Bank Owned And Back On The Market On The North Slope Of Bernal

This is what was the matter with the real estate bubble….what a P.O.S.
I know, that was an illuminating comment…

I was going to lol that some SF chump bought that for $841K in an obvious bubble (2005), but then I had to check the impulse until I consulted propert shark.
Yep, 100% no money down. And it might have been refinanced (cash out) in 2006 (I can’t tell – the records are not complete on PS). So, no real risk to the “owner”, and the taxpayer is ultimately there to mop up the fallout.
Not everyone put down big downpayments in SF apparently, at least not the smart ones.

Let me think about that, steve, and post something later. I’m actually going to buy a SFR myself (out of state) later this year, but probably only in the $500-700K range, so I should give a little thought to how a portfolio should be rejiggered in light of a purchase of residential real estate that hasn’t fully unravelled its nominal bubble price yet. I would stay away, though, from any of the “short” funds (like TBT) and especially the “double inverse” funds (like SFK, or SRS) for structural positions – they’re really just appropriate for short term strategies imo.

much appreciated, LMRiM!

Per curmudgeon’s point, this does fit the chain and illustrate how the bubble enveloped the whole market. A modest place in the Bayview sells for $700k so a dump in Bernal must be worth $841k, meaning a small condo in D5 must be worth $900k, meaning a decent condo in D7 must be worth $1.3M, meaning a nice but unspectacular 3/2 SFR in the Castro must be worth $1.8M, and so on.
The deflation may not hit everywhere at once, but it hits everywhere.
Notice they priced this place right about at the FHA w/ 3% down limit. Clever!

Trip, the FHA limit for SF County/San Mateo/Santa Clara is $729,750. A sale price of $768k or so is optimal taking into account the $18k in free money from CA and the USG. Everything under that will sell pretty quick relative to anything requiring a jumbo.

Here is the body count for Bernal Heights North: 12 foreclosures (NODs, NOTS, bank owned) to 22 resales. Bernal South is getting closer to being kicked out of Real SF (whatever that might mean these days); 32 foreclosures to 37 resales.

I think we need an illustration of how the housing pyramid was built.
And the foundation is crumbling…

I think we need an illustration of how the housing pyramid was built.
LOL, but no we really don’t need an illustration of that game of “Trade Up.” Trip said this is to that as this is to that and so on. But the lending game changed at a certain point, resetting everything. Creating a new local game. That was after the so called first domino had already fallen, Bayview. So now we have what should be the first domino of the new game being propped up by FHA.

I’m always incredulous that traders/investors don’t understand the levered (2x/3x /ultrashort etc) etf products.
I’m glad Debtpocalypse posted this article, but I had hoped (incorrectly perhaps) that this was already common knowledge…

600k for that shack? We must all be on drugs!!
This is bernal, not pacific heights. god the arrogance of these people

I recommend people stop balljacking with trying to hedge a RE purchase and focus on getting a good deal instead. Of course, if you feel the market still has a ways down, then why buy at all?

It amazes me that people still purchase these 100 year old shacks on Bernal. I guess it is all in the name of getting into the SF property game. But, you will still have to spend hundreds of thousands to make these worth living in. Yes, you have nice weather….but at the end of the day you are surrounded by the hood and highways. No thanks kids. That’s my never humble opinion.

I think we need an illustration of how the housing pyramid was built.
Figure 1 in the most recent San Francisco Fed Economic Letter should do the trick:
http://www.frbsf.org/publications/economics/letter/2009/el2009-16.pdf
(BTW, you can subscribe to all the fed economic letters and research reports. They will mail them to you for free.)

Some of you folks are pretty ignorant about bernal heights. 100 yo shacks? Many bldgs in SF are that age. And surrounded by freeways? That location is walking distance to the mish, noe and Bart. And just lesbians? No, heteros and families too. It would be helpful if people tried to be a tad objective about neighborhoods, even if they are not your cup of tea.
Robert- ive noticed you’re really into all this fed data. How is it’s accuracy? Have you been able to cross check it with any other sources? (you know…can you trust the gov)

~Miles
But there are 2-units with just one garage or no garage at all.

