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wilson
Posts:670
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| 08/29/2008 9:18 PM |
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Friday, Aug. 22, 2008 |
"On a per-square-foot basis, downtown real estate is among the most expensive in all of San Diego County. There are about 11,000 units in the city core.
Among the resale condos that closed escrow in the 92101 ZIP code in the second quarter of this year, buyers paid a median price-per-square-foot of $443. That's $200 a square foot more than buyers throughout the county paid, according to DataQuick Information Systems. The 92101 median price paid per square foot on resale condos has fell 20 percent between second quarter 2006 and second quarter 2008. The countywide median price per square foot fell 29 percent in that same time."
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Looks like a good benchmark to me to use for comparison. Don't expect dirt-cheap condos in quality buildings anytime soon. I'm sure lower qualiity buildings and non-desirable units will have some low ppsf, but if you are looking for quality see how far you are from the median price. Parkloft is a bargain using this benchmark. Downtown prices are holding their value better than the county median. If you are looking for $250/sf, don't hold your breath unless you are looking for least desirable units in the least desirable buildings.
Check out piggington website article on affordability. Prices have moved down substantially in terms of affordability. He makes the point that historically, we are about 60% along the path from high to low. He also cautions that we might not meet the historical trough in the present case.
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jackjack
Posts:159
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| 08/29/2008 9:34 PM |
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Wilson, you strike me as somewhat of a bull? Did you possibly purchase in the last year or two?
After the Labor Day weekend, we will have reached the end of the peak buying season - summer. Mark my words, this fall and winter will be absolutely brutal for the real estate market. Downtown will not be immune. All of the numbers seem point to the fact that this winter will be one of the worst winters we have experienced in a very long time. Prime mortgages are just beginning to reset, and I would think the Fed will have to raise interest rates somewhat to stave off inflation. Further, there is a lag time between the time that a trustee's sale takes place and the time it takes the bank to put the REO on the market. |
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wilson
Posts:670
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| 08/29/2008 9:57 PM |
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| No, I am out of town and looking to buy in the next 12-18 months. Prices will decline a bit forther, but no where as much as they have slid already. |
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Brian
Posts:2614
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| 08/29/2008 11:09 PM |
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San Diego is a very unique market, and it takes local knowledge to understand it.
1) You have to review every listing downtown for at least 3 months to get a feel of the market. Do it everyday.
2) The units downtown are all very similar in sizes.
3) People have fixed buying budgets. So as prices drop, they just buy in nicer buildings. That tends to keep the median prices fairly constant, and not reflective of the drops in values (50% drops in many cases). Think about it, your car budget is $25,000 for a Toyota. But drops in sales forces Lexus to lower their similar sized car to $28,000, you might just jump at the chance. The median just went up, as prices went down!!!
4) People who desire to purchase downtown tend to be yuppies who have net yet bought so they have more ability to stick to their buying budgets. They are the inexperienced buyers making mistakes. Those very buyers jumping at deals won't get affected until the recession is in full swing. In the rest of the County, only the low price neighborhoods are selling, dragging down the median (families who have wherewithal already bought their SFRs during the boom. Remember, "buy now or never"? )
Alan Gin just announced that San Diego is entering a recession.
http://www.signonsandiego.com/news/business/20080829-9999-1b29sdecon.html
I agree with Jack that this winter will be brutal.
Time will tell...
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tpc
Posts:624
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| 08/29/2008 11:09 PM |
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[quote]Prices will decline a bit forther, but no where as much as they have slid already. [/quote]
Wilson-what exactly do you base your projections on?????? If you aren't buying for 12-18 months, you are one lucky guy. |
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Brian
Posts:2614
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| 08/29/2008 11:13 PM |
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Posted By tpc on 08/29/2008 11:09 PM
[quote]Prices will decline a bit forther, but no where as much as they have slid already. [/quote]
Wilson-what exactly do you base your projections on?????? If you aren't buying for 12-18 months, you are one lucky guy.
I've been telling him to thank his lucky stars. For someone who went through the 1990s recession, he's very optimistic about real estate.
Time will tell... |
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Brian
Posts:2614
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| 08/29/2008 11:24 PM |
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Note that Alan Gin is an economist with USD's Burnham-Moores Center for Real Estate. Burnham-Moores = Real Estate Industry.
