New Home Sales Activity on the Rise in Downtown San DiegoBy - 1/4/2010San Diego Business Journal Staff
By EMMET PIERCE
The lingering recession continues to create a drag on San Diego’s downtown residential real estate market, but analysts say they’re encouraged by a surge of activity during 2009.
Developer Sherman D. Harmer Jr., chairman of the Downtown Residential Marketing and Builders Alliance and president of Urban Housing Partners Inc., notes that there were 511 new home sales downtown in the first 11 months of 2009, compared with 280 in all of 2008 and 349 in 2007.
“It is a very significant increase,” Harmer said. “If you factor in what we think we will sell in December, it will put us at 550 new homes for the year, which puts us back to where we were in 2000.”
As of Dec. 1, there were 521 housing resales downtown, compared with 552 in 2008 and 467 in 2007, the MarketPointe Realty Advisors research firm reports. That puts downtown at more than 1,000 sales overall through November.
Many view 2009 as a turnaround year. It was the best year for new home sales downtown since 2006, when there were 1,055 new home transactions. Harmer notes that prices are stabilizing. MarketPointe places the average resale home price as of Dec. 1 of the fourth quarter at $437,658, compared with $398,548 in the third quarter.
Prices remain well below their peak, however, creating opportunities for buyers. MarketPointe says the average new home price downtown was just under $500,000 through Dec. 1 of the fourth quarter. In the fourth quarter of 2008, the average price was $714,000.
The condominium tower construction that has reshaped downtown’s skyline in recent years won’t resume until the real estate market improves. Eventually, the lack of new product is expected to lead to a shortage that will boost prices. Sales patterns have been closely tracked by researcher Russ Valone of MarketPointe. The downtown area had 1,032 new and resale transactions through November, compared with 832 in all of 2008, he notes.
Leading The Way
“The downtown marketplace appears to be picking up and leading San Diego County in 2009,” Valone said. “Downtown is emerging a little bit faster from the recessionary cycle.”
Many investors and people who simply want to live downtown recognize that now is a good time to get a deal, Valone says.
“A lot of these projects are at the end of their cycle. Builders have paid off a lot of their loans. They want to sell and they will negotiate.”
The inventory of new homes downtown was 741 units on Dec. 1, MarketPointe reports. “It is one of the lowest levels of inventory we have seen downtown for quite a while,” Valone said. “There was maybe double this a couple of years ago.”
Abel Solano of ARG Abbott Realty Group says one concern sellers have is that banks soon may place more foreclosed homes on the market, creating a drag on prices.
“Asset managers are telling us that February is going to be a month where we are going to see an increase of REOs (real estate owned units) coming onto the market,” Solano said. “They will not flood the market. They will slowly release them.”
Plenty Of Offers
Credit remains tight but buyers with cash are finding good deals, he says. Many investors from Los Angeles are putting their money into downtown San Diego real estate as an alternative to the stock market. Some are focusing on foreclosures, which often offer discounts of 10 percent.
“At the bottom range, it is a frenzy,” he said. “We are having anywhere from 20 offers to 50 offers on aggressively priced units. Everyone is looking for a deal … I have seen some agents having their best year ever.”
Solano, who represents numerous landlords, says the ailing economy has made it hard to rent out the priciest units. Condos that rent for $3,200 per month and below remain in demand, however.
Louis A. Galuppo, director of residential real estate at the University of San Diego’s Burnham-Moores Center for Real Estate, says the downtown condo market likely will emerge from the present slump sooner than other condo markets around the county.
“Downtown is a unique marketplace because it offers so much, so many different things to do,” he said. “It is substantially different than it was in the early 1990s. It is a completely different place.”
Emmet Pierce is a freelance writer for the Business Journal.