San Diego a Top Market for Overleveraged Mortgage Debt

San Diego is a top market for overleveraged mortgage debt. According to a new report from Wallet Hub, the city ranks in the top 11% percent, with an average home overleveraged score in the 89^th percentile. The report analyzed 2,500 cities across the country. The difference between median house price and income is driving the high leverage.

“San Diego is among the cities with the highest mortgage debts,” Jill Gonzalez of Wallet Hub, tells GlobeSt.com. “This is because the median house value in the city is very high, at almost $600,000, while the median income is only about $55,000. This makes housing affordability a serious issue. However, people want to own a home, and they end up taking mortgages that can put strains on their household budgets.”

The other metrics are equally as concerning. The report shows the median mortgage balance at $332,267 and median debt-to-income ratio at 605%. The median home price is $574,900 while the median income is $54,875. “We’re going through trying times. The current health crisis will also have an impact on the economy,” says Gonzalez. “We’ve already seen interest rates go down, but because of the coronavirus many people are forced to stay at home and are unable to work. This puts a strain on their finances, and on their ability to pay their debts, including their mortgages. On the positive side, several banks have stated their willingness to offer assistance. People who find themselves struggling financially could ask their banks to allow them to skip a payment.”

The pandemic will no doubt put pressure on homeowners to pay their bills, even with state-imposed restrictions against foreclosures. “Right now, some states have imposed freezes on evictions and foreclosures to limit exposure to the virus. This will definitely reduce foreclosures at least temporarily,” says Gonzalez. “However, the health crisis will definitely have an impact on the real estate market. Given that a large number of people have become unemployed, evictions and foreclosures could boom after the crisis passes.”

San Diego isn’t the only market facing high overleverage. The problem is prevalent throughout California, where incomes are regularly far lower than median home prices. “San Diego is among several other cities in California that are facing the same problems—small median incomes and expensive homes,” says Gonzalez. “In fact, this seems to be a common occurrence throughout the state. Anaheim, Long Beach, Santa Clarita and Garden Grove are just a few of the other markets experiencing the same situation.”