Monday, July 24, 2006 | A couple of weeks ago, Bob Pinnegar was discussing with his colleagues what to call the phenomenon in San Diego real estate: the condo conversions that are now reverting back to rental units.
The group toyed with a number of possibilities: condo conversion-conversions, condo reversions and even apartment conversions. Pinnegar, executive director of the San Diego County Apartment Association, isn’t sure if they ever pinned down a final moniker. But he does know that everyone in the business is asking what’s going to happen to all the people who jumped on the condo conversion bandwagon in San Diego, only to find a sinking condo market at the end of the road.
In the once red-hot housing market, owners of apartment complexes rushed to convert their units into for-sale condos. The rush, combined with the recent cooling of the condo market, has resulted in a surplus of condos countywide – a trend that has left some developers in the lurch. Many developers in the niche market of condo conversions bought apartment buildings at high costs with the hope of converting them into condos and turning a profit, but now find themselves left with little option but to put their units back into the rental market – hence conversion-conversions.
“It’s sort of a game of musical chairs, and those who were the last ones to find a seat are going to get hurt,” Pinnegar said.
In a market where the median price of a single-family home now hovers around $500,000, condos have become the new starter homes for many San Diegans. Chuck Hoffman, president of Apartment Consultants, Inc. describes condos as the new bottom rung on the San Diego property ladder.
As home prices soared in San Diego for the last few years, the demand for condos rose in response, Hoffman said. Property developers saw their niche and pounced, leading to what many experts described as a “frenzy” of converting apartments into condos.