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Thursday, Dec. 4, 2008 | A lot has happened since 2004 — in the housing market and in the lives of everyone associated with Vantage Pointe, the largest residential project ever to be built in downtown San Diego.
That’s the case for Brad Willis, one of the first buyers to sign a contract saying he’d buy a unit in the building and make a 5 percent deposit.
Willis, a stockbroker, has seen his business soften this year. The condo he currently lives in has sustained a 50 percent price drop since 2006. That’s the year developers originally said the building would be finished, the year when Willis would have sold his condo to move into Vantage Pointe if it was ready. Now developers anticipate move-ins for mid-2009.
“I think the delays have been a killer,” he said. “I’ve had three different offices in that time. My dad died. I think that was three or four girlfriends ago. A lot of things change in people’s lives.”
Willis hasn’t given up on the building. Through an online message board, Willis has garnered a couple hundred members, many of whom are buyers like him who seek answers to questions they’re asking about the future of the project. He is the frequent recipient of e-mails from buyers lamenting their situation and the way things have changed since 2005 when many signed their contracts.
Those buyers aren’t the only ones astounded at the way the economy and the real estate market have changed in five years, or even in the last five months. The developers of the building, based in Canada, have faced several unplanned delays in construction.
Now everyone’s watching one date next year: May 2009. If the developers fail to finish the building and make it ready for move-in by then, some of the current buyers could walk away from their contracts, with a refunded deposit.
Construction teams have been working six days a week and staying past quitting time to meet the deadline, said Donna Lutz, sales manager for Vantage Pointe.
“They’re in there, they’re hustling,” she said. “That’s probably why you’re seeing people working long hours or six days a week; they know they have to finish it by May.”
As a gargantuan condo building poised to enter the market late next spring, Vantage Pointe is an emblem of the major stress and uncertainty in the region and its housing market. The future of the building hangs in the balance as buyers hesitate on the commitments they stood in a frenzied line in 2004 to make, leaving the developers with the prospect of having to sell even more units in a difficult market. Buyers have signed contracts to buy 288 of the building’s 679 units — less than half of the total.
Market analysts see the building as a bellwether for downtown housing in 2009 and beyond because of the number of units and the fact that they are all entering the market post-boom.
Sales agents at Vantage Pointe field lowball offers from buyers thinking they can apply foreclosure distress prices to units in the new project. Buyers with reservations on the project question nearly every aspect of their purchase: financing, the future health of the homeowners association finances while the developer seeks buyers for the vacant units, and the parking spots allotted to each unit.
An already tough situation — finding buyers for the remaining units in a slumping market with tightened financing — is made tougher by the prospect that some of the buyers who’ve already signed contracts for units worry about getting loans themselves.
One of the biggest questions buyers have in an era of harder-to-get mortgages is how they’ll finance their units. About 80 buyers attended a recent financing briefing with the building’s preferred lender, Wells Fargo. The bank is pursuing approval from Fannie Mae, a giant government-controlled buyer of mortgages, in order to make conventional mortgages available to buyers. To obtain that approval, the developer would have to prove to Fannie Mae that at least 25 percent of the units have been presold.
Current sales surpass that threshold by more than 100 units, but posts on the online message board for future buyers in Vantage Pointe show a host of buyers who may not go through with their purchases. Even with that approval, the minimum down payment a buyer would have to make would be 10 percent, said Michael Dalzell of Wells Fargo Home Mortgage.
The bank has to wait until 51 percent of the units sell before it can apply for approval from the Federal Housing Administration, which makes loans available for first-time homebuyers with 3 percent down payments.
“There’s good momentum,” Dalzell said. “At the seminar, obviously, there were concerns about the market and the credit market, but from our perspective it’s a good time to buy a home. What we really wanted to convey was that there is financing out there.”
Despite that message, some buyers at the meeting seemed concerned and fearful, Willis said. His group is monitored closely by interested downtown market watchers, buyers, the sales staff, and even the developers in Canada.
“Everybody’s nervous as hell; I think that’s an accurate statement,” Willis said. “Are we going to be able to get financing — do we even want to be financed? Those are the thoughts I’m having.”
Sales staff sees some positive signs for the building. Construction is wrapping up. The crane came down a few weeks ago. A covered walkway was disassembled, leaving just a fence on one side. Installers are working their way up through the building’s towers with walls, cabinets and flooring. Workers have been spotted carrying mattresses into the building for the seven model condos.
Willis is pushing for reductions in price from the developers, Calgary, Alberta-based Pointe of View.
Buyers are seeking those reductions not just because the general real estate market in San Diego has declined since they committed to buy their units, but also because they expect to assume some risk for the financial health of the homeowners association due to the number of unsold units.
Both Willis and Lutz said the developers have given no indication they’ll be lowering prices.
Lutz said that buyers think if they keep saying “price reduction,” it is going to come true. “But I think right now everybody’s in kind of a ‘wait and see’ mode still until after the holidays. We’re expecting a surge of sales and definite shift of attitude next year,” she said.
Willis said has one of the smallest units in the building. He expects his HOA fees to be around $500 a month, an increase of about 15 percent from their original level.
Lutz said she’s currently in negotiation with five potential buyers — four on the penthouse level and one about midway up the building. Many buyers are coming in now trying to lowball the asking prices, she said.
“The ones that are coming in are looking at the foreclosures on the market and trying to compare a brand-new home to something that’s gone through that distress,” she said. “It’s a bit different scenario when you’re buying a brand-new home, with a guarantee and a customer service center and everything.”
Lutz said there are a number of buyers who are “anxious and eager to move in.” She expects a pickup in activity next year, even if current buyers back out of their reservation.
Jennifer Bishop made a 5 percent deposit on a unit in Vantage Pointe in one of the first phases, she said. But now, she doesn’t even want to live downtown anymore, and doesn’t think she’ll be able to afford her unit.
“If they had done it in 2004, we would’ve wanted to go ahead and live there,” she said. “But it’s just a different time now — a lot of time has gone by.”
Bishop said even if the building’s finished mid-year 2009, and even if it means leaving money on the table, she will probably walk away from her unit next year.
Willis, though, keeps pushing.
“I’d still like to buy the place under the right circumstances,” he said.