August Real Estate Appears to ``Bottom Out'' in Fallbrook/Bonsall, Says Kalman

BONSALL, Calif.--(BUSINESS WIRE)--Sept. 6, 2006--Two prime real estate markets in North San Diego County appeared to bottom out during August, reflecting a hoped-for normalization of home buying activity, Jerry Kalman, RE/MAX United, reported today.

"Average selling prices for 37 homes that closed escrow in Fallbrook and Bonsall rose ten percent over July 2006 and five percent higher than August 2005 to $705,541, or $291 per square foot. Average time on the market, increased from 61 days in July to 73 in August, reversing a steady downward trend over the prior four months," he said.

Kalman based his forecast of positive results for September and beyond on an acceleration of the number of homes entering escrow in August.

"At month-end, 88 homes were in escrow, a 44 percent increase over July 31 levels," he noted. "The average asking price of those in escrow declined to $699,050, or $298 per average square foot. Nine of those that entered escrow were listed in August."

Active inventory on Sept. 1 showed a marginal increase again, reaching 522 homes, and the average asking price rose slightly to $873,517, or $340 per square foot. He added that 136 new listings came on the market and they averaged $834,519, or $324 per average square foot. One fourth of the available inventory continued to be priced at or above one million dollars.

"One condo closed escrow in August, and three entered in escrow, which indicated activity in single family attached homes increased here in the month," he said. The average price of the 44 condos still on the market remained flat at $375,884. Of the two North San Diego County communities, Fallbrook now represents more than half of the condo inventory.

"Since the first of the year, 381 single family residences sold in these two communities, a 33 percent decline in volume from the first eight months of 2005. Prices through August 31 of the current year were six percent higher than the comparable year-earlier period," Kalman said.

Operation Condo Conversion Invades San Diego

By ANDREW WOODBERRY
Voice Guest Columnist

Condominium conversions in San Diego and all of Southern California are increasing with both positive and negative implication. On the plus side, they offer more affordable housing which allows more people to purchase a home. On the negative side, they can displace renters who may have a hard time finding a new apartment. Here is Andrew Woodberry's story.

Strangers started showing up at my apartment complex in the fall of 2004. Middle-aged men in gabardine slacks and Tommy Bahama shorts strolled out of their BMWs to size up the stucco buildings. Their approving gazes obscured by Ray-Ban sunglasses, the smell of Old Spice wafted through the air. These soldiers of "fortune" were there for one reason: Operation Condo Conversion.

When my girlfriend and I first received the letter in the mail, it was not surprising. Hushed whispers of our apartment complex being sold had circulated for weeks. But what was surprising was the staggering price tag: close to $300,000 for less than 800 square feet. Unless the "conversion" aspect includes doubling the square footage and replacing the faux-granite with real granite, consider me a non-buyer. But plenty of people are jumping in -- people who have no intention of ever living in the complex.

Flipping real estate has become as much a profession as flipping burgers. With easy access to interest-only loans and a seemingly endless supply of buyers, the real estate market is sizzling. It has been since I first moved out here two years ago. But is all this part of a real estate "bubble" or the future of home buying in America's Finest City? Will the people flipping real estate be mentioned in the same breath as those who invested in Pets.com and Webvan? Are they descendants of the 17th century Dutch who bid up the price of bulbs? Or will I continue to beat myself up over sitting on the sidelines while others seem to be getting rich so easily?

The lure of the sun and beach have enticed many to come west. After four years of college in New Hampshire and one frigid winter in Boston during 2002, my girlfriend and I strapped a U-Haul to the back of her Honda Civic and followed the path of Ma and Pa Joad. Our destination, San Diego, was full of youth and vibrancy. Gentrification, however, seems here to stay.

One of the charming things about San Diego is how compact it is. You can get from Del Mar to Coronado in less than 45 minutes on a good day. But increasingly, those of us not benefiting from a six-figure job or inherited wealth have had to move further and further away from downtown (Riverside County may as well be considered a suburb of San Diego). A co-worker of mine recently sold his condo in Little Italy for a 33-percent profit (after living there for only three years), moving into a 4,000 square foot house in a suburb of Denver. The price tag: $450,000. That wouldn't even buy a two-bedroom apartment in my soon-to-be former apartment complex.

