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Icon in East Village, the Tilted Kilt
Downtown San Diego has posted a slight increase in median home prices for 2008. 92101 is up 7.4% from 2007 prices, despite having a higher than normal amount of unsold inventory. The median price for 2008 was $522,000 compared with $486,000 for 2007. Home sales were down from 1,331 to 1,061.
Looking closer at each building, you can find distinctly different stories. While some buildings were closing escrows from pre-sell days in 2005/ 2006, other buildings are struggling with high levels of defaults and HOA’s on the brink of being upside down – and are down from 2007 prices. Some of struggling HOA’s are actually compounding the downward price pressure by making it difficult for low down payment buyers to obtain financing. Other projects, like Icon (pictured) have been in a builder blow out phase slashing prices in some cases by $100,000.
All in all, however, Downtown San Diego condos have faired well relative to other parts of the County that have seen 40% + declines in value.
The majority of bank owned sales are falling into the entry level range of homes in Downtown San Diego. Over the past 6 months, of 63 bank owned sales that were recorded in the San Diego MLS, 35% fell in the range between $200k – $300k. An additional 25% could be found between $300k and $400k, 17% between $400k and $500k and a then sharp drop above $500k ( to $600k) with 9%.
With a lot of short sales on the market in these ranges that are not selling (I’ll grab some of those numbers later), we can expect to see a healthy (buyers perspective) inventory of foreclosed homes to hang around for the next year, at least.
Foreclosure note: We are closing this week for a client on a unit in Little Italy at 58% of it’s last market sale (last sale was in 04 – Downtown peaked in 06). At $354 per square foot, it is $27 per square less than the average for other bank owned properties. There were 3 offers on this property, all within $15k of each other.
Bank owned properties are proving to be the best deals for attached units in 92101 (Downtown condos) per Sandicor (MLS) records. Using a price per square foot comparison for all units that have sold (per MLS records) over a 6 month history we find that bank owned units are closing, on average, for $61.53 less than properties being sold as short sales. Most of the sales we are seeing for bank owned (and short sale) properties are taking place in the $200k to $300k range followed closely by properties selling in the $300k to $400k range.
Ok. This is starting to get very attractive. 726 square feet of studio in Centex’s Element in East Village. Listed at $186,500 – the otherwise mediocre building that currently separates hip, young urban dwellers from crack-alley vagrants at 15th and Market has reached a sensible level of affordability.
Element is an average building that located about 5 blocks from Petco Park. It’s close enough to the Gaslamp for a 5-10 minute walk, but by no means offers the downtown vibe of an Icon or Alta.
Slowly, however, East Village is growing up around Element. Construction timelines that have been halted as inventory levels spiked and credit markets tightened will soon have projected completion dates once again. As projects like Metro Center move forward, other residential projects will soon follow. And Element, in a futuristic East Village where the vagrants pee on the sides of buildings another 4 blocks east, will have simply been ahead of it’s time.
And that is why my eyes grow and my jaw drops just slightly as I see 726 sq ft come on the market at $187,500. A unit that will rent between $1200-$1300 whose principal and interest payment are likely going to be under $1200 (for most borrowers) makes me think that the world is starting to make sense again… Well, maybe the world will make sense when the HOA’s aren’t $450/ mo.
East Village entry level condos – those 699 square feet and under are off of their 2005 high by approximately 15%. Additionally, the price per square foot has dipped from $662 (2004) to $510 (2007) – the average unit size that has sold in this timeframe has gone from 588 (2005) to 641 (2007).
Market times are still higher than the 2005 levels. The average market time in 2005 was 45 days – but it rose 85 days in 2006 and has subsequently dipped in 2007 to 75 days. After a drop in 2006 to 95%, the list price to sold price percentage has returned to 2005 levels in 2007 at 97%.
As a broker, I am seeing a lot of folks that sat on the sidelines for the last year and half and watched the market starting to jump in. As distressed sellers and foreclosures push prices to a critical low, investors are seeing the bottom of the market – at least from their perspective. Other buyers are still holding out hope for additional price reductions – but it is safe to say with current market dynamics that anything under the $326,371.00 of at least 641 square feet can be considered a good value.
Interesting article published on the voiceofsandiego.org by Scott Lewis regarding the government mandating affordable housing being set aside by developers in new projects. It does raise the question, who is more efficient in creating affordable housing (for sale) in our not-so-affordable community – the market or the government?
Whether it is right or wrong, if you give a developer the option of paying a fee to support government affordable housing agencies, or to set aside units in a project for affordable housing, more often than not the developer pays the fees, builds the cost into their budgets and passes the cost right back to the buyers, inflating the price of those new units. When they set aside they set aside the affordable units…well, just read what Scott has to say.
