3976 25th Street
The sale of 3976 25th Street officially closed escrow today with a reported contract price of $2,800,000. That’s 3.3% under asking and 3.4% under its purchase price of $2,900,000 in November 2006. And yes, it’s the one across the street from 3961 25th.
If You Think You Know Noe, Now’s The Time To Tell (3976 25th Street) [SocketSite]
A Noe “House With A Conscience” (And Listing Lob): 3961 25th Street [SocketSite]

66 thoughts on “Another Noe Valley Apple Is Picked As 3976 25th Street Closes Escrow”
  1. That’s an excellent result for the seller, who was very smart imo to accept an offer quickly. Who knows how far down they would have had to go to find the next highest bidder?
    After standard sorts of transaction costs, we’re only talking about $275K or so in capital loss over three years, and that’s really not too bad in light of the enormity of the bubble. Congrats to the sellers here!

  2. Supposedly there were two offers. I don’t know. Maybe they should have held out for a bit longer.

  3. Looks like the Noe Valley’s price has not dropped that much. From $2.9M to $2.8M. So that’s like the price went back to 2006? or slightly earlier? I thought overall market price has gone down to 2004/2003 range. So until this house (or similar houses) actually sells for say $2M or $1.5M from $2.9M, I say the single family home market bubble has not popped here in SF. $2.9M to $2.8M is not what I called popped. And yes, please do not average in Bay View houses. Those foreclosures don’t count. I want to see nice houses (NOT Condos) like this one at Noe/Castro/Pac Heights/etc. that actually sells for cheap prices for me to believe prices in SF are actually dropping dramatically.

  4. Looks like the Noe Valley’s price has not dropped that much.
    Well, certainly this property has not fallen so much since late 2006, but shouldn’t be extrapolated out to the whole area (just as a bad apple shouldn’t be reflexively extrapolated out). Just another data point and some more evidence of the overall trend.
    The 2006 sale was interesting to me, in that the dynamics suggested that perhaps the current sellers “underpaid” back then. (See my post at May 9, 2009 8:49 AM in the earlier thread on the property.)
    If there was another offer on the table now in the 2009 sale, it may well have been so low (or unattractive due to contingencies) that the sellers got “spooked” and quickly accepted a reasonably big loss. It’s always tough with such unique assets as SFRs and such an opaque sales process to figure what sort of weight to ascribe to the “apple”, but I guess the more data that come in, the better.

  5. Don’t worry, jaja. This is just another example of a clueless SF realestate-specuvestor overpaying in the hyped-up, stock-option-frenzied, (not-“real-san-francisco”) enclave of Noe. I’m sure it’ll be back on the market in six months at 40% off.

  6. A good apple, data point, comp etc etc…
    certainly the buyers weren’t believing the numbers from Case-Shiller, Dataquick etc – they clearly had enough sense to see that it wasn’t as simple as offering (as some were suggesting). 2.9*.8.

  7. Losing $275K *plus* carrying costs over three years isn’t an example of a “clueless SF realestate-specuvestor overpaying in the hyped-up, stock-option-frenzied, (not-“real-san-francisco”) enclave of Noe”? Sounds like one to me. Also sounds like Dave has been drinking the realtor Kool-Aid.

  8. Congrats to the sellers and new owners, but dang! I was hoping to get another chance to check out the kitchen. Missed the open houses.

  9. Also sounds like Dave has been drinking the realtor Kool-Aid .

    Kids: Hey Kool-Aid.
    (Kool-Aid Man smashes through the fence)
    “Oh yeah!”
    So you took Dave’s comment as fascetious, and it made you think that us realtors must have already got to him with a pitcher or two of sweet refreshing mind control serum eh? Hmmmmmm. Don’t know.
    Dave?

  10. yeah, they “underpaid” in ’06. looks like they underpaid here too… they accept an under asking offer on day #4… and then the home across the street takes 1 day to go “pending”. maybe they’d have gotten asking on day #8.
    so there’s your apple…. underpaid to underpaid and we have a 3.4% price drop.
    of course apples don’t equal a market… noe is down more than 3.4% since ’06. but not a prime home on a flat block close to both Church & 24th in Noe.

