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thelifter

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Reply with quote  #1 
I'm thinking of buying a condo in Sapphire Tower during preconstruction (investment / vacation home), but I'm concerned that with the market downturn and so much condo construction going on that in 2008 when the building is finished that I could snap it or something comparable up for song if I wait.

I was just wondering if those who know the San Diego real estate market best have any thoughts on all the downtown condo construction and how the "bubble" popping might impact it.

dansimo

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Reply with quote  #2 
I think the downtown condos will see the steepest decline compared to most other areas... if only because of the price points.
San Diego's downtown revitalization has been good, but I think locking in a price now for only 2 years away is a mistake.

the biggest price cuts already have been on downtown condos.
I would think with all the inventory coming on, prices will only continue to decline beyond 2008.


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taddyangle

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Reply with quote  #3 

It won't have a single impact, at all.  What bubble?  Listen, its all about supply and demand.  People WANT to live in San Diego.  Why do you think they keep building?  They build because people will move there and buy.  You may have heard some talk about the affordability index, well it non-sense.  You know why?  Because people WANT to live in San Diego.  It supply and demand. 

There are many other reasons, so read the book by David Lereah (NAR chief economist) entitled "Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them".

 

Okay, I am being sarcastic.  Welcome to the board.  Hold tight, you'll be able to buy a sweet condo downtown.  By the way, why not rent in the interim, that will give you a good idea about where exactly you want a vacation home. 


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rlc

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Reply with quote  #4 

First of all, the downtown market is really soft. There are literally 100's of condos coming on the downtown market. You can't see how soft it really is because the developers are not lowing their prices that much but giving big $$$ incentives. Additionally, there are a lot of developers still building under long term commitments. Buy now, bad decision. Wait 6 to 9 months. A ton will be available then.

chatterweb

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Reply with quote  #5 

Here is a link for a Realtor I emailed back and forth with for a week straight when we were contemplating buying at the Smartcorner...and contemplating moving downtown in general.
My hubby has always wanted to live downtown. I would to but we have 2 large breed dogs...
Anyways, I found his website to be informative.
He was knowledgeble and did not seem to sugercoat stuff like some realtors do.

http://www.liveatthetop.com


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Greg

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Reply with quote  #6 
Here's a good blog to watch on the subject. Today's post is about condos.

http://sandiegomarketmonitor.blogspot.com/
godann

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Reply with quote  #7 
The hardest hit in any real estate downturn is condo's and apartment to condo conversions.   History repeats itself so this should be no exception.  You could buy into the baby boomer effect but that is risky.  There are thousands of condo's nearing completion now.  If you want to take the plunge for a place to live, why not buy one of those?  Otherwise, waiting 2 years might find you with a lost deposit.  I would take the advice of renting.  It's probably cheaper anyway, and more of a sure thing.  I would not be surprised that many of the condo's on the board for construction are not completed, just as in times past.  Retiring baby boomers moving to SD might have a blancing effect though.  Drive prices through the roof in the next 2 years?  I'd bet not. 

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chatterweb

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Reply with quote  #8 

I know that the Triangle project got squashed. But, I don't know why.
Anyways, right where I work downtown, alot of  older vacant lots are up for sale, around Commercial St and that proximity, alot of changes are taking place.
The East Village has been improved immensely from it's old dire state.
Sure, there is still the detox center on the newly named Park Blvd (formerly Market St.) and St. Vincent's is still there, but the majority of the homeless have moved east and south.
Park Blvd east and west have helped improve the area, and of course, Petco Park.
Here is another helpful link:

http://www.sandiegodowntown.org/index.cfm/fuseaction/res.featuredCondominium


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taddyangle

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Reply with quote  #9 

Quote:
Originally Posted by Greg
Here's a good blog to watch on the subject. Today's post is about condos.

http://sandiegomarketmonitor.blogspot.com/

 

Greg, good site.  I cut and paste this from the above site and I think it should sum it up.

 

August 11, 2006 - UPDATE: Foreclosed Downtown Condo at Renaissance #507

The foreclosed unit feature in a post a few week ago has endured a $30,000 price cut. It's important to keep in mind that financial instituations are not in the business of owning real estate and will want to get these properties off of the books.

Also keep in mind that if you use the current Fed Funds rate of 5.25% and add in taxes and HOA that the bank is paying this vacant unit is costing over $3,000 per month to carry. This makes cutting the price to get it sold the most practical move.

The numbers below have been updated to reflect the reduced price.

**************************************

Listed on Foreclosure.com as fully foreclosed this unit ended up being owned by WMC Mortgage Corp which presumably was the lender on this unit.

