San Diego County is filled with such diversity. There are over 90 sub communities that make up the Real Estate Residential Market. Each individual sub market performs based on its specific price points and location. I guess it should stop surprising me that performance of high-end product and very average product are continually generalized together. Investors who made bad choices buying average real estate in average locations broke the most basic of all value rules: LOCATION, LOCATION, LOCATION. Investors who made good choices buying quality product in desirable locations “weathered the storm” quite well.
Alin Nevin of Marketpointe Real Estate Advisors has written a very “eye opening” article that sheds some light on the inequity of distressed properties in San Diego. Consider the following facts that he outlines in his article What Housing Recession?:
- 70% of homes in California are in counties closest to the ocean where foreclosures are limited
- 2/3 of all foreclosures in the 1st quarter of 2008 occurred in 20 of the 90 sub communities in San Diego county.
- 700 of the 1,100 foreclosures were in these 20 communities…all of them inland.
- In another 20 of those 90 communities, absolutely NO foreclosures were recorded.
- The 10 communities with the highest level of forclosures averaged $394k
- The 10 communities with the lowest level of forclosures averaged $1.6 million.
We can see the same kind of trends here in Downtown San Diego. We now know that smaller units in quality buildings gain equity at the same rate as the penthouses in the same complex. Conversely, Penthouses in average buildings lose value at the same rate as tiny studios. Consider this…If you remove 4 complexes from consideration, we are able to eliminate over 80% of all distressed properties from the Downtown sub-market. In the last 6 months, 66 urban homes have sold for $775k or higher. More than half of those sales were above $1 million.
The bottom line for Downtown is: Unless you are a buyer looking to purchase in 1 of the 4 troubled complexes, sellers are NOT panic selling. The best complexes Downtown have, and will continue to have strong value. The decision in buying a Downtown home is not solely price driven. Other factors like quality, location, and construction materials mean so much more to the future value of your investment.