Condo Hell Freezes Over

Submitted by Rich Toscano on March 8, 2006 - 10:14am

Folks in the UTC area (fondly called "Condo Hell" by inhabitants--I know because I used to be one) may be interested in today's Voice of San Diego piece on the University City housing market. This area has apparently sat out the latter part of the boom, with prices pretty stagnant since late 2003. The zip code winners/losers list I recently put together shows the UTC area as having a 3% median price increase over the past year... positive, at least, but not enough to cover the cost of selling.

Of course, the median price of sold homes is a blunt instrument for measuring general trends; it does not tell you exactly how much the market price of a given home has changed. In this case, it appears the median price is overstating appreciation, as one real estate agent laments, "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."

The article wraps up with an amusing exchange illustrating how much the tenor of market cheerleading has changed:

Asked if sellers have done well in downtown's younger cousin to the north, [Coldwell Banker branch manager] 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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Submitted by davelj on March 8, 2006 - 12:19pm.

yup, sounds about right. i owned a condo up in la costa before deciding things were nuts and selling it two years ago (too early!! hahaha). i've been renting in utc for two years now and like the area a lot. three anecdotes regarding the problems selling condos here: (1) for the first time since moving to san diego in 1999 i've seen infomercials for two utc condo conversions, (2) i've been receiving mailing advertisements for these projects talking about reduced prices and fees, etc., and (3) the signs on one of the big ones (verano, i believe) that used to say "from the high $200s" now say "from the mid $200s" which suggests a 15%-20% price reduction over the last few months. the problem, of course, is that even if you can buy a 1000 sq. ft. two bedroom/two bathroom condo in utc for $400K, you're still probably overpaying by $50K or so... unlike downtown where you'll pay $600K-$800K for the same size and you're overpaying by $200K-$250K, depending on the exact location. i'm betting that downtown will be in markdown mode in about 6-12 months.

on a different subject, anyone know anything about the progress, or lack thereof, of "revolution," the large condo project slated to go up in national city? looks like a cool project... if it actually gets done.

Submitted by waitingitout on March 8, 2006 - 2:29pm.

The area is choked with condo conversions of 20 year old apartment complexes. The privledged lifestyle hype coupled with Italianate names and marketing that the developers are pushing makes me laugh.

It's more like...
Unwind in graceful sophistication at the end of the day, sipping a glass of wine you can't afford with that new mortgage. Go ahead, you've earned it. Relax in style. Dream of the delights of blazing sunsets, if you could only view them. Take in the sights and sounds of the vibrant traffic of I-5 and Nobel and/or Gilman Drive from your understated balcony. Breathe, but not too deeply. Fantasize that your neighbors really aren't staring at you as you imagine yourself a world away. A lifestyle that transcends day to day reality can be yours. The relaxing splendor of crushing urban density invites you. Your luxuriously appointed but practically uninsulated compartment awaits you!

Those that bought at the mid $400's are now looking at repricing of $380K in two developments. One is taking in renters again in unsold areas because sales are so slow. The exclusiveness marketing has given way to lots of sign twirlers and desperation. And yes, there's still more shoeboxes to come. As for Lucera, the canyon location is much hyped, but they don't like to mention the trains that go right by it 24/7. Almost all of these places have only made cosmetic improvements, and still have the problems that the former renters complained about for years.

UTC certainly has its own scaled down version of spectacular insanity going on, minus the cranes. Thanks for pointing out this article, Rich.

Submitted by davelj on March 8, 2006 - 11:38pm.

i'm surprised they'd have to resort to rentals. don't they have enough margin built into the project to just lower the prices to "market clearing" prices and accept a lower IRR on the project? condo converters renting out the conversions seems extremely desperate and you have to assume that they completely misjudged the market when buying the property in the first place.

Submitted by Asterix on March 9, 2006 - 9:49am.

I went one step further. I'm temporarily renting one of those units in UTC. Gotta say it's nice and convenient, but certainly not my dream haven for retirement.

Took my proceeds from a previous home sale and bought a 4 bdrm 2000+ sq ft home near Seattle with an awesome view of Mt Rainier - all cash offer with some money left over. I'll be moving soon - hope those who paid $400k for 2 bedrooms and a balcony overlooking a parking lot are enjoying their view as much as I'll be enjoying mine!

Asterix

Submitted by RightSide on March 9, 2006 - 12:55pm.

