10 Fernwood Drive
Purchased for $1,750,000 in May of 2004, 10 Fernwood Drive in Monterey Heights returned to the market almost four months ago asking the same.
Three months ago the list price was reduced to $1,650,000 where it currently stands after having been reduced down to as low as $1,550,000 for a period in between. Still available and advertising “Pre-Foreclosure Opportunity.”
Bets as to whether or not the sale of this “apple” will tell a very different story about what’s happening in this market with respect to appreciation (or rather depreciation) versus the trends in median sales price and average dollars per square foot for sold properties in District 4 over the past four years?
∙ Listing: 10 Fernwood Drive (4/3.5) – $1,650,000 [MLS]

Comments from Plugged-In Readers

  1. Posted by Satchel

    I’m glad to see SS covering this part of SF. I used to live right around the corner from this place. I’ve been inside this place a few weeks ago (back when it was $1.55M and it wasn’t staged).
    Based on what nearby houses have sold for (70 Ravenwood – within 100 feet or so of this house – and 154 Maywood) I think this house would go for about $1.45M in a “clean” sale.
    Typical shoddy work on the renovation of this one, which was done just prior to the current “owners” purchased in 2004. The cabinetry in the kitchen is junk, workmanship all around is poor, some of the upstairs level feels “attic-like” and the downstairs feels a little “basement-like”. Some questionable aesthetic choices – for instance, the wall paper in the bathroom – but surprisingly for such a traditional house, the choices *almost* work. The view is outstanding (same view I had when I lived around there).
    There are three loans on this property, and with fees and penalties, over $1.6M is owed. What’s left of the original sizeable downpayment (after a partial HELOC out) – about $200K – has died and gone to heaven.
    The first loan is $1.2M+. It looks like the realtors upped the price from $1.55M because they understand that the chances of this one actually getting a short sale approved is unlikely. The second and third lenders have no real incentive to ok the sale, as after fees, penalties, realtor commissions, etc., only the first will get paid. So, IMO, no need to make an offer here – just let it slide into foreclosure.
    A place like this would have garnered about $1.9M-$2M at the peak of the market out there in early 2006 IMO.

  2. Posted by anon

    The timing is interesting. Took four years to hit the fan. Loan re-set?

  3. Posted by ozzie

    This one is currently scheduled for trustee sale 8/28 – current amount due = 1,391,196.

  4. Posted by Satchel

    I’m guessing that that $1.39M figure is just the first loan (from WAMU), which started out at $1.225M, and presumably includes penalties, fees, missed payments, tax payments made on behalf of the “owner”. etc. Does your service show the breakdown of lenders? I think Greenpoint had the second (for $175K), and the agents told me that there is a 3rd loan (but I can’t find any evidence of it using the free web services).
    If the auction is already scheduled, then presumably it is a foreclosure brought by the first lien holder, which will probably get back a good deal of its money (my guess is that this house would go for about $1.25-1.35M in an auction), so after expenses the first lien holder should recover $1.1M to $1.2M.
    If that’s right, there’s no chance of a short sale here – the value just isn’t there for the junior lienholders to consent (or even spend 15 minutes thinking about the situation).

  5. Posted by S&S

    I wonder when these pictures were taken and if the interior really looks like this . I have looked at several properties either in a short sale or REO, and the interior basically looks like it was inhabited by pigs, even in a community that is only 11 years old. And, no, I’m not talking about properties in the Bayview. These are $1M+ SFHs.
    I really hope all the foreclosed-upon people and the banks who lent to them truly, deeply feel the pain of whatever repercussions may befall them. Thanks to these greedy bastards, they’ve made it nearly impossible to obtain loans now, even with a 25 – 30% down payment. Could I put down 50%? Sure. But I’m not going to. I have better things to do with my money. Do I sound bitter? Damn straight. I’m pissed off!

  6. Posted by Satchel

    “I wonder when these pictures were taken and if the interior really looks like this .”
    I was in this house about a month or so ago, and the interior was fine. Some wear here and there, but overall nothing that identified it as anything other than a used house. Maybe 90-95% of the condition of a house that was all done up for sale by a solvent owner. It wasn’t staged when I saw it, and that made it easier to note any cosmetic problems, but there really weren’t too many.

  7. Posted by Foolio

    This one won’t impact the median sf data until it sells (if it ever does). Yet another reason why such data is misleading.

  8. Posted by Anonymous

    Did he just say that there are better things to do with your money than buy real estate?

  9. Posted by anon

    That’s a nice looking place in Modesto. Wait? What? That’s in San Francisco? You mean South San Francisco, right?
    Horrible location, ugly suburban-style house. If you want this kind of house, you can get much, much more for your money in Marin or San Mateo Counties.

  10. Posted by Satchel

    @ FSBO or fluj –
    Do either of you have the time to check what the average psf selling price of houses in District 4-M (and District 4 generally) has been in 2006, 2007 and 2008YTD?

  11. Posted by 1st time buyer

    Thanks to these greedy bastards, they’ve made it nearly impossible to obtain loans now, even with a 25 – 30% down payment.
    I keep hearing that as long as you have good credit and can put down 20%, getting a mortgage won’t be a problem. Is that all just bunk? What has your experience been?

