Perhaps it was our “plugged-in” reader’s rundown of pricing and availability (as of about two weeks ago) for almost fifty of The Infinity’s corner condos that caught our attention.
Then again, perhaps it was the reader’s suggestion that the much ballyhooed “price increases” that occurred last Monday (3/26/07) were not across the board, but rather “1% on a few one bedrooms and 2% on a few 2 bedrooms.” Unofficially of course…
The Infinity: Pent-up Demand (For Discussion) [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by SF_Res

    Maybe the Infinity developer knows something that economists and/or even lay people don’t know because generally speaking, when a product is not selling particularly well or particularly fast, the seller generally does not decided that it is in position to raise prices.
    However, if the facts are the the price increase is due to the fact that the units are selling out faster than expected, then that might explain thing. But have yet to see or hear about any data that would suggest the Infinity has met with such success on the selling front.

  2. Posted by Michael

    “price increases … not across the board, but rather 1% on a few one bedrooms and 2% on a few 2 bedrooms.”
    Sound like the “increases” were a marketing gimmick intended to create a false sense of urgency (“we better buy before prices go up!”) and the false perception of appreciation (“look prices are going up!”). Not because the units are selling faster than expected or the market is necessarily up.

  3. Posted by jj

    Probably just loading up the sticker price so they can cover some of the 2% and 4% decreases when they are needed.

  4. Posted by Random

    I was actually looking at the 32nd floor unit on the South Corner until they increased the price. And I was a little suspicious when the unit sold a few days after the price increase. And I agree with the SF_Res that it does seem like a marketing gimmick.

  5. Posted by Joey

    Strange that the corner units facing the 2nd tower/courtyard generally cost more than the south corner units(which has great south bay views). I would think any units directly facing another building would be the cheapest.
    Anyhow, all sales teams have marketing gimmicks. And judging by what’s available in the corner units, the price increase might be justified.
    Out of approx. 140 corner units, seems they only have 24 units still available. Not bad if you ask me.
    Must be the midrises where they have the most availability…

  6. Posted by TOm

    On one hand I do agree that this seams more like a marketing ploy than a legit increase. On the other hand, I was there two weekends ago and the place was packed with potential buyers with lots of energy and excitement. Maybe with 1Rincon almost sold out, the one remaining new development tower is really heating up? I really don’t know.
    I do know that they have finished the round portion at the top of The Infinity and it looks great, I take the N line by every day and it has a great look to it.

  7. Posted by Tipster

    Ha ha, I love that term “almost sold out”. Not a single unit in either development has been “sold”. In both developments, only “options to buy” have been granted to buy at a future time. Anyone can walk and forfeit 3%. Big deal.
    It remains to be seen how many of these people at either project will qualify for financing when the time comes to actually buy, now that the rules have changed on how easy it is to get financing and now that the costs have changed. Will 20% not qualify or refuse to qualify given the higher costs of doing so? Will another 20% get spooked when they find out that 20% are being given back for lack of financing, the spooked second 20% will walk? Will another lower percentage find that their circumstances have changed, divorce, job transfer, they bought during a market euphoria and the market will have changed enough when the time comes, or whatever, and won’t go through with the purchase?
    How many people here have said that they bought a unit at each: one to live in and another as an investor: will it be as easy (and cheap) to get investor financing as they thought it would when the time comes?
    I think the term “almost sold out” is misleading given what is happening in the marketplace, with more news every day. I think the developers understand this very clearly.

  8. Posted by Tom

    “Anyone can walk and forfeit 3%. Big deal.”
    I’m not sure what it is at 1Rincon, but most of the units at The Infinity are 5%, and that is a lot of money. Note that although many people think the limit they can actually keep is 3%, those people are wrong.
    I understand that these people can choose to walk away, but I don’t know many people that would be spooked out of $50k or more.
    Wolf

  9. Posted by anon

    Tipster,
    The plain fact is very few of these buyers will fail to close on their units. As w/ Infinity, Rincon, and most other well run outfits, most of the buyers are sophisticated and know exactly what they are buying and what the risks are. If you compare to many other similar projects in the Bay area and elsewhere, there is usually very low fallout at closing time. In addition, most buyers at infinity and1rincon will have a good equity position already since pricing has increased from the initial releases.
    The whole subprime/qualifying thing you refer to also does not affect these buyers. Without going into detail, most of these buyers have substantial down payments and do not have issues qualifying for the loans they will need.
    You are correct that none are officially sold until they close. They are pending sales and as w/ the real estate market in general, some pending sales fall out for various reasons, most close.
    If there is some unforseen dramatic drop in SF re prices, then you will be correct and many/all will walk away. (as would any buyer of any property if values suddenly tanked) I think this is very unlikely and I don’t forsee doom and gloom in Sf.
    I’m sure some of the price increase here may be marketing related, but the market is there for highrise living at this and surrounding locations and I know for a fact that prices have been increased significantly since the opening of the sales office at Infinity, and probably even more at 1rincon.

