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rentingman
Posts:448

10/07/2008 9:26 AM	Alert
I think everyone who reads these postings no longer believes the high end is immune. However, if you do not some pretty interesting stuff going on in Horizons A third floor 2/2 just sold for $500K. There is now a battle between units 905, 1005, and 1205. Units 1005 and 1205 just lowered their prices to $699. Unit 905 is a flipper (bought as a foreclosure in 2007 for $650, redid the kitchen and floors and is now looking for $750). How far will these units need to drop their price to sell? PS unit 1405 is also listed at over $800, sorry I think your two floors do not add that much value. Oh yeah and for the builders of the Mark and Alta if 1,245 sq ft units on the 9th floor and higher at Horizons sell for $650 or less you need to get realistic about your prices really really quickly.

Brian
Posts:2628

10/07/2008 9:45 AM	Alert
I notice that too. Good analysis, rentingman. LIke I said before, everything is interconnected, despite people still clinging to what they paid for (they have no choice really because the alternative is foreclosure). There still is lots of room for prices to drop. MLS-080059730-510_1st_305_San_Diego_Ca_92101

Dirtcheap
Posts:39

10/07/2008 11:23 AM	Alert
1405 could be on its way back to the bank. 699-750 sounds high to me. My bet is they go in the mid or low 6's.

Goingup?
Posts:167

10/07/2008 12:11 PM	Alert
Don't make the mistake of thinking one or two foreclosures make the market for a building. It takes many more than that to form a market. 305 was a bank repo...meaning it sold for on average 20% below the market. For 905 pricing add 20% then 10K per floor. The unit I"m interested in at Horizons that will tell the market is #1504. That's a prime "C" unit and I knew the original owners who loved their unit but just couldn't believe someone would pay 1.1M for it in 2004. They were convinced the market would tank, and they could buy back in for around 600K (what they paid it) within a few years. 4 years later they're still waiting, and as bad as the market's been 600K gets them a much smaller unit with no view. IMO the bottom is in, now it's up to the economy as to where real estate goes from here. The FED should cut rates by .5% within the next few days, and we'll see how the credit markets feel about that. Right now only the best of the best can get loans.

Brian
Posts:2628

10/07/2008 12:52 PM	Alert
Posted By Goingup? on 10/07/2008 12:11 PM Right now only the best of the best can get loans. That's correct. As I said before people who believe that they can make money over the short run by living in San Diego won't buy. Only those who realize that it costs a lot of money to live in San Diego and are OK with that will buy. It's a 180 in mindset and that just about removes 50% of the previous buyers.

rentingman
Posts:448

10/07/2008 12:54 PM	Alert
Going up I do not normally like to say things like this, "But are you crazy?". I do not care if the appraisal manual says do not include bank repos in the comp. The sold unit was clean. It was freshly painted and had new carpet. The cabinetry and bathroom fixtures existed and were not damaged. Maybe you can make the argument for a single family home where there can be yard and exterior damage but it does not apply for a clean unit in a condo complex. Lastly, the owner before the foreclosure tried to sell at $600 with no success so clearly the 20% rule does not apply cause no one was willing to pay 20% more before it was a repo. Good example, based on if this was your own money. If unit 1405 is clean and goes to foreclosure would you pay 20% -$20K (your height adjustment) more for unit 1205? I doubt it. I believe the Fed will cut rates but what impact will it have. Mortgage rates are up since the Fed started cutting the Fed Funds Target. There will not be additional homebuilding cause there are millions of vacant homes. There will not be additional consumption spending cause consumer are maxed out (Ie they owe 200% of their homes value). There will also probably not be additional car building b/c people are still using the 33.5MM cars purchased in 2004 and 2005 (well above historic trends). One of the main problems with the economy now are homes are too expensive. Current home prices are draining all disposable income out of consumers. The economy will not improve if consumers need to spend all their money on housing. The other problem is that all the non-realtor and govermnment jobs were shipped overseas, but I will not discuss cause that will be a long thesis.

