Friday, Aug. 22, 2008 | If the rate of new condo sales in downtown San Diego continues the way it did in the first half of 2008, it would take five years and three months to sell all of the new units in the city core, according to recent sales counts from MarketPointe Realty Advisors, a local real estate industry consulting firm. That’s about five times as long as the absorption rate for all of the new homes constructed around the county.
“That’s not a good number, but these are not good sales times,” said Robert Martinez, director of research at MarketPointe.
There are 889 finished condos available for sale in downtown San Diego, according to MarketPointe. That doesn’t count units in some projects that have been pulled from the shelf and rented out until the market improves. Another 705 units that are under construction remain unsold or uncommitted to a buyer with a reservation.
In the first two quarters of this year, 153 condos were sold, that total counting either a closed escrow or a reservation made on a unit, according to MarketPointe. That’s an average of about 26 units a month so far this year — drastically lower than the 172-per-month average in 2004. If sales remain that low, it would take more than five years to absorb all of those units.
Of course, every time sales inch higher than that monthly average, the five-year forecast will shrink. And with little new condo development on the horizon, the volume of unsold units won’t grow by much. San Diego’s new condo stock looks miniscule compared with the nearly 18,000 new condos available in Las Vegas and the 25,600 in Miami, by local real estate analyst Gary London’s count.
“We’re not nearly in as bad shape as some urban areas like Vegas and Miami,” London said.
But the years’ supply combined with developers’ inability to find construction financing for projects in downtown San Diego means the boom time gleam of a new condo project has lost its luster. Downtown San Diego continues to slog through price discounts, foreclosures and a volume of new condos that could take years to sell through. And even the region’s real estate optimists acknowledge the city core is a hard place to do business right now.
“If anything I’m sort of a downtown booster,” London said. “But let’s face it: the cycle is over.”
Some developers are taking advantage of the lull in condo development to propose projects containing rental housing or hotel rooms. Some would-be residential projects in the core have stalled indefinitely; others have changed tack and added hotel rooms or rental units to deal with the slowdown in condo sales. A project at 1050 B Street once planned as luxury condos by KB Home has changed gears entirely and will now be an affordable high-rise rental building.
“The only things really going into the ground and starting construction are the affordable housing projects and the hotel projects,” said Brad Richter, senior planner at the Centre City Development Corp., downtown’s redevelopment arm.
Among buildings that are already standing, several have pulled some condos out of the for-sale mix to rent them out. Between the Lofts at 777 6th Avenue, Atria, Smart Corner and Park Terrance, more than 250 condos that were built as for-sale units have been pulled from the market and rented, Martinez said.
About another 360 units were available on the resale market as of Wednesday. At least 90 of those were bank repossessions or short sales, units listed for less than is owed on the mortgage. And among the last 50 condos that entered escrow — almost all of them in August — almost 30 of them were bank-owned or short sales, according to data from the Multiple Listing Service compiled by Lew Breeze, a Realtor in Little Italy.
Those distressed sales often mean prices that attract buyers more than the flashiest marketing campaign ever could.
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.