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6 Reasons Why Downtown San Diego isn’t Over Built
September 26th, 2007 categories: Buying, Real Estate News
The market is bad, homes are over priced, inventory is too high and interest rates are terrible….sound familiar? Well is that really the case? Having been in the business for three years, I’ll admit, this is still somewhat new to me. It’s true, I’m not as experienced, or as old, as some of my colleagues. However, I have been in the business long enough to know that bad news sells better than good news and that older isn’t always better.
Here are a few highlights on an article that Alan Nevin wrote in the September issue of the San Diego Metropolitan magazine.
1) July of 2007 had 492 active resale listings Downtown – July of 2006 had 613. That’s almost a 20% reduction in active listings.
2) In early 2006, there were about 100 condos for sale at The Grande at Santa Fe – today there are only 38 for sale(out of 440).
- Of the homes currently for sale the average size is 1,521 square feet and the average asking price is $1,134,886 – $731/square foot.
3) The average waterfront condo in Downtown San Diego is priced around $750/square foot, but is closer to $1,000/square foot in other West Coast cities like Seattle, Vancouver and San Francisco.
4) Fortune magazine recently stated that Downtown San Diego will be flooded by 6,000 newly constructed condos….but here’s what they neglected to discuss…
- Of those 6,000 condos, approximately one third of them will be completed by the end of this year. In addition, only 700 are still for sale.
- 2008 is scheduled to deliver three more buildings(but my guess is 2009) – Bayside, Breeza and Sapphire Tower
- The view units in these buildings will be priced around $850/square foot.
- Only Vantage Point is scheduled to be completed in 2009, bringing 677 units with it.
- Of these 3,100 future condos, 1,700 of those are already sold, only leaving 1,400 to be sold over the next year and half.
5) Many of the 2007 high end buildings have already paid off their construction loans.
- This means that the developers will not have to cut their prices to to pay off their equity partners (i.e. Lehman Brothers and Capstone).
6) Currently there are approximately 30,000 Downtown residents. By the year 2030, this number is predicted to be closer to 90,000.
Is all of this new to you? Does it seem to contradict what the Union Tribune says? There is no bubble and in my opinion, Downtown is not over built. Yes there’s a lot of inventory coming onto the market, but it’s spread out over time. In addition to this, there are very few high quality products coming on.
Once San Diego gets its corporate side going, which it slowly is, Downtown San Diego will be one of the nicest, most sought after metropolitans in the nation. We’re young, but we’re going to be great and you should take advantage of it while you can afford to.
In my opinion, buyers will have the best deals from now, through 2008. If you have any questions, or comments, I’d love to hear them. And if you need someone who knows and works the Downtown market, I’d love to get in touch with you.
To get a FREE list of some great deals, call me at 858-243-2092, or email me at denny@sandiegoh.com
Other Must Reads:
San Diego Is A) Over Priced B) Over Built C) In a Bubble D) The Most Under Valued Metropolitan…?
Has San Diego’s Real Estate Market Hit The Bottom?
2006 vs 2007 Downtown San Diego Condo Sales Statistics
[...] 6 Reasons Why Downtown isn’t Over Built Real estate blogs have become best known for one thing: the debate over a housing bubble. Although there is no disputing a slump in housing sales, the debate rages on over how long and deep the correction will go. As a journalist myself, I decided to highlight a contrarian view on how journalists are allegedly portraying the housing market – the charge is we overstate it to sell newspapers. [...]
[...] SanDiegoh.com’s Denny Oh: “6 Reasons Why Downtown (San Diego) Isn’t Over Built“ [...]
[...] ‘6 Reasons Why Downtown isn’t Over Built’ by Denny Oh of SanDiegoOh.com Go check out Matthew’s reviews on these posts and read them for yourself. del.icio.us this! [...]
[...] 6 Reasons Why Downtown isn’t Over Built Real estate blogs have become best known for one thing: the debate over a housing bubble. Although there is no disputing a slump in housing sales, the debate rages on over how long and deep the correction will go. As a journalist myself, I decided to highlight a contrarian view on how journalists are allegedly portraying the housing market – the charge is we overstate it to sell newspapers. [...]
[...] 6 Reasons Why Downtown isn’t Over Built Real estate blogs have become best known for one thing: the debate over a housing bubble. Although there is no disputing a slump in housing sales, the debate rages on over how long and deep the correction will go. As a journalist myself, I decided to highlight a contrarian view on how journalists are allegedly portraying the housing market – the charge is we overstate it to sell newspapers. [...]
Whether or not the market is overbuilt is a function of demand and absorption by consumers. So, if you release only 50 condos in the next 2 years, but nobody buys it, isn’t that also being “overbuilt”?