  12. Posted by Dude

    “Horrible location, ugly suburban-style house.”
    Ummm…what? Tastes are subjective, so no point in trying to say the place is or isn’t ugly. But in terms of location, this is one of the nicest parts of the city, IMO. Since when is St. Francis Wood not desirable or “prime?”

  13. Posted by S&S

    @ 1st time buyer:
    My credit score is in the 700s, and I’m WILLING to put down 25 – 30%, and without revealing too much about myself, I am a six-figure earner, and I already own property. To be perfectly honest, I’ve spoken with only one lender, and she told me pretty much all the banks are doing the same thing: They’re holding onto jumbo loans like wool underwear in the Antarctic. Okay, so those are really my words, but … you get the idea. I’m taking her words at face value.
    Oh, and I’m a she, btw, @ Anonymous at August 18, 2008 9:32 AM.

  14. Posted by anon

    Thanks to these greedy bastards, they’ve made it nearly impossible to obtain loans now, even with a 25 – 30% down payment.
    Not my experience. I easily got a loan recently (Feb). Put down 25% and have a high credit score.

  15. Posted by Foolio

    For a jumbo? Really? Well, I guess a lot has changed in the last 6 months. The responses I’m getting are very similar to what S&S experienced.

  16. Posted by 11223

    I think the key is you already have properties. I am like you, have 5 properties, earning $170K a year ($300K household income), credit score of 819. When I bought my short sale in Russian Hill, I had to put 40% down to get to the bank’s debt ratio.
    If you have not property,and you are a first time buyer, you would be fine.

  17. Posted by tipster

    I know someone who put 25% down for a Jumbo around the same late winter 2008 timeframe.
    They got qualified and preapproved at 15% and within a month’s time they were told they needed 20% and then the bank pulled the paperwork at the last minute and said, no, they needed 25%. A1 credit.
    That was 6 months ago. I don’t know if it has changed in 6 months like it did in the 30 days they went from 15% to 25%, but I doubt it has gotten any better.

  18. Posted by S&S

    @ 11223:
    See, that’s just it. I COULD put down the 40% percent to meet the bank’s debt ratio, but I REALLY DON’T WANT TO. I guess, more than anything, I feel like I’m rebelling and paying for the mistakes of the millions of others. In our former utopia, with my/your current stats, I/we would’ve had banks lined up around the block and crashing through my/our front door to throw money at me/you. Those days are clearly over.

  19. Posted by St.George

    Similar experience (and profile, without the property ownership) to S&S. Got a jumbo quite recently, but had to wait for it, loads of hoops to jump through and when the Fannie/Freddie issues blew up recently, the banks became really jumpy about appraisal values.
    So, I am inclined to share S&S’s views in the second paragraph of her post…

  20. Posted by 11223

    I understand each person thinks differently, but I personally looked at this as a golden opportunity to get in the SF real estate market, without having to competite with 10 other offers, which is always depressing.
    That being said, yes, that 40% downpayment did hurt. Now I have absolutely no more money for more purchases.

  21. Posted by Trip

    I see your point S&S. However, given the hundreds of billions lost on real estate in the financial industry recently, I imagine that anybody still buying securitized jumbo packages is demanding that the loans be essentially default-proof. If the lenders are keeping the loans on their own books, they likely want to be even more certain. I really can’t blame them. I don’t see this loosening up in the near future, particularly as prices continue to fall. Conforming loans could conceivably loosen up, but not jumbos.

  22. Posted by ozzie

    Satchell 8:13am
    You are 100% on, probably a neg am loan. The 2nd and 3rd will both get wiped out. What is more interesting, is whether or not the lender will discount this one at auction. Lenders have really been holding off discounting SF properties, but I’m starting to see more and more go with discounts.

  23. Posted by Michael

    Not my style but this is a prime block in a prime neighborhood of all single-family homes which borders St. Francis Woods.

  24. Posted by fluj

    I guess so, Satchel, but I’m not going to double check it against tax records and permits.
    So far this year, 4-M: Six sales 1.35M to 1.65M 511 a foot. Two contingent properties, three active, one of which is the Yerba Buena property for 4.25M.
    2007: 7 sales, 1.31 to 3.05M, 650 a foot.
    2006: 8 sales, 1.225 to 2.7M 733 a foot.
    My take — not enough data. The entry level seems consistent but the high end can vary wildly house to house.
    All of D4 won’t show much you know. Those ‘hoods are all quite distinct from one another. Sunnyside versus St. Francis Woods, etc.
    So far this year, 182 sales 615 a foot.
    2007: 330 sales, 633 a foot.
    2008: 380 sales 603 a foot.
    Miraloma Park:
    2008 ytd: 30 sales 640 a foot
    2007: 75 sales 643 a foot
    2006: 76 sales 592 a foot

  25. Posted by Anonymous

    The other day you were saying that your rent-controlled TIC tenant was paying you $2800 a month rent, but you thought you could get $3500 a month on the open market. You complained that this tenant was a high earner, making $250,000 a year, while you made less–only $170,000 a year in income.
    Later, in another post, you said this tenant was paying $2,850 a month, not $2,800. (No biggie. What’s $50 a month to a big shot like you?)
    But now you reveal that while you may be making $170,000 (less than your tenant’s $250,000) your own household income is $300,000, which is of course more than that TIC tenant. In addition, now you reveal that you’re not the poor, exploited landlord with a rent-controlled TIC property plus one condo, but the owner of five properties (which may or may not include your principal residence).
    Like they say–90% of landlords spoil the reputation of the other 10%.

