Downtown Condo Pricing Direction?

[urbanrealtor]

[quote=davelj][quote=Eugene]On the other hand, are there any prospects of any significant inventory (aside from some possible supply @ VP) coming on the market in the next few years?

Are there any condo projects under construction right now? (I don’t follow the downtown, but I wouldn’t expect any.) Is anyone even going to break ground in 2011?

Downtown condos move at a rate of about 50 per month. 700 condos at VP would make a splash if they were all to land in the multiple listing system simultaneously, but they would be absorbed.

Looking at a wider picture, there are also some condos in North Park, and some more condos in Hillcrest, and lots of condos in Mission Valley, and VP would compete with them too to some extent.[/quote]

I already addressed these issues above. Vantage Point units are not for sale. Zell’s company bought the whole project as apartments a few months back.

The last few large projects to get completed downtown were Vantage Point, Smart Corner, Aperture, the Legend, and Bayside (might be a couple of others I’m missing here). These projects broke ground in ’07 or thereabouts (if memory serves). Nothing of size broke ground once ’08 began (as the lenders put a halt to things about three years too late), so it’s been over three years since a major project got underway. I doubt we’ll see anything break ground for another 5 years but we may see some proposals start to pop up in 3-4 years.

It’s a bit difficult to find out exactly how many new and existing units are available downtown but I’m pretty sure I can find someone who has that data, and I’ll report back once I have it. Having said that, my gut, which is not to be trusted, tells me it will be 2-3 years before we’re at anything resembling a “normal” level of inventory downtown simply because no new inventory will be coming on over the period.[/quote]

1: Vantage point units will totally sell.
A landlord with a pre-mapped building that cash flows positive is in no hurry to fire sale them but I would expect that at some point in the next few years, the nominal prices will cause selling to make more sense than renting.
Further, VP can sell them off slowly and at its leisure (while still pulling rents). The only question in that strategy is the cost of HOA obligations for the project owner.

2: Generally when a project hits the market, it does so with a very small MLS footprint. If every project showed up with dozens of units for sale, they would modify the market through problematic signaling. By saying that there are dozens (or hundreds) of units for sale, the perception is created that there is no urgency and thus buyers can wait or bargain. I actually think honest listing would be preferable but I don’t think any strategically thinking developer would do this and I am sure banks would avoid lending on such a building.

3: The mean rate (taken over the course of the year) for closings in downtown is about 75/month.
The instantaneous rate of change on this is highly correlated to season (about 50 per october to march and about 100 per month april to september) but it works out the same. About 900 per year. Currently, there is about 400 active for sale in 92101 with roughly translates to about 5 months of inventory.
In a distress-heavy area, that is an impressive mean closing speed.
There are currently about 139 pendings listed in 92101. That means there are approximately 3 units for every one buyer as of today.
If you ask Jim Klinge about this, he will probably tell you that this is a healthy ratio with a just a hint of tilting toward a seller’s market.

Therefore, I think that we are staring a temporary equilibrium right in the face. There is some persistent downward pressure but I don’t think we need to wait until 2-3 years to see “normal” (partially because I don’t think there is such a thing). In sum, I would argue that what we are seeing is heaps of property being dumped onto the market there (resales, short sales, reo’s, late releases) but (to modify my previous statements) that there is also a complimentary voracious appetite among buyers there. Thus we are looking at, I think, a potential inflection point. If rates remain low, the new lending innovations for attached housing remain intact, and inbound inventory does not swell by an order of magnitude (and that is a fuckton of “if’s”), we could be looking at a seller’s market there soon.

I have been running numbers on 92101 since 2008 and this the first time I have thought that.

Your knife catching, davelj, may have been a much better decision than you realize.

[davelj]

[quote=urbanrealtor]

1: Vantage point units will totally sell.
A landlord with a pre-mapped building that cash flows positive is in no hurry to fire sale them but I would expect that at some point in the next few years, the nominal prices will cause selling to make more sense than renting.
Further, VP can sell them off slowly and at its leisure (while still pulling rents). The only question in that strategy is the cost of HOA obligations for the project owner.[/quote]

I’m not even thinking about VP… Zell (ERP) rarely sells his apartment buildings. I don’t think this will be an issue for downtown supply for so long into the future that it’s not even worth contemplating.