LoonyQT
Posts:931

10/07/2008 1:03 PM	Alert
Posted By Goingup? on 10/07/2008 12:11 PM a bank repo...meaning it sold for on average 20% below the market I'm sorry, I am a simple girl and I just don't understand this. From my perspective, the market is the market. Current market value is whatever someone wants to pay, be it $300,000 or $3 or $3M. There is no arbitrary percentage that needs to be factored into bank owned properties to "correct" for actual market value. Sure - the banks may price a listing at below current market comps, but all that does is generate interest and likely force a bidding war encoutraging a property to sell for top market dollar as quickly as possible.

Dirtcheap
Posts:39

10/07/2008 7:43 PM	Alert
I have to agree with the others, and its not just one or two foreclosures making the market in a building. Horizon is a nice building and I would certainly consider living there, but it's not it's own market, and there are lots of foreclosures spread throughout downtown, and they do affect every building, regardless of the number in any specific building, and there have been and will continue to be a few in Horizion for the near horizon. Let the market prove me wrong, but I stand by my prediction that those 05's are coming down in price. 600k for a C unit is probably unrealistic, but in another year, 800k probably is not. Time will tell.

rentingman
Posts:448

10/08/2008 8:52 AM	Alert
Dirtcheap Time will tell. Prices that two years ago were deemed impossible in DT San Diego are occuring right now. If you told someone there would be 1BR units of any size in any building in the 100's three years ago they would have told you, you are crazy. I am not familiar with the exact layout of the C unit in Horizons but I can imagine it would rent for about $3,000 unfurnished. If the price was $600K that would mean $1,400 in taxes and HOA and $3,500 a month in interest. In other words, even if there are tax deduction benefits (much more limited than believed due to AMT which should hit based on the income needed for a $600K mortgage) the cost is greater than rent. The process particularly on the high end is slow but if there is a lesson to be learned from the last bubble (1989) is they take a long time to deflate. Where will these units be in 2011?

Goingup?
Posts:167

10/08/2008 9:28 AM	Alert
I've gone against the grain with investing since I can remember. Crazy? Yea, but it works for me so I stick with it. I've been saying oil would hit 50 again ever since it blew through 120 and everyone here stated I was nuts...but it's not looking so nutty now. As for repos going 20% below market, that's just the way it is. Doesn't mean there any less desirerable, just the banks tend to blow them out faster than normal. Plus your taking the emotional attachement homeowners have out of the equation. Banks don't care who's kids grew up in which bedroom they just care about the money. So if you can find a repo that fits your needs, I say go for it. But don't expect the rest of the market to be priced in the same league or you'll be disappinted just like many potential buyers here are. As for using "rent" value to determine "price" that's fine, but many others use replacement costs to determine value. There won't be any new condos built downtown for years into the future, current pricing doesn't allow for a profit margin. If downtown was contracting that wouldn't matter. But it's growing, and becoming more desierable all the time. If the world is going into a GREAT DEPRESSION then prices on everything will fall, and the standard of living in the world will take a bit hit. I'm just not much for doomsday scenarios. Maybe it will play out like this and I'll be broke next year because of my stupid investments....and it wouldnt' be the first time for me either.

rentingman
Posts:448

10/08/2008 9:53 AM	Alert
You say buyers looking to buy non repos for bank repo prices are going to be disappointed. Isn't it the sellers who are not willing to sell at the market clearing price "The Market" that are going to be disappointed? I might be wrong about this number but aren't 75% of sales in DT SD distressed sales? Who cares about the rest of "The Market" if distressed sales cover the overwhelming majority. Most times I see a non-repo above market (or what you call a seperate market) I just wait for it to get foreclosed and it usually happens including the discussed unit at Horizons. The unit that sold as a repo in Horizons was offered as a non-repo for 20% more prior to foreclosure and did not sell. I guess you must be the only person willing to pay 20% more, and you were not buying at that time. You avoided the question I posed about would you pay 20% more for the non-repo if the units were the same? How would the non-repo unit not meet your needs? I did not realize anywhere in SD is growing. The Census statistics report net migration from SD. Can you provide your definition. Is DT SD adding more jobs? Is SD adding more jobs? Are more retirees selling their homes and relocating to DT SD condos? Many of the population growth numbers are based on available housing units. Have you considered how many of those units are vacant in your comment?