Check out Foreclosure.com for a free trial to access more information on this unit.

The site shows this as inactive so let's assume the unit has changed hands again.

Resale Price: $599,000
Cost: $760,000

MLS: 061033138

Loss@6% Sales Expenses: $196,940
Loss%: 25.91%

Purchase Date: 10/25/2004
Purchase Details: view

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samzell

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Reply with quote  #10 

Was anybody at the last North San Diego Real Estate meeting this month?  A guy name Alan Nevin who is the Director of Economic Research of MarketPointe Realty Advisors spoke.  He's been doing condo conversions in San Diego since 1977.  He did not see a big fall in downtown condo prices coming and he said most of the condo's being built downtown have already been reserved. 

 

And in general, he was not nearly as bearish on the San Diego real estate market as the alarmists.  Noting that at this point SFR's have not even budged in median price.  He was by no means bullish, thinking that things will be flat or maybe slightly decline, but he doesn't buy into the alarmist crash theories.

 

Can you show me some figures of a precipitous decline in downtown condo prices at this point? 

 

I'm not so sure it's going to crash down there like everyone thinks it is.

 

michaelr

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Reply with quote  #11 

downtown will absolutely see the biggest decline in price in san diego.  the amount of available inventory is gigantic with no end is sight as new construction continues.

 

i wouldnt reserve a unit unless you are not concerned w/ a price decline.

sdlocal619

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Reply with quote  #12 

I wouldnt buy, especially downtown.  It's seen the most speculation, not to mention the inventory.  You'd be kicking yourself in coming years

HiddenMarket

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Reply with quote  #13 

We were at the meeting and were very surprised to learn that most of the buyers for downtown condos are coming from San Diego. 

 

Alan Nevin is a very experienced and respected economist.  It was good to hear him directly express a NON pessimistic outlook on the future of San Diego real estate at the last http://www.NSDREI.com meeting.


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Suzanne

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Reply with quote  #14 

Bruce Norris talked about this on '04.  Condo conversions then condos and then I believed he said higher end homes will feel the slowdown/crash first.  I want to know if builder inventory goes to the same auctions as  condo/apts/homes.  I think Samson and Robert have this knowledge base but Samson is gone  

 

Suzanne

dansimo

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Reply with quote  #15 
Quote:
Originally Posted by samzell

Was anybody at the last North San Diego Real Estate meeting this month?  A guy name Alan Nevin who is the Director of Economic Research of MarketPointe Realty Advisors spoke.  He's been doing condo conversions in San Diego since 1977.  He did not see a big fall in downtown condo prices coming and he said most of the condo's being built downtown have already been reserved. 

 

And in general, he was not nearly as bearish on the San Diego real estate market as the alarmists.  Noting that at this point SFR's have not even budged in median price.  He was by no means bullish, thinking that things will be flat or maybe slightly decline, but he doesn't buy into the alarmist crash theories.

 

Can you show me some figures of a precipitous decline in downtown condo prices at this point? 

 

I'm not so sure it's going to crash down there like everyone thinks it is.

 


Is he a realtor too?!


"he said most of the condo's being built downtown have already been reserved"

This does not mean that contracts can't be cancelled or people won't walk away. Reservations don't mean very much in terms of projecting the market at this point. There's already huge inventory and more to come...there aren't that many people in the market for downtown condos.

"Noting that at this point SFR's have not even budged in median price."

Haven't we learned that median price is not a good leading indicator?

Don't get me wrong, I appreciate the cheerleading and influencing of the public mind toward not panicking. That will serve me well the same as the next guy invested in SD. But, I think the prudent thing is to prepare for the potential for bigger declines and be happy if they don't materialize.


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samv

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Reply with quote  #16 
Quote:
Originally Posted by samzell

Can you show me some figures of a precipitous decline in downtown condo prices at this point?


http://sandiegomarketmonitor.blogspot.com/
samzell

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Reply with quote  #17 

Dataquick who pulls their info from sales data recorded with the county has lot more credibility then some blog with anecdotal information.  So far the prices are not collapsing, merely slowing.  

 

Dataquick July release:

 

"Indicators of market distress are still largely absent. Financing with adjustable-rate mortgages has trended lower over the past year. Foreclosure activity is rising but is still low in a historical context. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity, DataQuick reported."

