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San Diego is… A) Over Priced B) Over Built C) In a Bubble D) The Most Under Valued Metropolitan…?

Downtown-san-diego

For those of you who are new to blogs, or real estate blogs, join the club. I signed up with the Real Estate Tomato just a few months ago and since then, Ive been running from blog to blog, reading and learning about how to write blogs, how to increase my search engine optimization, to reading blogs about blogs.

What Ive discovered, or rather confirmed, is that you can read about anything and everything on the internet. Thats why it was that much more exciting when one of my blogs was chosen by Mathew Padilla of the OC Register, as one of the top three blogs he came across in the Carnival of Real Estate.

After my article, 6 Reasons Why Downtown isnt Over Built, was selected for the weeks Carnival, a few readers left me some interesting comments. SCWOLF(who Ill refer to as Wolf from here on) pointed out that just because the number of homes for sale is relatively low, this doesnt mean that Downtown isnt 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, isnt that also being over built?

Wolf has a good point. Was Downtown San Diegos inventory still high, relative to demand? I decided to go to Sandicor and and do some more research. Heres what I found

I looked at Downtown condo sales statistics from 2005“2007, between the months of January and August(August of 07 was the most recent data Sandicor offered at the time I wrote this) and learned that my findings still supported my original argument, that Downtown is not over built.

New listings

Going back to 2005, arguably the peak of San Diegos market, you can see that with 1,418 new listings(YTD “ only going to Aug05), 2005 had the fewest new listings of the three compared years. Second place goes to 2007 with 1,487 new listings and 2006 had the most listings with 1,673 homes for sale “ these listings only refer to single family attached listings that were entered in Sandicor.

So what does that really tell you? Not too much, but if you look at this next chart, youll see how many homes were being absorbed.

Percentage sold

Yes, 2005 stand out. No doubt about it. At 38% of the listings sold, 2005 was just about 10% more active than second place, 2007. Last year, the market was slower, with less than 24% of the listings being sold. Percentage-wise, 2007 isnt too far off from San Diegos highest pointespecially when the media is painting a picture of a fire sale and that San Diegos market is crashing. So are people still buying homes Downtown? Simply put, yes.

Whether or not the consumer values Downtown living is obviously subjective, but I would argue that this is very much true. With Downtowns development, I think more people will want to live and work here. There have been three main catalysts for the Downtowns growth:

  1. Horton Plaza “ opened in 1985, this was the beginning of Downtowns exposure and growth.

  2. San Diego Convention Center “ with the expansion of the Convention Center in 2001, both tourism and relocation is on the rise.

  3. Petco Park “ giving our Padres a new home in 2004, Downtowns East Village is undergoing a complete renovation and has shed some much needed light on our teenage Downtown.

If youre still convinced that San Diego isnt worth what the homes are selling for, consider these items the Nations Finest City is involved with.

  1. Red Bull Air Races(only 3 US Cities have ever been selected)

  2. USA Sevens rugby tournament

  3. Comic Con “ dont laugh “ this is the largest convention of its kind, with over 125,000 attendees in 2007

  4. RocknRoll Marathon

  5. The USS Midway

  6. Buick Invitational

  7. Del Mar Races

  8. Hard Rock Hotel “ including the world renowned Nobu restaurant and Rande Gerber clubs

  9. The Weather and Beauty “ by far and away, San Diegos best attributes

Im not saying were there yet, but if you wait until we are there, I guarantee you wont like the home prices anymore than you do nowunless of course you buy now. And to answer another readers question, about whether or not people will continue to be able to afford these high prices, what would people have said to the people who lived in Los Angeles, or San Francisco, 10, 15, 20 years ago?

The bottom line is that people want to live in San Diego because of its weather, its location and its beauty. And as long as these things dont change, I cant see how home values will ever go down.

Other Related Reads:

Has San Diego’s Real Estate Market Hit The Bottom?

6 Reasons Why Downtown San Diego isn’t Over Built

 

  1. Sacramento Real Estate

    Congrats on being one of the top 3 articles chosen in the Real Estate Carnival. Having been a Judge in Carnivals, that is quite a coo for you. Good job and nice tomato blog!

  2. Carnival of Real Estate: 62nd Edition

    [...] Regional Outlook:I had to choose from several great regional real estate outlook posts. In this category, I thoughts that Toby Boyce provided a fairly comprehensive look at what is going on in Downtown Delaware in this post Q&A: What is Happening to Downtown Delaware Ohio? Denny Oh’s look at the San Diego market is also worth checking out. [...]

  3. The Property Pundit

    Congrats, Denny! And, nice response.

  4. joe smith

    Weather and location won’t pay the mortgage on the $750 psf condo in downtown, and the worst is by far yet to come. You think the ‘deals’ of today are the end all? Not quite. Wait another 12 mos, it’s going to get much uglier folks..

  5. Denny Oh

    “Joe,”

    I never claimed that San Diego is an inexpensive place to live – no one does. With that said, I still think it’s one of the best cities in the world and it’s worth it to pay a premium for the weather and location.

    As far as deals and prices, it just depends on what you’re looking for. And yes, there’s always the chance that prices will be a bit better in 12 months, but I can almost guarantee financing options will not.

    What about these “deals”
    http://www.sandiegoh.com/2008/02/08/great-condo-deals-in-downtown-san-diego/

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