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Wednesday, May 13, 2009 | The most famous piece of real estate in Oceanside is the blue, 19th-century, single-story Victorian house at the corner of Pacific Street and Seagaze Drive, notorious for its appearance in the 1980s blockbuster “Top Gun.”
But in recent months, some regular old houses in the county’s third-largest city have been attracting more attention than the cinematic landmark. In some parts of Oceanside, bidding wars are erupting over foreclosures and short sales. Many are listed at prices about 50 percent lower than what they went for at the market’s peak three years ago.
There are still some houses that languish on the market, usually higher-priced coastal homes with sellers who refuse to compete with distressed sales. A luxury condo project may go to auction in the next two months. But in swaths of the city, watchers of Oceanside real estate have begun to tentatively utter the word “bottom.” The city can be held as an example of how a market might start to stabilize once the price becomes right, said broker Jim Klinge, who has listed several foreclosures in Oceanside.
“Half-off is the equation,” Klinge said. “If you’re half-off in Oceanside, you’ve got a lot of buyers.”
A look at how its housing market is doing yields a look at some neighborhoods that have been through the foreclosure wringer, some waterfront places where development is stalled, waiting until the economy merry-go-round picks up again and one huge inland development where houses are still being built.
Prices in three of the city’s ZIP codes have fallen about 40 to 50 percent from peaks in 2006 and 2007, according to MDA DataQuick.
In western Oceanside, 92054, the median price paid per square foot was $183 in the first quarter of this year, down 54 percent from the peak hit in second-quarter 2007. For southeast Oceanside, 92056, that price was $188 in the first quarter this year, 42 percent lower than the peak in third-quarter 2006. And northeast Oceanside, 92057, dropped 48 percent from second-quarter 2006 to $163 per square foot in the first quarter this year.
Though prices continue to fall, buyer activity is booming. The 166 homes that sold in 92056 in the first quarter this year represented an increase of 54 percent over the same period last year. Sales in 92057 skyrocketed 57 percent in the first quarter compared to 2008.
“I don’t know if I could say ‘stability,’ but what we are seeing in Oceanside is that things that are in good condition, really well-priced, are getting multiple offers on the first day,” said Deborah Danko with Willis Allen’s Fallbrook office. “It’s been a while since we’ve been writing offers on the hood of our car.”
Just south of Camp Pendleton, Oceanside is the third-largest city in the county, with a population of nearly 180,000. The city has boomed in the last few decades, more than tripling its population since 1970. Like any coastal city, its inland neighborhoods vary greatly from what’s available at the beach. But Oceanside’s waterfront work-over is relatively recent compared to the build-out of some sought-after spots in San Diego County.
Downtown Oceanside, on the coast in ZIP 92054, has undergone some significant changes in the last 10 years. The downtown looks a little older and more rustic beach town than the downtowns of those of the city’s southern neighbors — Carlsbad, Encinitas
— and certainly more so than the cities to the north in Orange County.
There’s been a concerted effort to revitalize the downtown, to root out gangs, graffiti and prostitution and make way for development, said Roberta Murphy, a North County real estate broker who typically focuses on luxury properties, one morning last week as she drove past many of the coastal listings.
“The reputation is changing here,” Murphy said. “It’s becoming much more genteel.”
But the downturn has slowed the progress of two major planned projects on the waterfront. One is a beachfront hotel and timeshare, and the other is a five-block mixed-use residential, commercial and hotel project.
In the meantime, the recently completed downtown project Oceanfront Terraces is looking to auction its remaining condos in the next couple of months, a sign that sales on the regular market are going slower than expected. The project is near the Coaster tracks and the city’s coastal shops and restaurants.
Murphy, who’s selling units at the project, said that’s because of difficulties buyers have found getting loans to buy them. The condos are currently priced between the high-$500,000s and $1.5 million. But jumbo financing — loans for more than about $550,000 — is much harder to come by than it was in the housing boom. That and revised lending rules for condo projects whittles the buyer pool to those with large down payments or all cash to pay for the waterfront units, Murphy said.
Most of the 38 condos have been marketed and priced as if they won’t have views of the ocean because of some pending developments that would block their views. But those developments have stalled in the current economic conditions, Murphy said.
Murphy drove a visitor touring the Oceanside market to 92057. In that northeast part of the city, buyers are mostly looking at homes in developments like Jeffries Ranch, Arrowood and Del Oro.
Arrowood is a 1,000-home master-planned community north of Highway 76 that has been growing since 2001. The neighborhood has a golf course, an elementary school and a community center. The homes have been built by several different builders and resemble the suburban cookie-cutter type development that sprang up around the county this decade.
In the boom, the community boasted some “deals,” Murphy said — townhomes or small houses in the $400,000 range. Now, that’s more than enough to buy a detached house.
In July 2007, a 2,570-square foot house sold for $570,000, Murphy said. It’s currently listed for $364,900 — a 36 percent reduction.
A very large home in the Arrowood community — five bedrooms and 4,159 square feet — sold in May 2006 for $866,000. It’s currently listed for $535,900. That’s a 38 percent reduction in price.
Those are active listings that have not yet had an offer accepted. In Arrowood’s ZIP code, 92057, more than half of the 235 sales that had accepted offers as of last week were pending sale for less than $250,000. Only 30 are selling for $400,000 or more.
And the low prices are attracting significant buyer activity. One of Klinge’s pending bank-owned listings, 2409 Winter Road, sold previously in June 2005 for $490,000. The three-bedroom, two-bathroom house is 1,060 square feet.
The bank had Klinge list the house for $224,800. Klinge received 22 offers and accepted an offer for $265,000 — 18 percent over the list price.
In the places where prices are about half-off their peak prices, he said, the homebuyers who want to live in the houses are being outbid by investors who can pay hefty down payments and who seek turn a profit by renting the houses out. Often buyers are making dozens of offers, only to be outbid each time. And so the bidding wars are not necessarily because someone really loves a particular house — just that the process is exhausting.
“That frustration is impacting the buyers and the agents — the buyers just want to get something and the agents want to get paid,” he said. “The buyers are willing to pay over list price just to get it over with.”
Still, the threat of more foreclosures loom. In the first quarter of this year, there were 1,352 properties in some stage of the foreclosure process, according to RealtyTrac. That’s up from 501 properties in the same period in 2008, and up from 978 properties in the last quarter of 2008.
And so the future of Oceanside real estate market appears still murky. While coastal developers keep an eye on the frenzied buyer activity to time the resurrection of their waterfront projects, there’s no telling what impact more foreclosures or further pressure on prices at the coast could do to these inland markets. Still, the word on the street is “bottom?” — uttered with some uncertainty — for the neighborhoods that have been thrashed by foreclosures, especially in northeast Oceanside.
“How long it’ll take to come out, nobody knows,” Danko said. “And it’s not to say that there’s not going to be a bank-owned on somebody’s street that is ridiculously low-priced. But it’s a good sign.”