  26. Posted by Trip

    Re past sales, Redfin now makes available a lot more than (I think) anyone has previously made available to the public regarding district and sub-district recent sales and listings data. See:
    Pretty useful even though it only includes sales for the last couple of months, and I presume it uses MLS data which has been shown to be sketchy. It would be nice to go further back, and it may be a week or two behind in updating the sales info.

  27. Posted by anon

    @ Anonymous at August 18, 2008 11:40 AM
    And your point is….?

  28. Posted by marko1332

    Banks are establishing tougher standards, they need to rebuild their balance sheets; if the government doesn’t, then if fall on the consumer to make good on the errors of the finance industry. Gernerally the historical spread on the 10 year bond and a 30 year conventional mortgage is 1.68%, it’s currently about .91% above the historical spread in order for the secondary market to accept the risk. For jumbo’s its 2.03$; more risk, more reward.
    My girlfriend and I had no problem getting prequalified for a place in SF (we live in Seattle); we have great credit scores, high income, and are willing to put 30%-40% down. Now we need for the condo market to come down to reality.
    Nobody says you have to buy, you have a choice, pay want the banks want or wait until they have adequate capital to start making loans again; by that time there will be plenty of competiton for your desired properties.

  29. Posted by S&S

    Anonymous at August 18, 2008 11:40 AM:
    Why do you seem so resentful or critical of 11223? I don’t think she ever claimed to be poor. She just wants market rate for her rental properties. That doesn’t make her a bad person/bad landlord. It just makes her a businessperson … for the same reason most people are in business — for profit.

  30. Posted by badlydrawnbear

    So what happened here?
    Did the buyers just over pay by a huge margin in ’04?
    Have prices fallen so much to have wiped out the all the equity?
    How could an SFH in SF have had negative nominal price appreciation since ’04?

  31. Posted by badlydrawnbear

    oh please, do not let this thread veer off into more ‘rent control’ ranting.

  32. Posted by The Milkshake of Despair

    What architectural style would you ascribe to this house (ignoring the 70s era double-wide garage feature) ?

  33. Posted by Satchel

    “So what happened here? Did the buyers just over pay by a huge margin in ’04? Have prices fallen so much to have wiped out the all the equity?”
    I used to look at parts of District 4 VERY closely for years. I lived right around the corner from this place. I think I can offer an informed opinion.
    These guys did overpay by a bit in 2004, but not excessively. They obviously got suckered a bit be the renovation that was done just prior to their moving in. $1.5M-1.65M IMO would have been a more representative price for such a house in that neighborhood. Nevertheless, $1.75M was not such a high price that any fraud alarm bells should go off.
    I’ve said it a hundred times. The large majority of purchasers out in that part of District 4 who bought after mid-2004 will experience “negative” appreciation if they try to sell. If you take the 7% or so selling expense into account, the overwhelming majority will show losses. Prices on average – apples to apples – are back to where they were in early- to mid-2004.
    It’s a bitter pill, I’m sure, for people to swallow, especially because by early to mid-2006 (that was really the peak there) they could have sold at large gains. If a fall down fixer on a busy street like Monterey – 1260 Monterey – sold for $1.6M in a frenzied bidding war, a place like 10 Fernwood could have garnered $1.9M+ at the peak.
    My estimate is that the lower-desirable SFHs in most of District 4 are off by up to 20-25% on average from peak, while the most desirable are only slightly down, with most of the housing stock in the middle of course. A house like 10 Fernwood is pretty high on the desirability scale for District 4, given its location and size. Once in a while an SFH sells for a surprisingly high price, but these are overwhelmed by the numbers of listings that are withdrawn because the “owners” don’t want to – or can’t – write a check at closing.

  34. Posted by tipster

    There was an interesting op ed in the WSJ this morning, about how desperate the investment managers for the baby boomers money were to maintain returns as interest rates plummeted, and basically chased anything they thought would yield what had been the norm when interest rates were high.
    Enter these toxic loans. You basically convinced the buyers AND the investors that real estate prices would rise to the sky. So it didn’t matter to the buyer what the loan did (as long as the payments were VERY low) and it didn’t matter to the investor that the buyer couldn’t pay them back with anything other than the near certain infinite appreciation. If the investment managers questioned the reasoning, the boomers with money would quit their investment house and find someone who bought in, to keep the returns they were planning on for their retirements.
    Meanwhile, the buyers looked at the monthly payments and didn’t much care how much they paid: it would be worth double whatever they paid when the loan reset, they’d deal with that later. So the buyers paid what the market would bear, given that they were competing with other buyers who knew the same thing: money was cheap and payments would be low until the appreciation saved the transaction.
    Now we have the opposite distortion: inventory is SO LOW because these buyers cannot get out. They literally cannot sell.
    Think about it: the discussion above notes that, where you once could buy a home like this with nothing down and not even make the payments, you now need 25% down. Don’t you think that should make prices fall rapidly? My theory as to why they haven’t is because we are in a temporary period of very low inventory while the old set of buyers are trapped in their homes. So in spite of the fact that demand is way down, so is supply.
    The problem is that lots of other areas do NOT have this problem, so prices there continue to fall. The loan market being national, the banks continue to tighten.
    This is likely one of the first houses that is now starting to come loose, and even if this one isn’t a neg am loan, there will be others. When that happens, if the demand stays down, which is where it appears to be headed, given the tightening (and now Fannie and Freddie are starting to teeter on their own balance sheets), look out.
    The funniness in California loans started south and worked its way up from San Diego to LA to SF. They are falling in the same order. LA had the same issue: no real problems except in the sub prime areas and now it’s falling fast and hard.
    My belief is that by next year, you’ll start to see the real effects of these loans in SF, just like you are seeing them now in LA (LA includes the nicer nabes, as people took out toxic loans to maintain lifstyles they NEVER could have afforded). In SF these effects are, like they were in LA until a few weeks ago, currently masking themselves because someone who might want to sell for personal reasons is literally trapped in their own home, keeping, for a time, inventory artificially low the way it drove demand artificially high in 2004.