[quote=urbanrealtor]

3: The mean rate (taken over the course of the year) for closings in downtown is about 75/month.
The instantaneous rate of change on this is highly correlated to season (about 50 per october to march and about 100 per month april to september) but it works out the same. About 900 per year. Currently, there is about 400 active for sale in 92101 with roughly translates to about 5 months of inventory.
In a distress-heavy area, that is an impressive mean closing speed.
There are currently about 139 pendings listed in 92101. That means there are approximately 3 units for every one buyer as of today.
If you ask Jim Klinge about this, he will probably tell you that this is a healthy ratio with a just a hint of tilting toward a seller’s market.
[/quote]

I just wonder how much inventory is *really* out there. Again, I think most of the specuvestors are gone or will be gone by year’s end (2011). Now we’re seeing some unemployment-related foreclosures and short sales, but those are slowing down. So, my REAL question is how many new, unoccupied, un-owned units are sitting in downtown’s inventory. For example, how many units in Bayside have been purchased (to use just one example)? I wouldn’t be surprised if there are 1,000 new units sitting in inventory downtown. Having said that… I just don’t know. I’m pretty sure that I can get my hands on that data soon, though. But if you know these actual numbers, by all means… inquiring minds and all. I’d love to be wrong about this.

[davelj]

[quote=urbanrealtor]

1: Vantage point units will totally sell.
A landlord with a pre-mapped building that cash flows positive is in no hurry to fire sale them but I would expect that at some point in the next few years, the nominal prices will cause selling to make more sense than renting.
Further, VP can sell them off slowly and at its leisure (while still pulling rents). The only question in that strategy is the cost of HOA obligations for the project owner.[/quote]

I’m not even thinking about VP… Zell (ERP) rarely sells his apartment buildings. I don’t think this will be an issue for downtown supply for so long into the future that it’s not even worth contemplating.

[quote=urbanrealtor]

3: The mean rate (taken over the course of the year) for closings in downtown is about 75/month.
The instantaneous rate of change on this is highly correlated to season (about 50 per october to march and about 100 per month april to september) but it works out the same. About 900 per year. Currently, there is about 400 active for sale in 92101 with roughly translates to about 5 months of inventory.
In a distress-heavy area, that is an impressive mean closing speed.
There are currently about 139 pendings listed in 92101. That means there are approximately 3 units for every one buyer as of today.
If you ask Jim Klinge about this, he will probably tell you that this is a healthy ratio with a just a hint of tilting toward a seller’s market.
[/quote]

I just wonder how much inventory is *really* out there. Again, I think most of the specuvestors are gone or will be gone by year’s end (2011). Now we’re seeing some unemployment-related foreclosures and short sales, but those are slowing down. So, my REAL question is how many new, unoccupied, un-owned units are sitting in downtown’s inventory. For example, how many units in Bayside have been purchased (to use just one example)? I wouldn’t be surprised if there are 1,000 new units sitting in inventory downtown. Having said that… I just don’t know. I’m pretty sure that I can get my hands on that data soon, though. But if you know these actual numbers, by all means… inquiring minds and all. I’d love to be wrong about this.

[davelj]

[quote=urbanrealtor]

1: Vantage point units will totally sell.
A landlord with a pre-mapped building that cash flows positive is in no hurry to fire sale them but I would expect that at some point in the next few years, the nominal prices will cause selling to make more sense than renting.
Further, VP can sell them off slowly and at its leisure (while still pulling rents). The only question in that strategy is the cost of HOA obligations for the project owner.[/quote]

I’m not even thinking about VP… Zell (ERP) rarely sells his apartment buildings. I don’t think this will be an issue for downtown supply for so long into the future that it’s not even worth contemplating.

