosure surge remains the decline in home values. Additionally, a lot of the ‘loans-gone-wild’ activity happened in late 2005 and 2006 and that’s working its way through the system. The big ‘if’ right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans.

Recession or no, the big question is whether or not we have in fact worked through the worst of the troubled loans. Most agree that another wave of resetting adjustable rate mortgages is on the summer horizon and, once we get past that undertow, we will be moving toward calmer waters.

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