Eight below market rate (BMR) condos on Ora Way are on the market up in Diamond Heights. Applicants can have household incomes of up to 120% of the Area Median Income and applications are “due on a rolling basis” with a two-bedroom for $350,000.
The rather unusual Mayor’s Office note on four of the Ora Way units that caught our eye: “REDUCED PRICE.”
In addition to the eight (8) resales up in Diamond Heights, sixteen (16) other BMR resales are accepting applications on a rolling basis, upwards of twenty (20) new development units are either currently either accepting applications on a rolling basis or for a lottery, and thirty-two (32) new BMR’s are “upcoming.”
∙ Listing: 85 Ora Way #E302 (2/1) 913 sqft – $350,000 (BMR) [85oraway.com]
∙ Mayor’s Office Of Housing: Current Below Market Rate Listings [SFGov]
Not surprising that there are a lot of BMR resales on the market. Pricing on most BMR resales are calculated based on change to the Consumer Price Index, so prices on these properties have increased despite the slumping market.
Many of these sellers are probably hoping to cash out and either rent or use the profit for a down on a market rate unit or REO. Good move if you ask me, but whether they can sell is a big question mark. In addition to the income limits, a prospective buyer of a BMR property must also satisfy an asset test, which makes securing a bank loan very difficult.
$350k plus $455 HOA dues per month just still doesn’t seem that affordable to me.
Based on my recent loan refi, you could borrow $350k on a 5/1IO ARM and pay $1300/mo in interest costs. Add to that $300/mo in taxes and $455/mo in HOAs and that 2BR unit will cost you $2055/mo to own. Not really that expensive considering the location and all.
I’m too risk-adverse to get a 5/1IO ARM, so that math doesn’t fit me. Also, the BMR program wouldn’t allow it. “BMR buyers must use 30- or 40-year, fully amortizing, fully documented, fixed rate loans.”
@Jane The income cutoff for these units is around 90k (83k for a 2 person HH and 93k for a 3 person HH). So that would mean a price to income ratio of around 3.9x for a likely buyer.
Sounds pretty affordable by SF standards. The raw price-to-income ratio for SF approaches 10x, and even if you assume that houses are only purchased by HHs that are in the top half of the income distribution, it’s still 5-6x. Fortunately we have been assured by bulls that this is not a problem for real estate values going forward…it’s just the “SF premium” (above and beyond the fact that median HH income is already 32% higher in SF than the rest of the state and the fact that SF HHs already “pay” a hefty premium by having much smaller homes than other people in the state).
I’m sure you could refi out of the 30-year fixed into a cheaper loan after closing, if you wanted to. Odds are no one checks up on this stuff after the unit is purchased.
The mayor’s office really needs to check the listings of other condos for sale. These prices hardly seem BMR to me.
I appreciate that the purchase price to income ratio isn’t insane, but when you add those HOA dues to it, it’s not very affordable IMO. If the HOA dues stayed flat over 30 years they would total 47% over the purchase price (and would more than likely rise over time).
What is “a rolling basis?”
@Jane. I’m not necessarily claiming that it makes sense to buy this. Only pointing put that it makes much more sense than buying a non-BMR property in SF right now. And yet some people (suckers?) continue to do that…
@Guest. I dunno, $380/sf sounds below mkt to me for any good neighborhood in SF right now. Maybe not below where the mkt will be next year, but below where it is right now. Though if these places don’t sell, then I guess the market is dropping even faster than I thought!
If the HOA dues stayed flat over 30 years they would total 47% over the purchase price (and would more than likely rise over time).
1-2% is fairly common for maintenance, so 1.5%x30years = 45% — about what you would expect for maintenance costs. Of course, they will increase with inflation and the age of the structure.
Kathleen – for new BMR units, there’s a time period to submit applications, followed by a lottery. For resale BMR units, the first acceptable application submitted gets the unit.
btw, one of those units on Ora Way has been on the market for over a year.
E302 was just reduced to $299,000 (or less — “make an offer”). Now we’re getting close to making sense, although I still think those in the BMR income range would be better off renting in SF or buying outside of the city, especially if you have school-age kids.