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University City, with its high-rise condo blocks, flashy hotels and shopping malls, could easily be mistaken for Downtown San Diego North.
Like downtown, University City has been experiencing a real estate boom that has largely centered on condominiums. But unlike downtown, University City’s boom has been primarily driven by the conversion of existing apartments into for-sale condos.
In the last few years, as those condo conversions have flooded onto the market in University City, however, prices have stagnated there, leading some Realtors and home owners to worry about the future of their neighborhood’s real estate prices.
Sherry Sangan is a Realtor with Prudential California Realty who lives and lists in University City. She said the past couple of years have been tough for sellers in all but the best University City condo projects.
“I have buyers who bought two years ago over in Lucera (a condo conversion project) that are getting less right now to sell it than they paid, and that doesn’t include our commissions,” said Sangan.
“They’re getting killed,” she added.
Analysis of sales and price data from University City does not show any substantial drop-off in condo prices in the area. Indeed, since 2001, condos have markedly inflated in value. However, data compiled from Dataquick and ZIP Realty, two real estate data providers, shows that condo prices have completely stagnated since late 2003. Indeed, the median price of condos sold in January 2006 was $45,000 less than it was in January 2004.
At the same time, condo sales have also been drying up in University City.
In 2005, there were fewer sales in every single month of the year compared to 2004. Sales in 2005 were down 23 percent from 2004.
But many of the area’s Realtors remain upbeat about the condo market in University City. They said there are good projects and bad projects in the neighborhood, and that the right property can still find a buyer quickly, if it’s priced right.
“Depending on how you price it and how you market it and how you present it, and, of course, if the price is right, you can sell it,” said Terri Yaghoubi, a Realtor with Century 21 Award in the Golden Triangle.
Nevertheless, Yaghoubi added that condo conversions in particular have had difficulty selling due to new pressure from the city of San Diego to ensure that condo conversions are properly disclosed to buyers. When the condo conversions first started coming on the market, buyers flocked to them, Yaghoubi said. Now, many investors are having difficulty selling those properties on.
Gary London, president of The London Group Realty Advisors in San Diego, said what is happening in University City is analogous to what is happening in downtown San Diego, where inventory levels have risen steadily and condo owners are having difficulty selling. However, London said that the causes of the slowdown in University City are different.
“There just aren’t any real cranes going up in University City,” he said.
Downtown San Diego’s condo market is suffering from a glut of new construction projects.
Russ Valone, president and CEO of MarketPointe Realty Advisors in San Diego, said there are 52 residential projects underway in downtown San Diego, comprising a total of 11,000 condo units either being planned or under construction.
That dwarfs the number of condos planned for University City, which stands at about 2,000 units, most of which are contained within one 1,300-unit project. The vast majority of new units planned for the area are condo conversions, Valone said.
Though he stressed that he has not had a chance to review the sales or price data for University City, Valone surmised that the glut of University City condo conversions entering the market would explain why condo prices have remained so flat. However, Valone said the lack of available land and high construction cost in University City will likely dampen the number of condos or condo conversions coming on to the market in the future.
“As we roll through these conversions, we’ll probably see upward pressure on resale pricing again,” Valone said.
Of course, by then it will be too late for some people.
Adam Rappoport, a Realtor who has a number of clients in University City, said he’s heard a few horror stories from condo owners in the area. Though his clients preferred that their story not be told directly, Rappoport said he knows of a number of people who bought their condo or condo conversion within the last three years and have since run into trouble on their loan repayments.
Buyers were simply expecting prices to carry on increasing, Rappoport said; when the market stagnated, they have found themselves unable to re-finance and therefore getting burned.
“Because of the financing vehicle they took, now not only can they not sell it for what they hoped to get for it, but they’re probably a good $20,000 below the price that they bought it for, and they’re going to have to pay commissions and closing costs on top of that,” Rappoport said.
However, Rappoport stressed that buyers who used sensible, conservative lending vehicles should be able to weather any forthcoming storm in University City. Mary Burger, branch manager at Coldwell Banker in University City, said sellers like those Rappoport is referring to are hardly in the majority. Asked if sellers have done well in downtown’s younger cousin to the north, Burger was cautiously optimistic
“It depends upon how long they’ve owned the home. If they’ve owned it for 10 or 15 years, they’re doing quite well,” she said.
And what if they’ve owned it for one or two years?
“If they’re not absolutely pressed to sell, they still have a lot of opportunity there.”
That’s one way of putting it.
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