Liberty Station

[woody]

We are looking at moving into SD in the near future and are considering Liberty Station. We know that today is probably not a great time to buy (understatement) but were wondering if we could get some feedback from folks who know the area a bit.

There are big big plans for that area, including a huge park and amazing shopping/arts area. How much are these projects likely to increase the value of the homes in the area? Does anyone think it will be enough to offset any loss caused by the downturn that is here (and developing further)? The houses we have been looking at are around $950k today. We will be renting for a while while we see what the market is going to do. Even if they drop a little, won’t the completion of the development add a tremendous amount of value to nearby homes?

Thanks for any feedback.

[sdcellar]

I would think that most of the value that these ammenities will bring have already been baked into the prices.

I know that when we looked at the area a couple of years ago, we tried to rationalize the purchase price based on all the things they were going to do in the area.

Very personal, I know, but really no different from the mentality surrounding other new master planned communities. I believe buyers factor in the parks, schools, and the like that haven’t been built yet.

[4plexowner]

I’ve commented on Liberty Station several times – short answer to your question: “No, I don’t believe the upside to the location will make up for the potential loss in equity” – even the detached boxes in Liberty Station are just fancy condos – don’t be fooled into thinking of them as single-family homes – the prices of condos throughout San Diego are going to sink like a rock and the housing in Liberty Station is more condo-like than SFR-like – here are my comments from the archives:

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One of my properties was near NTC / Liberty Station so I kept a close eye on the development there.

Navy records show 50-60 toxic hot spots on the property and there are questions about how well these sites were cleaned up.

The most telling point to me is that McMillan trucked in six feet of clean topsoil before building on the home sites. Wouldn’t want anyone to test the soil in their front yard now would we?

McMillan told the city that he needed the extra height so the sewage would drain which is interesting since none of the historic buildings are being raised but I assume they will have bathrooms in them???

Here’s a website that tracks ongoing issues at Liberty Station: http://www.ntcsd.org/ – spend some time at this site if you want to see how badly the city and McMillan are screwing the public on this deal.

~

I was jogging through Liberty Station this morning (used to be NTC in Pt Loma) and noticed numerous For Sale signs.

I assume that most of these houses were bought by speculators and they are now bailing.

These houses had been selling for as high as $1.3 mil but they aren’t anymore.

I have been watching one in particular that came on the market just under $1.1 mil back in Oct/Nov of 2005. It is still on the market today – asking price is $899K.

~

The houses in Liberty Station are so close together you could borrow a cup of sugar from your neighbor by sticking your hand out the kitchen window.

I watched these things being built in 2004 and I was amazed that people were paying $800+K for them.

Even more amazed when they started turning over at $1+ mil.

Not surprising that many of them are currently For Sale.

Remember that these fine homes are just a few blocks from being under the flight path and they also get to enjoy the road noise from Rosecrans / Nimitz / Harbor Blvd along with the Navy jets on North Island.

Not to mention that McMillan had to remediate the hazardous waste at NTC before he started building these homes.

~

I took another swing thru Liberty Station this morning.

There are 16 For Sale signs with one of them flying a SOLD sign.

There are 209 detached boxes in Liberty Station so currently, 7% of the development is for sale. Anyone know how this compares to other developments around town?

Interestingly, ALL of the streets have at least one box for sale and some of the streets have as many as 4.

~

Interesting factoid about Liberty Station: McMillan didn’t want to remediate the contaminated topsoil from the home sites so he trucked in 6 feet of clean topsoil before laying foundations.

Told the city that he needed the extra height so the sewage would drain!

Not to mention that he was then allowed to build up to the 30′ height max after starting from the new raised ground.

~

Don’t get me wrong about Liberty Station.

This property will be a gem in San Diego’s crown once all of the development is complete.

From my perception however, there are 209 FB’s living there and we haven’t even discussed the multi-unit crap (oops, I mean condos) that was built.

[Bugs]

By the time it’s all over I expect that area will do a lot better than most because…proximity to employment and services. Not to mention the bay and coast.

[woody]

4plex…

That is a lot to chew on. I was not aware of the toxic waste issue.

