Alan Nevin, director of economic research for Market Pointe Realty Advisors, recently published an article in the San Diego Metropolitan Magazine that discusses Downtown San Diegos real estate conditions. In his article, Nevin focuses on three topics “ Inventory, Prices and Growth.
In the last year, seven condo buildings have been built downtown. According to Nevins research, only 538 condos are still available for purchase. Is that a lot to sell? No. Downtown San Diego has sold 6,441 condos since the year 2000 “ thats about 800 units a year!
Additionally, when you look at whats being built and when itll be done, theres not much to talk about. Between Breeza, Bayside and Sapphire Tower(all of which will be done in the next 2“12 months), there are approximately 500 condos total. To date, about one third of those units are already sold out(my research shows that theyre closer to 40“50% sold out). The only other building going up is Vantage Point and they are about 40% sold out(theyll be renting some of their units). Going forward, no other residential projects will be available until 2012.
Builders need condo prices to rise before they can afford to begin another project. Nevin states that condo prices need to increase $150-200 per square foot before anything new will break ground. So for now, there really isnt much inventory for buyers to choose from. In fact, inventory in the MLS is extremely low. With todays low condo prices, more and more people are buying and less is for sale.
Yes prices are down. Theyre back to what people paid 3“4 years ago. According to Nevin, the resale market peaked in the second quarter of 2006 at $644 per square foot and has since come down to $454 per square foot “ thats 30% decrease! Sure, short sales and foreclosures have brought prices down, but more so, its due to the fact that there was a lot of entry level condos that sold. Sales in the three buildings I mentioned earlier, Breeza(even though this isnt a high end building), Bayside and Sapphire Tower have averaged about $800 per square foot.
Nevin also points out that since January of 2006, only eight months have occurred when resales totaled more than 50 units. He goes further and says that four of the eight [were] the last four months. Let me say that again “ the last four consecutive months have had the highest number of sales of any other four month period in the last 34 months! Does that mean anything to you?
Does it matter that there were more pending condos this past September than any other month going back as far as November(thats when I started keeping track of new, pending and sold listings) of last year? People talk about timing the bottom. Is this the bottom? Probably not the absolute bottom, but Id be willing to bet that were not far off. If you can afford to risk not qualifying for a loan, then go ahead and wait. But if youre not an all cash buyer, Id seriously consider your options.
Downtown San Diego is a young city. When was the last time you were down here? How did it compare to what it was 10 years ago? What about just 5 years ago? San Diego is growing and I honestly believe that condo prices will never be this low again.
As I mentioned earlier, almost 6,500 condos have been sold in the last 8 years. Downtown San Diegos population is rising and its expected to almost triple in the next 20 odd years. The Convention Center is expanding, a new civic center is in the works and more hotels are being built. Commercially, things are expanding as well. The Irvine Company will be breaking ground in a year or so, a Dutch company just purchased Diamond View Tower and the Navy Broadway Complex will also bring plenty of new office space. On top of that, Downtown will be seeing a new library(hopefully), a new cruise ship terminal and a new federal courthouse “ all of which Nevin talks about in his article. And did you know that we have a Hard Rock Hotel?
Downtown San Diego is only about 2 square miles large(read “ theres not a lot of land to build on). People want to live here and people want to work here(read “ high demand = higher prices). Prices are well below what they used to be(read “ condos are on sale right now). Inventory is low(read “ theres not a lot being built). Money and development is coming into downtowns infrastructure(read “ more development means there will be higher prices).
What else can I say? Better yet, what else can you say?