  11. There remains a lot of demand for super prime finished properties. Buyers in this range do feel like now is the time to buy and are closing on properties that are priced in the 2005/6 range.
    I’ve said for a while now that apples are good market indicators, but the best indicator of where the market is headed is to look at the unfinished prime SF homes owned for 10+ years that are not attracting wealthy suckers. These homes are still getting developers but they are selling for much lower. I’ve not kept a log of these homes, but 123 Laural, view home on Broadway, view home on green, baker street home, washington street home. All of these homes have sold for 15-25% below prime prices; and 30-40% below prime finished prices. Maybe this weekend I’ll go dig up all the homes I’m talking about here and post up the exact address / metrics.
    These 2 Noe homes are fantastic and are still commanding a premium, and lots of interest. Plus Noe has gentrified substantially thereby permanently altering the financial landscape (similar to Williamsburg Brooklyn in NYC)

  12. Selling for 3.4% less than in 2006 is NOT the same thing as the market falling 3.4%. How much did Noe rise after 2006 until it started falling? 10% or more? Down at least 13.4% from the peak for prime Noe?

  13. The possibility that real estate whether nationally or locally would reach a floor was dashed in just the last 4 weeks, with this back-up in interest rates. And the back-up in interest rates is just the beginning of what will be one of the worst bear markets in government bonds of all time. A recovery in real estate–save for a very small uptick, or a series of small upticks that merely get pushed back down again–is now nearly impossible.

  14. Selling for 3.4% less than in 2006 is NOT the same thing as the market falling 3.4%. How much did Noe rise after 2006 until it started falling? 10% or more? Down at least 13.4% from the peak for prime Noe?
    There’s been a 3M ceiling in Noe throughout it all, number one. Secondly, it’s pretty tough to apply those sort of macro percentage figures to an individual property, whether up or down.

  15. I seriously doubt the market rose a further 10% or more from November 06!
    But hey if thats what it takes to make this house fall in line with the supposed fall from peaks – believe it!

  16. Regarding 2006 prices: When this place sold in Q4 of 2006, the average $/sqft for Noe Valley SFRs was 746. That’s clearly a little higher than 2004, but not nearly as high as the later peaks. FWIW:
    04Q1 660
    04Q2 709
    04Q3 686
    04Q4 706
    05Q1 708
    05Q2 809
    05Q3 785
    05Q4 734
    06Q1 769
    06Q2 738
    06Q3 751
    06Q4 746
    07Q1 797
    07Q2 826
    07Q3 883
    07Q4 807
    08Q1 881
    08Q2 787
    08Q3 809
    08Q4 766
    09Q1 662

  17. “I seriously doubt the market rose a further 10% or more from November 06!”
    For a REpornaddict you sure don’t know much about real estate.
    Using anonanon’s averages…from 746 in Q406 to 881 in Q108 is a 18% gain. It would be a 15% drop from Q108 back down to Q406. Add 3.4% and call it a 18.4% drop from peak. Or just use the averages and call it a 25% drop from Q108 to Q109

  18. Brilliant!
    if someone had gone on here claiming, as the data shows..
    a) prices rose 18% from q406 to q307
    b) prices were higher in q408 (post economic tsunami!) than in q406
    they would have been laughed out of town.
    But now its convenient, it’s being suggested. The whole point of apples is to make up for the inconsistencies/unreliability of median price data.
    but any apple that shows things arent falling of a cliff (there was another one recently showing a level price..) out come the medians to extrapolate/interpolate the apple price pair.
    It’s actually very, very funny to watch!
    And, they aren;t even medians in this example – they are averages – even worse!
    Wow.

  19. Those low interest rates really WERE something!
    2.8M *0.7 financed @6%/12 payments per year= $9800.
    But that was last month’s price with last months rates. This month:
    (This Month’s price)*0.7*0.0675/12=9800 (to make the same payment)
    This Month’s Price=9800*12/(0.7*0.0675) (to make the same payment)
    This Month’s Price=$2.489M to make the same payment.
    10% drop in one month.
    Just sayin’

  20. REpornaddict is out of touch with REality. Would higher NV prices in Q4’08 v Q4’06 really surprise anybody on this board? Even RErookies know the housing market doesn’t move as quickly as the stock market. NV peaked ’07/’08 and has been falling since.

  21. It is really funny to see two homes selling on the same block in the same week both at over $2.8M touted as “proof” that the Noe Valley market is collapsing. There have only been eight homes ever sold at that level or above in NV.
    The Bears have come completely unhinged. Looks like we will have to wait until next spring for that much awaited 50% drop in home prices.