“100 yo shacks? Many bldgs in SF are that age.”
Yes a number of buildings in SF are that age, but most Bernal houses are shacks shoehorned in between two other shacks.
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“And surrounded by freeways?”
The east and south sides of Bernal are pretty damn close to the freeway. Just take a quick peek up next time you’re on 101 or 280 in the general vicinity.
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“That location is walking distance to the mish, noe and Bart.”
That location is “walking distance”, but I would bet that most readers here would be a tad fearful making that walk at night by themselves. And you fail to mention that the rest of Bernal is just about the worst place to live in SF if one relies on public transport to get around town. Either multiple transfers, or scale a really steep hill, or both to get anywhere someone who can afford (or not quite afford) several hundred thou on a house might want to go in the City.
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You chide someone about being objective yet you fail to address the issue of being surrounded by “the hood”. This location is pretty damn close to the projects. To be fair, better to be close to these projects than “da Black Hole” on the other side of Bernal. To be fairer, better not to be close to either of them.
When the dotcommers starting moving into Bernal a decade ago, it was said that the lesbians were being priced out of Bernal and were moving across the bay to “gentrify” Alameda. In the end, I don’t know how much of an exodus actually occurred. In any case, one must acknowledge the role lesbians assumed in kick-starting the gentrification of Noe in the 80s and, after being priced out of Noe, Bernal in the 90s.
All the perceived “benefits” of living in Bernal (weather, views, freeway access, sense of neighborhood, diversity) predated the dotcom + credit bubbles. In spite of all these positives, it was never a desirable place to live for white professionals. Thus, it will be interesting to see what happens to the neighborhood when the (mostly white) professionals who bought in the last several years go underwater.
The “smart” traders were the aging working class folk who sold their houses for way more than they would ever have dreamed possible to professionals who, just several years prior, never would have lived in Bernal in their worst nightmare.

nnona,
You speak SOME truth, but spread a lot of misinformation as well.
Let me speak from personal experience. I lived on the north slope of Bernal in the early 90’s, well before the dot com boom. Yes, it was full of lesbians, and just as full of young professionals of all sexualities (mostly white). The neighborhood has been gentrifying for a very long time. To say it’s not a “desirable” spot for white professionals is just wrong….a lot of folks have located there, and I would guess the reasons include relative affordability, access to freeways south to SV, and a unique neighborhood vibe.
When I was living there, I never felt that the neighborhood was dangerous. Since I’ve lived there it’s gentrified tremendously, and Cortland Avenue took off as a great neighborhood commercial area.
That said, you did hit the nail for me regarding walkability and connections. I walked every day to BART and 24th, and the walk home straight up the hill was a major pain. Also often saw gang bangers hanging out, but they weren’t interested in me…I expect it’s much the same now along those rather empty blocks of Mission, but there is more housing now which helps.
And Cortland was also a hike. Basically anything was a hike when you live on a cliff. I felt very separated from the rest of the City, and anything I wanted to do was a car trip or a long bus ride across town. In that regard, Bernal feels like an island, and that’s what I didn’t like about it.
Finally, this particular overpriced POS shack is actually in a more walkable environment that I knew, further up the hill, close by Precita Park and with good access to BART. But it is even further from Cortland and the “nice” commercial areas.

45yo hipster wrote:
> I recommend people stop balljacking with trying to
> hedge a RE purchase and focus on getting a good deal
> instead. Of course, if you feel the market still has a
> ways down, then why buy at all?
I saw a lot of people lose money in the mid 90’s and there is a lot more pain ahead for real estate owners in the next few years. Smart people always hedge since you never know what is going to happen (make sure to always buy as a LLC and get a non recourse loan)…

“In spite of all these positives, it was never a desirable place to live for white professionals.”
I’ve lived here for almost 15 years, and love it here. It is safe (I’ve experienced no crime in all of these years, unlike other places I’ve lived in SF), sunny, quiet, convenient, has a sense of community, is a ten minute walk to BART from my house (a little longer walking up hill coming home), great views, etc, etc.
Best of all, “nnona” types think it’s scary, ans stay away.