  35. Posted by fluj

    The problem with that theory is this. Why South to North? That’s plainly illogical considerint the same products were available to everyone at the same time. I think you need to look at specific regions’ characteristics.

  36. Posted by view lover

    2006 was out of control in terms of pricing. I’m not a bear, but so much mediocrity was sold at outrageous prices that there has to be a correction. I remember looking for property and a listing in West portal was mid 800’s. Talking with the listing agent, my realtor was told it would go for around 1.2, anyone that liked the house and wanted it had to put up offers at that level plus. This is the same story where people just bought always thinking it was going to keep appreciating. Somehow 1.5 million did not seem like alot of money, not even to the banks that lent out even more. It is quite ridiculous to imagine that so many of the houses in “good” neighborhoods cost over $1,000,000.00, which in my opinion is still alot of money! The average person cannot afford a SFH in SF. To S&S point, I believe the damage is done and it will be a while before things are back to affordability, if ever. Even at 40% reduction, its’ still over a million dollars.

  37. Posted by 11223

    thanks to those that posted in my defense.
    In order not to ruin the reputation of all landlord, let me quickly clarify on the issues that Anonymous brought up:
    1. the rent on my TIC is now $2842, to be exact. It started at $2800, and after some pre-determined annual increase, it is now $2842.
    2. I was making $150K until 6/28/08, when I moved to another company, now at $170K. And that is me. Adding my husband, it would be around $300K.
    3. I said before that I had two properties in SF, and I live in south bay, so that is #3. And we have one in phoenix, and one is plesanton.
    Please let me know if you see other areas where numbers don’t add up. Being a finaical director of corp planning and budgeting, I should be able to explain deltas, that is what I do for a living most of time anyway.

  38. Posted by tipster

    It was basically from inexpensive regions to expensive ones. The subprime market goosed the appreciation in the lesser-priced places. They loaned subprime money to people who clearly could NOT pay the loans back, and yet, as interest rates fell, the early investors DID get paid back when the subprimes refinanced to get still cheaper money. That caused option arms to be offered first for moderately priced homes, and when that well ran dry, to higher priced ones.
    It just kept moving into higher and higher priced areas. In our case it was east to west. Stockton was first, followed by the east bay and now the shotgun is pointed at SF. LA was cheaper than SF, so the locusts descended on that area, picking it as clean as possible to spread out the risks over more borrowers for the same amount of money, before increasing the loan limits that allowed it to hit our area.
    So you are correct that you have to look at local characteristics. But those local characteristics meant that we get nailed dead last.
    And LA is very scary right now. Everything was holding up perfectly fine in the better areas until really just a few weeks ago.
    Now the wheels are coming off that train, and the areas everyone thought were “different and special” turn out to really just be “later”. As the loan limits for toxic loans were increased higher and higher, because the holdout investors, whose returns were dropping faster than Alan Greenspan could say “a little froth”, finally threw in the towel and demanded those same high returns everyone else had been getting, the loans hit the higher and higher priced regions, because the lower priced ones had already been mostly mortgaged by anyone who wanted one.

  39. Posted by Foolio

    “Now the wheels are coming off that train, and the areas everyone thought were ‘different and special’ turn out to really just be ‘later’.”
    What areas are you talking about, specifically?
    Although I’m sure someone’s brother-in-law knows a guy who sells RE in LA who says everything is just fine…

  40. Posted by fluj

    There are probably some LA realtors reading this. Let’s hold off and allow them to weigh in on the subject.

  41. Posted by oaktown

    i bought in oakland in the end of oct. put 20% down. my credit score had dipped into the high 600’s due to some issues from a prior move. got a loan with no trouble. jumbo 30 year fixed 7.25
    refinanced in july. put in some money to get down to the new conforming limit ($729,750). my credit score is uup again in the mid 700s (i guess cause ive paid my loan regularly etc). Got a 30 year fixed 6.375. didnt have to jump through any hoops

  42. Posted by 11223

    Who is your lender?
    What is the lowest on TIC loan now??

  43. Posted by michiko

    LA is an awfully big place. If you’re correct, that means Santa Monica, Brentwood, the Palisades have been hit in the last few weeks. That’s not what I’ve heard.

  44. Posted by Dan

    Here are the June LA stats. Westside and other affluent areas are generally holding up. Valleys and marginal areas are way down.