  22. In case anyone cares about my theory on apples versus long standing homes sales as an indicator of where things are headeded, I present 2319 Washington St that just came on the market for $3M. MLS claims 3200 sqft. This home appears to be average at best and nowhere near the class of these $3M Noe Homes that are drawing buyers out of the woodwork. I’m hesitant to make a prediciton on thse 2319 will sell, but I’m fairly certain that it will be below $3M. Point is, this home was purchased in 1989 for around 580k although it looks like it was tapped a few times for equity / refi. These folks should have plenty of room to negotiate. Homes like this were getting high 900’s and 1k+ in 2007 & early 2008. I’ve not seen any pictures of the interior but my gut tells me that this is a home in the 800 range, maybe even the 700 sqft range. 1612 Vallejo SFH sold for 670sqft but that was certainly on the low end for a SFH in PH and the location was subpar. I’d say the location is better here, and the home is about the same quality so if I had to take a guess I’d go with 775psf or ~$2.5.

  23. 2008? the peak in Noe Valley? REally?
    again,if you had come on this board and claimed that anytime during 2008 you would have been laughed at. seriously.
    but now, it suits the picture you want – that this house is much more than 3.4% down from peak – it’s suddenly ‘oh, yeah, 2008 was the peak’…’prices were rising well after this house sold in November 2006 – by at least another 15%…’….

  24. This thread is hilarious. So much clatter! Yeah, tack on an additional 18.4%. It would have sold for 3.3M all things being equal to peak. Except for the small matter that that precedent never existed.
    And Tipster, I gotta give it up. At least you were saying the same interest rate armageddon scenario stuff eight months ago when rates were slightly higher than they are now.
    The city changed over the last decade, folks. It gentrified southward. Believe it or not. It’s a fact.

  25. A lot of whining and hot air from REpornaddict and anonn but nothing of substance. How about some numbers?

  26. “The city changed over the last decade, folks. It gentrified southward. Believe it or not. It’s a fact.”
    And yet the southern districts in the city are where the hit to prices has been the most severe! You can keep repeating this “gentrified southward” point until you turn blue anonn. It won’t change the fact that prices are taking a big hit all over the city but the biggest is in the southern parts.
    It’s a lot of fun talking about these anecdotal $3 million places, but anonanon’s numbers give the irrefutable picture of what is going on in the broader sense. Noe peaked last and it is down about 25% since then, and falling fast. Back to 2004, about where the rest of the city is now, with some areas slightly better and some slightly worse.

  27. these are the only the real important numbers on this thread:
    $2.9m 11/06
    $2.8m now
    thats the whole point of apples.
    it’s better than medians, or averages, or using interest rate changes to predict price changes. – and trying to determine the Holy Grail ‘peak’ 2008(!) peak price.
    I think its official Bears now love medians and averages more than anyone ever did – they have come to love the very thing they once professed to hate!
    Anna – the hot air is coming from elsewhere on this thread.

  28. Nope, 25% is the new 25%.
    Look at anonanon’s numbers and do the math. Peak $/sf price in 07Q3: 883 (or 08Q1: 881 to get YOY change). 09Q1 $/sf price: 662. 662/883 = .7497. Down 25% in one year.

  29. as proven by Joe above – using average numbers (not even medians).
    Thanks Joe, right on cue.

  30. REp, as far as I know $/sf is always reported as an average. But find us the numbers reported as medians and see if the result is any different. I doubt it. You make a typical real estate bull argument — “yes, the broad, verifiable numbers show a big decline but some other number that I won’t give you would provide a different result. Trust me.”

  31. I honestly cannot believe some of these people are on here talking about 2008 was peak after all the grief they gave me. Wow.

  32. and throwing around averages and medians to disprove apples..
    I nominate this thread for “Best of Socketsite”

  33. hangemlo is exactly right, “selling for 3.4% less than in 2006 is NOT the same thing as the market falling 3.4%. How much did Noe rise after 2006 until it started falling?”
    I’ll repeat, a lot of whining and hot air from REpornaddict and anonn but nothing of substance. How about some numbers?

  34. Anna, this thread is anchored by a number, an apple. In fact, three Socketsite posts were devoted to two properties on 25th street that got peak-type prices at this late stage. And I call it a late stage because that’s the Socketsite conventional wisdom.
    And Joe, what’s your deal? In all seriousness I have grown tired of random contrary positions, positions contradicting the most basic of concepts, such as Noe Valley/Bernal/Potrero/Glen Park have gentrified over the last decade. To me it’s seemingly solely based upon “oh look, there’s anonn, I’m going to contest him.” So, what’s your position? If you’re going to argue with me constantly that’s OK. But you know who/what I am. What are you? Are you a perspective buyer looking to take advantage when the bottom ultimately drops? Someone who feels abused by the last market’s craziness? What is it?

