With around 40 units remaining in unsold inventory, yesterday the sales office at One Rincon Hill (425 First) further reduced asking prices on four of their listed units by between $70,000 (5%) and $265,000 (11%).
Another 14 units at One Rincon Hill are listed on the secondary market including the short sale of 425 First Street #904 at $449,000 (purchased for $532,500 in 2008).
The foreclosed upon #3908 is currently in contract.
∙ Listing: 425 1st Street #4703 (2/2) – $1,310,000 [MLS]
∙ Listing: 425 1st Street #5302 (3/2) – $2,100,000 [MLS]
∙ The First Listed Foreclosure At 425 First (One Rincon Hill) [SocketSite]
This building is perfect because it can fit a 42 inch round table and the sales staff is keeping property values up because they will not negotiate or drop prices….oh wait….
I know there are a lot of unsold units in this place, but I’m still amazed that so many decided to close in the first place. By the time this building was wrapped up the writing on the wall was crystal clear — even the “not in SF” shibboleth had been roundly disproven by then. It’s a nice enough building, but why not just kiss the 3% goodbye and rent if you really wanted to live there? All I can figure is they have a really, really good sales team.
I know several people who live in ORH. you can dig up my posts, but if I recall correctly
-most of them felt that ORH was going to be a super luxury building, and thus somewhat immune. It was the so-called “real SF” arguments if you remember them
-the people I know who moved in wanted to LIVE there.
-most of them had unrealistic expectations… they said “well it might fall in price for a year or two, but then we can just hold for another year or two and then sell for a profit!”
IMO at the time of ORH opening most san franciscans were still quite blind to the idea that the downturn would hit SF fairly hard along with the rest of the country.
the only people i can imagine wanting to live there at that price are people who don’t actually live there. does that make any sense?
Yao: it makes sense to a degree.
Overall, I’ve found that most people that I know still love the building, but they are angry that they paid so much.
Years ago I had conversations with some of them like “well, what if it loses 10 or 20%, would you still love the place?” and they said “yes”. I thought that was good because it meant they were buying a home and not an investment.
But now that the losses are more “real” (still not realized of course) I think it’s a bitter pill to swallow. Hard to pay an $8,000 mortgage on a unit when others pay $4000/month in rent on the same thing. Especially when your unit is losing $100,000 of value a year.
Combine that with the demographics of the building and you have a very unfortunate situation and lot of regret. Many of the owners are part time owners, accidental landlords, younger people with higher incomes but not a lot of savings, people who wanted to buy before they were “priced out forever” (trademark)
Obviously I’m sure there are sheiks and princesses and oil barons and Chinese RE magnates in the building, but I’ve never seen them. In general I’ve seen youngish people: 25-40 years old, solid but not spectacular incomes, and some of them with a sizable but not outrageous nest egg.
In other words, they can pay the mortgage but it chafes, and the loss most definitely hurts even though not yet realized.
It’s amazing how many experts that don’t own a property at One Rincon, have an opinion on how the owners at One Rincon feel.
I own a unit at One Rincon, and also a unit at the Infinity. In my experience, I do not feel the feelings as described above. I also don’t fit any of the demographics as described above. Also, I have not spent time building rail roads or doing other people’s laundry, although in my younger days, I did rock the pigtail.
I also don’t fit any of the demographics as described above
so just to be clear, none of these fit you:
-25-40 years old,
-solid but not spectacular incomes,
-sizable but not outrageous nest egg.
just wondering.
I also want to make absolutely sure you NEVER felt that ORH would be a super luxury building, and also that you NEVER felt that it would be somewhat immune to a possible downturn.
If you didn’t feel it would be a super luxury building that would be somewhat immune to a downturn then why did you buy a unit?
obviously I can pull up your posts from 2006-2007, but that seems like a tiring exercise and I already know what I will find.
pull the posts, u r incorrect on all counts.
in fact you are totally wrong.
I’m 42. I won’t comment on income or nest egg, but can tell you money is not a motivator for me.
I think it’s clear for anyone that has travelled that One Rincon would not be considered a super luxury building. Although I feel it is a nice one.
Anyone that tells you what’s going to happen 1-3 years out is just speculating. Things could go up or down. Over the long term land is a hedge against inflation. I’ve always said that. Do me a favor and pull the posts, you’ll make me look good.
Certainly I did not buy my unit to lose money, but that was not the decision maket. I always stress test investments anyways.
You will not find the post you are looking for, because it does not exist. Amazingly wrong on all counts. What’s amazing is that you think I posted those items. Pull the posts.
