San Diego Condo Market Mirrors South Florida

The condo market in California is looking a lot like what we are seeing locally. Take the hip Atria condos in San Diego for example. On the surface, these units have a lot to offer young professionals and empty-nesters. A prime downtown address, skyline views, a gym, rooftop decks and units starting at $300,000 make them highly enticing.

Better yet, developers are even throwing in free plasma TVs and $5,000 home renovation gift certificates to lure skittish buyers in what was, until recently, one of the nation’s hottest real estate markets. But there’s been little action. Why?

With sales stalled by a spiraling slowdown, incentives are on the rise in San Diego and other areas such as South Florida that saw explosive condo construction during the boom. The problem? Much like dating, any sign of desperation in real estate can be counterproductive. No clever staging can stave off the larger market trends at work. Thus, many prospective buyers simply shrug off the enticements.

“We can wait a while and try to get the most for our money,” said Andy Albert, an empty-nester who recently sold his home in Carlsbad, Calif., after slashing 10 percent off his initial asking price.

Like many would-be buyers, Albert and his wife intend to rent near his downtown law office while they keep looking for the best possible deal. San Diego County has been at the forefront of the housing boom that began five years ago across the U.S., particularly in coastal markets. But in June, it became the first major California market to see annual median price for houses and condos slide.

• The figure dropped 1 percent to $488,000.
• Meanwhile, as mortgage rates have risen, sales have dipped 24 percent due in part to a sharp decline in demand for condos in the newly redeveloped downtown core.
• In San Diego County, a total of 1,794 new condos went into escrow in the first half of the year, a third less than in the first half of 2005.

“The only people who are buying right now are the people who really need to,” said Peter Dennehy of the Sullivan Group Real Estate Advisors, a San Diego consulting firm. “There are a lot of people waiting on the sidelines, because they’re under the perception that they’ll get a big deal if they hold off.”

As the South Florida housing market has shown us time and again since the start of 2006, high-flying condo markets around the nation have been bogged down by sagging demand and rising interest rates. Areas of California, Nevada and Arizona have also been particularly hard hit.

In Vegas, at least three major projects backed by high-powered investors have been put on hold. Florida real estate developers have deep-sixed a couple of major complexes in Miami-Dade County as well.

The condo slowdown has been particularly pronounced in areas where rapid urbanization attracted a number of investors who are now rethinking their strategies. Even as Florida mortgage costs have drifted upward, a raft of new projects are still under construction, threatening to exacerbate the problem.

To help jump-start sales, developers throughout the county are turning to financial incentives, even street advertising gimmicks.

Back in San Diego, a complex that bills itself as a resort-style community just north of downtown is advertising $35,000 discounts on units already boasting state-of-the-art stainless steel appliances.

The developer is now selling condos online and dropping the price by $1,000 a day until a unit sells. A new development in upscale La Jolla, Calif., is dangling zero down payment programs to lure buyers.

“We’re in a market that requires incentives, and just about everybody has got some sort of a program for their buyers,” said Ed Easley, president of Crown Pacific Properties.