[quote=urbanrealtor]

3: The mean rate (taken over the course of the year) for closings in downtown is about 75/month.
The instantaneous rate of change on this is highly correlated to season (about 50 per october to march and about 100 per month april to september) but it works out the same. About 900 per year. Currently, there is about 400 active for sale in 92101 with roughly translates to about 5 months of inventory.
In a distress-heavy area, that is an impressive mean closing speed.
There are currently about 139 pendings listed in 92101. That means there are approximately 3 units for every one buyer as of today.
If you ask Jim Klinge about this, he will probably tell you that this is a healthy ratio with a just a hint of tilting toward a seller’s market.
[/quote]

I just wonder how much inventory is *really* out there. Again, I think most of the specuvestors are gone or will be gone by year’s end (2011). Now we’re seeing some unemployment-related foreclosures and short sales, but those are slowing down. So, my REAL question is how many new, unoccupied, un-owned units are sitting in downtown’s inventory. For example, how many units in Bayside have been purchased (to use just one example)? I wouldn’t be surprised if there are 1,000 new units sitting in inventory downtown. Having said that… I just don’t know. I’m pretty sure that I can get my hands on that data soon, though. But if you know these actual numbers, by all means… inquiring minds and all. I’d love to be wrong about this.

[davelj]

[quote=urbanrealtor]

1: Vantage point units will totally sell.
A landlord with a pre-mapped building that cash flows positive is in no hurry to fire sale them but I would expect that at some point in the next few years, the nominal prices will cause selling to make more sense than renting.
Further, VP can sell them off slowly and at its leisure (while still pulling rents). The only question in that strategy is the cost of HOA obligations for the project owner.[/quote]

I’m not even thinking about VP… Zell (ERP) rarely sells his apartment buildings. I don’t think this will be an issue for downtown supply for so long into the future that it’s not even worth contemplating.

[quote=urbanrealtor]

3: The mean rate (taken over the course of the year) for closings in downtown is about 75/month.
The instantaneous rate of change on this is highly correlated to season (about 50 per october to march and about 100 per month april to september) but it works out the same. About 900 per year. Currently, there is about 400 active for sale in 92101 with roughly translates to about 5 months of inventory.
In a distress-heavy area, that is an impressive mean closing speed.
There are currently about 139 pendings listed in 92101. That means there are approximately 3 units for every one buyer as of today.
If you ask Jim Klinge about this, he will probably tell you that this is a healthy ratio with a just a hint of tilting toward a seller’s market.
[/quote]

I just wonder how much inventory is *really* out there. Again, I think most of the specuvestors are gone or will be gone by year’s end (2011). Now we’re seeing some unemployment-related foreclosures and short sales, but those are slowing down. So, my REAL question is how many new, unoccupied, un-owned units are sitting in downtown’s inventory. For example, how many units in Bayside have been purchased (to use just one example)? I wouldn’t be surprised if there are 1,000 new units sitting in inventory downtown. Having said that… I just don’t know. I’m pretty sure that I can get my hands on that data soon, though. But if you know these actual numbers, by all means… inquiring minds and all. I’d love to be wrong about this.

[davelj]

[quote=urbanrealtor]

1: Vantage point units will totally sell.
A landlord with a pre-mapped building that cash flows positive is in no hurry to fire sale them but I would expect that at some point in the next few years, the nominal prices will cause selling to make more sense than renting.
Further, VP can sell them off slowly and at its leisure (while still pulling rents). The only question in that strategy is the cost of HOA obligations for the project owner.[/quote]

I’m not even thinking about VP… Zell (ERP) rarely sells his apartment buildings. I don’t think this will be an issue for downtown supply for so long into the future that it’s not even worth contemplating.

