According to a recent article by Roger Showley at the San Diego Union Tribune, the sluggish sales of luxury condos are negatively affecting the rest of the real estate market in San Diego County.
Luxury condo resales for the month of June were down to 43 from 93 in the previous month.?? Houserebate.com found over 340 luxury condos for sale just in the downtown area alone.?? Construction of an additional 3,500 downtown units has all but halted.?? All of these factors indicate one thing:?? not a lot of buying and selling in the luxury condo market.???? If high end buyers aren't selling their properties and upgrading, then potential buyers of their properties can't follow suit, creating a ripple effect down the real estate "food chain."
This can be attributed to a few different factors, but the main problem that people are facing when looking to purchase a luxury property (those greater than $417,000) are the new guidelines implemented by Freddie Mac, Fannie May and the U.S. Department of Housing and Urban Development.?? Included amongst the many stiffer guidelines are:
- Fewer insured luxury property loan programs (>$417,000)
- Tougher asset and income inspections
- Multiple appraisals
- Additional property insurance
*See the article for a more detailed look at the guidelines
Showley quotes mortgage broker Dave McDonald as predicting "We're going to see the pool of buyers just dwindling," stating that "if underwriting is not loosened up, it may take many years, if not decades, before San Diego's resale condo median rises to $400,000 once again."
Houserebate.com's Brian Yui gave Showley an alternative view about the decline of condo purchases: "Now, houses are within striking distance for many people."?? He indicated that because of the drastic drop in the prices of single family homes, people who were perhaps looking to buy a condo because they could not afford a house, are now able to do so.
Whatever the reason, luxury condos don't appear to be taking off any time soon for a majority of people.
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