Homebuyers turn to condo conversions
Thursday, February 23, 2006
Jennifer Claussen, Condo Owner: "I love coming home. I come home and I think, what can I do today? I like having the freedom to be able to decorate it as I choose, to paint or to hang drapes or take down vertical blinds and not have to check with the landlord or worry about getting approval from anybody."
Home ownership is a dream come true for Jennifer Claussen. The 27-year-old and her boyfriend recently bought a 2-bedroom condominium in the La Mesa area. The school teacher had to abandon hopes of a freestanding house long ago.
Claussen: "I've worked so hard. I've done everything that I was told to do. I went to college. I got a job, I've had this job. I've saved. I don't have debt. And then to like get out in the real world and see what I could actually get, I was so depressed and frustrated by it."
After an exhaustive search, Claussen was thrilled to buy a condo at Cerro Vista. It's part of a new craze - condo conversions. They're apartment buildings remodeled and sold as attached units. The average price for condominium conversions so far this year: $288,000. Compare that with brand new condos, which are averaging nearly $500,000 around the county. Detached houses: $677,000 so far this year."
Wade Mains, Developer: "I think one of the biggest benefits of the conversion craze, as it has been put, is the fact that it's one of the few vehicles that directly addresses the affordability crisis in San Diego. Everyone is screaming that there's no affordable housing in San Diego and the cities have been trying to do something about it. And conversions put a housing product out there that is affordable."
Developer Wade Mains says condo conversions are less expensive than new construction. But they cost about 10 percent more than re-sale condos. The premium often means new appliances, carpet and an updated look. They're attractive for first-time home buyers who don't want a fixer-upper.
Mains: "They're wildly popular. When a new homebuyer has the opportunity to go out and look at some condos, they see resale product and that's usually a little bit older. It hasn't been kept up as much and they see for a slightly higher margin, the condo conversion product looks brand new."
One unwelcome side effect of condo conversions is displaced tenants. Residents who rent the apartments get the first opportunity to buy the unit. Otherwise, they have to move out.
Jon Hammer, Developer: "So they effectively have the first right of refusal, where they can buy their unit and if they don't want to purchase their unit then we take it to market. But if they do want to purchase their unit, then they face no competition to buy that unit."
Jon Hammer buys apartments and converts them to condos. He says demand is increasing with skyrocketing home prices. The trend reached a new high last year, with 2,338 condo conversions in San Diego County.
Hammer: "For the last three or four years, you've seen the rate or the number or conversions effectively double each year, until this last year. And I think this year you're probably going to see it triple or quadruple. What's happened is there is enough proven demand in the marketplace that there are pressures being put on market to deliver more of these kinds of units."
Claussen had to compete with hundreds of other would-be buyers at Cerro Vista. The value of her condo has already appreciated $50,000 since May.
Claussen: "I knew we would never find anything in this same price that was as desirable to us. And as time went on, the pricing was only getting higher in the market. So the longer we waited, the more out of reach what we wanted became."