I would like to respond to the comment about replacement costs. The reasoning sounds good on the surface and the cancellation of condo projects certainly will tend to reduce downward pressure on existing units.
I predict that the writer has not yet had a ring side seat at a real estate down turn. In the mid 90’s many apartment buildings in City Hts sold for under $15,000 per unit. Apartment buildings sold for less than 1/2 the cost of building the fees and permits to reproduce them!!!
During the 90’s I was told by several apartment developers (actually former developers) they could not make a project pencil if they were building on free land.
The building of San Diego like any other city occurs in stops and starts. Remember all the see through office buildings in the early 90’s followed by 10 years of no office building construction.
We have been on an incredible roll for the last six years or so. That is an extremely long time for a building boom but it does not mean that the business cycle or the real estate cycle have been repealed.
The free market system is working even with all of the government interference. Contractors have been making huge profits, their workers are well paid, and people are flocking to the business.
Workers are busy building housing for the people building housing, for the people building housing. Even so it is getting easier to find a contractor to do bid on your project. The cost of building materials is stabilizing as more and more production capacity is brought on line.
When housing slows down, Contractor profits will plummet; building material prices will plummet, and land prices will crash!! In the mid 90’s finished lots were selling for less than the replacement cost of the curbs, gutters, and sidewalks already installed.
I own a 20 unit apartment building with condo permits put on it by a former owner. As little as six months ago the phone was ringing off the hook from brokers wanting to bring me an offer. They no longer call. At one point those permits made the property worth a $40,000 per unit premium over a similar building without permits. That premium has disapeared. That building is worth $800,000 less than it was worth a year ago! How much have replacement costs dropped?