Alan Gin was a cheerleader for real estate during the boom and completed missed the coming crash. During the boom, Alan Gin had the attitude of "if drops have not happened yet, then they doesn't exist."
Either Alan Gin completely failed as a forecaster and academic, or he was mindful of pleasing his funders. Alan Gin now has no choice but to acknowledge the facts.
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jackjack
Posts:159
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| 08/30/2008 8:19 AM |
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Posted By Brian on 08/29/2008 11:24 PM
Note that Alan Gin is an economist with USD's Burnham-Moores Center for Real Estate. Burnham-Moores = Real Estate Industry.
Alan Gin was a cheerleader for real estate during the boom and completed missed the coming crash. During the boom, Alan Gin had the attitude of "if drops have not happened yet, then they doesn't exist."
Either Alan Gin completely failed as a forecaster and academic, or he was mindful of pleasing his funders. Alan Gin now has no choice but to acknowledge the facts.
Correct. I remember that as well, Brian.
I have known Alan Gin to be completely delusional and a complete moron. I began following the things he said from 2003, and he has always been wrong. He is out of touch with the real estate market. I don't think he understands the fundamentals that drive a real estate market. Just because you teach at USD does not mean that you know what you are talking about. In fact, I know many teachers/professors at USD who don't know what they are talking abou, and all completely off base.
I do not give any credibility to Alan Gin's statements. He is like that Karevoll character at DataQuick - a perpetual bull cheerleader that conspicuously misinterprets data. Some of his statements were just complete horse maneur (sp?). But, the UT keeps coming back to him like what he says is gospel. Quite frankly, I don't understand it. |
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Brian
Posts:2614
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| 08/30/2008 9:48 AM |
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Alan Gin acknowledges as much. He missed the recession, because he didn't think that residential housing would drive us into recession. But bloggers saw that coming with the exotic loan resets. They saw the loose lending standards and knew that buyers would not be able to afford their mortgages beyond the initial teaser period.
The 1990's recession was partly driven by a downturn in apartments and commercial (investment) real estate. What Alan Gin completely missed is that in the 2000s, people were speculating on, rather that living in, residential real estate. In fact, buyers were speculating on their own homes.
Excerpt from UT article:
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But the intensity of the housing downturn has overshadowed any gains by other sectors, dispelling the notion that San Diego's economy was too diverse to suffer much in a recession.
Gin used to endorse that theory. Not anymore.
“It turns out the damage from housing, the loss of employment from housing, is much more severe than I would have thought,” he said.
It's uncommon for housing to drive an economic downturn. The 2001 recession was sparked by a bubble in technology stocks. The early 1990s recession was linked to cuts in federal defense spending and overbuilding of offices, apartments and other commercial real estate. |
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wilson
Posts:670
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| 08/30/2008 9:49 AM |
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The article below by Toscano is what I was referring to.from Piggington website. I think Toscano is one of the best, balanced reporters out tthere. Check out paragraphs 4 & 5. Go to Piggington website to see the graphs for yourswelf.
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Home Prices Prices Making Their Way to Normalcy
Now that we've gotten Case-Shiller home price data for the first half of 2008, let's check back in on the long view of how home prices stack up with their underlying fundamentals: local incomes and rents.
As of the last update to these charts, which included data through December 2007, San Diego home prices -- despite having dropped substantially -- were still higher in proprtion to rents and incomes than they had been at either of the two prior bubble peaks.
That is no longer the case. At least, not with the home price-to-income ratio, which has now dropped below prior peak levels and could as a result be considered within the bounds historical normalcy (though admittedly very close to the upper bound).
As of June 2008, by the measurement approach described in the above chart, the ratio of home prices to area incomes had dropped 39 percent from the peak was back to a level last seen in January of 2002.
In order to reach to the low point seen during the last housing bust -- and I'm not saying that's necessarily going to happen -- the price-to-income ratio would have to drop a further 25 percent from here.
The June price-to-rent ratio, on the other hand, was still above the peaks achieved at the heights of the prior two bubbles. It nonetheless tells a similar tale to the price-to-income ratio: the June price-to-rent ratio was 37 percent down from the peak, falling to a level last seen in March of 2002.