  45. Posted by anon94123

    As for the O.C., Newport Beach , Cornona Del Mar and Laguna Beach are still strong while inland Orange County is heading straight down.

  46. Posted by 11223

    what about Pasadena??

  47. Posted by RenterAgain

    “…the banks became really jumpy about appraisal values.” (from St George)
    I haven’t heard a lot about this piece of the puzzle, and it seems important to me. In the last five years of zaniness, for every crazy overbid to “win” a house over other bidders, there was an appraisal to back up the bid. I read that there would be a crackdown against collusion between mortgage brokers and appraisers, and stricter rules about appraisals. But does anyone know of a case in which a crazy overbid (in S.F.) didn’t get okayed by the appraiser and had to be lowered to qualify for a loan? Isn’t the appraisal supposed to protect both the lender and the buyer?

  48. Posted by fluj

    “Although I’m sure someone’s brother-in-law knows a guy who sells RE in LA who says everything is just fine…”
    As opposed to a couple of guys who don’t work in real estate and don’t live in Los Angeles claiming that it has tanked in the last few weeks? Get the brother in law on the phone, stat.

  49. Posted by fluj

    “But does anyone know of a case in which a crazy overbid (in S.F.) didn’t get okayed by the appraiser and had to be lowered to qualify for a loan? Isn’t the appraisal supposed to protect both the lender and the buyer”
    I don’t. But your larger point I think is moot due to the fact that new comps that do support these highly expensive values are still being generated weekly. We aren’t anywhere near critical mass as far as that goes.
    It would have to be something very far out ahead of the curve, coupled with a lack of capital, to put real pressure on an appraiser. And remember, in a competitive instance such as that it isn’t always the high dollar amount that takes a property down.

  50. Posted by LA ex

    Regarding LA and SD real estate.
    LA has been very similar to SF in terms of SFHs in “prime” areas (90402 – N. of Montana in SM, good parts of Pasadena, Brentwood, etc) retaining their values despite a cratering of values elsewhere – at least until now (I don’t know if anything has changed in the last few weeks or so).
    Shockingly, SD, which has been at this housing correction the longest still has nice areas that have retained their value very well (downtown LJ SFHs, Del Mar (W of 5)). I track both areas because I used to live in both towns and would love to buy a nice little house or condo near the beach in Del Mar but nothing (despite my fervent hopes) is budging yet…
    Don’t take my word for it – if you want a nice tracker of how Santa Monica real estate has performed since this bubble crisis started you should check out the SM distress monitor:
    Not my site, but the guy believes that SM prices are ripe for a correction (and knows the area extremely well) and even he admits that N. of Montana (if you know SM, you understand this area) has not corrected at all to this point. Does a lot of the same Apples to apples comparisons that SS uses to follow the market.
    The same is not true for condos / townhouses which have been beat up pretty bad across LA. I personally would have lost a lot on the townhouse I sold in LA in March (if it wasn’t for that sweet relo package).

  51. Posted by michiko

    He definitely knows the area well, and doesn’t see the most desireable areas correcting through 2008.
    2009 is another story.

  52. Posted by ex SF-er

    I agree with LA ex and fluj.
    LA is a very big metro area. So far the coastal communities and prime locales in general are doing fine (Santa Monica, Brentwood, Bel Air, West Hollywood, Beverly Hills, Pasadena). There is no “blood”. The damage that is severe is the inland areas. Same with SD. many of the “Prime” areas are holding up well (La Jolla, Del Mar, Coronado Island, Mission Hills) but the rest of the city and the inland areas are getting slaughtered.
    as for fluj’s question:
    The problem with that theory is this. Why South to North? That’s plainly illogical considerint the same products were available to everyone at the same time. I think you need to look at specific regions’ characteristics.
    I agree with you. I don’t think it really migrated south to north. it just happened in the south before happening in the north… but there was no “spread” per se.
    It happened in the Southern lands first because there are huge differences in zoning, building, and inventory. So in SF there are like 1-2k properties for sale at any given time, but in SD there were like 15-20k. Also, the starting prices were much lower in SD. so it was easier for investors and first time buyers etc to “jump in”. The other reason why SD and LA “boomed” first is because they weren’t affected as much by the dot-com bomb. SF was still recovering from job losses and population loss when SD was gaining population and jobs.
    I think SF would have started around the same time as SD if it had similar RE prices, similar inventory, and no dot-com fiasco. I personally think that the loose lending allowed SF values to stay up from 2001-2003… in SD loose lending led to appreciation in those years, in SF it stalled depreciation.
    just some thoughts… no science.

  53. Posted by diemos

    So this was purchased using a first lien of $1.225M and now the first lien is $1.39M, or 113% of the intial value, about where an option arm would recast and become fully amortizing.
    You don’t suppose this
    purchased a house, made the minimum payments, and now that the mortgage payment has doubled is choosing to walk away rather than manfully step up to his new payment?
    Yikes. Who could have predicted that?
    Luckily this is just a fluke and everybody else who used an option arm to purchase a home will cheerfully make the new payment when they can’t sell or refinance. After all, if a significant number just walked away and let the banks dump their houses on the market for whatever they could get it might negatively impact SF values.

  54. Posted by fluj

    Excellent cynical ghoulishness. Bravo.
    Person loses house = fun for you?
    Actually you have no idea what went down. Perhaps an illness in the family occurred. Shame on you.
    You guys need to check yourselves. This landscape is becoming impossibly mean spirited.

