San Diego Housing Bubble News and Analysis

My feelings are that downtown is still way overpriced. I am not trying to be to much of a wet towel but I think there is just alot more room for depreciation due to inventory, speculation, distress...you know the same old story. I also think some of the newer developments will have issues with builders defects that will be difficult to resolve if the developers are out of business. This translates to assessing the homeowners that are not in distress. If you have a year or two or three to hold out I think you will be happy you did.

I think it is a great time for you to buy a downtown condo. Why limit it to $300K? Or maybe buy two at that price! I'm sure the neighbors around your new place will love you for providing them with an endless stream of European tourists to interact with. Some of the negative nellies on this board will try to scare you with tales of bankrupt HOAs, but don't let them discourage you. They're just jealous bitter renters. There's never been a better time to buy a downtown condo!

Disclaimer: Not investment advice

I don't think you are going to find a $300K unit in a good building, unless you are talking about a studio unit. I'm not sure the better buildings even offer studios. I can tell you that many of the buildings downtown, even some of the ones considered high-end, have or have had some pretty significant construction-related problems. Plumbing issues seem to be a recurring theme, in particular. If I were you I would do plenty of research on each development. It's not going to be "if" a building has issues, it's going to be "how many" and "how bad".

SD Lookup has a condominium forum that covers many of the downtown condos. Good place to start:

http://www.sdlookup.com/REData/tabid/59/...

Is San Diego really that big of a European destination? I mean I kinda understand LA with Hollywood and all, but lets be honest LA and SD are not that different on a 1 week vacation and there is alot more there to visit. (disneyland, Ustudios, Venice Beach, etc etc.)

Why not go to the south of spain or portigal, or France or Greece or Italy if you are looking for weather? Why fly half way across the world for the same thing? (I have been in all of the above persoally, it isnt that different weather wise. Culturally sure, but not weather.)

And for those that do take the 12 hour flight here, and all the trouble of connections and passports and such, do they really want to be in a studio in a so so building?
(I am just thinking out loud here)

Why not go to the south of spain or portigal, or France or Greece or Italy if you are looking for weather? Why fly half way across the world for the same thing? (I have been in all of the above persoally, it isnt that different weather wise. Culturally sure, but not weather.)

Why fly within Europe when they can come here and get the "rubber glove" treatment from the TSA gangstaz and the "Jack Bauer" treatment from our customs and immigration staff? Why spend $100 euro on Ryanair tickets for a 2 hour flight to south of France or Spain where you can see topless beauties when you can spend $600 euro to fly to San Diego and hang out with drunken thugs and their chubby girlfriends from Alabama in PB? I mean it's really a no-brainer. Don't get me wrong, I love this place but as a tourist destination for anyone outside of the US I don't really get it. It's just too far away and too much of a hassle. A lot of euros do come here though, I see them all the time. You can spot them because they're the ones that aren't wearing Chargers jerseys 3 times too big for them or walking around with a Double Gulp from 7-Eleven in each hand...

I believe these are well-to-do folks from Latin America who have family ties to Europe.

We fail to realize it but there are different classes of Latinos.

I heard that some Euros now have to get evisas. Another travel hassle.

https://esta.cbp.dhs.gov/esta/esta.html?...

This will probably get even uglier in the next year as more condo project get complete and more inventory builds up.

"Developers who once snapped up downtown land with almost giddy abandon have retreated amid falling prices and low demand. Of the 22 condo buildings in which developers are offering units for sale, all but three have completed construction, and 1,549 condos remain unsold.

It would take more than five years to sell that many condos if the sluggish pace of sales during the past year were to continue, according to MarketPointe Realty Advisors, which tracks the new-home market.

The reason is that the $415,000 median price of a resale condo downtown during the third quarter was down more than 38 percent from its 2004 peak of $675,000, according to MDA DataQuick. Last month, the median dropped even further, to $377,500."

http://sdhomes.signonsandiego.com/forecl...