  35. Late to this thread, but it is a fun one. Because everyone is right!
    Anonn is right that Noe saw prices peak late, in late 2007 or early 2008, just as anonanon’s numbers bear out. This was later than the rest of the city, which started declining in mid-’06 in the lesser neighborhoods and mid-’07 in most better parts. Right in line with when the types of funny loans fueling purchases in the various areas got cut off. Noe Valley hung in there about 6-9 months longer before it too started tumbling (why? I don’t know. My guess is a few late google/option sales, but it’s just a guess).
    So hangemhi and others are right that the “mark to market” price of this place saw about a 10-15% rise from 11/06 purchase to peak (again, in line with anonanon’s numbers). Thus the new sale price at 3.4% less than 11/06 reflects about a 15-20% drop from peak (actually, slightly better but within reasonable range of anonanon’s numbers).
    A fun debate, but both sides are really consistent with each other!
    Now, imho the most important factor in this debate currently is tipster’s point on rising interest rates. Unlike previous periods of low rates, record low rates are the only thing stimulating housing right now, and that is just slowing declines a bit. Rising mortgage interest rates will be a big deal, particularly at the higher end.

  36. anonn, a simple question: Did Noe peak in 2006? If not, when did it peak and how much higher did it go?

  37. Anna, I don’t know where the numbers are but they’ve been posted on here before. Spring 2007 was peak dollars per foot. 2006 saw the most volume for the highest sustained figures.
    And Trip,
    Thus the new sale price at 3.4% less than 11/06 reflects about a 15-20% drop from peak
    No, it doesn’t, you know that it doesn’t, and you also know that real estate does not work that way. There are real ceilings in play in every single market. Look up 3M+ sales in Noe sometime. There are practically none. I’ve only posted the fact of that dearth on this website 47,000 times, at least 46,000 of which you have probably read. But don’t go changin’.

  38. Jeez. anonanons numbers aren’t even medians they are averages. since when did posters suddenly attach such weight to them?
    since it suited their arguments to do so I guess.
    and i say again, they show prices in q408 higher than the whole of 06. but the common opinion here was that the bottom had fallen out in q408. did that really mean > 2006 prices?
    also, looks like I really should have bought in q105 and sold 3 months later though. Man, 15% gain in 3months – an annuallized gain of 70%!

  39. “you also know that real estate does not work that way. There are real ceilings in play in every single market. Look up 3M+ sales in Noe sometime.”
    Huh? Sorry, I just don’t understand your point at all. I suspect there have only been a handful of $3 Million+ sales in Noe ever. But what does that have to do with anything? A quick redfin search shows 17 sales of $3 Million+ condos in SOMA. The significance of either of these points to the current market state or trend? None, even if you repeat it 47,000 times.

  40. Trip the point is that if the $2.8 on this house is 25% off peak then that peak was $3.5M. But, this house would never have gotten that number.
    Here is some more fun with math (as this is what is really going on). This house sold for $700/ft. Let’s say the current peak price for this hood is $930/ft. (For this number, I used accross the street). So this house sold for 75% of the peak, now. If it would have sold for 75% of the peak dollar at the peak of the market ($3.5M) it would have sold for $2.625M, so infact this house is doing great and is up from the number at the peak.

  41. I got that this is the argument, but there simply is no evidence to support it whatsoever, and it defies logic. Are you saying $2 million homes (in 2006) in this neighborhood would go up by another 15-25% over the next year or two, to $2.3M – $2.5M (as the $/sf numbers indicate) but a $2.9 million home (in 2006) was subject to some sort of invisible “cap” and would not have gone up any further? So if the bubble had not burst you would have ended up with lesser homes approaching the market value of this place but this place would just be stuck? I don’t buy that for a minute. I get the “don’t buy the best home on the block” line, but it isn’t like this place is surrounded by dumps.
    As for your math, as I noted above, this place at the recent sale price did, in fact, appear to hold up about 10% better than Noe as a whole — falling only about 15% or so from peak rather than 25%.

