733 Front Street (www.SocketSite.com)

According to the Barbary Coast News 46 of the 69 condominiums at 733 Front Street are now in escrow. And according to the sales office four (4) two-bedrooms remain. If so, that would suggest only one (1) new two-bedroom sale (but ~23 junior/one-bedroom sales) over the past four months.

Also according to the Barbary Coast News, buyers have been on the younger side, the majority plan to owner occupy, and at least one has combined two (penthouse) units into one. At the same time, we can’t help but notice that asking prices on at least three of the remaining smaller condos have been reduced by up to $45,000 (7.4%). 733 Front #210 is currently available for $585,000 and #306 for $570,000 (four months ago they were asking $625,000 and $615,000).

And it was three months ago that 733 Front #206 was being offered at $605,000 (today they’re asking $560,000).

Comments from Plugged-In Readers

  1. Posted by missionbayres

    Have folks starting closing and moving in?
    It’ll be interesting to see how many are able to get jumbo loans and close.
    Could be a good gauge for other luxury developments around the city…

  2. Posted by tipster

    Nah, this won’t tell you much. For all we know, each unit has already been sold 6 times when the prior 5 buyers couldn’t get loans. That’s a gross exaggeration of course, but you see the point.
    The bigger issue with respect to this particular place is that it wasn’t purchased by speculators at the height of the mania, like some of the other luxury and so-called luxury developments. The speculators, rampant in some of those other developments, were starting to thin out by the time this one opened their doors. This one has people interested in living there. It *is* telling that, without all those speculators, a much smaller development couldn’t even sell out without lowering prices.
    And finally, this project doesn’t have a second tower with hundreds of units going up right next door like some of the other projects do. That adds further trouble to those other developments that this one doesn’t have.
    Unfortunately, this development isn’t going to be the canary in the coal mine for those other developments. There is no canary: the miners in those developments are on their own.
    As for the speculators, if someone has a nonrefundable $20-30K, and now they have to put down $100K to get the loan, and that 100K could earn $30-50K in emerging markets or commodities over the next two years, I think they are going to bail. Especially when you consider the fact that, even if they close, AT LEAST $20-30K is almost certainly going to get lost anyway in even a minor correction, so for the investor, that deposit is lost no matter what they do. The smart investor would walk away from that deposit and apply the 100K to a more profitable enterprise, not throw good money after bad.
    And if you think investors might wade back in, recall what happened in the dot com bust: Greenspan opened the spigots at the start of the dot com bust and tech continued to die, but the housing bubble was born. The money was applied to the NEXT bubble, not the PRIOR one. I think you are again going to see the easier money from lower interest rates being applied by investors to the next bubble, not housing, which now takes its place in the pecking order as the prior bubble.

  3. Posted by Dude

    Sorry for the completely off-topic post, but Tipster, you bring up something I’ve been thinking about for a while: What is the next bubble? Is it fine art? Gold/commodities? Old cars? Weather derivatives in anticipation of global warming?

  4. Posted by Spencer

    waste disposal is the next bubble
    get in now

  5. Posted by Tipster

    When I figure out what the next boom is going to be, first I’ll invest in it, then I’ll come on to every blog in the country and talk it up.
    Seriously, though: wait a little bit, then follow the herd. Just make sure it’s something that wall street can make gobs of money on. It doesn’t matter what it is: if the herd thinks that’s the next bubble, and Wall street can make piles of cash at it, then it’s the next bubble. That leaves fine art, old cars, and weather derivatives out because wall street can’t make piles of cash from them, and so all those smart people won’t apply their brainpower to come up with creative ways to feed any of those bubbles, and they will die.
    I’d vote for emerging markets and commodities. But it might be too early to tell where the herd is really going. I’ll tell you where the herd is running from (whisper: real estate). Trust me, the wall streeters wanted SO BADLY for the tech boom to come back, but they finally accepted that the investors had soured of it, and that it was too much trouble to get them to invest: there were easier ways to make money. So it will be with real estate.
    Wall streeters will try and try to reignite housing (mostly by pretending that it’s coming back, mostly claiming mysterious persons: foreign investors, Martians, Jimmy Hoffa, ghosts, etc., are all pouring into it), but the reality is that it is too wet to relight and the locusts have moved on. And like the carnage that was done to the tech industry, so it will be with real estate.
    The people who invest in this housing development will be hurt less than others because this project has something very few of the other “luxury” projects have: a good location.
    [Editor’s Note: And now back to 733 Front (or at least location, location, location).]

  6. Posted by 49er bandwagon

    7.4 % down with another 13.6 % to go. All the sales offices are slow included the Infinity. We will see another round of price adjustment with 1k more units coming online 2Q 2008. When will the bleeding stop???

  7. Posted by BernalDweller

    “When will the bleeding stop???”
    By most accounts, in mid 2009. Prices have already fallen 5% year on year in SF, and will fall another 5% each year for 2008 and 2009 before flattening and eventually beginning to rise again. It will be far worse in Contra Costa, Alameda and Solano.
    That’s my (well-informed) guess based on prior corrections and voluminous research. One interesting read is the National City valuation analysis at:
    http://www.nationalcity.com/corporate/EconomicInsight/HousingValuation/default.asp
    Read the whole thing, including how they measure impact of corrections.

  8. Posted by anono

    huh? what on earth are you talking about?