Forget the actual volume of condos for a minute and look at the other half of your equation – the consumer: as long as you are correct that consumers are willing to pay higher prices for these condos (versus SFR) despite the additional carrying costs of HOAs on top of mortgage payments, then the market is not overbuilt. But if consumers don’t value downtown living to the same degree as people in Chicago, Seattle and Vancouver, then this market is overbuilt. When you assume that 90,000 people will be living in downtown, you are making the assumption that these additional 60,000 prefer downtown living over SFR living nearby – hardly a certainty.
Hey Denny,
I love stats so I liked what you had to say.
Having said that, the last post here adds a little more insight to your analysis. The real question is how many people will actually by at those prices?
You have to look at how many have purchased at those prices over the past 5 years and estimate how many more will be able to.
Another way to look at that is how many more households do you really think can afford the payments for the asking prices on the homes coming to market?
I think that almost (almost) all households that could afford have already bought. That would mean that any inventory would have to be presented at a lower price INHO.
Thansk for the forum!
[...] 6 Reasons Why Downtown isn’t Over Built Real estate blogs have become best known for one thing: the debate over a housing bubble. Although there is no disputing a slump in housing sales, the debate rages on over how long and deep the correction will go. As a journalist myself, I decided to highlight a contrarian view on how journalists are allegedly portraying the housing market – the charge is we overstate it to sell newspapers. [...]
[...] After my article, 6 Reasons Why Downtown isn’t Over Built, was selected for the weeks Carnival, a few readers left me some interesting comments. “SCWOLF”(who I’ll refer to as “Wolf” from here on) pointed out that just because the number of homes for sale is relatively low, this doesn’t mean that Downtown isn’t over built. Wolf further posed the fact that “Whether or not the market is over built is a function of demand and absorption by consumers. So, if you release only 50 condos in the next 2 years, but nobody buys it, isn’t that also being “over built”? [...]
Aldo G and scwolf, thanks for reading and thanks for the comments. After thinking about what you said, I did some research and posted a new blog….thanks again.
http://www.sandiegoh.com/2007/10/03/san-diego-is-a-over-priced-b-over-built-c-in-a-bubble-d-the-most-under-valued-metropolitan/
You have a very useful post. I agree that bad news sells better than good news and older is not always better.
[...] my 6 Reasons Why Downtown San Diego isn’t Over Built blog was selected as one of the 61st Carnival top blogs, my viewership took off. Since then, I’ve [...]
very interesting. i’m adding in RSS Reader
There are some good deals in SD – The City ain’t one of them now.
Picked up a Point Loma, ans they rents are A+.
Be careful y’all.
Thanks j lester.
Pt. Loma is also a great area – only a few minutes from Downtown, great views(depending where) and you get a yard! How much did you put down? Downtown units require about 30% down to break even – depending on what you’re buying that is…but you can get some great rents in the “city” as well.
San Diego isn’t going anywhere but up. Literally, we are almost out of buildable land so all construction will have to go vertical. The communities of the future will be the loft and condo buildings, cities within cities. There is so much infrastructure being developed that will only raise the value of Downtown San Diego property in the future.
Very true mike. We have Mexico to the south, Camp Pendleton to the north, desert and mountains to the east and of course, about 70 miles of coastline to the west.
Downtown is young, in it’s teenage years, and finally at an affordable price point again! People complained that home prices were too high to ever be able to buy a few years ago and now they have an opportunity.
What are they waiting for? The newspapers to tell them homes cost too much?
BTW…congratulations on your blog. You present some good information about the Downtown San Diego Real Estate Market. Exactly, what are buyers waiting for? You hit it on the nose when you said that Doom and gloom makes for better headlines. Often times the Union Tribune articles will post good information and statistics, only to have them overshadowed by a general negative tone in the writing. The “perception” of what is going on has created a “buyers” market where people are unsure of what to do. It comes down to Econ 101…supply and demand. The fact is, this is a great time to buy…not a great time to sell. Money is cheap again, and the inventory provides some good choices. As we go thru the year, I suspect that most of the “valuable” units will be picked over.
The UT is notorious for slamming the market and then ending it’s articles with the “but it’s not that bad” statement. My take is, if you see something you like, why not let me try and get it for you?
If I can’t negotiate the price and terms you’re happy with, what have you lost?
Denny
In hindsight, now that it is painfully obvious, can you at least say there may have been a bubble?
Doug
Hey Doug,
For someone who thinks I’m an idiot, you seem to spend a lot of time on my site…aren’t there any better blogs out there?
Going back to your question though, sure there may have been a bubble. That doesn’t mean that downtown San Diego is/was over built. I still think there’s tremendous value downtown and that buyers are getting incredible deals. I doubt that even you could argue that downtown isn’t a great investment.