Hello 2025

 Time to blog about the bubble again?

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.

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.

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.

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

Four Acqua Vista Foreclosures

Over the last day or so foreclosure.com 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.

$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

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.

Problems at Solar Lofts & Tower?

Extremely interesting report over in this forum post regarding part of the Solar Tower has gone into foreclosure. There is also a report of a developer bankruptcy possibility as well.

Solara Tower was supposed to be the sibling project to the neighboring Solara Loft project. Solara Loft is now completed and sales are almost assuredly less than projected and given the broader credit market problems this is not too surprising.

Former Condo Project Converts to Affordable Rentals

The condo project planned for the East Village to be built where the Burger King on 10th Avenue now resides is going to be built after all, this time as an affordable rental project with CCDC and tax free bond subsidies.

From the Union Tribune story today I find the following detail particularly interesting:

"The developer, San Diego-based Affirmed Housing, got the land at the bargain-basement price of $4.4 million, or $202 a square foot. The current per-square-foot average is $250; the average was $350 during the market heyday two years ago, said one real estate economist."

This means that developable "dirt" downtown has depreciated roughly 40%. While not surprising given predictions made on this blog and by many market watchers getting confirmation with actual transaction data is always notable.

Downtown Condo at Park Blvd West #1405

This smaller two bedroom unit at Park Boulevard West is listed substantially below its last sale in December 2004 and is very close to the original developer price set by DR Horton probably sometime in early 2003.

Market watches may be interested to know that this project is a bit of a sibling to La Boheme in North Park which is the subject of a lot of promotion for a "quasi-auction" that is taking place soon.

Type: Listed on MLS(#076047580)

List Price: $409,900
Cost: $500,000
Loss@6% Sales Expenses: $114,694
Loss%: 22.94%

Purchase Date: 12/23/2004
Holding Period: 33 months and counting...

Bedrooms: 2
Bathrooms: 2
Square Feet: 910

Purchase Details: view

Downtown Condo at Symphony Terrace #503

This Cortez Hill condo is interesting as it's last sale date is in early 2004, it's a bank owned property and based on the MLS pictures it was throughly trashed by the prior tenant.

Type: Listed on MLS(#076070982)

List Price: $209,900
Cost: $276,500
Loss@6% Sales Expenses: $79,194
Loss%: 28.64%

Purchase Date: 02/18/2004
Holding Period: 43 months and counting...

Bedrooms: 1
Bathrooms: 1


Purchase Details: view

Huge Loss on Bank Owned Downtown Condo at La Vita #1308

La Vita is located in Little Italy and is a "middle market" complex. This unit pretty much personifies the current crisis in the credit markets as it was purchased just over a year ago and has already gone back to the lender.

Type: Listed on MLS(#076059723)

List Price: $549,900
(Range priced $549,900 to $549,900)
Cost: $725,000
Loss@6% Sales Expenses: $208,094
Loss%: 28.70%

Purchase Date: 08/04/2006
Holding Period: 12 months and counting...

Bedrooms: 2
Bathrooms: 2
Square Feet: 1132

Purchase Details: view

Downtown Condo at ParkLoft #414

ParkLoft is a mid rise "loft" style project near Petco Park.

This unit has a fairly large loss but what is really interesting is that it is listed below the developer sale price from four years ago - way back in 2003!

Type: Listed on MLS(#076042541)

List Price: $487,000
(Range priced $475,000 to $499,000)
Cost: $523,900
Loss@6% Sales Expenses: $66,120
Loss%: 12.62%

Purchase Date: 06/27/2003
Holding Period: 50 months and counting...

Bedrooms: 0
Bathrooms: 1.5
Square Feet: 1380

Purchase Details: view

Taxes Due on Foreclosed and Short Sale Properties

I found this Union Tribune article very insightful on the short sale issues surrounding foreclosed and short sale properties.

Downtown Condo at Horizons #1301

Horizons is a Bosa project in downtown's Marina District.

The loss on this unit isn't horrible relative to the other losses that we've seen. What is very notable is the last sale was back in April 2004 which is getting awfully close to 2003 prices. Keep in mind this is a very high quality building and not an apartment conversion.

Type: Listed on MLS(#076057042)

List Price: $609,000
(Range priced $599,000 to $619,000)
Cost: $635,000
Loss@6% Sales Expenses: $62,540
Loss%: 9.85%

Purchase Date: 04/28/2004
Holding Period: 40 months and counting...

Bedrooms: 1
Bathrooms: 2
Square Feet: 1036

Purchase Details: view

Bankers Hill Condo Project Ceases Construction

The San Diego Union Tribune reports on the work stoppage at a Bankers Hill midrise.

This is too bad in my view as more development on Bankers Hill is a positive. Regardless this is not overly surprising given the credit crunch on Wall Street.

Lofts at 777 6th Avenue

The Lofts at 777 6th Avenue was a rental project that was converted into condos. This is another apartment conversion project that is likely to have a majority of the units worth less than what the current owners paid. There are four units current listed for sale at losses noted below:

Unit #411
Type: Listed on MLS(#076058976)

List Price: $409,000
(Range priced $389,000 to $429,000)
Cost: $438,990
Loss@6% Sales Expenses: $54,530
Loss%: 12.42%

Purchase Date: 10/27/2006
Holding Period: 9 months and counting...

Bedrooms: 1
Bathrooms: 1
Square Feet: 749

Purchase Details: view

Unit #207
Type: Listed on MLS(#076050300)

List Price: $387,000
(Range priced $379,000 to $395,000)
Cost: $441,000
Loss@6% Sales Expenses: $77,220
Loss%: 17.51%

Purchase Date: 10/12/2006
Holding Period: 9 months and counting...

Bedrooms: 1
Bathrooms: 1
Square Feet: 725

Purchase Details: view

Unit #415
Type: Listed on MLS(#076054817)

List Price: $412,000
(Range priced $399,000 to $425,000)
Cost: $486,000
Loss@6% Sales Expenses: $98,720
Loss%: 20.31%

Purchase Date: 10/04/2006
Holding Period: 9 months and counting...

Bedrooms: 1
Bathrooms: 1


Purchase Details: view

Unit #205
Type: Listed on MLS(#076058984)

List Price: $389,000
(Range priced $379,000 to $399,000)
Cost: $441,000
Loss@6% Sales Expenses: $75,340
Loss%: 17.08%

Purchase Date: 10/02/2006
Holding Period: 9 months and counting...

Bedrooms: 1
Bathrooms: 1
Square Feet: 725

Purchase Details: view

Downtown Condo at Symphony Terrace #801

Symphony Terrace is on Cortez Hill and was built in the early 80s. As one of the older buildings around this property has an interesting price history. The description indicates the unit is in need of upgrades.

Type: Listed on MLS(#076039349)

List Price: $499,000
(Range priced $499,000 to $499,000)
Cost: $560,000
Loss@6% Sales Expenses: $90,940
Loss%: 16.24%

Purchase Date: 07/02/2004
Holding Period: 36 months and counting...

Bedrooms: 3
Bathrooms: 2
Square Feet: 1384

Purchase Details: view

Downtown Condo at La Vita #M706

La Vita is an Intergulf project in Little Italy.

This unit is at the top of the midrise tower. This unit is listed dramatically below its last sale price from early 2006.

Type: Listed on MLS(#071053258)

List Price: $699,900

Cost: $810,000
Loss@6% Sales Expenses: $152,094
Loss%: 18.78%

Purchase Date: 02/03/2006
Holding Period: 17 months and counting...

Bedrooms: 2
Bathrooms: 2
Square Feet: 1246

Purchase Details: view