So cancel your paper, mute the 11pm news, find the funds, and go pick up a killer deal today!

I’m writing from the trenches of the Downtown and Central San Diego real estate market.  Surrounded by MLS printouts, lead cards, and contracts, the market has never been better for the savvy real estate investor.  Blah blah blah “rates are at historical lows” and “buyers have more choices than ever!”  We’ve all heard this before.  What I’m talking about is far more exciting; like the 2br/2ba city view 9^th floor condo at The Pinnacle Museum Tower that sold in May for $595,000, about $100,000 under market value.  Or how about the 20^th floor city view high rise 1br/1.5ba at The Grande along the Western Waterfront that sold for $442,000 in June?  REO (bank-owned) properties are surfacing in limited numbers Downtown and are priced to sell.  Witness the 1br/1ba low rise unit on the Gaslamp/Marina border that sold for $283,500 in 2 days last week, about $50,000 under market; or the 2br/2ba, 1023sf unit in the same building that started at $410,000, had 8 offers in 2 days, had bidding suspended and will sell for close to $500,000, about $30,000 under market.  Shut-out investors shifted to Little Italy for a 680sf 15^th floor unit on the SW corner of a newer building that was listed at $270,000 and also had 8 offers and sold over list.  Banks have found the sweet-spot on the pricing and investors are responding.  Banks and investors are dancing with one another as the starting prices on these REOs are post-discount and therefore a real steal if you can get an accepted offer before the looky-loos catch on. 

Don’t let the bottom-feeding newspaper hype fool you:  the market is picking up and seasoned investors realize that the real estate market in San Diego hasn’t been this lucrative for buyers since the early nineties.  Over-correction is a real possibility, not uncommon after such a frenzied run up in prices during 2002-2005.  Prices have decreased 10-30% depending on property type, location, and price range, similar to the correction in 1990-1992.  The key difference now is that the economy is strong and there has been no economic implosion, which was the impetus for every major real estate correction on record.  While the UT reports record numbers of properties in foreclosure status, this represents homeowners that have been hit with a Notice-of-Default, not homes that have been repossessed and are currently being marketed by the banks. 

Banks are not motivated to be in the real estate business.  REO properties drag down their balance sheets in an increasingly-scrutinized ROA environment, thus they’d rather work out a payment plan with the homeowner than pile up losses and footnotes to their financial statements.  Hype—hype sells papers and makes great sound bites.  The facts are much different.  Can you believe that the real number of REO properties currently listed is only 3.2% of the total inventory?  That’s 674 properties out of over 21,000!  Get real---that’s hardly apocalyptic!  In fact some running rate of foreclosures is healthy in a normal market.  Yes there will be steady market for REOs, but with banks marketing these with fat discounts, and 6-8 investors bidding on each choice property, a massive stockpile of REO inventory is unlikely.  The current REO inventory would have to increase TENFOLD to come close to moving the market. 

So cancel your paper, mute the 11pm news, find the funds, and go pick up a killer deal today! 

Bob Carlson

Prudential CA Realty

bobinthewater@gmail.com

619-248-8090c