  55. Posted by diemos

    “Isn’t the appraisal supposed to protect both the lender and the buyer”
    The appraiser does whatever the person paying them wants them to do. Otherwise, they get blacklisted and don’t work anymore.
    In the good old days the appraiser worked for the bank and the bank wanted them to come in low to make sure that the collateral would cover the loan in case the bank had to foreclose.
    In the “new era” mortgage originators wanted to close the deal so that they could collect their commission. They would let the appraiser know what number had to be hit in order to make that happen and the appraiser would dutifully hit that number. Otherwise, they would be blacklisted and not work again.
    Moral: If YOU want an accurate appraisal then hire the appraiser yourself and make sure to let them know that:
    a) you want an accurate appraisal
    b) you won’t let anyone know that he did that for you so he won’t risk getting blackballed.

  56. Posted by oaktown

    original 7.25 was wells fargo
    new 6.375 is citimortgage

  57. Posted by diemos

    “Person loses house = fun for you?”
    When a person who used money he didn’t have to “purchase” a house he couldn’t afford is removed from said house it allows someone else who CAN afford it to purchase it.
    Not fun for the foreclosee but a net gain for society as a whole.

  58. Posted by tipster

    we’re all very much aware of how much you, as a real estate salesperson, empathize with buyers who were willing to bid anything to get a house, and how concerned you are for their welfare, but…darn, I lost my train of thought laughing so hard.
    As for an appraisal, I doubt you could even find someone who could do what you want. I think those people left the market a long time ago. The name of the game has been to hit the number, not identify the value.
    Even if you could find someone who was able to do that, could they? With all the shenanigans, how could you come up with an accurate value. Case in point: the $1M condo last month that had a $100K cash back that the buyer used to make the payments until he threw the keys back to the bank, thereby ensuring that he never spent a penny for the property. Would that buyer really have bought it for $900K? Not a chance: he really got it for $0, and that’s all he wanted to pay. At $900K, he NEVER would have purchased it.
    What about the FHA “buyer assistance”, where the seller paid a “nonprofit” the downpayment plus $600 to make the downpayment so the buyer could pretend to make a downpayment without actually spending a penny? How much would a buyer with absolutely no savings have spent if they had to put 3% down? Zero! Was the price just 3% too high for that buyer or was it 100% too high?
    So what’s the real value of a home to those of us who don’t play those games? Who knows? I can’t see how an appraiser is supposed to determine it.

  59. Posted by San FronziScheme

    I’ll side with tipster. The same guys who helped send prices through the roof with smoke, mirror and staging did sink these people into unfathomable debt without ANY remorse.
    Shame on them for bankrupting hard working Americans and shame on them for hiding now behind their victims.

  60. Posted by John

    The fair value of a property is always where the seller meets the buyer. Seller willing to sell, buyer willing to buy.
    So, the contract price is always the market value.
    The purpose of the appraisal is for the lender to make sure if this buyer disappears (if he wants to sell), the second best offer is not that far off.
    So, if you want a “fair appraisal”, the fairest number should always be the second highest offer.

  61. Posted by deshard

    As for Newport Beach and coastal Orange County still going strong, um, we just relocated here from SF (and still check into Socketsite as we’ve got our house off the market in SF and are contemplating a re-listing or leasing it). The townhouse in Newport Beach that we’re renting just sold to our landlord here prior to our moving in for $920k and was listed at $1.069m and sat on the market for over three months and this is definitely one of the nicer units in the development that we’ve seen after attending several open houses. Just anecdotal, but I don’t get the feeling that the market here is faring all that great. Better than inland OC, sure.
    If you’re interested in a little chuckle regarding some observations about how life has changed since moving from SF to the OC, I started a little blog: newbieintheoc.blogspot.com.

  62. Posted by 11223

    so, how much are you paying as rent for this place that is listed at $1.069M?? If you can share, that is.

  63. Posted by fluj

    Just for the record you are a disinformation specialist, Tipster. You present your anecdotes as market indicators. Others anecdotes are “merely anecdotes” in your tellings. What about the guy who bought the house with the neg Am loan and made minimum payments for a year, and then once some other expenses were cleared up, began paying it down? More than one such person has posted that very story on here. Why they are less relevant, they are real people with their own stories? Somehow your hypotheticals are more indicative of the market? Oh, and LA really tanked two weeks ago? Clearly that was a falsehood. We’ve all been talking about LA’s pockets for months. And so it remains.
    Diemos, you take glee in others’ misfortunes. Do not try to deny it. There are several of you who do so. You have marked yourself this way over the course of the past year or so. “Society’s net gain” — no. Your amusement. Don’t kid a kidder. You are also the 50% market falloff guy, if I recall.

  64. Posted by San FronziScheme

    Wow. That was utterly condescending.

  65. Posted by fluj

    “Wow. That was utterly condescending. ”
    Yeah well you don’t know anything about San Francisco real estate, Fronzi. You are a novice using this blog to fill in very huge gaps in your r.e. acumen. Yet you are one of the loudest voices on this blog. How is that for further condescencion?
    Tipster “lost his train of thought laughing” at me trying to ask for a bit of sympathy.

