Downtown Condo Stats

[davelj]

capeman, I hope you’re right, but I doubt things will get that bad. Here’s the problem. It’s extremely difficult to find a 2bed/2bath, 1000 sqft. downtown renting for less than $2,000/month, and most of them are in the $2,200 – $2,500 range. Yeah, you MIGHT be able to find the occasional desperate owner with a crappy unit willing to rent it out for $1,800. (While rents might go down in the coming recession, they probably aren’t going to go down by more than 3%-5% if the 90s are any guide.) So, assuming a price of $250/sqft. you get a price of $250K for a 1000 sqft. unit. Using traditional financing (20% down, 7% 30 yr fixed) you’ll get a total monthly payment (excluding principal) of about $1,800/month including taxes, HOAs, etc. In other words, at $250K most of these units will actually cash flow pretty well. While always possible (isn’t anything?), that’s a highly unlikely scenario. As was discussed in a previous thread a few months back, it’s completely logical for a would-be homeowner to pay a premium to what they would otherwise pay to rent the same unit, although debatable as to what that premium should be (I argued 20%-40% – others argued higher). My point is that if you’re waiting for $250/sqft. downtown, you’ll probably never buy downtown. $300/sqft. is possible, but also fairly unlikely. Nevertheless, I support you in your pessimism.

[davelj]

capeman, I hope you’re right, but I doubt things will get that bad. Here’s the problem. It’s extremely difficult to find a 2bed/2bath, 1000 sqft. downtown renting for less than $2,000/month, and most of them are in the $2,200 – $2,500 range. Yeah, you MIGHT be able to find the occasional desperate owner with a crappy unit willing to rent it out for $1,800. (While rents might go down in the coming recession, they probably aren’t going to go down by more than 3%-5% if the 90s are any guide.) So, assuming a price of $250/sqft. you get a price of $250K for a 1000 sqft. unit. Using traditional financing (20% down, 7% 30 yr fixed) you’ll get a total monthly payment (excluding principal) of about $1,800/month including taxes, HOAs, etc. In other words, at $250K most of these units will actually cash flow pretty well. While always possible (isn’t anything?), that’s a highly unlikely scenario. As was discussed in a previous thread a few months back, it’s completely logical for a would-be homeowner to pay a premium to what they would otherwise pay to rent the same unit, although debatable as to what that premium should be (I argued 20%-40% – others argued higher). My point is that if you’re waiting for $250/sqft. downtown, you’ll probably never buy downtown. $300/sqft. is possible, but also fairly unlikely. Nevertheless, I support you in your pessimism.

[PerryChase]

I fully expect Downtown San Diego to be a place of mostly renters with a minority of high-end homeowners.

Right now, Downtown is a “premium” place to live. But give it a few years for those apartments/condos to get old and dirty.

People who grew up in the suburbs think that Downtown living is glamourous (it can be if you’ve got the money) but they’ll soon realize otherwise — especially if they spend all their money on housing.

The suburban lifestyle is very pervasive and people will get married, or have children (within or outside of marriage), then they’ll move. People will get old and fat and I’ll need that SUV with room to park so they can easily unload their Costco purchases.

In a boom, it makes sense to buy Downtown, but even with a stable market, it takes 5 years to break even on the transaction costs. Once people start telling each other that buying is a losing proposition, then prices won’t recover.

Downtown is barely 5 years old and it’s still a work in progress. People wanted in on the grown floor. But like Amway, only a few prosper.

Downtown SD is not Manhattan, people have lots of choices. Except for banking and law firms, Downtown doesn’t even have job. Most residents there have to commute out of Downtown.

[PerryChase]

I fully expect Downtown San Diego to be a place of mostly renters with a minority of high-end homeowners.

Right now, Downtown is a “premium” place to live. But give it a few years for those apartments/condos to get old and dirty.

People who grew up in the suburbs think that Downtown living is glamourous (it can be if you’ve got the money) but they’ll soon realize otherwise — especially if they spend all their money on housing.

The suburban lifestyle is very pervasive and people will get married, or have children (within or outside of marriage), then they’ll move. People will get old and fat and I’ll need that SUV with room to park so they can easily unload their Costco purchases.

In a boom, it makes sense to buy Downtown, but even with a stable market, it takes 5 years to break even on the transaction costs. Once people start telling each other that buying is a losing proposition, then prices won’t recover.

Downtown is barely 5 years old and it’s still a work in progress. People wanted in on the grown floor. But like Amway, only a few prosper.

Downtown SD is not Manhattan, people have lots of choices. Except for banking and law firms, Downtown doesn’t even have job. Most residents there have to commute out of Downtown.

[Arraya]

I agree, I can’t figure out what most of these developers are thinking. The “months of inventory” per the MLS are dismal and that is not accounting for the numerous units on the market that are not listed.

My MLS tracking is about 12 months of inventory on the market per MLS and probably another 8 months not listed.

http://www.dqnews.com/ZIPSDUT.shtm

49 units sold in June and roughly 590 listed. Out of the units sold a good portion were bought with a loss to the previous owner.

At this point it seems that the sellers and the developers are in the same posistion. Many of both cannot afford carrying costs and are being forced to dramaticlly decrease there “wish” price and take a big lose. (usually the the expense of the lender. The ones that can afford the costs, I’m sure are not happy with there investments, are making plans as we speak to cut there loses before it gets to bad.

I can understand how the “average joe buyer” would be duped into buying at a bad time but I cannot understand how the developers were so short sighted???

Anyway you slice it downtown will be hurt the most…

[Arraya]

I agree, I can’t figure out what most of these developers are thinking. The “months of inventory” per the MLS are dismal and that is not accounting for the numerous units on the market that are not listed.

