May 2008 - Posts

Fannie, Freddie Scrap Declining Market Label in Downtown San Diego
30 May 08 09:16 PM | 92101urbanliving | 1 comment(s)

All properties in 92101, previously considered as being geographically located in a “declining market” since last December by Fannie Mae [1] and Freddie Mac [2], will no longer be stymied with this stigma. What does this mean for you? If you happen to be shopping for a downtown condo, your lender will no longer have to ease you into the idea that a higher down payment will be required for your loan to be approved under Fannie Mae or Freddie Mac loan guidelines.
 According to the May 25th 2008 article in San Diego’s Union Tribune entitled Fannie, Freddie scrap declining-market label:  “Starting June 1, mortgage applicants who are underwritten by Fannie Mae’s automated system online will qualify for 3 percent minimum down payments, wherever the property is located.  Borrowers whose applications require “manual” underwriting will pay 5 percent minimum down.” Fannie Mae indicated that it was able to move away from the declining markets policy because their latest version of Desktop Underwriter (DU) ver 7.0 will limit risk layering and assess each loan more precisely.The rest of this article makes mention of private mortgage insurance (PMI) industry which has not yet removed the declining market label from their vocabulary.  PMI is an additional monthly cost associated with Fannie or Freddie loans generally greater than 80% of the home’s value.  One traditional way that homebuyers have avoided PMI is to offer 2nd mortgages or Home Equity Lines of Credit (HELOCs) for the amount financed above 80%.  There is still a shortage of these types of 2nd available to borrowers in today’s mortgage marketplace.  Nevertheless, removing the “declining market” stigma is a step in the right direction for 92101downtown condo financing in general.

A prior article written on April 27, 2008 in the San Diego Union Tribune entitled Declining market tag may threaten recovery offers more detail about the previous impact of the “declining market” stigma.

For more information concerning this article or questions about condo financing in general, please contact Pete Thistle at pete@92101urbanliving.com  Pete is a licensed broker with 92101 Urban Living.  Pete also has many years of previous experience as a loan officer focused on downtown condo financing with Wells Fargo, Countrywide, and American Mortgage Express.

Filed under: Downtown San Diego Condos, downtown San Diego market analysis

Builders looking to infill
29 May 08 01:23 PM | 92101urbanliving | with no comments

So with the state of the market comes the downsizing of a lot of developers. Within this comes the fact that a lot of the developers that were here in the past aren’t going to come back when the market corrects again. Today’s paper has an article regarding this. It speaks of how urban infill will be the way of the future for development as there is really no more buildable land. Buildable in the idea of an Eastlake or Otay Ranch or Scripps Ranch.

Vertical living is the way of the future. With that in mind, one could view a purchase in downtown as a “first phase” purchase. So to speak. As there are numerous empty lots to develop you can view the construction that has been done as a first phase of downtown redevelopment. You can’t say the same thing about suburban development. Not that there won’t be suburban development ever again or that there won’t be any investment return on a suburban purchase. Not my point at all. Point is, and read the article, the future of development will be vertical infill.

Filed under: Downtown San Diego Lofts, Downtown San Diego Real Estate, Downtown San Diego Condos, Downtown San Diego Condo, Urban Living , Downtown San Diego Urban Living, downtown San Diego market analysis

Housing Crisis Over??
28 May 08 01:21 PM | 92101urbanliving | with no comments

The Title of the Wall Street Journal Article is “The Housing Crisis is Over”. Could this actually be? A well respected national publication is suggesting that there is actually something positive on the horizon for Home Sales in the United States. Well, things are not that easy. I am positive that this topic will continue to be debated for months to come. However, new statistics and historical data regarding National Supply Inventories, Local Market Conditions, and Construction Activity show that the right conditions for improvement are starting to become note worthy. A decline in Home values combined with competitive mortgage rates allows buyers who have normally been priced out of the market a chance to take advantage of diverse supply inventories. As these inventories decrease, and as construction activity slows, the result will be a shift of the market values and perspectives’.

We can see this trend in Downtown San Diego starting to develop. Construction Downtown is now limited to only three residential projects. As these and existing New Construction inventories start to be “picked over”, buyers must rely on the resale market to find the certain floor plans in specific price ranges. For a more detailed look at this trend, review our Blog on Downtown New Construction Inventories.