  66. Posted by San FronziScheme

    Nobody’s listening to the supposedly “knowledgeable” Realtors anymore. Not since they brought us into this mess.

  67. Posted by fluj

    “Nobody’s listening to the supposedly “knowledgeable” Realtors anymore. Not since they brought us into this mess.”
    Speak for yourself. Just maybe not so loudly? OK newbie?

  68. Posted by Satchel

    Look, cry me a river for this “poor” purchaser of 10 Fernwood who is now “losing his home”.
    None of us know the whole backstory of course.
    What we do know is that this purchaser couldn’t come up with a reasonable value estimate of the home he wanted to purchase. After 4 years, the property is going to go for at least 5-10% under its 2004 price, and it could be 20-25%. That, after the largest bubble in world history. That was forecasting/valuation error #1.
    We also know that he couldn’t forecast his own personal circumstances even 3 years out from the purchase. No big deal. Stuff DOES happen. To all of us. Loss of job, shortfall in income, death in the family, sickness. That’s why it makes sense to be conservative. People need to relearn that. That was forecasting error #2.
    We know that this is a $1.75M asset purchase. How much is actually at risk? With 3 loans (including a HELOC, according to the agents I talked with), this “owner” really didn’t have more than $100K at risk. Is that a lot of money? Well, I’d argue it’s no big deal to someone who is contemplating the purchase of a $1.75M home. As a trader, I’ve lost in excess of $100K of personal money at least TWENTY times over the past 10 years (last time was 9/07), and I don’t “own” a $1.75M house. And of course, I am not going to stick a bank, and ultimately the US taxpayer, with the consequences of my forecasting errors.
    Last, the realtors who sold this place in 2004 took in a cool $100K, plus or minus. If realtors feel so bad about these poor owners, where is the NAR or CAR program designed to “refund” some of these transaction costs to the poor victims who in many cases relied on the professionals’ “read” of the market. In fact, on that very subject, when I was speaking with the agent and suggested that there might be some room here for a workout (I was only aware of the $1.4M 1st and 2nd loans before I spoke with them), they were VERY clear – almost insistent – that the “selling expenses” (ie, their commission) needed to be covered, so it wasn’t going to be possible to go under $1.5M.
    If hard economic reality is too “gritty” for the average Californian, let’s concentrate on the positive! Every dollar “lost” by the purchaser of this home will be a “benefit” to the next purchaser, who either through luck or forecasting skill chose to wait until Q3 2008 to purchase this home. Every dollar lost will be a benefit, of course, except for those dollars that were siphoned off by the agents, which consitute in economic terms a “deadweight loss” to society.

  69. Posted by tipster

    “What about the guy who bought the house with the neg Am loan and made minimum payments for a year, and then once some other expenses were cleared up, began paying it down?”
    If that was any more than a small fraction of the market (about 1/5), those loans would still be written. The vast majority used them as ways to buy houses they couldn’t possibly, and won’t ever, afford.
    Many of the buyers are likely going to walk away, leaving an INVESTOR, not them, holding the bag.
    The INVESTOR is going to lose their life’s savings with NO RECOURSE.
    The homeowner got to live like a king for 1/3 of the payments and now gets a 7 year ding on their credit report and has to move. Cry me a river.
    Sorry, I don’t think most homeowners are very “sympathetic” people in this situation.
    By the way, today some criminals went to jail for their actions because their actions have consequences. You should show sympathy for the fact that they had a bad outcome (they got caught) to actions whose risks were known when they so gladly performed them. You’ll excuse me when I don’t.

  70. Posted by fluj

    “If that was any more than a small fraction of the market (about 1/5), those loans would still be written. The vast majority used them as ways to buy houses they couldn’t possibly, and won’t ever, afford.”
    Says you, chief conspiracy theorist here.

  71. Posted by Foolio

    “Don’t kid a kidder.”
    Finally, some truth from Kennth.

  72. Posted by S&S

    I don’t know if I’m implied among the people who take glee in others’ misfortunes, which is not true, but I will tell you why my seemingly callous (to some) comment: Without revealing the industry within which I work, I have met and heard the stories of many of these people who are/have been foreclosed upon. And do you know why they are being foreclosed? Because money rained upon them from the sky. They pulled equity time and time again out of their homes that they got for free with no money down. Was anyone in their family ill? No. Did anyone lose a job? No. Was it because they needed the money for some misfortune or unexpected event? Nope again.
    So what was the money used for?
    “Oh, we bought a boat. We’re still paying for it.”
    “I bought a new car.”
    “I had bills to pay.”
    “I co-signed for a car for my ex-daughter-in-law, and she stopped making payments.”
    These statements are all from the same person. To top that off, these very people had filed for bankruptcy BEFORE the banks continued to give them refi loans. There are many of these same “sob” stories, and I am so sick and disgusted by them.
    I’m sure there are some people who have been subjected to unfortunate circumstances and are losing their homes because of that, but from the stories I’ve heard from the horses’ mouths themselves, these are few and far between.
    So, no, I have absolutely no sympathy for these people. They got themselves into this situation because they and their lenders are greedy, Greedy, GREEDY, G-R-E-E-D-Y. I have nothing but utter disdain for them.

  73. Posted by Foolio

    @S&S: Well said. It’s like feeling sorry for people who ran up their credit card bills at the mall with no understanding of the 18.9 APR that was barrelling down at them like a freight train.

