The San Diego discount: 30%

Good Morning, Jeff Tedford, we hope you are not afraid of heights.

As promised, a few notes and thoughts about that San Diego condo auction yesterday. The Union-Tribune quotes real estate agent David Pastor, who says units sold for prices "comparable with the market."

Exactly what those prices were is a bit of a mystery -- the auction of condos and townhomes built by D.R. Horton was closed to the press. But commenter "sunsetbeachguy" directed us to this San Diego real estate website, where a second commenter, "Chuck," lists what he says are the sales prices. Based on his numbers, it appears most units sold at about 30% to 33% below the price the auctioneer says the units were "previously valued to."

Chuck's take: "I did not buy; prices were about five to ten percent to high for me to be interested, but the auction seemed fair to me and I think people today got a good deal and will do well in the long run."

Our friend Inland Empire's take: "... the sky really didn't fall. The buyers got starter homes and the builder got rid of cheap condos in a bad area and can now move on to other projects."

Our take: A few important caveats here: we don't know for a fact what these condos sold for, and we don't know if they were ever worth the "previously valued to" numbers publicized by the auctioneer.  If a condo was "previously valued to" $547,000, and sold yesterday for $375,000 (one of the examples given by Chuck), that represents a "discount" of 31%; but it's a discount from a somewhat meaningless number. Was the condo ever "worth" $547,000? Perhaps. Or, perhaps, that was wishful thinking by a builder with less than perfect timing. In any event, it appears this was a successful auction for the builder, in the sense that condos sold for prices a real estate agent felt were equal to the rest of the San Diego condo market -- in fact, the LATimes yesterday, in a profile of the San Diego market, cited a condo that had sold for 30% less than its peak market value. So these sales appear to be in line with the rest of the market -- there was no "fire sale" yesterday.

Your thoughts? Insights? Email story tips to lalandblog@yahoo.com.
Hat tip: Sunsetbeachguy

Comments

[sandiegan]

Some perspective on the great DR Horton condo auction.

A 3bd townhouse in Encanto went for $250K ($262.5K w/5% fee to seller) at the auction.

Encanto is one of the lowest-priced neighborhoods in all of San Diego.

Here are some Encanto comps from CL:

3bd SFH w/pool - $279K
http://sandiego.craigslist.org/rfs/430335450.html

3/2 SFH on a big corner lot - $350K
http://sandiego.craigslist.org/rfs/433017970.html

Something San Diegans have known for a while that seems to have slipped past a lot of media pundits:
You can get a home relatively cheap in San Diego...if you're not picky about the neighborhood.

[Jax]

No, they weren't ever worth that much. North Park is not a nice place and in fact, it's a crap hole. What's really interesting is that apparently these buyers were not aware that they could have bought a much better condo in a nicer area of San Diego for around the same prices that they paid for these units. Prices have fallen substantially and many sellers are more than willing to negotiate further to get rid of their albatross condos. Most of the people who bought these condos at the auction are going to feel pretty stupid in another year or two when they're selling for 25-35% less than they just paid.

[Steve]

Again there is rarely a deal from a builder, unles they have gone BK and the assets are being liquidated. There are deals out there and the game is to make a multiple rediculously low offers to identify the motiviated sellers. Start out at 50% below asking at this point the deals might the bank owned properties. There are no deals direct from builders and so called auctions are a waste of time, unless the lender owns them.

[SD Dan]

The condos were built on potential. North Park is a great neighborhood, with an abundance of things to do, places to eat, and stores to shop at. (http://www.northparkscene.com/ has happenings, and http://www.northparkmainstreet.com/ is the business improvement district). There's more than a whiff of gentrification, and it's not just from condos either: many streets, particularly south of University, still are lined with the original 1900s to 1920s bungalows. It's also cheaper than Hillcrest, Normal Heights, University Heights, and certainly Kensington and Mission Hills.

It's still a bit scruffy here and there, but that's typical of any non-suburban neighborhood. And most people who've been slamming North Park generally haven't been here in years and still think of how unpleasant it was in the 1970s and 1980s. There are a couple of indications on how things have changed: very few homes have barred windows now, and when you drive through the neighborhoods, the cars are fairly new and well-kept up.

For those of us that don't want to buy a condo in a nice, bland part of town (let's say... Rancho Bernardo? Yawn. Scripps Ranch? Pretentious. UCSD area? Crowded and soulless), North Park is a good choice.

[Toby]

At $375,000 (unless they were on the beach) is still way over-priced. Remember, a good deal today may not be one tomorrow.

[Jax]

This auction has been discussed on another forum. The latest comments today indicated the following:
1. The buyers had to pay another 5% to the auction company thus making the true discount only 25% from the highest asking prices.
2. One person who lives in the building bought a popular unit before the building was completed at a pre-construction price of $365k Two of the same units sold at the auction for $365k and two more for $375k. All had to pay an additional 5% to the auction house. The bottom line is that there were NO real bargains and anyone who purchased a unit at this auction paid too much.

[tew]

The auction may have been "closed to the press", but you can probably find the sales prices in the country records within a month or two...

[Charles Wilson]

I realize the following is a bit misplaced, but you all might want to have a look at the Seattle market that Jim Cramer recently said was doing well.

http://tinyurl.com/2vgjbz

[Blue Sky]

Auctions, discounted, true market prices!!!!! Don't believe the hype

You can get better deals with more transparency using one of a number of discount brokers that allows you to buy any house without the gimmicky auction.

Check out catalisthomes, redfin, domus bella, help'u'sell, and numerous others for real deals.