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

October 3rd, 2007 categories: Buying, Core District, Cortez Hill, East Village, Gaslamp District, Little Italy, Marina District, Real Estate News, Sales Statistics

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, I’ve 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 I’ve discovered, or rather confirmed, is that you can read about anything and everything on the internet. That’s 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 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”?

Wolf has a good point. Was Downtown San Diego’s inventory still high, relative to demand? I decided to go to Sandicor and and do some more research. Here’s 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 Diego’s market, you can see that with 1,418 new listings(YTD – only going to Aug’05), 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, you’ll 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 isn’t too far off from San Diego’s highest point…especially when the media is painting a picture of a fire sale and that San Diego’s 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:

Horton Plaza – opened in 1985, this was the beginning of Downtowns exposure and growth.
San Diego Convention Center – with the expansion of the Convention Center in 2001, both tourism and relocation is on the rise.
Petco Park – giving our Padre’s 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 you’re still convinced that San Diego isn’t worth what the homes are selling for, consider these items “the Nation’s Finest City” is involved with….

Red Bull Air Races(only 3 US Cities have ever been selected)
USA Sevens rugby tournament
Comic Con – don’t laugh – this is the largest convention of it’s kind, with over 125,000 attendees in 2007
Rock’n’Roll Marathon
The USS Midway
Buick Invitational
Del Mar Races
Hard Rock Hotel – including the world renowned Nobu restaurant and Rande Gerber clubs
The Weather and Beauty – by far and away, San Diego’s best attributes

I’m not saying we’re there yet, but if you wait until we are “there,” I guarantee you won’t like the home prices anymore than you do now…unless of course you buy now. And to answer another reader’s 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 it’s beauty. And as long as these things don’t change, I can’t 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

Downtown Buildings

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

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