Downtown San Diego Condos Jump in Price YTD 2008

Downtown San Diego is a great place to live and buyers continue to push prices higher in 2008. Over the first two months of 2008, the average sold price per square foot has jumped 2% over the same period in 2007. If the market forces continue at that pace prices will be up 12% over 2007.

This factual data may come as a shock to anyone reading a mainstream newspaper real estate story because they talk in very broad terms. Sure San Diego has its problem neighborhoods with condos dropping dramatically in price, which can influence county wide data. But when you focus in on the constantly improving downtown market, demand continues to be strong and is pushing prices back up.

Yes you can find condos in downtown that are off their peak prices by 20%, but they are units that were bought, and probably will not be bought again, until inventory gets so tight it looks more attractive. This price increase of 2% was realized even when the volume of sales were down 22% compared to 2007. Why would prices be rising when volume is dropping. Well there is one component of buyers not reported in the MLS. That is buyers buying new construction. There are four condos in downtown now that are completed yet not sold out, buyers are often choosing these buildings, which are more expensive on average, so it appears volume is off more than it really is. If these new condos sales were added the price jump would be even higher, because these buildings are on the upper price range.

Two of downtown most desirable neighborhood locations, the Historic Gaslamp District and the Marina District, are completely built out with the exception of one remaining buildable lot in the Marina District. Basic economics tells us this will only cause prices to rise as demand continues to grow over time. One example of a driving force to push demand higher is the all the hotel rooms soon to be built in downtown. Look at any city that is building hotels and you will often find a red hot local residential real estate market. The Gaslamp District just experienced the opening of the Hard Rock Condo Hotel and soon will see four (4) new Marriott hotels build, two in the Gaslamp and two a few blocks over.

If you're thinking about buying a condo in the downtown San Diego market, take advantage of the large inventory supply (550 resale condos) and slower appreciation rate that will allow you to hop on the train everyone is having so much fun on.