  42. “is that if the $2.8 on this house is 25% off peak then that peak was $3.5M”
    actually, no…its $3.73m.
    it seems the bears are actually incredibly bullish about what prices were as recently as 2008!! having read this site for much of that year, I am amazed!

  43. anonn, you just hate being called on your B.S., huh? So the answer is for those who call you on it to “post less”? Oh, I forgot, you “win every argument.” So predictable.

  44. No Joe. I made reasoned points and that’s not all that was said. But thank you for illuminating once again that your main position is merely to be contrary to me.
    I’ll give you the benefit of the doubt tho, because I’m bored and procrastinating on some yardwork. I take it you agree with Trip’s take that this property illustrates a 15% fall from peak. All things being equal to peak it would have just sold for 3.35M or so, and not 2.8M. You also agree that localized real estate ceilings do not exist apparently. Because according to Trip numerous SOMA condos have sold for 3M+, and therefore Noe Valley SFRs must do same.
    Yeah. Less often for you too, Joe. But if not, before I ever interact with you again you’ll need to answer the questions I asked you above. Otherwise I don’t see the point, siding with clownish baloney as you are.
    This thread is priceless. “2008 was peak! Every.single.thing I said last year was fake” — bears in this thread (TM)

  45. anonn: you’re constantly using median $/sqft to make your point but suddenly can’t quote the numbers for noe? agree with anna, a bunch of hot air.

  46. I could. Maybe I still will. Maybe you yourself could do a search on this archived website, because we’ve already gone down that road about 50+ times.
    But “median” “constantly” ME? Nope.

  47. I just wanted to interject a little about this focus on apples. There is a reason that Case-Schiller has such large boundaries for the SF MSA — you don’t get enough apples for a small population like SF. OFHEO has smaller boundaries — but it includes refinancing as well as purchases. OFHEO does publish a purchase only index, but not for cities — the sample sizes are too small.
    The “state of the art” (pdf) for trying to measure house price is to treat it as a diffusion process, with a log-normal distribution. In other words, one standard deviation is “stretched” exponentially. So the prices follow brownian motion centered on some “true” value, and you need to collect a lot of samples to get a reasonable estimate. Moreover, the apples wont be harvested simultaneously, so to compare an apple that fell 2 months ago with one that fell today, you would want to assume that some brownian “drift” occurred over that period.
    The point of all of this, is at the end of the day, trying to focus on a handful of apples to gauge a specific neighborhood is absurd. You are just collecting noise.
    Now, you could focus on median $/sqft, but then you have mix effects. You could look at census data — but that primarily measures sentiment i.e. it’s a poll, not a transaction-based index.
    In either case, getting data for home prices at the level of SF really needs to be done in 1-2 year timeframes. If you want data for a specific hood — well, maybe you look at 3-5 year timeframes, depending on the number of transactions.
    Another thing to keep in mind is that housing is not liquid. The last “bear market” SF had involved nominal declines for 19 consecutive quarters. Real declines lasted 25 quarters. Moreover, that was just a counter-trend rally in a 25 year secular boom.
    Folks, we are only 8 quarters into this bear market. The proper time frame even for the “froth” should be measured in terms of 5 year periods, and secular booms and busts will reveal themselves over at least a full business cycle (e.g. peak-to-peak) or 10-20 years.

  48. Gentrification certainly has been slowly working its way southward, as anyone familiar with this side of The City knows.
    Bernal was a dump in the 80’s and is actually pretty nice now, especially the north side. Central Noe was working class in the 70s and has been gentrifying every since. Upper Noe really started to take off in the 90s and has continued to improve. Glen Park was the “next big thing” for a long time and now it finally is, with the new library, Tower Market and upgraded commercial strip.
    I won’t even get into SOMA, which used to be an industrial wasteland and is now full of luxury high rises.
    Even The Mission has improved, at least parts of it, especially around Mission Dolores.
    Even places like Silver Terrace, Portola and Mission Terrace have been improving, albeit haltingly.
    Now it is possible that this tide will partially reverse during this economic downturn, but contrary to the prediction of so many Socketsiters violent crime is way down. Like 25% down. I can’t explain it either, but this bodes well for these neighborhoods keeping their gains, and I don’t mean home price gains, I mean livability, safety, shopping districts, etc.