It would have to drop a further 24 percent from here in order to equal the 1997 post-boom low point.
Now for some clarifications. First, as is always the case with these graphs, we are making some very broad generalizations by aggregating all home prices, incomes, and rents in the county at any given time into just three numbers. These calculations serve only to provide a very big picture view of approximate relative valuations over time.
Second, while the rent figures are fairly up to date, the income data ends in 2007 and income has been extrapolated into 2008 based on 2007 growth rates. It's probably pretty safe to say that per capita income is growing more slowly in 2008 than it did in 2007, so the more recent income figures above are likely slightly overstated. However, that doesn't really matter all that much because home prices swing a lot more wildly than incomes. The vast majority of changes to the price-to-income ratio over shorter intervals are caused by changes not in incomes but in home prices, for which the data is pretty well up to date.
Finally, I've included 30-year fixed mortgage rates on the chart to show that despite substantially different interest rates over time, the price-to-income and price-to-rent ratios have tended to remain fairly contained. The exception would the sky-high valuations of the the recent bubble, which I maintain owe more to incredibly loose mortgage lending standards than to low rates.
Next week we will put mortgage rates at center stage and take a look at how rents and incomes have compared to monthly mortgage payments over time.
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Brian
Posts:2614
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tpc
Posts:624
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| 08/30/2008 1:40 PM |
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| Going up-i concur. If prices drop to $200/sf, then there is little doubt that your conclusions will be right on?????? |
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tpc
Posts:624
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| 08/30/2008 1:42 PM |
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| Going up/Wilson-and people think realtors are full of crap. |
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Aeneid
Posts:52
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| 08/31/2008 9:20 AM |
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| News articles are just like us bloggers/readers here. Some take on bulls' views and while others take one bears' view. Therefore, take them with a grain of salt. Regarding ppfs in downtown. I see some units are pretty attractive tight now. Parkloft is at around $300/sf. Renaissance is at $400/sf. I know that there is a pending lawsuit at Parkloft, which may explain the low ppsf. What about the Renaissance? It seems like a solid building in a good prime location. Prices for the Pinnacle and Park Place are still pretty up there. I wonder if those comps at Parkloft and Renaissance will eventually influence the prices at the Pinnacle and Park Place. What do you guys think? |
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Dirtcheap
Posts:39
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| 08/31/2008 10:37 AM |
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Hello all, I've been a lurker for awhile following this site, so i finally decided to jump in - lots of great comments and info!
I'm agree with Jackjack, those numbers do not add up. I also would like to more closely examine the 1600 number as the current inventory through the end of 09. I don't know the exact numbers, but i see lots of new buildings downtown that are still barely 50% sold such as The Mark, Aria, Sapphire tower and several others. Vantage Pointe alone is nearly 700 units, less than half sold, and likely to have some fallout when closing time comes around next year. If anyone has more specific info, please help out, as a group we can probably get a better number. I suspect that the builder inventory is/will be more than 1600, and then there are the resales, and the investors who currently own, but want to get out, and are just waiting. And of course, the steady supply of REO's which does not appear to be going away antime soon, and is in fact increasing.
Goingup's point about the lack of new construction starts from now through 2010 and the increase in costs is certainly accurate, and so i think the real question we are all trying to answer is how long will it really take to absorb all this supply. My guess is that is may take longer than 2010 for these paths to cross. Another reason is financing. The pool of buyers going forward has been changed dramatically and most of the folks that were driving the demand are now locked out through the lack of any financing options. I don't pretend to know what that number is, but I would guess it's more than 50% when you consider that Stated Income loans are mostly gone, down payment requriements are higher, as are credit requirements, and rates are higher.
At a rate of 26 per month, and accepting the 1600 number, that's 5 years. That's 2013 assuming 0 new supply is added, so what is the real story here? |
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Horst
Posts:33
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| 08/31/2008 10:43 AM |
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Posted By Aeneid on 08/31/2008 9:20 AM
News articles are just like us bloggers/readers here. Some take on bulls' views and while others take one bears' view. Therefore, take them with a grain of salt. Regarding ppfs in downtown. I see some units are pretty attractive tight now. Parkloft is at around $300/sf. Renaissance is at $400/sf. I know that there is a pending lawsuit at Parkloft, which may explain the low ppsf. What about the Renaissance? It seems like a solid building in a good prime location. Prices for the Pinnacle and Park Place are still pretty up there. I wonder if those comps at Parkloft and Renaissance will eventually influence the prices at the Pinnacle and Park Place. What do you guys think?