[quote=urbanrealtor]

3: The mean rate (taken over the course of the year) for closings in downtown is about 75/month.
The instantaneous rate of change on this is highly correlated to season (about 50 per october to march and about 100 per month april to september) but it works out the same. About 900 per year. Currently, there is about 400 active for sale in 92101 with roughly translates to about 5 months of inventory.
In a distress-heavy area, that is an impressive mean closing speed.
There are currently about 139 pendings listed in 92101. That means there are approximately 3 units for every one buyer as of today.
If you ask Jim Klinge about this, he will probably tell you that this is a healthy ratio with a just a hint of tilting toward a seller’s market.
[/quote]

I just wonder how much inventory is *really* out there. Again, I think most of the specuvestors are gone or will be gone by year’s end (2011). Now we’re seeing some unemployment-related foreclosures and short sales, but those are slowing down. So, my REAL question is how many new, unoccupied, un-owned units are sitting in downtown’s inventory. For example, how many units in Bayside have been purchased (to use just one example)? I wouldn’t be surprised if there are 1,000 new units sitting in inventory downtown. Having said that… I just don’t know. I’m pretty sure that I can get my hands on that data soon, though. But if you know these actual numbers, by all means… inquiring minds and all. I’d love to be wrong about this.

[briansd1]

[quote=davelj] Having said that, my gut, which is not to be trusted, tells me it will be 2-3 years before we’re at anything resembling a “normal” level of inventory downtown simply because no new inventory will be coming on over the period.[/quote]

I feel the same.

Downtown is overall an expensive place to live with HOA and parking issues. It’s a place for childless professionals. Younger folks don’t have the downpayments that old folks do. And mortgages are harder to get.

Add to that employment related foreclosures (as opposed to investment/speculation foreclosures) and the market still has some time before returning to normal.

Unlike city centers on the East Coast, people in San Diego don’t feel compelled to live downtown. There are alternatives.

Another thing to watch for is demographic trends. Will people want to live closer to the urban core or outside? How will future gas prices affect where people choose to live?

I feel that many, older, well-to-do buyers who bought investment and second homes during the peak are tiring of downtown and would rather be elsewhere. Let’s see how long they hold in the face of a protracted stagnation in prices.

[briansd1]

[quote=davelj] Having said that, my gut, which is not to be trusted, tells me it will be 2-3 years before we’re at anything resembling a “normal” level of inventory downtown simply because no new inventory will be coming on over the period.[/quote]

I feel the same.

Downtown is overall an expensive place to live with HOA and parking issues. It’s a place for childless professionals. Younger folks don’t have the downpayments that old folks do. And mortgages are harder to get.

Add to that employment related foreclosures (as opposed to investment/speculation foreclosures) and the market still has some time before returning to normal.

Unlike city centers on the East Coast, people in San Diego don’t feel compelled to live downtown. There are alternatives.

Another thing to watch for is demographic trends. Will people want to live closer to the urban core or outside? How will future gas prices affect where people choose to live?

I feel that many, older, well-to-do buyers who bought investment and second homes during the peak are tiring of downtown and would rather be elsewhere. Let’s see how long they hold in the face of a protracted stagnation in prices.

[briansd1]

[quote=davelj] Having said that, my gut, which is not to be trusted, tells me it will be 2-3 years before we’re at anything resembling a “normal” level of inventory downtown simply because no new inventory will be coming on over the period.[/quote]

I feel the same.

Downtown is overall an expensive place to live with HOA and parking issues. It’s a place for childless professionals. Younger folks don’t have the downpayments that old folks do. And mortgages are harder to get.

Add to that employment related foreclosures (as opposed to investment/speculation foreclosures) and the market still has some time before returning to normal.

Unlike city centers on the East Coast, people in San Diego don’t feel compelled to live downtown. There are alternatives.

Another thing to watch for is demographic trends. Will people want to live closer to the urban core or outside? How will future gas prices affect where people choose to live?

I feel that many, older, well-to-do buyers who bought investment and second homes during the peak are tiring of downtown and would rather be elsewhere. Let’s see how long they hold in the face of a protracted stagnation in prices.

[briansd1]

[quote=davelj] Having said that, my gut, which is not to be trusted, tells me it will be 2-3 years before we’re at anything resembling a “normal” level of inventory downtown simply because no new inventory will be coming on over the period.[/quote]

I feel the same.

Downtown is overall an expensive place to live with HOA and parking issues. It’s a place for childless professionals. Younger folks don’t have the downpayments that old folks do. And mortgages are harder to get.

