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.

9 comments:

Anonymous said...

It would be interesting to look at some multifamily projects to see if they pencil out.

Mark in San Diego said...

Haven't checked in here for a while since no new news, but a nice roundup of downtown. . .the Electra is starting to become the new "black hole of value" downtown. . .with well over 45 units already on the re-sale market (and no telling how many the builder took back) With high homeowner dues (north of 700) and not the greatest floor plans (I have looked at two or three) it may be a hard sell. . .if people look here and then over at the Grande, they will buy there. . .much better value.

Agree, downtown has had some nice improvements since my almost two years of living here - Balboa Theater, US Grant, even some of the empty space on Broadway is filling up (Fudruckers - hey its better than an empty storefront). . . now if we can just get the California Theater moving!!

PL Willy said...

Mark in San Diego,
Have enjoyed your posts, both here and elsewhere. The Electra is getting ready for a big "race to the bottom" as the speculators try to position their unit as the lowest price unit in their range, and assume that there are just a limited pool of borrowers. I think the Grande is a much better value---- someone messed up in the design of the Electra units---- assuming a building full of elderly bachelor millionaires.

Mark in San Diego said...

More on Electra - yes, today the race for the bottom really ramped up . . .an 8th floor 2/2 just reduced to 599!!

coolraz said...

Does anyone know if there is a LanRecords online for Cali? We have one here in maryland that has scanned in mortage documents etc that is very helpful in finding out what type of financing the person who owns the property used when buying it. So is there something similar that you can use to look up this info for SD properties? Thanks!

Cort said...

Just came across your blog. My wife and I live out in Palm Springs and are looking downtown for a getaway condo. I've been looking at rents vs. mortgages in case I would want to rent my place out, and they are starting to even out if you can pick up one of these short sales for the low end of their asking price, with reasonable HOA's. I'd be interested to see what you find in your research. Anyway, I'll be checking in on occasion. I'm trying to learn the different areas of Downtown San Diego and what areas are worth looking at. Any advice you or your readers could provide would be helpful.

Mr. Brightside said...

Hi Cort,

I'm happy to help you, post here or for quicker response my email is brightside@inbox.com.

3DSumoWrestler said...

Great blog. Wish I'd known about it earlier when shopping around downtown for a new place.

I recently moved into my new place at The Mark. I have to say that even though I don't think we've seen prices bottom out yet, I'm extremely happy.

It seems that your predictions about these East Village places are spot on in terms of the number of ready-to-move-in units. There seemed to be a fair amount of vacant units in The Mark when I was looking in September. Many of which seemed to have had steady price cuts through the year.

Anonymous said...

come back and post again, Mr. Brightside. Your comments are missed.