Not sure where you are getting your numbers. Renaissance is currently tracking at an average of $522/sq foot for the units currently for sale (over $700/sq foot if you include the penthouses) and an average of $517/sq foot for all closings from January 1, 2008. I don't track Parkloft - most overrated building downtown.
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Dirtcheap
Posts:39
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| 08/31/2008 10:48 AM |
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| I just did a check on foreclosure data. There are currently approx. 115 bank owned properties in 92101. There are approx. 92 NOT's and 144 NOD's. 26 sales per month is barely enough to absord the new REO supply coming to market. Lightbulb goes on in my head - I think some of the builders could be in some big trouble. Am i missing something? |
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Goingup?
Posts:167
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| 08/31/2008 10:53 AM |
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The 26 a month is the current number while 174 a month was the 4 year ago number.
Just looking at the numbers gets one all depressed, like the market is just dead.
I always look beyond that, trying to see if there's an opportunity that others are missing.
Population downtown has swelled from 17K to over 30K since 2000. Condo's have gone from 2000 to 10,000 (up 500%). Yet with this massive building only 1600 are left available (compared to 10X that amount in Las Vegas and Miami).
The growth downtown is continuing, but the resales and forclosures are being picked up instead of the new ones since they are 20% cheaper (which is way new condos sales are at that 26 number).
The new ones will sit until supply/demand forces move prices up 20% at which time they'll move within a year.
CCDC estimates downtown wil continue growing, and they've been right on in their numbers for years now.
Downtown will need at least 1000K units a year (what we've been averaging which is expect to accelerate) just to keep pace with growth over the next decade.
Construction costs and limited financing will hinder new developement for years going forward.
Even with the all clear, it's at least 4 years from start to finish on a new condo project (2 years construction).
Bottom line, either downtown ceases to be attractive and people stop moving in, the economy is sour and were all poorer for years going forward (the end of the US dominace in the world and GDP growth), commodity prices drop dramatically bringing construction costs way down, or prices are going to go up rapidly because of the basic laws of supply and demand.
Won't happen this year or even next, but by 2010 you'll start to see the number of resale condos on the market drop way down. I'm thinking that after those 1600 units get sold within a year the resale inventory will drop to the 2 month range and stay there until new construction starts to come on line again (and then the cycle starts all over again).
This is my take, and as usual, I'll be putting my money where my mouth is. But those like Brian have been right on in the last couple years, and I suspect he sees this playing out a little different than I dol
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Brian
Posts:2614
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| 08/31/2008 12:53 PM |
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One of the arguments about the desirability of Downtown SD is that everyone wants to live here so we can attract reach people from all over the world (at least that's what the bulls are claiming).
1) So how come we have few "celebrities" here compared to to Las Vegas or Miami? All we have is people from Mexico and Arizona.
2) Las Vegas or Miami, have 10 times the supply of San Diego.
a/ They are fun cities with plenty of celebrities living there.
b/ San Diego is a parochial, boring town compared to the competition.
c/ There are no state income taxes in Florida or Nevada, a big plus. If you are a green-card holder, then you are a permanent resident of America an need to file income tax on world-wide income to maintain that status.
d/ The deals are everywhere in Vegas and Miami.
e/ Vegas and Miami are closer to both Europe and Asia with direct international flights. It takes almost twice as long to come to San Diego if you include the transfer and hassle time of going through US Immigration and Customs in a transit city.
Prices are always relative to the competition (principle of substitution).
If San Diego was 2 times the price of Miami, it will proportionately remain 2 times the price of Miami. Logically, San Diego could not catapult to 4 times the price of Miami (it would take many decades for that to happen).
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wilson
Posts:670
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| 09/03/2008 7:32 PM |
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Who gives **** where celebrities live? Have you ever lived in the heat/humidity oof LV or MIA?
No thanks.
"Nuff said. |
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