The majority of this excess supply or total properties listed for sale existed from June through October of 2006 (Chart A). Not only was this supply greater than the supply in the same period of 2007, it accumulated very quickly, i.e. the number of properties available for sale grew by 70% from January 2006 to July 2006. The market reacted in classic fashion to this accumulation in supply by extending marketing timelines and further discounting sales prices from original listing prices (Chart C). When comparing the properties sold for this period to the same period in 2007, this reaction is evident with marketing times 8% longer and discounts 17% greater in 2006 than 2007.

Specifically, for this period, marketing timelines averaged 122 days in 2006 versus 113 days in 2007 and average discount from original list price was 10.8% in 2006 versus 9.2% in 2007. Ironically, all this excess supply and price discounting in 2006 did not yield more properties sold in 2006 versus 2007. The number of listed properties sold (Chart B) was virtually the same for 2006 and 2007, 610 and 606 respectively. Moreover, 2007 actually experienced a higher average sale price. This increase appears to come from sellers generally discounting their original listing prices less in 2007 compared to 2006. All in all, 2007 appears to have been a strong year in La Jolla. Not only did it correct a supply/demand imbalance, but it did so while selling the same number of properties at an on average higher sale price.

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 D), the number of sales in 2007 was less than 2006 (Chart C). 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 D), 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 B) 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 A), 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. Coronado

Unlike Downtown San Diego, 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, unlike Downtown San Diego, 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 F). 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 E). 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 F). 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 G). 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 G). 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.

Written by Linda and Tom Sansone

Willis Allen Real Estate

www.LindaSansone.com 

Phone (858) 775-6356

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