Thanks for the food for thought. I appreciate the insight. I am not sure anyone answered the question if any buildings allow subletting or vacation rentals. Thoughts? Sorry for going awol after the initial post.
92024
P.S. Concho, great post. You have mastered the art of Piggy sarcasm. Sorry for wanting to buy real estate. The nerve!

Concho isn't being sarcastic - he's being realistic

San Diego IS a vacation destination - for people in cars

Why would a zonie driving in from Phoenix or Tuscon want to rent a vacation rental in a high rise condo downtown?

The issue of vacation renting was more of a subtext. I was more interested in any possible pitfalls other then depreciation.

How about stepping out the front door of your fancy new digs to find the homeless pissing on the side of the building?

You mean pitfalls like that?

....and then looking across the street to see the homeless pissing on the side of the building that is now blocking your unobstructable view?

Sorry for the sarcasm, but if you're asking for investment advice on an internet message board, you're asking for it! As for purchasing real estate, I have nothing against it. Some of us here have already gotten incredible deals that would have seemed impossible only a couple of years ago. There are lots more of these deals to come. Having owned (and sold) a condo in Hillcrest and also having talked to many condo owners here in SD, I can give you a few pieces of advice (with no sarcasm even!)

There are good buildings and bad buildings. Good buildings have a large percentage of owner-occupied units, good participation by homeowners in the HOA, and a healthy surplus in the HOA's bank account. When disputes arise between homeowners or when there are problems in the common area (as there always are), the homeowners roll up their sleeves and get things taken care of. In these buildings most of the homeowners know each other and while they may not be friends they are cordial to one another because they understand that they all share a common interest. They spend their HOA money wisely and (most importantly) they pay their HOA dues.

In good buildings, renting out your unit (especially to short-term vacationers) is likely to be frowned on at a minimum and is more likely to get you in big trouble with your HOA. Most good buildings will not allow short-term rentals.

That said, if you really want to buy a condo and rent it out you will probably not be able to do this in a good building, so you'll have to settle for a bad one. What's a bad building? It has a large number of "investor" owners that rent their units out, who never come to HOA meetings, who never vote for HOA increases even when the HOA bank account is empty and the common areas are a mess, who simply don't pay their HOA dues requiring the HOA to spend money on attorneys, etc... Such buildings can be nightmares to live in, especially for those foolish enough to purchase an owner-occupied unit. Your neighbors are likely to be young people having lots of parties, or vacationers tracking sand down the hallways and parking in the wrong spots in the parking garage, etc... It can be difficult to sell a unit in a bad building, especially when there are lots of units available (like right now).

There are not a lot of good buildings and units in good buildings command a premium. Do your research carefully before putting any of your money in a downtown condo. There are nice units available but the prices could still come down. I know of one or two good buildings but I'm not going to name them here because that would be giving you the benefit of my work and research without you having to do it yourself :-) They won't be hard to find if you look carefully.

The newer buildings are the biggest risk in my opinion as their HOAs have not been operating for very long, and they are likely to have many "investor" owners that expect to be able to just throw a little cash down and then have their "investment" magically maintain or increase its value over time without them having to do any work. Many of the newer buildings still have lots of vacant units which means that the HOA will be in big trouble from day one. Also, most newer buildings have ridiculously low HOA fees (to entice buyers) -- it is not uncommon for an HOA in a new building to be flat broke in the first few months after everyone has moved in, requiring an increase in fees. This is true even when the HOA seems "high" like $400/month. It is not cheap to pay for swimming pools, 300 hallway lights and common area insurance on a $30M building.

Good luck!

Your point is valid but that's really a criticism of urban areas in general.

Not everybody likes rural or suburbs.

The only urban scene where I have not seen that is in Singapore.

Anyway that city is more of a concrete-jungle-meets-stepford-wives weirdness than I have ever seen. Though the Indian quarter is nice...

Great post Concho. Thanks for your help. I usually piss off the balcony, so the bum's won't be a bother.