I recently posted a blog that reviewed some sales statistics at The Grande condos. The analysis covered sales in both the North and South Grande towers, primarily during the second half of 2008. This post addresses a comment that a reader posted.
Comment from citiboy:
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 Bosas 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.
Here is my response:
I completely agree with youthat I’m right! Just kidding “ honestly though, I do agree that there is very little “high end” inventory downtown. Both Sapphire Tower and Bayside are about 50% sold and nothing else is slated to break ground for quite some time. In fact, theres very little residential construction scheduled to begin period “ there was a lot planned, but most of it has been put on hold, or has simply been terminated.
And while I do believe the long term outlook for all price ranges downtown will rise, I think immediate gains are still a little ways out. Primarily because San Diego has a large number of small businesses, many of which have been affected by the economy and as a result, many people are not in a position, or mindset, to purchase million dollar condos. I think they are going to wait for the economy to turn around before they buy that second home, or whatever their needs are.
The other issue is that the lower end, specifically anything below the $350“400K range, is being hit extremely hard. Homes that were purchased for $500“800K a few years ago are now selling for $300“400K. These condos were purchased by people who stretched themselves to get into the downtown market and bought inventory that wasnt anything special “ buildings that dont have the best location, views, quality, amenities and so on. Im not saying that these are bad buildings, but more so that theres nothing unique about them.
And now that the market has turned, there are short sales and foreclosures. These lower priced homes are moving, but as more ARMs(Adjustable Rate Mortgages) adjust, well see more distressed sales. Investors and more recently, first time home buyers, are back in the market, picking up these incredible deals. And until these distressed sales are absorbed, the prices will continue to drop. Going back to the high end inventory, we have to remember that theres a chain reaction in housing “ first time home buyers buy at the low end, those sellers buy a little more home, those sellers buy something more expensive and so on.
My point is that there need to be people who can afford the high end homes and until people who have equity in their $700“900K homes can sell, they probably wont be able to buy the million dollar plus homes. Hopefully Im wrong and things will turn around sooner. In the meantime, I think liquidity is the key. Sellers need to sell now and buyers need cash.
In the end though, it depends on the buyer/sellers needs. Everyone has their own situation and specific needs. If you would like to discuss your options and review your current situation, please contact me.
Denny Oh 858“243“2092 [email protected]
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