Every so often, I think about giving up the San Diego weather to move to New Hampshire, where a two-story home is considerably more attainable. Without taking on the burden of an interest-only loan, I doubt I will ever be able to be a homeowner anywhere near San Diego. It is increasingly an area controlled by the BMW-driving, Tommy Bahama-clad jet set and an area where Florida corporations are buying whole apartment complexes, and selling individual units to people who have no intention of ever visiting or living in the apartments. And an area I'm not sure I can ever call "home."

The Best Condominium in Downtown San Diego Is?

This question was recently asked to 2,000 downtown resident condominium owners in a survey asking them to rank their homes in 13 categories and tell what they like the best and the least. The categories included relaxed feeling of home, views, audible outside noise, security, parking and quality of construction, etc. The survey results show you can purchase a home in one of the top five rated properties for under $450,000.

Topping the list by a very narrow margin was the Meridian, a sleeper of a building downtown but a treasured home for many downtown residents. This condo rose to the top as a result of its complete and full service amenities.

Rounding out the top five downtown condominiums were CityFront Terrace, Citymark at Cortez Hill, Harbor Club, and Discovery. Condos offering the best values as reflected in the high ratings yet available for low prices were Treo and Porto Siena.

Almost all of the survey respondents had positive things to say about living downtown including the convenience of being able to walk to the mall, restaurants, nightclubs, theaters and even work. The residents say their quality of life has improved and many have also seen the value of their home appreciate quite a bit in the last few years.

Mark Mills, a Realtor with RE/MAX Real Estate Consultants in downtown San Diego who conducted the survey, says the purpose of the survey was to provide an education to people shopping for a condominium downtown. There are about 50 condominium buildings to choose from downtown. In the past people bought into a building because it was a landmark or looked appealing and later regretted buying there. These surveys are a resource to help buyers choose the building that’s right for them.

Detailed survey results can be seen on the web at www.LiveAtTheTop.com, downtowns best resource for buyers of condos and lofts. Mark can be reached by phone at (619) 699-1425 or by email at e-mail protected from spam bots.

Some Experts Question Whether Downtown Condo Boom Will Continue

By PATRICK HEALD
Contributing Writer
Published April 7, 2005

With more than 7,400 new downtown San Diego condominiums scheduled to come on line for sale by 2008, concerns are rising that the rapid price increases of the last few years could be coming to an end.

In June of 2004, the average sale price for condominiums downtown was $1,005,161, according to figures from the San Diego Multiple Listing Service. As of the last week of March, the average sale amount was $854,039. The average sale price actually fell to $774,300 during the first week of November 2004, the week of the November general election. Since then the average sale price each week has floated between $790,415 and $854,039. The average price is due both to market conditions and to the type of units (size and location) that are available for sale.

The 7,400 units represent almost double the number completed between 2000 and 2003, according to San Diego real estate consultant Gary London who supplied these numbers to Voice of San Diego.

London, president of the real estate consulting firm The London Group, said the number of people who have already bought downtown condos and are now trying to sell them has also increased.

"We have (more than) triple the inventory of resale units on the market now from this time last year," London said. He says 253 downtown condominium units are on the market now, compared to 57 at this time last year.

Investors waiting to sell
Real estate professionals say some investors are now biding their time before selling, speculating that the precipitous rise in real estate prices here will continue, and that they will see the kind of profits investors usually only dream about.

"I would say [the rate of speculators] is about 30 to 40 percent," said real estate broker Lew Breeze who handles properties in Little Italy. He says many buyers don't move into the units, and aren't even bothering to rent them out.

"I'm seeing a lot of people buying second and third homes," Breeze said. "And then [they are] leaving them vacant, paying $700 a month homeowner's fees … It wasn't like that two or three years ago."

London said downtown has historically attracted real estate speculators, but he noted that many of the approximately 1,500 units coming on line this year are in the East Village, which has more affordable housing that will attract investors.

"If history is our guide, [the rate of speculators] will be about 30 percent, but it could be lower because the units are in East Village," said London. "But there are people there who are obviously going to live there and flip."

Flipping is the practice of buying property for the sole purpose of selling it quickly after it has appreciated over a short period of time.