LRMiM, since you are around, let’s say, for lifestyle reasons, you were likely to purchase a SF house sometime in the next 6 months. as an experienced trader, how would you hedge it for the next several years?
Steve, I’ve been thinking about this for a while, and sad to say I don’t have any great strategies or insights into “hedging” here, but perhaps a few thoughts might help.
First, there’s no way to hedge nicely an idiosyncratic asset like a house, and so you are never going to achieve a good hedge using a diversified hedge instrument. Consider, for instance, the historical difficulty one would have encountered by trying to hedge a randomly selected house in SF with the Case Shiller index.
Since your house will be by definition a “non hedge-able leveraged asset”, the key to reducing risk is to “scale” the exposure to fit into your overall life/goals/investment portfolio. That’s a fancy way of saying to buy within your means. To assess the outer bounds of risk tolerance under reasonably foreseeable scenarios, I’d want to be sure I could withstand a 20-30% decline in price from here, and the idea that it may stay down there for 5-10 years. Psychologically, I’d be sure I’d be comfortable living in the place for a long time (in excess of 7 years and preferably more than 10) or accept the possibility that you will realize a large capital loss.
Once you’re past that exercise, you identify a target price range within those parameters, and then I’d do what 45YOH suggests – concentrate on getting the best deal possible. This is just a variation on what hedge funds do, for instance, when trying to get the best “execution” for a trade.
That gets you into the best fit asset at the best fit price, and then you face the financing decision, in view of the prospective risks. To my mind, real housing prices in SF are going to decline with absolute certainty, especially at that price range ($1.5Mish). That means that what you really want to “own” here is the obligation to pay, not the asset. So, I know that downpayment requirements are not what they used to be (meaning they exist now!), I would look into the highest leverage possible, and perhaps be willing to value the low downpayment higher than a higher interest rate in the tradeoff between downpayment versus rate. Same logic for i/o – if interest only balloons are available, that might be preferable to straight amortizing debt. Only you can answer what the tradeoffs should be for your particular income and tax situation. But remember that the nonrecourse nature of purchase money loans can be a real godsend in the event of a real outlier in the distribution of possible future outcomes.
Now that you’ve got into the asset at the best risk/reward versus lifestyle preference that you can attain, you can think about how the asset fits into the rest of the portfolio. I wouldn’t let the housing purchase completely drive your investment preferences in the rest of the portfolio (if it does, then you’ve bought too much house), but it makes sense to adjust your preferences elsewhere based on the new asset.
It seems to me that the biggest risk to nominal housing prices in USD is a continued deflation of credit markets, which I think is pretty likely. Therefore, you probably want to somewhat overweight sovereign debt (treasuries, and I’d also add some foreign exposure, particularly Asia) from what your preference otherwise would be. And be a little lighter in US equities than you otherwise would be. The next largest risk would be a dramatic increase in price inflation and interest rates. This risk, however, is more of a short- to medium-term risk, and having a fixed rate debt and a willingness to retain the asset (live in the house) for a long time “hedges” this risk. Over time, nominal prices of real estate would adjust with price inflation, but it may take a long time, and they would still fall in real terms. That’s why you want to own the obligation to pay rather than the asset and so leverage should be maximized.
I hope all that rambling helps. On balance, I’d be more concerned with adjusting exposure in the rest of my portfolio to account for the deflationary risk, than the inflationary one.

If you look at what I wrote, I said that gentrification in Bernal was really kick started in the 1990s. curmudgeon and Dan’s time frame for when they moved in was …….the 1990s. Before the 90s, the neighborhood had a sprinkling of white professionals (and political activist types) mixed in with a heavily and fairly diverse working class population.
Let me qualify what I wrote concerning “white professionals”. I should have been more specific. The recent dotcom + credit bubbles forced many (mostly white) professionals who otherwise would not have considered a neighborhood like Bernal (preferring the northern neighborhoods or Noe, etc..)to consider it. It was this rather large wave of “white professionals” I was referring to.
You all are absolutely correct that Bernal had (mostly white) professionals who desired living there previous to the dotcom boom (but not previous to say 1990 (give or take a few years)). I see that I was not clear in delineating this in my post above. My bad.
Under the assumption that a good chunk of this more recent wave find themselves “homeless” in the near future, will this group stick around or gravitate to the (by then cheaper) neighborhoods they would have preferred? What about the chunk of this group whose jobs are based in an uncertain Valley environment? What about the chunk who have started families and realize that the pre90s working class Bernal tendency to squeeze multiple children into a bedroom is not for them?
Of course, if you are a “mostly white” professional who bought or started to rent in the 90s, then the price/value calculations are much different than the crowd who bought in the last several years.
When I say it will be interesting to see what happens to this neighborhood, I think of it in the context of will Bernal continue to be considered a “hot” neighborhood for the mainstream professional class or will it revert to being more like Bernal in the 1990s (quirky, with its charms, affordable but not a “trendy” neighborhood for the “mostly white” upper-middle class)? (Back to pre-1990s heavy working class seems out of the question for the near future.)

I am so excited prices in Bernal are finally coming down! I am looking forward to trading my 1600 sqft prime marina pad with parking for a falling down 2/1 in a neighborhood that looks like it hasn’t been powerwashed since the early 70s!
The best part is that it will only cost around double on a monthly basis, plus a teensy $150k (ATAX) in downpayment & closing costs. Exposing myself to the risk of further value declines is just gravy.
Where do I sign up?

But, but, but SF Banker…….what about “pride of ownership”?

RE: ANON
Regarding “the $18k in free money from CA and the USG”, actually the $10k from CA is only good towards BRAND NEW buildings. It does not apply to homes resold.