In this blog, we talk about the concept of “New Urbanism”:  Creating sustainable and dense neighborhoods focused around mass transit and walk able distance to work, live, and play.  In Downtown San Diego, the concept of New Urbanism is alive and well.  The development and revitalization of Downtown San Diego starts and finishes with the CCDC (Centre City Development Corporation).  This organization has insured the well balanced development of Downtown with a commitment to the infrastructure growth of distinct core neighborhoods( Marina, East Village, Gaslamp, Columbia, Cortez Hill, and Little Italy).  This provides a San Diego “Urbanite” choice and diversity.  I think this is one of the most interesting results of New Urbanism.  Choice and diversity mean there is a little something for everyone.  Urban Living in Downtown San Diego transcends age.  Aging “baby-boomers” have just as much of a desire to downsize and be close to live, work, and play as a younger working professional. 
CNN.com featured an article with an interesting twist on the results of “New Urbanism” on the suburban culture that has flourished since the end of World War II.  The article entitled: Is America’s suburban dream collapsing into a nightmare?  The author addresses the result of an oversupply of depreciating suburban housing and an increased demand for walk able urban space.  Real Estate in urban centers can be as much as 40% to 200% higher than removed suburban neighborhoods.  Buyers will pay more money for a smaller urban home if it has “LOCATION, LOCATION, LOCATION”.  Estimates and residential studies indicate that by 2025 there could be a surplus of 22 million large-lot homes that will not be left vacant in a suburban wasteland, but instead become occupied by lower classes that have been driven out of their once affordable inner-city apartments and houses.   Interesting how we see the “American Dream” changing right in front of our eyes.

Many of you have called and written info@92101urbanliving.com with questions about the low 3% down FHA financing that is currently available.

In the past, FHA financing criteria have excluded bank owned properties for 90 days as well as certain communities that were not “FHA approved” from eligible for FHA financing.

FHA financing just got a little easier for bank owned property buyers.

For one year, the White House temporarily suspended the rule that imposed a 90-day waiting period before foreclosed homes can be sold to receive government loans.

FHA Commissioner Brian Montgomery said “A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery.” He went on to say that the new policy “will allow homebuyers to purchase these homes in much greater numbers and ease the excess supply of unsold homes.”

Check out the full article by clicking on the link Property-flipping rule suspended.

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?:

1. 70% of homes in California are in counties closest to the ocean where foreclosures are limited
2. 2/3 of all foreclosures in the 1st quarter of 2008 occurred in 20 of the 90 sub communities in San Diego county.
3. 700 of the 1,100 foreclosures were in these 20 communities…all of them inland. 
4. In another 20 of those 90 communities, absolutely NO foreclosures were recorded. 
5. The 10 communities with the highest level of forclosures averaged $394k
6. 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. 

In  this month’s issue of Wired Magazine, there was a very interesting editorial that I thought I should share.  It is titled “Inconvenient Truths: Get Ready to Rethink What it Means to be Green” .  In the article, we are challenged to examine our preconceived notions of what we think may or may not be good for the environment.  The first suggestion is that it is actually more environmentally friendly to Live in Cities.  Is this true? Could we be doing our part to decrease Global Warming just by living in this great place we call Downtown San Diego?  I was surprised to learn that the Carbon footprint of an urbanite is significantly lower (30%) than that of a suburban dweller.  When you think about it, it starts to make good sense.  Cities are more dense, and as a result more efficient.  An urbanite is more likely to either walk or use public transportation.  3.5 MILLION “Extreme Commuters” living in suburbia can spend as much as three hours a day just getting to and from work.  It is well know that the carbon dioxide produced from U.S. automobiles (some 1.9 billion tons a year) is greater than emissions from India, Japan, or Russia.  Also, the central heating and cooling systems of a residential urban complex are much more efficient than that of its’ suburban counterpart. 

The bottom line for most people in choosing an urban lifestyle is all about central locations….being close to work, life, and play.  If you can accomplish this AND do your part to save the environment, isn’t a move Downtown worth considering?

All properties in 92101, previously considered as being geographically located in a “declining market” since last December by Fannie Mae [1] and Freddie Mac [2], will no longer be stymied with this stigma. 

What does this mean for you? 

If you happen to be shopping for a downtown condo, your lender will no longer have to ease you into the idea that a higher down payment will be required for your loan to be approved under Fannie Mae or Freddie Mac loan guidelines.
 
According to the May 25th 2008 article in San Diego’s Union Tribune entitled Fannie, Freddie scrap declining-market label:  “Starting June 1, mortgage applicants who are underwritten by Fannie Mae’s automated system online will qualify for 3 percent minimum down payments, wherever the property is located.  Borrowers whose applications require “manual” underwriting will pay 5 percent minimum down.” 

Fannie Mae indicated that it was able to move away from the declining markets policy because their latest version of Desktop Underwriter (DU) ver 7.0 will limit risk layering and assess each loan more precisely.

The rest of this article makes mention of private mortgage insurance (PMI) industry which has not yet removed the declining market label from their vocabulary.  PMI is an additional monthly cost associated with Fannie or Freddie loans generally greater than 80% of the home’s value.  One traditional way that homebuyers have avoided PMI is to offer 2nd mortgages or Home Equity Lines of Credit (HELOCs) for the amount financed above 80%.  There is still a shortage of these types of 2nd available to borrowers in today’s mortgage marketplace.  Nevertheless, removing the “declining market” stigma is a step in the right direction for 92101downtown condo financing in general.

A prior article written on April 27, 2008 in the San Diego Union Tribune entitled Declining market tag may threaten recovery offers more detail about the previous impact of the “declining market” stigma.

For more information concerning this article or questions about condo financing in general, please contact Pete Thistle at pete@92101urbanliving.com  Pete is a licensed broker with 92101 Urban Living.  Pete also has many years of previous experience as a loan officer focused on downtown condo financing with Wells Fargo, Countrywide, and American Mortgage Express.

appreciate people saying to me that they are waiting for the market to bottom out. I understand that. But here is something to contemplate. There will be nothing new delivered between now and 2012.

It is going to cost $200 per square foot more to build than it did when all this was built 3-4 years ago. As for the distressed market is concerned… if you remove Treo, La Vita and Acqua Vista from the mix you eliminate 80% of the distressed market! Holy cow!

The inventory of 700+ condos will not be inundated with anything new. Stop looking at CCDC’s website! That stuff isn’t getting built! I am using a lot of exclamation points for emhasis! The cranes you see in the sky in downtown are for hotels, apartments (rentals) and for commercial/office buildings.

This is a huge time to buy. Rates are still pretty good but to get the money is getting tougher. 100% financing is gone- your above 720 credit score isn’t a VIP pass to a loan anymore. Make sure you have money to bring down and you’re not buying more than you can handle.

Developers are now going to be buying up land, lots of land! The lots that cost $40 Million in 2005 are now appraising at around half that(estimated). This is the time that developers are lining up to make their big bucks in five years from now. The cost to build in four years is substantially higher than four years ago- please take that into consideration. You don’t have to try to undercut the market with ridiculous low ball offers to make yourself feel good. Getting down here and hanging out for five or more years will make you feel really good. I look forward to digging up this blog on April 30th 2013 and saying- “I told you so!” but not in a “nanny nanny boo-boo” way but in a “congratulations on your great investment five years ago” way. A positive way.

With everything, make sure you find a place you can live in for a number of years and be comfortable. Make sure you aren’t borrowing too much. Make sure you have quality consultation for your investment and not someone that is trying to sell you something. The last comment is a plug for us. Come in and find out for yourselves. But don’t miss out on this opportunity.