Filed under: Downtown San Diego Lofts, Downtown San Diego Real Estate, Downtown San Diego Condos, Downtown San Diego Condo, Urban Living , Downtown San Diego Urban Living, downtown San Diego market analysis

Old Police Headquarters Conversion
05 May 08 01:20 PM | 92101urbanliving | with no comments

San Diego’s Old Police Headquarters resides at 801 W. Harbor Drive in downtown…right across from Seaport Village. The old Police Headquarters closed in 1987 and has been abandoned and neglected ever since. Slated for sometime this summer, the old police headquarters will be receiving some love and will be transformed into a public market and at least two restaurants. San Diego Port Commisioners are currently meeting with a Carlsbad development firmo over what this project will take. It is projected to be completed in a little over two years with a bill of about $40 million. At the moment the discussions between the Port and the developer are closed as they negotiate points of the lease. The building was opened in 1939, vacant since 1989, and in 1998 it was added to the National Register of Historic Places. The building will clean-up nicely and become a waterfront highlight of downtown.

The Future of the Downtown condominium Market
02 May 08 01:18 PM | 92101urbanliving | with no comments

We know no other condominium projects that will break ground in the next year. As high-rise projects require two years to complete, we do not anticipate the completion of any new high-rise projects until atleast 2011 or possibly 2012.

There are two factors that impact the future supply of condominiums downtown:

• First is the near absence of financing and equity capital-a situation abetted by the financial struggles of the major banks and investment institutions.
• Second, and of equal importance, is the rising costs of construction. The condominiums that are newly completed downtown, like The Mark andf The Legend, were bid out in 2004-2005. Since then, as a result of international demand for concrete and steel, the cost of construction has increased between $125-150 per square foot. New high-rise condominiums started today would in all likelyhood cost #350-400 per square foot.

To put that in context, a 1,500 square foot condominium in a newly completed building that sells today for $600 per square foot, or $900,000 would have to sell for as much as $1,100,000 if started today. As construction continue to rise, it is likely that the next round of condominiums downtown would be far more expensive.

Further, the supply of high quality condominium sites is near exhaustion, a situation that will make it even more difficult for developers to justify the type of pricing that will be necessary to build new product.

It is likely that most new condominium product in the forseeable future will be low-rise as the cost to produce that producxt would be significantly less than high-rise.

Therefore, it is highly probable that only high-rise condominiums in waterfront or inland premier locations will be built, as it is the only type of product that will generate the price per square foot necessary to warrant development.

We take position that until new high-rise condominiums can justify the heady pricing necessary for financial viability, there will be no new construction.

It also means that buying a condominium unit today makes economic sense because any new condominium to be built in the future will be priced far higher than the one bought today.

In 2006-2007 timeframe, almost 50 condominium projects were built downtown. Today, there are four projects under construction with none in the pipeline.

On balance, it is the opinion of Market Pointe Realty Advisors, and us here at 92101 Urban Living that downtown will continue to accelerate as a popular residential venue with demand outstripping supply over the next few years.

**all information/graphs provided by Market Pointe Realty Advisors**

Filed under: Downtown San Diego Lofts, Downtown San Diego Real Estate, Downtown San Diego Condos, Downtown San Diego Condo, Urban Living , Downtown San Diego Urban Living, downtown San Diego market analysis

Inventory Of New condominium Units for Sale: 2008-2001
02 May 08 01:17 PM | 92101urbanliving | with no comments

As noted above, there are only four condominium projects under construction downtown: Vantage Pointe in the East Village and Bayside, Breeza and Sapphire at the Embarcedero. Those projects will be completed in 2009. After that there will be no delivery of new units, recently

 

Filed under: Downtown San Diego Lofts, Downtown San Diego Real Estate, Downtown San Diego Condos, Downtown San Diego Condo, Urban Living , Downtown San Diego Urban Living, downtown San Diego market analysis

Inventory of New Units
02 May 08 01:15 PM | 92101urbanliving | with no comments

Currently, if you were to look at the toatl availability of unsold unit downtown that are in buildings that are either completed or under construction, the total would be 1,696 units. Of that total, 694, or 40% are units in the buildings that are under construction and won’t be delivered untill 2009. Another 176 units, or 10%, are in adaptive reuse or conversion projects. The balance, 826 units, comprising half of the inventory is in completed buildings.