Breeze says the practice is a lot more common now than it used to be. "People are looking to flip," Breeze said. "People were coming in 2003, buying it and flipping it in 2005 and making $200,000."

Shiller says downward price adjustment could happen
The man who correctly predicted the stock market's decline in 2000 says the speculation in downtown San Diego condominiums reminds him of 1929 just before the stock market crashed.

"People can't imagine that this is a bubble, but it is," said Yale University economics professor Robert Shiller. Shiller is the author of "Irrational Exuberance," in which he predicted the collapse of technology stocks in 2000. Shiller says the frenzy of buying in San Diego real estate over the last four years mirrors what happened in 1929, and he says conditions are right for a major downward adjustment in overpriced real estate markets like San Diego.

"It's happening now like in the '20s," Shiller said of housing prices in San Diego. "People then thought that the market can only go up, and they were trading stories about how much money people made. And you had economists saying it was fundamentally sound, that prices would never go down."

Shiller has authored a second edition of "Irrational Exuberance," in which he looks at the dramatic increase in housing prices throughout the country, and the perception that real estate investment is risk-proof. He says even in light of the real estate collapse of the early 1990s, when housing prices in Southern California dropped by as much as 20 percent, many buyers today still think there is no downside to real estate investment.

"It used to be that you had people who said home prices had never fallen," said Shiller. "But the '90s changed that. Now they say [prices] may drop, but they will come back stronger that ever."

Disagreement with Shiller's view
Not everyone agrees with Shiller's gloomy view of real estate futures.

"Downtown has been a strong investment for quite a while," said Mark Riedy, executive director of the Burnham-Moores Center for Real Estate at the University of San Diego. "All the stars are aligned to make downtown San Diego a good place to live and work. I don't see any indication that downtown housing is going to be a money-losing proposition."

Riedy says he believes there is enough insulation against downward pressures on the market to protect buyers who invest in real estate in downtown San Diego. He cites the growth of the restaurant and entertainment industries downtown, the ballpark redevelopment project, and the city's commitment to promote development through the Centre City Development Corp. Riedy also believes that even if the number of buyers who are speculating on downtown real estate approaches 30 percent, the vast majority can handle the risk.

"Eighty or 90 percent of that 30 percent have staying power to last for the long haul," Riedy said. But even though Riedy is optimistic about the investment potential of downtown condominiums, he agrees that a correction is taking place.

"I think it's probably a healthy correction," Riedy said. "Two months of reduced sales does not surprise me. It may cause some people to drop prices, maybe. Is it going to cause the bubble to burst? No. But I think we are past the peak."

South Bay units OK'd for switch to condos

Tenants to appeal planners' decision
By Janine Zúñiga
UNION-TRIBUNE STAFF WRITER
February 4, 2005

The San Diego Planning Commission reluctantly approved a plan yesterday to convert 188 South Bay apartments to condominiums and sent a strong message to the City Council expressing its apprehension about this and other conversion projects.

That message made the issue less about the Otay Mesa tenants who showed up to fight the conversion of the Southgate Village Apartments and more about the growing phenomenon of condo conversions in the city.

Saying they felt for the tenants but had no choice, commissioners voted 4-1 to approve the tentative subdivision map of property owner Ralph Bwy at a public hearing yesterday. Commissioner Carolyn Chase voted against the plan; Commissioner Gil Ontai was absent.

"We are concerned of the effects of condo conversions on tenants," Chairman Barry Schultz said. "We understand and feel just as you do about the issue, but we have an obligation to work within the rules we have."

In a second motion, however, commissioners voted 5-0 to advise the City Council through Schultz of their serious concerns regarding the growing conversion trend, some even calling for a moratorium.

Commissioner Mark Steele said in the rush to approve conversion projects, no one has studied the effects they are having on the rental stock, on the affordable-housing market and on the potential ability to redevelop those areas where the soon-to-be-converted units sit.

Commissioner Kathleen Garcia said she wants to know what the city is doing to create more affordable housing, how that effort is being balanced with all the new conversions and how much more and what types of housing are becoming available.

"We're looking at one part of the issue," Garcia said. "We need to look at the whole issue of affordable housing."

Bwy, the property owner, said yesterday that barring an appeal, he will continue with the project. He said he was relieved by the decision.