  49. Just to add to Robert’s post about trying to draw too much of a conclusion from any particular apple (or small set of apples) over a relatively short period, it’s also worthwhile to emphasize once again that even “apples” generally exhibit selection bias. All other things being equal, until you get into a situation where there is a large percentage of “forced” or otherwise “unemotional” sales, there will be a bias to understate actual value declines in any examination of sold apples.
    For instance, 3976 25th exhibited only a ~3% decline since its 2006 price. (Let’s leave aside whether 2006 was “peak” or whether it cold have sold for north of $3M at some point.) This sale shows that the current seller was able to absorb a roughly $275K capital loss (perhaps a company was covering it? perhaps they are rich enough not to care, etc.).
    On the same street, but on a less desirable stretch, someone paid $2.725M for a lesser house (one which anonn termed a very “circa 2002 HGTV remodel):
    https://socketsite.com/archives/2008/11/an_elegant_noe_valley_apple_still_on_the_tree_4545_25th.html
    After almost six months of trying, and a cut in wishing price to more than 3.5% under its 2007 sales price, the property was withdrawn. Clearly, that property would be down more than the one we are looking at right now, but we don’t see the objective sales price. We can infer that the loss would have been too much for the seller to bear. Selection bias.
    We’ve seen this in other Noe properties as well. 714 Duncan, for instance, is now pending at what looks to be well under 20% under its 2008 sales price (we’ll know soon enough how much under).
    https://socketsite.com/archives/2009/04/four_weeks_riper_and_another_cut_for_this_noe_valley_ap.html
    On almost that exact same stretch of street, however, 826 Duncan looks to have been withdrawn, with the latest wishing price more than 7% under its 2005 price. Again, more data on value declines drop out. (If anyone knows whether 826 was actually withdrawn or sold, data would be appreciated.)
    One can keep going with this, just thinking about the NV apples we’ve seen on SS. 4214 26th would have sold for well under 5% of its 2007 price. How much more? Well, we don’t know – it could be 15-20%. We can infer, though, that the seller cannot face the loss, and so will continue to pay a mortgage on the asset that he would clearly rather not “own” anymore. (The bank of course owns it, and he is just renting it until such time as the value gets back above his hurdle.)
    https://socketsite.com/archives/2009/03/4214_26th_street_a_remodeled_noe_valley_apple_on_the_tr.html
    By contrast, 4176 26th, another house almost across the street was an unemotional seller (bank), and thus the apple saw a 21% decline since 2006.
    Obviously, there’s no reason to keep going with this, the pattern is clear.
    Over time, what Robert refers to as “noise” ultimately gets shaken out, as people progressively become less “emotional” (for a number of reasons) and the data trends coalesce around a central trend.
    BTW, this selection bias is also at work in both the median sales charts we know as well as the Case Shiller series, which correct for mix issues but still cannot overcome the selection bias inherent in the fact that it can only examine repeat sales. Obviously, at some point the percentage of “forced sales” becomes so great as to overwhelm and perhaps reverse the selection bias, but I think we can agree that we are nowhere near that stage in Noe Valley and other “nice” nabes in SF. Yet.

  50. $2,800,000 is 23x rent assuming some sucker is actually willing to pay $10,000 per month for this house.
    WAY OVERPRICED! i don’t give a hoot about “apples” – fact is there are some rich stupid buyers in this town.

  51. Since I have been outed anyway,
    om LMRIM note about 4545 25th st., I did the permitting architecture but not the interior design or the build.

  52. “I don’t give a hoot about “apples” ”
    seems very much to be the current way of thinkig on this site now!

  53. 123 Laurel. Ask 2.9. Sell 2.6. Beautiful house, A+++ location, Beautiful facade, B- condition (seriously outdated, but everything appeared well maintained), and I understand that getting into the garage was difficult for all but the smallest car.

  54. LMRiM,
    Pretty interesting explanation. Sellers withdrawing their listing, not willing to see their overpaid properties fall into the wrong “grubby hands”. At some point hubris can border to stupidity, but who are we to judge?
    They’re ready to throw good money (earnings, savings) after bad (neg equity) and we will never thank them enough for retiring all that real cash from the money supply.
    The Deflation bug works in mysterious ways and upside down debt payment eating away consumption cash is a darn efficient one. Still upside down tomorrow, but you wrote your monthly checkS! I hope paying a mortgage is a pleasure for you, because that will be the sole benefit you’ll get for your money. Everything is gone once it is in the mailbox.
    Kudos also to specuvestors who are subsidizing tenants day after day, year after year. Like guys who have 100% financed rentals with I/O loans and will not break even in the next 10 years. They’re stuck, stuck, stuck. And they still maintain the place clean at a loss (of real money). Ah, all these unforeseen expenses coming with all rental (I have these every month on 2 rentals thankfully free of debt) that generous appreciation was supposed to cover by far… To these generous souls, the renter crowd says THANK YOU.
    Again, before the wolves start tearing my post to pieces and dismiss it as a renter rant, I am definitely interested in buying in SF eventually (not at these prices) and could afford any place in the first 95% percentile of the current supply. It’s just that these prices are silly in too many ways. Any non-insider investor should stay away from SF today.

