July-December 2008 – The Grande Condo Sales

Posted on January 7, 2009 | by Denny Oh

The Grande at Santa Fe Place.  One of Bosas biggest hits, the North and South Grande towers had a total of 19 sales in the second half of 2008.  With a total of 442 condos between the two towers(including the ground floor townhouses), were only talking about a 4.3% turnover rate.  I dont know who came up with the idea that theres a ton of inventory out there, but clearly with so few sales, this cant be the case.

Of the 19 sales, from July-December of 2008, 8 were distressed sales “ either short sales, or bank owned homes.  Of these short sales and foreclosures, many had a sales price equal to what the banks were asking.  In fact, the average sales price was only 2% below the list price.  Compare this to the regular 11 other sales that had an average sales price of 6% below asking and its clear that short sales and REOs were better priced condos.  And aside from one ridiculous sale, none of the regular sales sold at full price.

What does this mean? Well, with 8 out of 19, or 42%, sales being distressed sales, clearly it shows that even some of the best addresses are being affected by the market.  Actually, it really isnt the markets fault, rather than the homeowners who over extended themselves.  I imagine it was a case of people getting too greedy, too hopeful and too careless. People leveraged their homes way too much and had to pay the price.  Yes, clearly the lending industry needed to have been more regulated, but I still think the majority of the blame falls on the homeowner.

Opinions aside, heres a look at the numbers

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In the first quarter of 2008, The Grande towers had 15 sales with an average sales price of $884,067.  Q2 at The Grande had only 4 sales, averaging $866,702 per sale.  With the increase in short sales and foreclosures, The Grande saw a lower average sales price in the second half of 2008, with an average sales price of $769,468.

Ironically, the first and second half of 2008 each had 19 sales between the North and South Grande towers “ 38 sales, for the 442 condos “ less than 8.6% of the entire inventory.  This is well with in the 7“10% healthy turnover rate.

Whats to come? with 38 active condos today, 8 condos pending, I think were going to see an upswing in sales.  Interest rates are down and prices are low.  I think prices will continue to slip over the next 18“24 months until the finally stabilize.  I dont think well see any major reductions, but the prices are at the mercy of the short sales and REOs.  Until all of that inventory is absorbed, prices must come down.

So what should you do? If youre thinking about selling, I suggest you do it now.  I can promise you prices will not be going up anytime soon and while you probably wont make a profit on your home, you will get more today than you will 6 months from now.  I think the key for sellers is to sell now so they have liquidity and be ready to jump on the next deal that comes around.

If youre a buyer, it depends.  If youre a cash buyer, you can afford to wait.  Interest rates dont affect you, so you can wait for a great deal to come by and take advantage of your cash.  Banks love cash buyers and theyll almost always beat out a loan.  If youre a buyer who needs a loan, Id suggest you start looking now.  While prices will probably continue to decline, slightly, the interest rates probably wont “ and any gains you might see on the lower prices will be negated by the increase in rates.

Additionally, buyers who wait will face more competition.  As prices level out, more and more buyers will come into the market.  The key is not so much, timing the bottom, but finding the right home under the best possible conditions.  If you know anyone whos been actively trying to buy a home, ask them how many properties theyve lost to other buyers.  Youll be surprised

For more information on the Grande, or other homes in San Diego, please contact Denny Oh at 858“243“2092 or [email protected]

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5 Comments

  1. citiboy says:

    Denny
    EXCELLENT analysis.
    Your suggestion to sellers is right on the mark.
    The buyer scenario makes perfect sense.
    I would take exception with the recovery time of 18-24 months. The high end price range will recover much faster than the mid price range only because of the amount of inventory available.

    Soon after Bosa’s Bayside and the Sapphire sell out, the amount of high end inventory will begin to dry up rapidly. This will lead to a stabilization of that sector of the market.

    With no new high end projects coming on line any time soon, this sector will begin to appreciate much sooner than the rest of downtown.

    The mid range downtown condos have a longer wait since many new project are left with a much larger amount of inventory to sell.

  2. Denny Oh says:

    citiboy – thanks for the feedback! Here’s a post I wrote in response to your comment.
    http://www.sandiegoh.com/2009/01/08/why-you-need-to-sell-your-home-today/

  3. Schahrzad says:

    The inventory is in the stratosphere is you are a seller of a $1mil and up condo at the Grande.

    There are 20 listings over $1 mil, and the I checked all the way to October 1, and the highest sales price is $935K.

    That makes it an infinite months supply. OUCH!

    Why are 3 of the 5 pendings from January? I guess activity was down in December. The other 2 pendings are a short sale and an REO.

    I love that building, and it will eventually bounce back. It’s a classic, and will outperform the newer, more eastern areas of downtown.

  4. Denny Oh says:

    Schahrzad,

    I agree, there are a fair amount of $1million plus listings at the Grande, but keep in mind there are 2 towers there…we’re talking 442 units! So with 36 condos for sale total, that’s only 8% of the inventory – a very healthy number.

    And in terms on the higher end(over $1 million) listings, there are 20 – yes this is a high number, but clearly, some of these sellers are WAY off base.

    With that said, there are 5 units in escrow, 3 of which are between $1-1.6 million. But is that really that bad, considering it’s January and our economy is worse than many of us have ever lived through?

    And there were 4 recent sales that were right around and well over the $1million mark – I think we’re ok. But like you said, the Grande is a great building and is way undervalued.

    Now is the time for buyers to get a great deal.

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