"It's been a long process," Bwy said. "We want to continue to work with the tenants, helping them acquire their units. We've been very fair."

Bwy first began notifying residents of his plan to convert in May 2003. The following January, the matter went before the City Council, where tenants complained that they weren't properly notified, a requirement when turning rental apartments into for-sale condominiums.

The council voted against the project, and Bwy was required to start again. The next step is to get the final map approved, said Bwy's attorney, Matthew Peterson. He said he expects the tenants to appeal the commission's decision.

About a dozen current and former Southgate Village tenants spoke at the three-hour hearing. Many, including Antonio Lopez, said they can't afford to buy. Lopez, who has rented an apartment for four years, urged the commission to vote against the project.

Tenants, who have vowed to appeal, have 10 working days to appeal the decision to the City Council. The city clerk would then place the item on the council agenda for consideration.

Members of ACORN, an advocacy group for low-and moderate-income families, some of whom live at the complex, and a representative of Rep. Bob Filner, D-San Diego, also attended the hearing. Many spoke on behalf of the complex's low-income, senior, minority and single-parent tenants. One, Rosalie Leon, said many of the Southgate Village tenants are spending up to 60 percent of their income on rent.

One man spoke in support of the tenants even though he doesn't live at the complex. He said that as a formerly homeless man, he is concerned by a recent notice that his apartment complex is to be converted.

ACORN officials and Mario Lopez, with Filner's office, said they intended to pursue a citywide moratorium on conversions until the city is no longer in a housing crisis.

"Homeownership is good, but the reality is that tenants at Southgate cannot afford condos there or anywhere else," said Lopez, who called on the commission to make a symbolic gesture by denying the project.

Commissioner Steele said it was "absurd" for the City Council to declare a housing crisis but do nothing to address it.

A number of condo-conversion advocates, including Chris Christensen of CondoConversions.com, said converted units have a positive effect on a community and that buyers appreciate the opportunity to buy into the American dream, made more affordable by the conversion process.

Some commissioners questioned how affordable the units are to most low-income families.

High-rise project will be launched next month

Downtown building to include old facade
By Jonathan Heller
UNION-TRIBUNE STAFF WRITER
December 13, 2004

An ultramodern high-rise with some unusual architecture will start rising from one of downtown's oldest districts next month.

The project also includes the long-awaited House of Blues concert venue, which cranked up construction in October after several false starts over the past four years.

The Diegan Hotel on Fifth Avenue, near the Gaslamp Quarter, will feature a glass-and-steel facade with a mesh "blade" slicing down the center. As part of the project, the facade of the historic Jessop's building will be preserved.

This mix of old and new is becoming a common theme in downtown San Diego, with several developments incorporating historic buildings into modern high-rises.

The 170-room, 21-story hotel will have 24 condominium units on the top three floors, similar to the setup at the Omni Hotel next to Petco Park.

The $60 million project is expected to open in summer 2006. It will feature a couple of nightclubs, an upscale restaurant and the adjacent House of Blues.

The project will add a little spice to what some people say is a somewhat stodgy area of central downtown, dominated by old, bulky high-rises, discount stores, cheap-lunch eateries and the C Street trolley line.

Jim Trammel, a principal with Fifth Avenue Partners, the developer, said the project will have Gaslamp-esque overtones.

"It's really going to be an entertainment and night life hub," Trammel said.

Jeff Zinner, a project manager for the Centre City Development Corp., the city's downtown redevelopment agency, said he was relieved to see the project moving forward.

"For years, we looked at this as being critical (for) the continued redevelopment of the core area," Zinner said.

The Core District, generally the area downtown between Horton Plaza and Cortez Hill, has been slower to redevelop than other parts of downtown.

Vacant for 20 years, the historic First National Bank building at Fifth Avenue and Broadway is being converted into live/work lofts set to open early next year.

The old San Diego Trust & Savings building on Sixth Avenue at Broadway, which backs up against the First National Bank building, was renovated in 2002 and transformed into the Courtyard by Marriott, which includes the popular Faz restaurant.

The old Walker Scott department store building on Broadway between Fourth and Fifth avenues reopened last year as the On Broadway apartments, which include the Yard House restaurant.