Hey Asterix,

I made a similar trade, but after 2 winters up here in the Seattle area, we are packing it in and heading back to Cali. This winter it has rained for some 60 out of the last 80 days, and as I type this, it is currently windy, rainy and free-ee-zing, 35 degrees. While I love this place, its clean, the people are friendly, and Seattle is an amazingly vibrant and beautiful city, I'm ready to move back to the warmth and sunshine of so cal, no matter what the cost.

I'm probably going to be buying a place this summer in San Diego to move to in Fall, so I'm hoping the market crashes quick. Unfortunately, my wife is not going to let renting be an option, so we will probably end up buying high, but at least we won't be cold.

If you can handle the weather up in Seattle, and everyone around you complaining about it (a common pastime I guess in all areas that experience bad weather), then I think you will be very happy with the move. I also think Seattle is a great long-term real estate investment.

Good luck!

Submitted by powayseller on March 9, 2006 - 2:10pm.

RightSide, please forgive me for budding in, but in regard to renting, I just wanted to note that the renting market has really changed in the last few years, and your wife might be surprised at the quality of the rental housing inventory.

We keep reading about investors buying houses to flip, but there are many who are buying to hold, and they are renting those houses. Investors have purchased houses in almost every neighborhood, and you can rent a 2500 sq ft house in the most desirable areas of Poway for about $2500/month. I had dinner at a friend's house last weekend, and they told me that on their street alone, 3 houses are rentals.

The rental houses of today are interspersed among stable neighborhoods, and bear no resemblance to the rental neighborhoods I used to see, with peeling paint, rusty window screens, and endless lines of junky cars parked out front. Well, I wish you well; I just can't see buying at the top of the largest housing bubble in history.

Submitted by Asterix on March 11, 2006 - 11:16am.

Northwest weather is certainly an issue, but to me, it's a tradeoff. Get wet in the Northwest or get stressed out in SoCal.

Also, I should have mentioned, I've lived here before and have both friends and family in this area. Plus, I'm originally from PA where the weather is even worse than the NW. And as you've already seen, the summers up here can be awesome - even nicer than San Diego as hard as it may be to believe.

Consequently, I spent a lot of time considering the pros and cons before deciding to make the move. This part of the US isn't right for everyone, but now that I've made the decision to move back here again, I'm feeling pretty good about it.

Submitted by powayseller on March 11, 2006 - 1:10pm.

You're a trendsetter, part of the exodus out of Southern California. The rain brings with beautiful and lush vegetation. But you understand, there are those of us who love this place as much as you love yours. Best wishes. The NW US is a prime place to live, also.

Submitted by Asterix on March 11, 2006 - 5:47pm.

Thanks, powayseller, and the best to you too.

I'm still living in SD, but I'm in WA this weekend finilizing the deal up here. Also stuffing myself with Dungeness crab while I have the opportunity.

You'll note I posted a point on another topic regarding "Bubble Theory." I think it's obvious by my selling out and moving that I'm convinced enough of the "Bubble Theory" to take action. Drastic action to some!

However, I certainly have no ill-will towards those who choose to live in San Diego and I hope that all things turn out well for everyone.

Now my next problem is figuring out who to root for next NFL season. I'm from PA and a life-long Steelers fan, I lived in San Diego for over 20 years so have an affection for the Bolts, and love the NW enough to want to see the Seahawks win. (Watching the last Super Bowl was really tough - I knew that no matter who won, I'd feel bad for the loser!)

Asterix

Submitted by powayseller on March 11, 2006 - 7:04pm.

Selling a house is a drastic action for many, unfortunately. I did this, too. My friends are real surprised, because I had a house designed by an architect, and spent so much time designing and finishing it. We decided to rent, because my husband refuses to leave San Diego. I am willing to live someplace cheaper. I think rent is too high here, and with about $900/month just on kids' activities, it leaves little money for extras or unexpected expenses.

Submitted by RightSide on March 11, 2006 - 10:36pm.

Congrats on your move Asterix. It snowed last night up here!! Can you believe that? Not enough to stay on the ground, but enough for my son to go outside in his underwear and chase snowflakes. It was very beautiful.

There are many, many Californians I have met, in fact 5 of the 6 people who bought in the little new subdivision that I moved into up here were from California.

I might add that one of the other awesome benefits of living in WA is that there are NO state income taxes. Its like an extra 10% bonus on your income. Man I'm going to miss that the most!

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