Or don’t and just continue to make up facts and tell everyone how I feel. You only dilute your own credibility by not backing up your statements with some evidence. By argueing “tiring exercise” you are just verifying your laziness or the fact that you are just making stuff up.
ex-sfer,
“IMO at the time of ORH opening most san franciscans were still quite blind to the idea that the downturn would hit SF fairly hard along with the rest of the country.”
i’ll call you out on that one too. anyone who was watching knew that sf re had gone up spectacularly for over 10 years before orh opened. i think people had an idea that we would at least have a pause.
also, sf has been hit far less than the rest of the country and still continues to defy the odds. imo, we have some more correction to go and , as nvjim points out, our cycles last 5-7years and this one probably will as well.
despite that, i have seen many a flipper continue to cash out even in this market. and i’ve yet to see the 40-50% correction that many have touted over and over…
in other words, despite the greatest worldwide downturn since the depression, sf re has, (on a relative to other asset classes basis)proven quite resilient.
in fact you are totally wrong. I’m 42. I won’t comment on income or nest egg, but can tell you money is not a motivator for me.
So you claim that I am “totally wrong” based on you being 2 years outside of my range… and by refusing to comment on the rest.
interesting.
=======
I don’t deny that I am lazy.
I’ll just bring up one quote
it is always possible that I misunderstood the thrust of your quotes.
Believe it or not, people are still buying real estate in San Francisco. San Francisco is a great place to live, prices have come down and there are many good deals out there. If the stuff that appears on Socketsite is news to you, then you are working with the wrong Real Estate Broker.
Posted by: Paul Hwang at December 11, 2008 3:08 PM
when someone says “there are many great deals out there” I tend not to think that it means “prices will fall hundreds of thousands of dollars”
I agree wholeheartedly with your point that in general you didn’t spam “it’s different here” like some other posters did.
I agree with you that you rarely (if ever) said what RE would do going forward. in fact you specifically stated this:
And for that reason I have never made 1-3 year predictions for real estate appreciation. If I had that ability I would not be posting on Socketsite. The only thing I do is advise on the quality of the deal relative to what’s happening in the market and in relationship to my clients goals, which may or may not be financially motivated.
so perhaps I simply misinterpreted what you meant when you talked about “great deals” and you only meant that they were “great deals” compared to other buildings that were also going to lose hundreds of thousands of dollars.
I retract that accusation.
i’ll call you out on that one too. anyone who was watching knew that sf re had gone up spectacularly for over 10 years before orh opened. i think people had an idea that we would at least have a pause
ROFL.
go read almost any thread from 2007. There was INTENSE discussion and argument between many posters as to whether or not SF would be affected.
This is why people still post jokingly about “the real SF” to this day.
@ex-sfer,
as paul noted, there were good deals out there and indeed many a flipper took advantage of them. i would argue that the sf re market is like any other in that you need to study it to know how to take advantage of it. just b/c the entire market went up for a while does not mean that one could disregard the rules and be guaranteed to win. to wit, dumb luck could turn into just dumb, whereas the saavy re player was (and still is) able to profit in any market.
that is why certain professionals on this site will argue that you cannot paint the sf re market with one brush; some buy and sell to profit, some to have a certain type of roof overhead. just b/c some paid too much for luxury condos or sfrs in bernal or even premium places in real sf does not mean that all did, or would.
anonee, tell me how I can make money buying SF real estate in this declining market. I’m pretty savvy with investments and with numbers generally. I guess one might short case-shiller futures. Or I might buy a place with an FHA loan and 3.5% down, never make a payment, and rent it out as long as I can get away with it then walk away. Any other ideas that would work in real life (i.e. not some fantasy like “buy something at a good price that won’t go down in value and will rent for more than the carrying costs”)?
@a.t.,
perhaps you have not seen the number of flips that have sold in cole valley or phgts in the last year?
here’s how it works: you buy something that needs work in a good neighbourhood, you watch your costs and design choices on the remodel and then you sell for a profit. on the multi-unit side you pick up one of the many lembi-puke offerings, do some freshening, and collect rents. my personal favorite is to approach the many folks out there whose savings are being punished and you offer them attractive rates on first deeds. this is an easy sell b/c i put alot of my own $ in first loss position as proof of good faith. of course i have alot of $ b/c i use mortgage debt to keep some powder dry and i have made lots of money doing the real estate profit and repeat game. sound too easy? well, i admit that the competition for good product is fierce b/c the many saavy folks who play this game are good at scooping the good deals (and leaving the poor product for their unsophisticated competition).
iow, buy wholesale, sell retail.
anonee, fair enough. I agree that contractors can make money in just about any market, including this one. But I’m not a contractor, so no thanks. And I’m not so sure multi-unit properties pencil out to much of a deal today unless you build in a bunch of generous assumptions about kicking out rent-controlled tenants and future rent appreciation. That all might work, or it might kick you in the head if your generous assumptions don’t pan out. I agree your two options can work, but too much downside risk in them for me (and too much work — at my hourly rate I’d need to make a whopping profit to offset the lost billable time).
