Affordable Home Ownership
by Jim Scott

Lately much real estate-related media attention has been focused on the lack of affordable homes in San Diego. At 55%, our rate of home ownership is far behind the national average of 68%. Recent gains in prices, 19% from April 2001 to April 2002, make the goal of widespread ownership even more elusive. There is no question home ownership is an important part of our social fabric. It allows the have-nots to become haves; it builds a sense of community which in the end determines the quality of life. Those of us already on the train cannot ignore those eager supplicants standing on the platform; it is pure social dynamite to do so.
Everyone has a theory as why housing is so expensive and I am no exception. There are many villains in this drama and plenty of blame to pass around. To do so is futile and non-productive as there are ways ordinary citizens can help with this problem. And make money at the same time.

Getting on the Train

Buyers in 1976 had a reasonable expectation that a one wage-earner family could buy a traditional home in any number of neighborhoods in San Diego. The median price of a home in San Diego that year exactly matched the national price. For example, I bought a home on Ingalls Street in North Mission Hills in March of 1976 for $52,000. I was a new county Probation Officer and yes still managed to purchase the home. A buyer today in similar economic waters can still buy-only not in Mission Hills.
Buyers have to realize two things. First, their initial purchase has to be viewed as a transitional solution. The concept is to buy something that will appreciate at least at the citywide rate. Second, the price of new construction, land, and development fees is going nowhere but up. But I understand not everyone can buy a $250,000 property.

Affordable Housing on the Cheap

To see the future, one needs only to look at the housing stock of older urban areas. In these densely populated cities, a major portion of the owner-occupied property consists of older apartment buildings that have been converted to cooperatives or condominiums. In some cases, the land is leased by the homeowners association, making costs even lower.
As San Diego matures, our urban housing landscape will slowly begin to resemble those other cities. In short, the answer is right under our noses, and you can make a profit and make a useful contribution to society. Converting apartments to condominiums or coops is not a new idea. What is new is that the economics of doing so have never been better. And the raw material for projects, while expensive, is everywhere.

Why Apartments Can Be a Good Buy (Even Now)

The prices of smaller apartment buildings, less than 20 units, have reached record pricing levels. There are many reasons for the lack of supply and resulting rental shortages. Both the electorate and city planners have no real consensus on the issue of density. Until there is short range plan based on the practicalities of San Diego, we are doomed to the current market of scaracty, both for investors and renters. The lack the necessary moral will to fix the problem is what concerns me. Money is generally made in political vacuums. Strictly by accident, it currently makes sense to buy buildings suitable for conversion. As long as inaction governs our planning process, this opportunity should be around for some period of time.

Jeff Quinn, who co-founded Scott & Quinn with me in 1987, is back at Scott & Quinn and is specializing in condo conversions. You may want to give him a call at 619 296 2286 if you have any questions.

I welcome your comments; my email address is jimscott@sqre.com.

You can reach Jim Scott at his office, conveniently located in the heart of Mission Hills, at 1111 Fort Stockton Drive. Founded in 1982, Scott & Quinn is the oldest full service real estate firm in Mission Hills and is still locally owned and operated. Jim has been a homeowner in Mission Hills since 1976. He is married and has two boys. He can be reached at 296-9511, extension 100. Scott & Quinn features professional property management as well as 15 sales associates. Click here to see Jim's past Market Reports .You can also download Jim's 26 page research paper on San Diego County apartments.