rentingman
Posts:448

10/08/2008 9:56 AM	Alert
Going up I think you also need to consider your replacement cost argument. I am not sure if you realize but the price of most construction materials has been falling significantly the last two months. This includes steel, wood, concrete, the land, etc. The only stubborn component has been labor but we will see how long union laborers need to stay out of work before they bargain to a lower price. I have heard you cannot build SFH homes below $200/ sq ft argument but amazingly they build them for $50 in Tx. Are input material prices really that different?

Goingup?
Posts:167

10/08/2008 12:53 PM	Alert
"You avoided the question I posed about would you pay 20% more for the non-repo if the units were the same? How would the non-repo unit not meet your needs?" Did not. "So if you can find a repo that fits your needs, I say go for it." The problem is finding that unit. Horizons just doesn't have enough repos to form a market. Currently I think the number is zero available. I guess you could wait and hope, but I just don't see many coming on the market. I'm also a firm believer of buying the best view you can afford. Real Estate is all about location, and downtown view plays into that more than anywhere. I have yet to see one view unit repoed yet in the Marina (not saying it hasn't happened, just not that I know of). Aqua Vista is different, and if that's the building your looking into then you have plenty to choose from. The Grande has a few every now and then, and Electra is zero so far. As for land and building costs, there is only one vacant lot left in all of the marina district and Bosa paid a fortune for it and there is no way he's selling. As far as I can tell lots in other areas of downtown have/are holding their value. Copper prices are down 30% in the last three months but were up 300% over the last 2 years before that. Steel is down, yet up over 80% from just last year. Concrete just got a price increase, and it's a rigged market anyway and much higher than last year. So no, I don't see construction costs taking a hit. Either downtown will become less desirable or prices will increase. Supply takes at least 4 years to come on line and everything is frozen that I know of. I'm thinking prices have to rise at least 40% before anyone's building anything downtown again. But if the world ends up in a GREAT DEPRESSION next year then all bets are off. Barring that, I really like downtown (but then I really like stocks right now, too).

Brian
Posts:2628

10/08/2008 1:33 PM	Alert
Remember that other neighborhoods are gentrifying also. National City and Chula Vista have urban projects it the works. Mission Valley and UTC are being remade into lifestyle destinations a la Disneyland (not my thing but plenty of people dig that). Those will be competition for downtown.

rentingman
Posts:448

10/08/2008 3:02 PM	Alert
So a long time ago when I took Intro to Economics (sad this is a long time ago and yes Intro not Iintermediate, Advanced, or Graduate) I learned that the demand curve had multiple components including (Taste, Income, Price of Alternatives, etc). Why do the analyses of most of the people (including Goingup) who claim prices need to rise only include the Taste component. Downtown is too desirable so prices need to rise. How are people going to pay for it? Did you look at the demographics of the people moving into DT? Most of DTs new residents seem to be 20 somethings, how can they afford $1MM, $1,200 sq ft condos? This whole thread started b/c foreclosures in Horizons are now starting to exist. Last year there were hardly any listings at Horizons, now there are almost 10. Next year we can count on the foreclosures as the next step. There are vacant lots all over DT. They might be owned but they are all over DT. These include the lot next to Icon where the Library tower was going to be built, the lot next to the fire station across the street from the ballpark where Cosmopolitan was going to be built, The parking lot next to Harbor Club, The parking lot in front of Electra, The empty lot in Little Italy where Elle was going to be built. How many more empty lots would you like me to name?

rentingman
Posts:448

10/08/2008 3:04 PM	Alert
PS I am glad to know of the handful of units that closed at Electra within the last year, there have not been any foreclosures. Not really sure I would be predicting higher prices based on a new construction building not having any NOD within six months of delivery.