  9. Posted by Bill

    A two bedroom unit at 733 Front is listed for rent on Craigslist for the ridiculous price of $6,000 per month. I have a feeling this rental will sit on Craigslist for quite some time unless the price is significantly reduced.
    http://sfbay.craigslist.org/sfc/apa/425280023.html

  10. Posted by anon

    “A two bedroom unit at 733 Front is listed for rent on Craigslist for the ridiculous price of $6,000 per month.”
    And that doesn’t even cover the interest payments on the jumbo loan……..

  11. Posted by VultureBoy

    “Trust me, the wall streeters wanted SO BADLY for the tech boom to come back, but they finally accepted that the investors had soured of it, and that it was too much trouble to get them to invest: there were easier ways to make money. So it will be with real estate.”
    Um, what are you talking about? If you bought the survivors at anywhere near the bottom of the dotcom crash, you’d have cleaned up. I did, and I was buying from 2001 through 2004 so you didn’t need to be a hedge fund supergenius(tm), just willing to bet that computers weren’t going to go the way of 8-track tapes and mood rings. Heck, if only I’d held on longer, I’d have made way more but I learned I’m no high stakes player in the process and had way too many sleepless nights.
    As for real estate: there are way too many players in the 250-300K a year class (spelled any of the upper half of Silicon Valley couples in any of its lucrative industries be it tech, law, renewables, or even (say it ain’t so) biotech), and right below that, plenty of 2nd tier players in the 150-200K range that are going to make the whole thing a lot less predictable than the renters I suspect would like it to be.
    The former would be fine with a $6000 monthly mortgage (That’s like a $3600 a month rent in SF) and the latter will be waiting to scoop up the bottom end of the crash once the dust settles, which obviously won’t be settling for some time, but settle it will. Of course, if you’re sitting on a stinker in Stockton, it’ll still be a stinker, and still in Stockton, in 2009.
    I’m with the Wells Fargo guy that in thinking that there’s a lot more opportunity than gloom and doom right now.

  12. Posted by anon

    “I’m with the Wells Fargo guy that in thinking that there’s a lot more opportunity than gloom and doom right now.”
    Oh yeah, I am with the Wells Fargo guy as well. But he probably meant himself and a bunch of his Executive Vice Presidents as opposed to you and me…….

  13. Posted by tipster

    I fully agree. Oracle went from 55 to 50 to 8 and is now at 21. If you jumped in at 50, at the start of the downturn, like where we are here, you are still underwater and will be for a very long time. If you WAITED until it hit bottom at 8, you are way up after 5 years or so.
    So the lesson is to wait. Not to jump in when things are starting to shake themselves out.
    And to merely state that “people have money” is irrelevant if they aren’t spending it in that asset class. Lots of people could have bought Oracle as it dropped through $50 per share (all they needed was $50). But fewer people were buying than were selling, so prices fell. According to the same logic, because everyone in the country had $50, Oracle would be unlikely to fall through that level. It didn’t seem to work out that way.
    And a $6000 mortgage on an asset that loses $50-100K per year is not really all that cheap.
    The guy from Wells Fargo said what he said probably because Wells has a problem: they are HOLDING mortgages on declining assets and he’s making a LOT less money reselling mortgages. So of course he is encouraging OTHER PEOPLE to buy so that the value of his holdings doesn’t go down as much and so he can restart that gravy train.
    I don’t think I’d be listening to people holding mortgages or those that were part of the gravy train for investment advice on investing in mortgages right now.

  14. Posted by Dude

    Another key point is that people don’t need to own stock, but we all need to live somewhere. A lot of those “250-300K players” mentioned already own property. Many probably own multiple properties…aside from their $6K mortgage, they may also own “investments” in places like Stockton. So instead of waiting for a buying opportunity, they’re hoping the house of cards (pun intended) doesn’t collapse under them. Some very intelligent people in my office are actually in this predicament right now. $800K mortgage in the bay area and stuck flips in Vegas/Phoenix/Sacramento/Wherever.
    Agreed this will create buying opportunities. But as tipster notes, probably not until 2009.

  15. Posted by phatty

    So… does the $6k a month craigslist ad mean that someone bought that unit at 733 Front as an investment, and is renting it out until it matures??? I’ve toured the site and loved it – great location and superbly finished, but the pricetag is way high. Especially considering the market is tanking. After paying way too much for the place, they now expect to rent it for 6k a month??? It only has a view of the bay bridge if you crawl out on the oddly designed communal balcony (which you can use to run laps around the building and see what everyone else on your floor is up to), and the actual view from your windows is quite crappy. Who would pay 6k a month for that? Are people with 1.5M laying around to invest really this stupid??? I should become a con man….

  16. Posted by anon

    The reductions were made for the junior one bedrooms I believe. I saw them and they defintiely needed the price cut and are more reasonably priced now.
    Phatty – they put up barriers on the balconies so each of them is sectioned off. You can tell in the Craigslist picture.
    Given that folks like that 28 year old in the Barbsary Coast News link are bringing in Australian Fireplaces and knocking down walls, my guess is that the owner wants to rent it out until all of the headache construction is finished.

  17. Posted by anon

    That doesn’t make sense. How could he rent it out if construction was going on in the unit? Wouldn’t seem like a very livable place… no floors… probably not even full electrical coverage.

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