Many are still for sale and I’ve seen a bunch relist to reset the date. They do not appear to be selling at the moment. I wonder how much they’ll come down since they are so new. (To be clear, we are very new to the RE world too. If I seem like a dolt, excuse me)

[4plexowner]

The only stupid questions are the ones you don’t ask. You are doing your homework first instead of jumping in and THEN trying to justify why you bought in a declining market.

There are many different opinions expressed here on Piggington’s about how far the market will decline – my opinion: in 2009/2010 I expect to be buying rental properties for 1998 prices – that means entry-level single-family homes in Clairemont for about $225-275K in 2006 dollars – well located multi-unit properties (I like 4plexes) for 8-10 times yearly rents – Liberty Station wasn’t built until 2004 so it is harder to estimate a bottom price – I would guess there will be some desperate sellers in Liberty Station letting their townhomes go for $500-600K before this correction is over

[Anonymous]

What is an FB? I’ve seen the abbreviation a lot here but never an explanation.

[sdcellar]

A “F’d Borrower”

[Anonymous]

Two Words: FLIGHT PATH. Why would you want to live so close to the airport? If you are willing/able to pay that kind of money, you shouldn’t have to live in such a crappy noise polluted environment.

[Steve Beebo]

For me, for the price you would pay at Liberty Station, the lots are way too small, and the aircraft noise is WAY too loud.

[powayseller]

4plex, I did home price/rent calculations for San Diego going back to 1983, and I’ve not seen it get as low as 8 or 10. The lowest is 13. Maybe my data does not line up properly with the way you price rental SFR. I’m using OFHEO HPI for median home price, and BLS rental index based on average Craiglist rents (per Rentslicer) for rents. I would like to do a chart of price/rent using SFR, but I don’t have any data points I can use. What do you think would be reasonable sources for median home price for a 4 bedroom home today, and a 4 bedroom rental today. I can use the index to adjust these figures back several decades. Why do you think we will go back to 1998 prices? That would require a very big overshoot on the downside.

[4plexowner]

8-10 rent multiplier is for multi-unit properties not SFR – when I started shopping in 1997/98 well located properties that I was willing to live in (one of my criteria for buying) were already selling for more than 8-10 times rents – in 2000 I paid 11.5 times rents for a 4plex in Mission Beach and thought I was paying too much – the last 4plex I sold went for 18 times rents

other forums have talked about rent multipliers for SFR – probably more like 12-14 or higher depending on the property – remember that SFRs are for you and your family to live in and are NOT investments for positive cashflow (I’m generalizing)

my sources for data are my feet, eyes and brain – I get to know the areas that I am interested in and I gather all of the data I can find on rents, sale prices, listings, etc – every area is different and local factors make averages less meaningful – for example, being walking distance to an especially nice park doesn’t show up in average rents or sales prices

1998 prices:
> I believe 1998 is when the bubble started – rents and sales prices began to diverge at this point
> all bubbles throughout history have been fully retraced (for all you naysayers: identify one that hasn’t and don’t include NASDAQ or DOW until at least 2011)
> retracing the bubble takes us to 1998 – overshoot would be even lower

[PD]

Are you taking inflation into account?

I’m a big RE bear but 1998 seems to be too big of a drop. My former house was worth about 250k in 1998 and it is worth 775k today. That is over a 65% drop. I think we will be seeing 2002 prices again and may go as low as 2000 prices.

[(former)FormerSanDiegan]

In 1998 the nominal prices of homes in San Diego were just getting back to their previous peak from 1991. If prices are at the same nominal level in 2008, that would be 17 years with zero increase, a real decline of at least 70% since 1990 … don’t see that happening.

[Bugs]

The key phrase in describing 1991 prices is “prior peak”, which for that particular cycle means those prices were already 25% above the long term trend.

I think price retraction to 1998 might be a little too agressive but then again it’s hard to say if this downswing will indeed stop short as the bulls are telling us, contract right to the long term trendline, or overcorrect past the trendline into “undervalued” territory. A correction to 1998 pricing would represent an overcorrection that corresponds to other overcorrections following the spikes in the past, so although I think it might be a bit much this time it could turn out to be dead on. There’s more precedent for it happening that way than not.

The last time our prices intersected the long term trendline was in late 2000 as it was on its way up, and prior to that it intersected in 1993 on the downside of the prior cycle.

[Author]

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