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Thursday, Mar 28, 2024
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Let’s Make a Deal

At the height of the real estate market a few years ago, downtown developers began building up. Pedestrians shared the sidewalks with cranes and construction workers. And restaurants and boutique shops began anticipating the activity, quickly filling spaces in between.

Young professionals looking to own a piece of property near the waterfront converged with savvy investors hoping to turn a quick profit. Many of the buyers got in over their heads. And lenders offered up more than they could handle.

The abundance of homes for sale today has created a unique environment downtown, sprouting lower prices, condominiums-turned-rentals and a host of move-in incentives.

“There’s a glut of condominiums downtown,” said Mark Goldman, a mortgage broker with the local office of Windsor Capital Group Inc. and lecturer at San Diego State University. “A lot of condos are going into rental supply and that’s creating some softness in the market.”

In the past three years or so, Goldman said he’s noticed condominium prices drop an average of $150,000 per unit as inventories inched higher.

He philosophizes on the topic, blaming much of the downturn in the residential real estate market on “greed at all levels.”

“The thing is, the money screwed the demand,” he said. “It created an artificial increase in demand and now that the aggressive financing is down, we return to affordability again and that’s what is going to drive the market.”

Like many real estate professionals, Goldman says the downtown residential real estate market will pick back up again soon. He cites factors such as easy access to public transportation, harbor views and the area’s proximity to restaurants and night life.


Defaults On The Horizon

Sean O’Toole, founder of ForeclosureRadar.com, speculates that the foreclosure market will stay strong until the end of the year. O’Toole has made a business of helping real estate agents track foreclosed properties and properties that are in danger of foreclosing, when homeowners have received notices of default.

ForeclosureRadar.com reported that 332 homes , including 282 condos , in foreclosure or danger of foreclosure in downtown’s 92101 ZIP code for the last four months.

O’Toole said default notices, which place the homeowner in danger of foreclosure, jumped to 60 in April and fell slightly to 53 in May.

“We’re still seeing defaults increasing even though they were down a bit last month,” he said.

DataQuick Information Systems reported that, in the first quarter of the year, California homeowners were a median of five months behind on their payments when lenders began the default process. Borrowers owed a median $11,474 on a median $346,750 mortgage.

Foreclosure sales in the county represented 36 percent of the market in May, according to San Diego-based DataQuick.

Karen Wheeler, an agent with Coldwell Banker Real Estate, has been trying to sell a bank-owned, one-bedroom condominium in Cortez Blu, a 67-unit, 20-story high-rise in Cortez Hill that has been listed since January. In February, the price was reduced from $384,900 to $349,000.

“It’s probably dropped by 40 percent value over the last year and a half,” Wheeler said.

Wheeler said that she foresees further declines with real estate owned, or REO, properties flooding the market until 2012.

“What we’re competing with are the short sales as well as REO properties and regular sellers just trying to sell their homes,” she said.


Enticements For Buyers

In real estate, a short sale involves selling a property for an amount that’s less than what’s owed on it.

Meanwhile, newly built developments are enticing buyers with low down payments and other incentives to stay competitive in the overstocked marketplace.

At Vantage Pointe, a 679-unit condominium complex being erected near San Diego City College, Canadian development company Pointe of View is offering buyers what it calls its employee discount program. Buyers are eligible to receive a discount off the purchase price of their new home, credit toward options and upgrades, paid homeowners association fees, or closing costs paid at close of escrow.

In the East Village, the 301-unit Smart Corner is offering buyers an additional 4 percent savings off its already reduced summer prices. It has 240 units left to sell, according to Weston Harmer, vice president of San Diego-based Urban Real Estate Services Inc.

In Little Italy, the recently completed 11-story, 86-unit Aperture condominium complex, which is selling its remaining 23 units, is offering buyers a 3 percent down payment.

Russ Haley, vice president of CityMark Development, said the firm’s sales agents were able to sell at least one home a week for more than a year partly because of its qualification for Federal Housing Administration financing.

“It really opens up the pool for eligible people that can afford our place,” Haley said. “I think that helped drive some sales for us.”

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