Add to that employment related foreclosures (as opposed to investment/speculation foreclosures) and the market still has some time before returning to normal.

Unlike city centers on the East Coast, people in San Diego don’t feel compelled to live downtown. There are alternatives.

Another thing to watch for is demographic trends. Will people want to live closer to the urban core or outside? How will future gas prices affect where people choose to live?

I feel that many, older, well-to-do buyers who bought investment and second homes during the peak are tiring of downtown and would rather be elsewhere. Let’s see how long they hold in the face of a protracted stagnation in prices.

[briansd1]

[quote=davelj] Having said that, my gut, which is not to be trusted, tells me it will be 2-3 years before we’re at anything resembling a “normal” level of inventory downtown simply because no new inventory will be coming on over the period.[/quote]

I feel the same.

Downtown is overall an expensive place to live with HOA and parking issues. It’s a place for childless professionals. Younger folks don’t have the downpayments that old folks do. And mortgages are harder to get.

Add to that employment related foreclosures (as opposed to investment/speculation foreclosures) and the market still has some time before returning to normal.

Unlike city centers on the East Coast, people in San Diego don’t feel compelled to live downtown. There are alternatives.

Another thing to watch for is demographic trends. Will people want to live closer to the urban core or outside? How will future gas prices affect where people choose to live?

I feel that many, older, well-to-do buyers who bought investment and second homes during the peak are tiring of downtown and would rather be elsewhere. Let’s see how long they hold in the face of a protracted stagnation in prices.

[briansd1]

It’s interesting to me that there are quite a few buyers who bought at the “low” in 2008 (remember, it was a great buying opportunity after the real estate crash, but before the financial crisis).

Those buyers have run out of wherewithal already.

Here’s an example.
http://www.sdlookup.com/Property-F9E589ED-1205_Pacific_Hwy_305_San_Diego_CA_92101#117166

And talking about inventory, listings by supposed “solid” sellers aren’t what they seem.

This previously “solid” seller who would never “give away” his condo is now in distress.

http://www.sdlookup.com/Property-29FDA794-1205_Pacific_Hwy_701_San_Diego_CA_92101#117169

[briansd1]

It’s interesting to me that there are quite a few buyers who bought at the “low” in 2008 (remember, it was a great buying opportunity after the real estate crash, but before the financial crisis).

Those buyers have run out of wherewithal already.

Here’s an example.
http://www.sdlookup.com/Property-F9E589ED-1205_Pacific_Hwy_305_San_Diego_CA_92101#117166

And talking about inventory, listings by supposed “solid” sellers aren’t what they seem.

This previously “solid” seller who would never “give away” his condo is now in distress.

http://www.sdlookup.com/Property-29FDA794-1205_Pacific_Hwy_701_San_Diego_CA_92101#117169

[briansd1]

It’s interesting to me that there are quite a few buyers who bought at the “low” in 2008 (remember, it was a great buying opportunity after the real estate crash, but before the financial crisis).

Those buyers have run out of wherewithal already.

Here’s an example.
http://www.sdlookup.com/Property-F9E589ED-1205_Pacific_Hwy_305_San_Diego_CA_92101#117166

And talking about inventory, listings by supposed “solid” sellers aren’t what they seem.

This previously “solid” seller who would never “give away” his condo is now in distress.

http://www.sdlookup.com/Property-29FDA794-1205_Pacific_Hwy_701_San_Diego_CA_92101#117169

[briansd1]

It’s interesting to me that there are quite a few buyers who bought at the “low” in 2008 (remember, it was a great buying opportunity after the real estate crash, but before the financial crisis).

Those buyers have run out of wherewithal already.

Here’s an example.
http://www.sdlookup.com/Property-F9E589ED-1205_Pacific_Hwy_305_San_Diego_CA_92101#117166

And talking about inventory, listings by supposed “solid” sellers aren’t what they seem.

This previously “solid” seller who would never “give away” his condo is now in distress.

http://www.sdlookup.com/Property-29FDA794-1205_Pacific_Hwy_701_San_Diego_CA_92101#117169

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