The Morning Report
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Douglas Wilson says it’s a great time to buy one of the condos he’s built at The Mark, a 244-unit building in the East Village.
His company sent out this press release this morning: “Urban Developer Predicts Housing Shortage in Downtown San Diego by End of 2009, Making Now an Excellent Time to Buy at ‘The Mark.’”
What downtown housing shortage? you may ask. I wrote about the abundance of new condos in downtown San Diego in August.
Wilson says a study his company commissioned showed that new completed condos, and those under construction, will be sold out by the end of 2009. I’ll bold the part of my story that starkly contrasts Wilson’s claim:
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.
Martinez said that an average of 26 condos a month sold for the first six months of the year. Take the 820-some finished condos on the market and 700 unclaimed units under construction, divide that total by 26, and you get your months’ supply. If sales remain that low, it would take more than five years to absorb all of those units.
But Wilson had to get his optimism from somewhere. Turns out it came from the same firm that gave me those numbers; the press release references a study Wilson commissioned from Alan Nevin at MarketPointe.
I called Nevin to find out if he really said everything will sell out by the end of next year. For that to happen, everything that’s currently built, and everything under construction — including Vantage Pointe, downtown’s biggest-yet condo project with 679 units almost ready for release — would have to sell. Does the press release accurately quote his study?
“Well, it’s close,” Nevin said. “To the extent that I think all the ones that are completed will be sold out except Vantage Pointe.”
But isn’t that like saying everything will sell, except for that huge project that won’t?
Nevin dropped a bombshell:
“I’ll tell you what I don’t know yet,” he said. “I don’t know if Vantage Pointe will ultimately be a condominium. I mean, they have said as much that if they don’t get the kind of reaction on the first round of closings, they’re going to have to turn it into rental.”
Vantage Pointe’s developers hadn’t told me that; the president told me last month he hadn’t “made any commitments as far as rental.”
If the developer pulled some or all of the building’s units from the market and rented them out instead, the building would become the biggest condo project in downtown to bow out like that. 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 Terrace, more than 250 condos that were built as for-sale units have been pulled from the market and rented, Martinez told me in August.
So, technically, the prediction that everything sells by the end of next year, as quoted by Wilson, isn’t exactly what Nevin believes will happen. But he still says that there are a couple of ways that the downtown condo market isn’t looking as dire as that five years’ supply we mentioned. We acknowledged a couple of those in August:
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.
Nevin nuanced his prediction, used to tout Wilson’s condos, this way:
“I don’t know, because the market functions on a herd concept and it very easily could blow out that inventory in a relatively short period of time,” he said.
“When you begin to look at the inventory that’s really available for sale over the next 15 months, it’s pretty meager,” he continued.
Except for Vantage Pointe, I said.
“Except for Vantage Pointe,” he agreed.