 

All Homes No Sold
July-05
No Sold
July-06
Pct.
Chg
Median
July-05
Median
July-06
Pct.
Chg
Los Angeles 10,711 8,040 -24.9% $488K $520K 6.6%
Orange County 4,341 2,779 -36.0% $601K $639K 6.3%
San Diego 4,765 3,370 -29.3% $496K $487K -1.8%
Riverside 5,762 4,420 -23.3% $385K $414K 7.5%
San Bernardino 4,084 3,216 -21.3% $328K $366K 11.6%
Ventura 1,406 887 -36.9% $579K $634K 9.5%
So. California 31,069 22,712 -26.9% $469K $492K 4.9%

SoCalStan

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Reply with quote  #18 

I think the term "Median Price" is just about next to worthless when we have low end condos at $250,000-$300,000, low end SFRs at $$350-000-$400,000, desirable Bread'n'Butter SFRs at $550,000-$700,000, and more than a few $1,000,000+ homes, with many of those multi-millions (and Millions) of Dollars.

 

Remember, Statistics can say just about anything you want them to say.  Stats are very useful, but only in terms of a long-range look. 

 

Now ..... if you look at this SoCal RE game this time'round from a Game-Day view, it looks like we are just getting ready to end the pre-game fungo/practice session. 

 

 

Batter UP!    


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RonaldStarr

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Reply with quote  #19 

Neil Evansan AKA “SoCALStan”—CA-----------------

 

I think the term "Median Price" is just about next to worthless when we have low end condos at $250,000-$300,000, low end SFRs at $$350-000-$400,000, desirable Bread'n'Butter SFRs at $550,000-$700,000, and more than a few $1,000,000+ homes, with many of those multi-millions (and Millions) of Dollars. “

 

In a way I agree with your statement, it would be nice to have some sort of break-out of condo and house data separately.  However, if we are going to have just one measure, I think the median sales price is the most informative and the most stable.  Unless there is a tremendous change in the proportion of condos to detached single family houses sold, the measure is informative about what is happening in the market.

 

With more and other measures, one might form a more sophisticated analysis and projection of what is going to happen.   

 

My feeling is that prices in CA are facing two major pressures. 

 

The first is increased demand compared to the supply, since fewer units have been built every year since 1988 than the increased population each year needed.

 

The second is the difficulty of many people who are not owners to become owners.  This is due to somewhat higher interest rates on mortgage loans and tightening lending standards.  Plus, the current high prices just make it hard for people to buy.

 

So, these two factors are like in a tug-of-war on the prices.  I find it hard to judge which one will predominate in the next few years.  My own guess is that prices will remain stable or move a small amount during the next four years, perhaps within 5% up or down.  This is assuming mortgages stay pretty much as they are now. 

 

Further out, I’m predicting long-term we will continue to see increasing prices in CA.  I know it seems hard to believe, but until there is production of more units or a lessening of population growth in California, the supply/demand imbalance continues and puts added pressure on prices.

 

I think the 25-30-40-50% decline predictions for the next few years are simply wrong.  However, I have no way to prove it, as I’m predicting from my feelings.

 

Good Investing and Good Posting**********Ron Starr********

samv

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Reply with quote  #20 
Quote:
Originally Posted by samzell

Dataquick who pulls their info from sales data recorded with the county has lot more credibility then some blog with anecdotal information.



I disagree. If you read that blog carefully you will see that every sale reported comes with a link to county recorders office and also MLS number if it is listed.
samv

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Reply with quote  #21 
Quote:
Originally Posted by RonaldStarr

Neil Evansan AKA “SoCALStan”—CA-----------------

However, if we are going to have just one measure, I think the median sales price is the most informative and the most stable. 



Raon, have you considered the following: You can have every sold house in San Diego be sold at a price lower than last years but it is still possible for their median to be higher than the median of last year's sale!
RonaldStarr

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Reply with quote  #22 

Sam V--CA?--------------

 

"You can have every sold house in San Diego be sold at a price lower than last years but it is still possible for their median to be higher than the median of last year's sale!"

 

I probably am not understanding the question here.  As I read your statement it does not sound correct to me.

 

Are you saying something like: "If every property that sold last year in San Diego County were resold this this year at a lower price than last year's price for that property, ... it is still possible for their median to be higher than the median of last year's sale!"

 

If that is your proposition, I believe it is wrong.  But, as I say, I'm not sure I understand what your setup is.  Perhaps a little more detail would help me understand you better.

 

Good Investing and Good Posting*********Ron Starr********

 

samv

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Reply with quote  #23 
I was probably not very clear on my last post. My point is that median statistics, reported by dataquick, does not adjust for the mix of the homes in the distribution. Maybe I can offer an example:

Let us say that last year 9 properties were sold in SD downtown with the following sale prics--
A = 100000
B = 200000
C = 300000
D =  400000
E = 500000
F = 600000
G= 700000
H= 800000
 I=  900000

So last year's median as reported by dataquick would be 500,000 and the sale volume would be 9.