a.t.,
remember that there is no free lunch. if you do not understand construction then do not go into it.
if you do not understand securities markets then do not just trust your broker to make you $.
as for the ‘generous assumptions’, well, maybe to an inexperienced onlooker they may seem such. but i have given you examples of high end sfrs (on pacific,pine,downey,waller,cole etc…)being flipped this year. and examples of multi-units being offered for 12grm and 7%cap rates are out there so no assumptions needed. as for the availability of capital from yield starved savers, well, i think you can work that out (or not) on your own skills.
remember that this is my response to the ss bears who only see destruction of capital in this market. when certain re pros post on here based on their (wait for it) ‘in-the-trenches’ knowledge they get ridiculed. you tell me who would or should know better-sideline sitting editor with bearish cheering section, or guys/gals who actually do it for profit?
anonee, I’ll accept that with a lot of hard work (both mental and physical) it is still possible to make money in RE out there for a select few individuals — albeit not without risk of substantial losses. Too bad for everyone else. However, as to your comment that “there is no free lunch” — there certainly was free lunch for just about anyone who bought anything in SF from the early ’90s through about 2003.
I do have an easy way to make money in SF real estate for the masses (in a sense). If you’re looking to buy an SFR, condo, or TIC — don’t! Wait a couple years, and the money you “make” by not losing it will greatly outperform the returns of flippers and multi-unit investors.
Why wouldn’t the sales office just significantly discount the remaining 40 units a’ la Infinity T2? Surely biting the bullet and moving these final units would be more profitable than letting them languish empty.
as paul noted, there were good deals out there
in ORH? In December 2008?
Please enlighten me as to which ones they were.
your post is not applicable at all to our topic. we are not talking about rehabbing fixer-uppers for a profit. We are talking about “good deals” in ORH. ORH was brand new. there was no need to be a contractor and go and renovate anything. IT WAS BRAND NEW.
How many units did Paul sell to clients in 2008? 20? 30? 40?
30 sales x $800K avg(?) = $24M x 2.5% = $600K in ORH paid commission to Paul
$24M x 20%(?) drop = $4.8M in lost equity for Paul’s clients
Did Paul buy his unit in 2008 when he was advising his clients to buy or after prices dropped?
Michael, you forgot to make up the following facts also:
1) 250% commission
2) Space Alien Elvis Buyers from the future went back in time to aquire all the properties in South Beach.
3) A soccor loving Octopus named Nostradamis predicted it all.
Believe it or not, people are still buying real estate in San Francisco. San Francisco is a great place to live, prices have come down and there are many good deals out there. If the stuff that appears on Socketsite is news to you, then you are working with the wrong Real Estate Broker.
Posted by: Paul Hwang at December 11, 2008 3:08 PM
I think the topic was San Francisco (Sentence 1 and sentence 2) and not One RIncon Hill
“Anyone that tells you what’s going to happen 1-3 years out is just speculating. Things could go up or down. Over the long term land is a hedge against inflation. I’ve always said that.”
Whether you realize it or not, you are taking inflation for granted. That sounds like speculation to me, when you look at what has happened in Japan over the last 25 years. They are doing everything possible to inflate the currency but they can’t make it happen. Incomes just keep dropping.
I’m taking inflation for granted? That’s speculation? Incomes have dropped in the last 25 years in Japan?
???
J,
Just trying to follow your logic: “land is a hedge against inflation.” How is that speculating that there will be inflation? That statement is saying land is going to follow inflation. I don’t understand your argument.
However, I do think there will be inflation in the next 25 years. I think everything will be more expensive 25 years from now, and I do think incomes will be higher. Guilty as charged.
Paul
Just call me the Inflation Speculator. I like it. Perfect.
Thank You J.
“How is that speculating that there will be inflation? That statement is saying land is going to follow inflation. I don’t understand your argument.”
Generally if you feel the need to have a hedge against something, you have some reasonable expectation that it will happen.
Now, Japan has been in a liquidity trap for 25+ years. The US has now entered a liquidity trap. How do you expect the US to be more effective at exiting the liquidity trap?
“Generally if you feel the need to have a hedge against something, you have some reasonable expectation that it will happen.”
True, but if you were absolutely sure it will happen you wouldn’t hedge you would just be out there naked. Your statements are a little vague. What time horizon are you suggesting? And what do you consider “reasonable” (3 standard deviations?)?
Are you a business school student? Just wondering.
In the wake of the “Keynesian revolution” in the 1930s and 1940s, various neoclassical economists sought to minimize the concept of a liquidity trap by specifying conditions in which expansive monetary policy would affect the economy even if interest rates failed to decline. Don Patinkin and Lloyd Metzler specified the existence of a “Pigou effect,” named for English economist Arthur Cecil Pigou, in which the stock of real money balances is an element of the aggregate demand function for goods, so that the money stock would directly affect the “IS” curve in an ISLM analysis, and monetary policy would thus be able to stimulate the economy even under the existence of a liquidity trap. While much of the economics profession had serious problems with the existence or significance of this Pigou Effect, by the 1960s academic economists gave little credence to the concept of a liquidity trap.
