San Diego apartment sales slowed in the first quarter of 2005, with declines in both the number of transactions and total units sold, but that’s nothing to be alarmed about, according to George Carlson, a vice president and apartment specialist with Burnham Real Estate.
“The 25.2 percent decrease in sales transactions and 16.4 percent decrease in number of units transferred, though notable, is not unusual,” he said. “Of the 24 years that we have been conducting the survey, 14 recorded first-quarter annual lows in transaction activity. Historical analysis of this data indicates that the fall-off in first quarter closings may reflect the natural slowdown that occurs during the prior winter holiday season, when investors tend to defer acquisition decisions.”
According to the study, there were 244 sales of apartment properties totaling 3,984 units for the three-month period ending March 31. This compares to 326 transactions totaling 4,763 units during the same period of 2004.
There were six first-quarter 2005 sales involving 100 units or more:
La Terraza, a 402-unit project in Rancho Bernardo, $88 million; Cabrillo Palisades, 371 units in the Mission Village area, $62 million; Balboa Arms, a 299-unit project in Clairemont, $57 million; Canyon Pointe Apartments, a 116-unit community in Escondido, $20.1 million; River Village, a 123-unit community in Escondido, $16 million; and Ocean Breeze, a 130-unit community in Oceanside, $10 million.
Leading San Diego County in first-quarter transactions was El Cajon, with 21 sales involving 409 units; Inland North, with 19 sales of 468 units; and Coastal North, with 19 sales of 393 units. In the city of San Diego, Golden Hill/Southeast San Diego led with 22 sales of 167 units, followed by North Park with 19 sales of 160 units; East San Diego with 14 sales of 166 units; Hillcrest/Mission Hills, with 13 sales of 109 units; and Pacific/Mission Beach with 12 sales of 63 units.
That slower first quarter in 2005 might also mean that the market is correcting itself following the run-up in pricing and investment activity that has occurred over the past nine years, said Carlson.
“It would stand to reason that there is less product available or less product at acceptable asking prices,” he said. “The wave of recent transactions has been driven largely by condo converters, and as Burnham recently noted, many developers are waiting to see how pending legislation and current high pricing affects the market. The good news is that this gives the market some much-needed breathing room and actually creates more opportunity for existing owners and investors to position for long-term value.”
Carlson added that there are many owners who would like to sell, but don’t want the tax implications of a straight sale.
“These owners may not be able to find a suitable property for a tax-deferred exchange,” he said, “and therefore are choosing to hold their properties until the right opportunity comes along.”
Pat Broderick