Now say this year market is slow and following sales happened.
E = 400000
F = 500000
G= 600000
H= 700000
 I=  800000

Please note that every one of the property which was sold this year,  resulted into a $100,000 loss for the  holder. Yet this year's median price, as reported by dataquick, would would be 600,000 and a sale volume would be 5

If I was not careful to look at the market, I can say just based on the medians, that the prices appreciated by 20% and  sales dropped by 45%. Yet the experience of every one of those in the market who sold and (those who did not sell) would be that of a decline of anywhere between 11% to 20%

This is one good example that I can offer to justify why dataquick can claim good appreciation, while my blog example shows "anecdotal" declines!
RonaldStarr

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Reply with quote  #24 

Sam V---------------

 

Thank you for clarifying what you were saying.  I agree with your analysis of your example.

 

The thing is that the DataQuick medians are based on a lot more properties, so the median tends to not move as much.

 

What you are saying is that the distribution or “mix” of the sales has changed toward the high-end home and thus the median has gone up although the individual property values have gone down.  This is true.  And this is a good argument for your position that one needs to study the market more closely.  One needs to see whether the distribution of sales, by neighborhood, size, or price, is about the same as before. 

 

A better measure is the one used by federal agency that oversees Fannie Mae and Freddie Mac, I believe--OFHEO or whatever it is called..  I think that they report prices based on resales of the same properties.  While there can be some biases in that data due to properties deteriorating over time if not maintained or properties being fixed up between earlier purchase and more recent purchase, these effects are probably pretty minimal and offset each other. 

 

And, it may be that your antecdotal evidence is more like the OFHEO data: based on recent sales of properties compared to the sales of very similar properties in the past.  The thing I would worry about here is having a biased sample which does not represent accurately the whole market.  And because of  selection of examples or selective memory of the bad news situations there could be bias.  It is hard to avoid this when one is relying on a small sample of antecdotes and the selection process is not carefully designed to be respresentative of all sales.  At least the data base for all sales does not have biases of selection.

 

The usual view is that higher-priced properties sell less well when a real estate market softens.  If this be so, one expect that the distribution of sales would shift in the opposite direction of your hypothecial shift.  Thus, one would expect that the less costly properties would become a higher proportion of the properties sold and thus the median prices would go do in an exaggerated fashion.  So, the median prices could even go down when the actual sales prices of individual homes, or comparable homes, is going up.  This is the same mechanism as your example, just pointing in the opposite direction.

 

So, it may be, if the shift is toward a greater proportion of less costly houses in the sales mix, that the apparent decline of market values is being exaggerated these days.  It may be that prices are actually still going up some.

 

I don’t know if the mix is changing or not.  But, I think your main point is correct: one should not go only on one number to figure out what is happening.  This would especially be so when the market is changing rapidly and in somewhat uncertain ways.

 

Good Investing and Good Posting**********Ron Starr**********

 

Jeff

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Reply with quote  #25 

Quote:
Originally Posted by samv
I was probably not very clear on my last post. My point is that median statistics, reported by dataquick, does not adjust for the mix of the homes in the distribution. Maybe I can offer an example:

Let us say that last year 9 properties were sold in SD downtown with the following sale prics--
A = 100000
B = 200000
C = 300000
D =  400000
E = 500000
F = 600000
G= 700000
H= 800000
 I=  900000

So last year's median as reported by dataquick would be 500,000 and the sale volume would be 9.

Now say this year market is slow and following sales happened.
E = 400000
F = 500000
G= 600000
H= 700000
 I=  800000

Please note that every one of the property which was sold this year,  resulted into a $100,000 loss for the  holder. Yet this year's median price, as reported by dataquick, would would be 600,000 and a sale volume would be 5

If I was not careful to look at the market, I can say just based on the medians, that the prices appreciated by 20% and  sales dropped by 45%. Yet the experience of every one of those in the market who sold and (those who did not sell) would be that of a decline of anywhere between 11% to 20%

This is one good example that I can offer to justify why dataquick can claim good appreciation, while my blog example shows "anecdotal" declines!

This is a common criticism of the median as a "representative" number for a larger group...

 

http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1315694&highlight=median

 

But remember, it is not that the median is a "perfect" measure to use...it is that it is better than the mean with respect to sensitivity to extreme scores.

 

To paraphrase Winston Churchill:

 

"The median is a terrible measure...unless to you compare it to anything else."


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