My MLS tracking is about 12 months of inventory on the market per MLS and probably another 8 months not listed.

http://www.dqnews.com/ZIPSDUT.shtm

49 units sold in June and roughly 590 listed. Out of the units sold a good portion were bought with a loss to the previous owner.

At this point it seems that the sellers and the developers are in the same posistion. Many of both cannot afford carrying costs and are being forced to dramaticlly decrease there “wish” price and take a big lose. (usually the the expense of the lender. The ones that can afford the costs, I’m sure are not happy with there investments, are making plans as we speak to cut there loses before it gets to bad.

I can understand how the “average joe buyer” would be duped into buying at a bad time but I cannot understand how the developers were so short sighted???

Anyway you slice it downtown will be hurt the most…

[SD Realtor]

Could not agree more. I feel downtown will hit the 250-300 sf range depending on the quality of the unit and the view. Those who wait will do great here.

Downtown has the perfect recipe for the biggest fall. Definitely among the top areas where speculation ran rampant. A growing resale inventory along with plenty of new development. I very poor pending to active ratio. High carrying costs (HOA) for the nicer properties. Pretty much a perfect mix for healthy depreciation cycle.

SD Realtor

[SD Realtor]

Could not agree more. I feel downtown will hit the 250-300 sf range depending on the quality of the unit and the view. Those who wait will do great here.

Downtown has the perfect recipe for the biggest fall. Definitely among the top areas where speculation ran rampant. A growing resale inventory along with plenty of new development. I very poor pending to active ratio. High carrying costs (HOA) for the nicer properties. Pretty much a perfect mix for healthy depreciation cycle.

SD Realtor

[capeman]

So, assuming a price of $250/sqft. you get a price of $250K for a 1000 sqft. unit. Using traditional financing (20% down, 7% 30 yr fixed) you'll get a total monthly payment (excluding principal) of about $1,800/month including taxes, HOAs, etc. In other words, at $250K most of these units will actually cash flow pretty well.

 

You're assuming that in the next year rates on a 30 yr fixed are still going to be 7% or south… Take a look at how the MBS bond market is unwinding and the possible outcome of 1.4T dollars in bonds getting marked to market. Real interest rates are likely to nearly double in the next 12-18 months and with that goes south the prices on all housing. Downtown doesn't have the business it needs to support people wanting to live down there. On the front page of the UT yesterday it stated how California job growth has now officially stalled. We're near or currently in a recession and I don't think that will bode well for all the high end restaurants/$30 cover clubs that have sprouted up recently downtown. Business down there isn't doing as well as it has been in the last few years of hayday. Less business leads to fewer businesses which leads to less desirability to live there. Couple this with a recession and possibly double rates on the mortgage and you've got massive depreciation and roughly equivalent mortgage payments to rental payments. Just watch and be patient. I could eat my hat on this prediction but I’m willing to sit with money in my pocket to wait and see. In the end I will have a great deal or at least still have the money in my pocket.

cheers,

chris

[capeman]

So, assuming a price of $250/sqft. you get a price of $250K for a 1000 sqft. unit. Using traditional financing (20% down, 7% 30 yr fixed) you'll get a total monthly payment (excluding principal) of about $1,800/month including taxes, HOAs, etc. In other words, at $250K most of these units will actually cash flow pretty well.

 

You're assuming that in the next year rates on a 30 yr fixed are still going to be 7% or south… Take a look at how the MBS bond market is unwinding and the possible outcome of 1.4T dollars in bonds getting marked to market. Real interest rates are likely to nearly double in the next 12-18 months and with that goes south the prices on all housing. Downtown doesn't have the business it needs to support people wanting to live down there. On the front page of the UT yesterday it stated how California job growth has now officially stalled. We're near or currently in a recession and I don't think that will bode well for all the high end restaurants/$30 cover clubs that have sprouted up recently downtown. Business down there isn't doing as well as it has been in the last few years of hayday. Less business leads to fewer businesses which leads to less desirability to live there. Couple this with a recession and possibly double rates on the mortgage and you've got massive depreciation and roughly equivalent mortgage payments to rental payments. Just watch and be patient. I could eat my hat on this prediction but I’m willing to sit with money in my pocket to wait and see. In the end I will have a great deal or at least still have the money in my pocket.

cheers,

chris

[Anonymous]

Outside of investors there is very little real demand for downtown condos, or condos anywhere for that matter. Not sure why you people thing that this is such a premium place to live. Just look at the beating the Harbor Towers took in the early 90s. Now there are about ten times as many condos, where do you think all the demand is going to come from to pay premium rent for those places?

[Anonymous]

Outside of investors there is very little real demand for downtown condos, or condos anywhere for that matter. Not sure why you people thing that this is such a premium place to live. Just look at the beating the Harbor Towers took in the early 90s. Now there are about ten times as many condos, where do you think all the demand is going to come from to pay premium rent for those places?

[mixxalot]

I agree-

Most jobs in biotech and tech sector are concentrated in either Sorrento Valley, Del Mar or Carlsbad area. If I stay in San Diego that would be area for me to consider buying to be close to jobs.

[mixxalot]

I agree-

Most jobs in biotech and tech sector are concentrated in either Sorrento Valley, Del Mar or Carlsbad area. If I stay in San Diego that would be area for me to consider buying to be close to jobs.

[Arty]

Agree too, and don’t forget the school districts near Sorrento Valley, Del Mar, Carmel Valley, and anything near 56 are closer enough to San Diego. I want to an open house today for a hillcrest condo studio, it want 430,000 for a 750 sf studio (573/sf)! Nice studio but at $573/sf?

[Author]

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