In order to help keep you informed about your local area in an objective way, Premier Magazine will be monitoring the health of different San Diego areas in each edition. In this edition, we look at Coronado and Downtown San Diego.
Too often we want to understand the health of our local real estate, but can only find either raw data or broad statistics which seem disconnected, contradictory, or without explanation. In order to help keep you informed about your local area in an objective way, Premier Magazine will be monitoring the health of different San Diego areas in each edition. In this edition, we look at Coronado and Downtown San Diego. The other areas we are monitoring: Rancho Santa Fe, Del Mar, La Jolla, and Solana Beach/Encinitas.
Coronado (defined for the purpose of this analysis as all attached and detached residential properties listed with the San Diego Multiple Listing Service for the 92118 zip code) experienced an average and median sale price increase in 2007 from 2006. Both average and median sale prices increased approximately 4%. The average sale price increased from $1,564,000 in 2006 to $1,633,000 in 2007. The median sale price increased from $1,330,000 in 2006 to $1,381,000 in 2007. Also, the number of properties sold increased as well. 2007 had approximately 22% more sales than 2006 with 221 properties sold in 2006 and 269 properties sold in 2007 (Chart A). Quite a dramatic difference compared to downtown, especially considering the two markets are literally only a bridge apart.
Nevertheless, despite the increase in the number of sales, Coronado’s average daily inventory of listed properties available for sale increased 11% between 2006 and 2007 (Chart B). The average daily inventory was 184 and 205 for 2006 and 2007, respectively. Interestingly, this occurred with 2007 having 2% fewer new listings than 2006 (Chart A). At first this may seem paradoxical, until one examines Coronado’s increasing marketing time lengths. From the first half of 2006 to the second half of 2007, they have increased 30% (Chart C). This steadily increasing time protraction resulted in an accumulation of inventory, generally outstripping the increase in sale volume (or the number of properties sold).
Going forward, it will be important to watch Coronado’s inventory levels and marketing time lengths, since inventory levels and marketing time lengths tend to correlate with price discounts (Chart C). However, given that the average and median sale prices have been increasing, as well as the number of sales, inventory levels and marketing time lengths have not been a problem. Clearly, the increase in the number of sales exhibit buyer confidence and the extension in average marketing time lengths exhibit seller-price confidence. These factors in conjunction with one another made for an exceptional 2007 market in Coronado.
Downtown San Diego
Over the last 15 years, Downtown San Diego has become a full-fledged residential real estate market. In the early 1990s, the Harbor Club became a forerunner, introducing Downtown San Diego to luxury, high-rise residential living. Since then, condominium growth has spread throughout downtown. Today, the majority of units are in the following areas: Columbia, Cortez Hill, East Village, Little Italy, and Marina (Chart E). Over the next 3 years, new construction is expected to add 35% more units to the downtown area, mostly coming from those areas except Cortez Hill (Chart F).
2006 – 2007 exhibited some of the effects of this growth. From 2006 Q2 to 2007 Q4 average sale price has declined 15% with median sale price and average sale price per square trending downward as well. Interestingly, even though prices fell and marketing times remained the same (Chart H), the number of sales in 2007 was less than 2006 (Chart G). Given this, one would expect to see deeper than usual discounts from original listing prices for those properties listed for sale in Downtown San Diego. However, while the discount was greater in 2007 than 2006 (Chart H), it was less than 1% greater, specifically 7.2% versus 6.6%, not enough to account for the change. Discount percent remained relatively stable because those properties that sold in 2007 started with a more competitive (or lower) original listing price, than those properties that did not sell. The discount was built-in from the beginning. Thus, two different types of sellers emerged in 2007: the motivated and the complacent.
Going forward, it appears that Downtown San Diego will continue to be a buyer’s market, especially considering the inventory slated to be released within the next 3 years (Chart F) and the expected economic environment. Nevertheless, it is important to remember that downtown residential properties are not created equal. Downtown represents over a half dozen areas (Chart E), some of which were mentioned above. Furthermore, every condominium building has its own character. Even within a building, view, floor level, layout plan, square footage, unit improvements, building services, and amenities, all create differentiating factors when valuing a property. Thus downtown, like the other areas we examine in San Diego, is comprised of property subpopulations, any one of which can trend counter to the whole.
When reviewing the data that we put together for Downtown San Diego and Coronado, it is important to remember that these areas are comprised of sub-populations, some behaving much differently than others. For example, properties that are on the beach in Coronado can behave differently than other areas of Coronado. Likewise, condominiums in one area of downtown can behave differently than another area. What we have presented here is a macro or total snapshot that blends these sub-populations together. For Downtown San Diego, we have also integrated Multiple Listing Service (MLS) data with County Recorder’s Office data, since many new, large condominium projects do not list their new construction (an anomaly relative to the other areas we analyze in Premier Magazine). In next month’s edition, we’ll revisit Rancho Santa Fe and Del Mar to analyze 2008 Q1.
Written by Linda and Tom Sansone
Willis Allen Real Estate
April 2008 Vol 21