  74. Posted by fluj

    Yeah, OK. There are also people who used these loans in an intelligent fashion. We have seen quite a few such stories here. I do agree that it is unfair that bad apples have spoiled the bunch so to speak. A ten percent down loan should be attainable. It’s a shame that it no longer is.

  75. Posted by PUAgent

    I am a real estate agent who lives in district 4 and I follow it closely. It feels as if prices are off historical highs, but to be sure, I calculated a 6-month rolling average of mean prices from 2004 to now.
    I was surprised to discover that District 4 has done pretty well. The mean price of a home for the first half of 2004 was $860K (n=184) and in the first half of 2008 it was $1,173K (n=146).
    Obviously specific homes on a specific block will have their own story, but the data support a healthy appreciation.
    I plotted the rolling average and there are local maxima and minima which can explain the impression of depreciation over a specific time frame. For example, there was a 9% drop from Q307 to Q407 followed by a 7% recovery to today. The overall trend is still pointing upward though.
    Remember, I used a 6-month rolling average on a quarterly basis to keep the numbers statistically significant.
    Even though the mean price is up, it’s interesting to note that the average number of days on the market has recently grown from around 30 to 45. Also, the number of transactions have dropped from a peak of 242 in the last half of 2005 to 146 for the first have of 2008.
    So while the market has turned to favor buyers, we are relatively inventory constrained which should help keep prices from dropping too much.
    I guess time will tell.

  76. Posted by Mark D.

    Re: “A ten percent down loan should be attainable. It’s a shame that it no longer is.”
    Um, no, it’s not.
    One of the reasons why the property bubble of the past few years occurred is because buyers, resorting to no or low down payment loans, were able to do unbelievably stupid and foolish things in real estate markets like buying properties they could not afford and should not have bought. This extra demand had the net effect of creating the all-too-frequent bidding wars and pushing up the market value of all properties in SF. I can see why real estate agents and sellers loved this, but I don’t think anyone else did.
    The fact that the crazy loans are no longer available is a good thing, not a bad thing. I realize that people who in 2005 bought a house for more than they could afford are now stuck, and I feel sorry (a little) for them. But I didn’t buy. I knew how much I could afford and I thought the housing prices were (and still are) crazy. Eliminating no and low down payment loans means that the only buyers left in the market are those that can afford to save a 20% down payment – i.e., people who can afford the house they are purchasing. This will have a net effect of depressing property prices. I can see why real estate agents and sellers will hate this, but I don’t think anyone else will.
    will depress property prices (a good thing

  77. Posted by The Milkshake of Despair

    PUAgent – does your analysis account for the value of remodeling that was invested in those houses being sold ? Is it possible that the average square footage also increased as well as the average price ?

  78. Posted by flujk

    If you don’t think buyers liked the 10% down model, you are mistaken.

  79. Posted by Mark D.

    If you think buyers like outrageous bubble prices, you are mistaken.

  80. Posted by S&S

    Fluj, I will be the first to admit that I loved the 10% down, not because I couldn’t/can’t afford to put down more, but that allowed me to spread my money farther as an investor. The difference between me and many of the other buyers or investors is that I refused to bid one penny over any other multiple offer and made that plain to my agent. If there were multiple bids on a property, then I was more than happy to let someone else have it who wanted it THAT badly. I am a patient investor, not irrational. So, although I chose to put only 10% down, I have made good on my loan.

  81. Posted by S&S

    So for those who do legitimately qualify and can afford the loan/home, it IS a shame that 10% down payments are history.

  82. Posted by fluj

    “If you think buyers like outrageous bubble prices, you are mistaken.”
    I don’t know that we fundamentally disagree. But that argument is better suited for ninja loans and subprime. Ten percent of $1.5M is a hefty amount of money for most. Zero percent of $1.2M or whatever, a completely different story.

  83. Posted by PUAgent

    No, my numbers are claculated as the mean price of all homes sold over a 6 month period.
    I calculated the numbers quarterly and used the previous six months as a rolling average in order to get a large enough sample. The average sample size was about 180 homes. If I remember correctly from my statistics course, any sample over 30 is valid.
    With that many homes, things like condition and remodling are averaged out. It also prevents a few tear-downs in Sunnyside or a few $3,000,000 Saint Francis Wood homes from skewing the data.
    The price per square foot numbers should correlate too, but I cannot easily confirm because the MLS square footage numbers are often wrong or missing.

  84. Posted by deshard

    11123– no, I don’t mind sharing that info: $3600

  85. Posted by waterbug

    According to the Paragon RE website, it’s pending. The craigslist posting must have worked.

  86. Posted by anon

    MLS still shows it as active.

  87. Posted by james

    they have an offer but it probably isn’t enough to stay off the foreclosure/auction. it has a negam loan and the balance is 1.4 million.

  88. Posted by SocketSite

    Now bank owned and “coming soon.”

  89. Posted by West Portal

    Redfin shows a sale at 1.32M on Feb 20, 2009. Is this the sale back to the bank or a real sale? And, if it is a sale back to the bank, whiy has the bank been sitting on this for more than 5 months…

  90. Posted by diemos

    oof. 25% below it’s May 2004 price.
    I’ll have to agree with the bulls on this one. They overpaid.

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