Dirtcheap
Posts:39

10/08/2008 7:46 PM	Alert
going up, I think there are a few flaws in your theory. If you are a buyer that is only looking for a specific view unit at Horizon, then you either will have to pay the price to buy now, or wait and hope for a very specific unit to go into foreclosure. Most buyers aren't that specific, and they would take a similar unit at Renesaince or somewhere else if it satisifed their needs, and is priced much less. Renesaince has 7 units in some stage of foreclosure. Meridian has 3. Horizon has 3 (I didn't check to see if 501 or 1101 sold - too lazy, 1405 is in early stages, and its a good unit & 602 and 305 sold recently?) Electra is too new, but its likely there will be some over there as time goes buy. A luxury condo buyer that is not in a hurry has plenty of good choices that will get better with time in the near term. In the long run (10 yrs), most of what you say will probably come true. Here's my problem, what is the monthly absorption rate downtown right now? 20 or 30 units per month. It's true that no new projects will be breaking ground anytime soon, but there is still plently of inventory available, and coming available. Does anyone know how many units are available at the Mark? Alta? Aria? Smart Corner? Others? Vantage Point is 679 units, only 290 are in contract, and from what I am hearing, many of those will not close. Add in the fact that the number of buyer able to qualify and buy these properties has been cut in half, and many of the downtown condos are 2nd or 3rd homes for people who may have to cut back given the economic situation, creating even more sellers. I have to wonder how long its going to take for the inventory downtown to get absorbed to a level that will create price stability or even increases. I hope its soon, and I'm not a doom & gloomer, I just don't see any positive signs at the moment. If conditions change, they could put lots of inventory back on the market in less than 4 years. Many of the projects are ready to go, just waiting to break ground.

rentingman
Posts:448

10/09/2008 4:36 PM	Alert
Goingup To be clear the way the market as you say it works is as follows. Horizon unit 1205 is listed at 699. If it sells at 699 and then unit 1405 goes to foreclosure, it is on its way, I should be able to buy it for $720-20%-=$576. Then I can list it for $720 and sell it for $720 cause it is not a foreclosure. Is my interpretation of your analysis correct? Further you claim the market is turning DT. I agree. In the past you did not see listings at Horizons. Now units 305, 805, 905, 1005, 1205, and 1405. Guess What they are not getting multiple bids or even selling. Lastly lets talk about construction costs. Do you know for certain constructions costs excluding land. Here is what I know, Oliver McMillan turns a profit managing the buildings they build and renting units for an average of $2,000. If I were to believe your hypothesis about construction costs then it would be impossible to stay in business. They would need to rent the units to cover $500/sq ft construction costs. In other words their 800 sq ft units would need to rent for $3,000 a month. However they do not and they are not out of business. How is this possible?

Dirtcheap
Posts:39

10/10/2008 10:15 PM	Alert
"(three at Pinnacle recently near or above the 2 million range)." Oh, really? which ones? I see one that closed over 2 mil, one that was originally listed for 2 mil that sold for 1.2 (40% off) and one more under 1.5. "There are MAYBE 1000 units left to be sold and coming on line next year, then zero." Do you just make this stuff up? There are probably closer to 2000 units in inventory downtown, go through and add it up. And do you really believe the 60/month absorption rate from the busy summer months will continue through the winter months which traditionally have much lower volume, with no new listings? Not to mention the fact that something like 8-9 trillion has just been lost in the stock market in the past few weeks. I wouldn't put much faith in CCDC, they just want as much development as possible.

rentingman
Posts:448

10/11/2008 3:05 PM	Alert
Well just remember when CCDC makes populations forecast it is for all of DT, all the way to the eastern border at the 5. Going up do you believe there are no vacant lots east of 10th?

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