Sunday, February 24, 2008

2008 Predictions

It's been an interesting year since my last predictions. For the most part the market performed pretty much as speculated. In retrospect it was pretty easy predict the market selloff. Predicting the bottom might prove a more complex task. At any rate here are my predictions for 2008.
  1. Prices in the aggregate continue to decrease. The slow deflation of values continues with the distressed properties leading the way.

  2. The new developments, Electra, Aria, The Mark, SmartCorner and Alta continue to have relatively large ready for sale and unoccupied units that slowly get occupied via sales or rental programs. Back in the "old" days it was normal for a new condominium project to have unsold units that were available for immediate move in. This was why the early phase people got a relative bargain. This relationship got pretty warped during the bubble and to some degree the standing inventory may point to a return of the normal pre-bubble relationships returning which is a good thing.

  3. A bottom isn't reached in 2008 however relative bargains that have seen most of their deprecation start to become interesting.

  4. In the broader market the concept of cash flow positive/neutral rental property starts to become more realistic. I'm planning on doing some analysis in this area to see what things are like today and what price action is needed for this to start making sense. If anyone has any specific examples post them or email them over as this may be an interesting topic to revisit over the course of the year.

  5. Wildcards that could factor significantly into the market include the increase of the conforming loan amounts, recovery or yet another leg down in the credit markets, the prospects of a recession and inflationary pressures driving interest rates higher.
The market will remain worth watching. Downtown will continue to grow in other areas like hotels, rental apartments, office and entertainment which will help create an even better environment that will pair up nicely with reduced prices.

Thursday, February 14, 2008

Another La Vita Unit Close to Developer Price

La Vita is a middle market property in Little Italy. Built by Intergulf.

Unit #1508 which is a nice northeast view two bedroom recently closed for $525,000, previously sold for over $700,000.

Keep in mind that the developer prices for La Vita were set at least a year before the initial closings took place in early 2005.

Saturday, January 05, 2008

La Vita Getting Close to Developer Price

This bank owned mid rise penthouse has been price cut almost down to the original developer price.

Currently listed at $549,000 this unit once sold for a whopping $810,000.

Monday, December 31, 2007

2007 Predictions Revisited

I know the blog has been slow lately and I thank those of you that email me privately about the blog and what I've been up to. Doing this has been extremely fun and personally rewarding.

The original mission of proving the market was moving down via posting about the price action of specific properties has been met. I still intend to blog from time to time about specific properties or other items of interest so check back.

It's New Years Eve and there is very little time to update the blog with analysis of last year's predictions before we uncork 2008. Stay tuned for another post on predictions for next year.

The Predictions
1.) San Diego property will continue to decline in value with condos continuing to lead the movement down. This decrease will range from 5-25%.
I think it's very safe to say that this value range decrease came to pass for all but a very small portion of unique properties.
2.) Downtown condos will depreciate another 10-25% in another slow and orderly decline similar to how 2006 played out. Quality will be key in terms of holding value.
Again, this also came to pass. Quality condos did fair better than the marginal condos, apartment conversions in particular.
3.) At least one more downtown condo project will go rental before completion. As noted on this blog the former Broadway Lofts condominiums has reverted to a rental project. A potential candidate for going the rental route is Solara Lofts which is an office building conversion project that should be finished by early summer, since sales haven't started yet it may be prudent for them to pull the development off of the market until prices stabilize.
While Solara Lofts did not convert to rentals, the SmartCorner project is advertising new condos as rentals on Craigslist.
4.) The massive number of new urban condos coming will continue to impact price declines in the attached sector of the market, however since many of the developers will decide to carry inventory for 3-6 months after project completion and since the natural tendency for construction projects to take longer than scheduled the inventory increase and price declines continue into 2008.
There are many unsold new developer units on that are not listed for sale as well as new units at Aria and Electra coming onto the market, this prediction while hard to quantify is arguably taking place and as predicted will persist into 2008.

My closing comments for last year:
In summary the decline trend continues for 2007 with a bottom in the market pushed out past the coming year. A significant wildcard are interest rates which could drive a quicker decline if the one two punch of materially higher rates combined with adjustable mortgage resets combines to drive more foreclosure and short sale activity
While interest rates didn't go up much the major credit market problems related to the housing correction did in fact drive short sale and foreclosure activity in 2007 which clearly added to the price declines experienced in 2007.

All in all it's been a very interesting year in San Diego real estate

Friday, November 02, 2007

Four Acqua Vista Foreclosures

Over the last day or so lists four Acqua Vista condos that are end the end of the foreclosure process.

Units 222, 536, 858 and 1106 to be specific.

I think it is safe to say at this point in time that every unit in the building is worth less than the original developer price.

Tuesday, October 16, 2007

$200K+ Loss on Foreclosed Downtown Condo at Discovery #211

This is a huge loss from the high water mark set in the summer of 2004. Based on the new listing price and the original developer price this property is likely valued at mid to late 2004 prices. I also know that this unit was vacant for probably two years so the "all in" loss on this property is quite substantial. I do think this is a good example of once underutilized "portfolio" property that wasn't being used now coming back to the market.

The question is how many properties like this are out there?

Type: Listed on MLS(#071081723)

List Price: $524,900
Cost: $699,000
Loss@6% Sales Expenses: $205,594
Loss%: 29.41%

Purchase Date: 07/28/2004
Holding Period: 39 months and counting...

Bedrooms: 2
Bathrooms: 2.5
Square Feet: 1329

Purchase Details: view

Thursday, October 11, 2007

2003 Prices Arrive at Discovery

Very interesting closed sale on this Discovery condo

This is an almost four year hold time that still generated a substantial loss.