From another perspective, if we look at the longer term view of unitsthat will be available for sale in the future, we find the current inventory and those projects under constructionsell out by the end of 2009–whch is likely–then there are no new condominium units to be deliverd in 2010 or 2011. It is likely that should have a solidifying effect on the downtown condominium market.

Filed under: Downtown San Diego Lofts, Downtown San Diego Real Estate, Downtown San Diego Condos, Downtown San Diego Condo, Urban Living , Downtown San Diego Urban Living, downtown San Diego market analysis

New condominium Sales
02 May 08 01:14 PM | 92101urbanliving | with no comments

The downtown new condominium market was highly active in the 2002 through 2006 period when there were several dozen projects offered for sale. In 2007, with most of those projects complete, sales slowed dramatically.

To date this year, 62 condominium units have been sold in newly completed buildings and buildings under construction.

Part of thr reason for the slowdown in sales is the absence of a full range of inventory. Most of the units under construction and completed have product priced over $400,000. Although $400,000+ condominiums are an important part of the market, most of the sub-$400,000 product has been long sold out. It is that sub-$400,000 portion of the market that has traditionally provided the heaviest percentage of the total sales.

The average price per square foot for new condominiums in Downtown San Diego has almost doubled between 2000 and 2007. At the end of 2007, the average price for new condominiums in Downtown was $600,038 or $587 per square foot. The $587 per square foot figure is a slight decline from the peak of $593 in 2006 but still higher than 2005.

Filed under: Downtown San Diego Lofts, Downtown San Diego Real Estate, Downtown San Diego Condos, Downtown San Diego Condo, Urban Living , downtown San Diego market analysis

Foreclosure Activity
02 May 08 01:13 PM | 92101urbanliving | with no comments

Dataquick has released its first quarter 2008 figures for downtown SanDiego. In that period, there were 121 sales, 36 of which, or 29.8%, were foreclosure sales. The foreclosures represent 4/10th of one percent of the downtown inventory.

Most of the foreclosures were in the lesser-priced projects, averging $385,000. The foreclosure sales were generally in the batter quality projects and averaged $625,000.

Filed under: Downtown San Diego Real Estate, Urban Living , downtown San Diego market analysis

Downtown condominium Resale Market
02 May 08 01:12 PM | 92101urbanliving | with no comments

The downtown resale market continues to be relatively steady. Ignoring the highly unusual year of 2005, resale condominiums downtown have averaged more than 40 sales per month in the 2003 through 2007 period. These tabulations do not include sales by developers.

Notably, sales countrywide have fallen almost 50% in the 2003 to 2007 period, yet the downtown condominium market has persevered.

In the first quarter of 2008, sales totaled 102 units, compared to 113 sales in the first quarter of 2007 and could match the 40-unit a month total in 2008.

The price per square foot peaked in 2005-2006 at more the $600 per square foot and has now subsided to the $558 per square foot level. The peek to present reduction price per square foot is less than 10%.

Also indicative of the strngth of the resale market is “days on the market,” the period between the listing date and the date the home goes into escrow. The current quarter average of 71 days is only 11 days highewr than the traditional 60-day average. In the torrid 2004-2005 period, days on the market did decline to 40-50 day range, but that was highly unusual.

The Recent History of Downtown San Diego
02 May 08 01:09 PM | 92101urbanliving | with no comments

Since 2000, downtown San Diego has seen the development of two major office buildings, more than 6,000 new condominium units, 3,000 new apartment units and 3,700 hotel rooms, and, of course, Petco Park, the key anchor of the East Village…

Today, there are more than 30,000 persons living downtown and more than 75,000 persons working downtown.

Until the year 2000, the total number of condominiums and rental units downtown totaled 8,303. Of that total, there were 1,311 condominiums and 1,812 market-rate rental apartments. The balance were senior, single-room occupancy and subsidized units.

Since 2000, there have been 77 projects built and occupied downtown. Of those, 46 were condominium projects totaling 6,421 units along with 21 renter apartment projects totaling 1,482 units. In total, more than 9,000 unit have been built downtown since 2000.

Now the downtown San Diego area has more than 17,000 housing units, including 7,732 condominiums and 3,294 market-rate aprtments. Thus, in the past seven years, the number of living units downtown has more than doubled.

*all info from Market Pointe Realty Advisors*

Filed under: Downtown San Diego Real Estate, Urban Living , downtown San Diego market analysis