The neoclassical economists’ assertion was that, even in a liquidity trap, expansive monetary policy could still stimulate the economy via the direct effects of increased money stocks on aggregate demand. This was essentially the hope of both the Bank of Japan in the 1990s, when it embarked upon quantitative easing and of the central banks of the United States and Europe in 2008–2009, with their foray into quantitative easing. These policy initiatives attempted to stimulate the economy through methods other than the reduction of short-term interest rates.
However, the concept returned to prominence in the 1990s when the Japanese economy fell into a period of prolonged stagnation despite the presence of near-zero interest rates.[1] While the liquidity trap as formulated by Keynes refers to the existence of an horizontal demand curve for money at some positive level of interest rates, the liquidity trap invoked in the 1990s referred merely to the presence of zero interest rates (ZIRP), the assertion being that since interest rates could not fall below zero, monetary policy would prove to be impotent in those conditions, just as it was asserted to be in a proper exposition of a liquidity trap.
While this later conception differed from that asserted by Keynes, both views have in common first the assertion that monetary policy affects the economy only via interest rates, and second the conclusion that monetary policy cannot stimulate an economy in a liquidity trap.
Much the same furor has emerged in the United States and Europe in 2008–2010, as short-term policy rates for the various central banks have moved close to zero.
“Wikipedia” Paul
I am a tech guy.
I am not doing statistical analysis here, so standard deviations do not apply. What I am saying is that our current situation mirrors the beginning of the period in Japan that was followed by zero inflation or deflation.
In reference to: “True, but if you were absolutely sure it will happen you wouldn’t hedge you would just be out there naked.”
I think it is more likely that people use inflation as a post-facto rational for getting into real estate.
If you merely want to hedge against inflation, there are much more effective ways to do so:
http://finance.yahoo.com/q?s=TIP
^ After reading my posts, it should be obvious that I’m not endorsing that right now. /disclaimer
That may be a better hedge for you, but it may not be a better hedge for other people.
If you used this http://finance.yahoo.com/q?s=TIP as a hedge you would continue to pay rent. For an $800k property it is probably around $3800-$4000 per month.
Other benfits:
1) You have some place to live.
2) You can be leveraged.
3) You can be more efficient in your life:
a) Able to concnetrate on your career more, (not having transitory feeling / monkey on your back).
b) Renters many times waste time looking at properties on the internet and posting on real estate blogs. After you buy, you usually don’t feel as compelled to waste time doing this. Look at the psots in this thread. All nonowners at One Rincon Hill.
4) Certain tax benefits may apply.
5) You may put in yourself in the environement to have an opporutnity (i.e. how many people from the dorms do you know that got married? any? how many relationships and lives have been determined by demographics and geography).
In general, I believe most people only look at the direct benefit of price appreciation, without looking at the other possible financial and personal benefits owning a home has to offer.
Paul
Whether you own or rent, has nothing to do with hedging inflation. Unless you are advocating a 100% allocation in real estate, which leaves nothing for other investments.
1. If there is inflation, TIP will go up, and cover a large part of your rent/mortgage. If you own and there is deflation, you will owe more than your house is worth, and your income is likely to go down. Double whammy! Rent would go down.
2. You can be leveraged for any asset. And leverage amplifies the pain in times of deflation.
3. Owning is more likely to hurt your career than anything. It makes it harder to move for a new job opportunity. Especially if you can’t break even renting the property out.
4. Taxes are lower on capital gains than income…
5. I would not want any “opportunities” from a woman that cares about which property I do/don’t own. But that is besides the point. You don’t have to live in a dorm just because you don’t buy a unit at One Rincon(or others) right before it drops in value by $100,000s.
I’m not at all against ownership(I do own). But most of these ownership benefits can(and should) be quantified in terms of value. At this point, buying in SF, represents a poor value proposition.
Everything has a price.
The listing for the proposed short sale of 425 First Street #904 at $449,000 has been withdrawn from the MLS without a reported sale. Once again, purchased for $532,500 in 2008.
The sales office listing for 425 1st Street #4703 has been withdrawn from the MLS after 119 days on the market without a reported sale. Last asking $1,310,000.
904 didn’t sell, but 3004, a different configuration, just dropped their price from 1.799 to 1.699 after 4 months with no sale at that price, and about 6 months on the market.
Purchased for $2.019M in 2008. Beautiful views and 1947 square feet (3/3) and they are looking at $400K in losses for a two year hold.
#904 back on for $439K, $10K off last year’s price.
The NOD on #904 was canceled on 12/28/10. Hope springs eternal. Emphasis on Spring.