  55. Over time, what Robert refers to as “noise” ultimately gets shaken out, as people progressively become less “emotional” (for a number of reasons) and the data trends coalesce around a central trend.
    There is no particular evidence that people become more rational over time. Perhaps over the span of human history, but not on the order of a few years.

  56. I hope paying a mortgage is a pleasure for you, because that will be the sole benefit you’ll get for your money. Everything is gone once it is in the mailbox.
    Except for that little fact that after 30 years (or 15, depending on the mortgage) the property is paid off. Or is your remark only directed at I/O loans holders? Every month my outstanding balance of my mortgage goes down another thousand dollars. This is a real benefit.

  57. There is no particular evidence that people become more rational over time.
    I totally agree with that statement. Arguably, people are becoming less rational and more foolish, as they make the same mistakes over and over again even though the historical record of man’s achievements and failures becomes easier and easier to access.
    My statement regarding people becoming “less emotional” should have been worded better. What I mean is that over a longer period, many other factors influence the decision to sell a residence (e.g., divorce, job change, need to move to a larger place, job promotion or demotion, death, etc.) that ultimately overwhelm the desire to not face the loss from selling at what is perceived to be a low price. (Note, even long timers with a lot of equity – like our friends in Forest Hill Extension who imagined last year that their house was worth $1.25M and are now renting it out because they discovered it was only worth $950K – are not immune from the reluctance to realize losses, even when the losses are only reductions from a perceived higher level of profit.)
    Every month my outstanding balance of my mortgage goes down another thousand dollars. This is a real benefit.
    For me, every month that I rent the $1M Tiburon 3/2 for $2800, I estimate that my bank account is $3K higher than it would be had I bought it, and that’s a real benefit for me. And of course I am not even counting the $100K in capital loss I estimate I would have suffered had I bought the place last July instead of renting it. Not to mention the $60K in used house salesman commission that would have to be sacrificed either, if and when the CA tax situation makes it more advantageous for me to establish residency in a no income tax state.
    There are a lot of benefits to home ownership, but there are also significant detriments and risks. Today, a person buying is literally paying to assume the risks and detriments, as the spread between purchase and equivalent rent costs demonstrate in most parts of the Bay Area.

  58. Not to mention the $60K in used house salesman commission
    These cheap shots only diminish otherwise well thought out posts. And I’m no defender of the profession, nor is this a direct criticism. Just an observation/opinion.

  59. Yeah, you’re probably right, eddy, and that’s good advice/criticism. But where’s the fun in being all well thought out and reasonable? :-0

  60. Yeah, you’re probably right, eddy, and that’s good advice/criticism. But where’s the fun in being all well thought out and reasonable?
    Probably somewhere next to the fun to be had in any other city that you do not live in, nor have any interest in ever buying into. Yeah. That city’s real estate blog. Try Houston next week or something.

  61. For me, every month that I rent the $1M Tiburon 3/2 for $2800, I estimate that my bank account is $3K higher than it would be had I bought it, and that’s a real benefit for me
    Yeah, that’s great and in your financial situation, it obviously makes no sense to buy. But it has not always been that way in the Bay Area, and in some locations arguably, the purchase decision pencils out. Maybe even in The City in places like Bayview and Excelsior.

  62. Might as well opine here on this statement:
    “There is no particular evidence that people become more rational over time.”
    I think people, overwhelmingly (and even smart people) tend to get sucked into mob psychology. I think also that a lot of stuff peddled by the investment community is rational.
    People do learn from their mistakes, but the common elements of fear and greed (plus leverage) are always there motivating decisions…and always will make people crazy and overshoot.
    I sort of feel like bubbles are usually an A + B, A = some legitimate economic expansion and B = pure hype and conjecture. The public at some point, understands A but it is very different to discern at “what point on the curve” you are with B. That can be really dangerous I guess.
    rant off

Leave a Reply

Your email address will not be published. Required fields are marked *