Drive through California's sprawling inland suburbs and you'll spot the familiar mileposts of a real estate bust: foreclosure signs, brown lawns and abandoned subdivisions.
To see the damage in downtown San Diego, walk a few blocks. Then look straight up.
There you'll see hundreds of unsold luxury condominiums stacked in vacant high-rises. Some units downtown are now selling for less than half what earlier buyers had paid during the market peak.
These see-through buildings, with names evoking European sophistication like Aria and Vantage Pointe, are the opulent spatter from the bursting of one of California's flashiest housing bubbles.
From 2001 through 2008, more than 8,000 condominium units were built in downtown San Diego. That's double the number of downtown units constructed over the same period in Los Angeles, a city three times its size. So while sales of urban high-rise units are convulsing elsewhere, nowhere is the collapse more dramatic than in downtown San Diego.
Flush with easy credit, developers and home buyers were eager to invest in "America's finest city," the nickname used by officials to tout San Diego's bay-side location and perfect climate.
At the height of the frenzy, hopeful purchasers queued up outside sales offices to plunk down deposits. There were occasional arguments over who was first in line. No one wanted to miss out with condo values riding an elevator to the sky.
Near the peak, in May 2004, median resale prices of downtown condos hit $647,500, a 56% increase in just three years, according to San Diego research firm MDA DataQuick.
One savvy flipper made a $91,000 profit in less than two months in 2005 by reselling a 560-square-foot studio for $340,000.
"There was a little bit of a mass hysteria mentality. . . . People thought they would be priced out of the market," said Bradford Willis, 47, who signed a contract in 2004 to purchase a $341,000, one-bedroom condo in a planned luxury development. Willis said he bought on speculation because there was little existing inventory on the market at the time, much of it priced above $500,000.
Irrational exuberance has long since given way to buyer's remorse. Median resale prices for downtown units stood at $370,000 in June. That pricey 560-square-foot studio? It was foreclosed and resold this year for $162,000, down more than half from its 2005 sale price.