  10. Posted by tipster

    As w/ Infinity, Rincon, and most other well run outfits, most of the buyers are sophisticated and know exactly what they are buying and what the risks are. Ha ha! Good one. Was there a test? This might have been a good test: “What floor is your unit on?” Ha ha. Wonder how many buyers could pass that one! The fact is, the sales offices took $$ from who ever gave it, you didn’t have to demonstrate any degree of sophistication. All it took was $30K. How many day traders lost that or more in the dot com bust? Just because they had $30K didn’t make them any more or less “sophisticated”. And it didn’t stop the smarter of them from running for the hills when things started looking sour.
    If you compare to many other similar projects in the Bay area and elsewhere, there is usually very low fallout at closing time. No doubt, but there hasn’t been several major projects where people signed on in a time of free and easy money, but then had to pony up when the spigots were much more firmly closed. I’m sure 80% will be able to get their loans funded, but it’s the other 20% that can start the ball rolling. It’s one thing to come up with 30K. But when you need 10% down or maybe by then 20% down, coming up with $100K or $200K is a whole different ball game. Will 80% be able to do it? I’m sure they will. Could 20% fall out? It’s a possibility.
    In addition, most buyers at infinity and 1rincon will have a good equity position already since pricing has increased from the initial releases. Maybe, but when the sales office has to play games like it looks like they are starting to play, I think there is a chink in the armor of “the sales office price raises mean I have equity”. 1%? You gotta be kidding. When they start with that kind of nonsense, it tells me they may be grasping at straws…

  11. Posted by Uppercut

    It’s true, prices have gone up at The Infinity. To deny this fact, is deny the fact that housing has heated up drastically these past couple of months.

  12. Posted by Anon

    Heated up in the past couple of months? Maybe you are reading the NYTimes a bit too much (Manhattan/Brooklyn have been noticeably spiking in the 1st quarter – along with steep increases in their rental market over the last 18 months). Most indicators around here show a continuation of a pretty flat market – not tanking, but not really heating up to any meaningful degree either. Sales volume is the best indicator of a market generally and it is well below historical averages and has not seen the typical spring increase in activity yet. Sure a property here and there is going to have a bidding war and go over asking – for each one of those, there is a property that is sitting on the market.

  13. Posted by anonanmouse

    Tipster, will you be my Realtor?

  14. Posted by anon

    “But when you need 10% down or maybe by then 20% down, coming up with $100K or $200K is a whole different ball game.”
    We are talking about $1+ Million condos, right? $200K is whole different ball game? This is getting absurd. If you don’t have $200K in the bank, what the hell are you doing in this market? Can’t wait to see events unfold……

  15. Posted by Sean

    “The fact is, the sales offices took $$ from who ever gave it, you didn’t have to demonstrate any degree of sophistication. All it took was $30K.”
    Tipster, you are actually quite wrong as usual. I am a very qualified buyer with over 6MM in owned property assets. I’m putting 400k down and trust me, they just didn’t accept my 50k just like that.
    Actually, I was in Hawaii when I got the call from my realtor that a good unit became available. I of course said I will fedex the check tomorrow. Wasn’t good enough, they made me talk to the bank to get prequalified first. Well, they actually said they would hold my check for 24 hours while they waited word from the bank.
    You talk out of your arse.

  16. Posted by Salarywoman

    Sean,
    What do you consider a good unit?

  17. Posted by tipster

    they made me talk to the bank to get prequalified first
    Did you say Pre- qualified?!?! Not even pre approved, just pre- qualified!!!!
    Ha ha, stop it, you’re killing me, this is so funny! In case you haven’t heard, a buyer’s realtor won’t even blow his nose on a pre-qual letter these days, those things were worthless!
    Try to buy a property with one of those, and the seller will laugh harder than we all are laughing right now: “Hi I’d like to buy your property: I’ve got 6MM in assets, but even better, I’ve got a pre qual letter!”
    Yeah, they really screened those buyers well! You got me: you win! HA ha!

  18. Posted by InfinityBuyer

    Tipster, you sound so disgruntled…
    I bought in the early weeks at Infinity and now they are easily selling units several floors below mine at over 100k what I reserved mine at.
    So unless the market really crashes I’m sitting pretty and so are a lot of folks that got in early at Infinity and 1Rincon.
    So believe it or not, some of us really did get a fair deal and will not back out and actually live there as our HOME.

  19. Posted by tipster

    I bought in the early weeks at Infinity and now they are easily selling units several floors below mine at over 100k what I reserved mine at.
    Selling? You mean offering.
    Imagine you are the developer. You optioned all but one unit at $1000 psf, but the market price has dropped to $800 psf. Do you a) drop the price on that ONE unit, thereby admitting that prices have dropped and causing all of the option holders to walk, forcing you to resell their units at $800psf? Or do you b) price it nice and high, not sell it, and keep the option holders happy so they’ll buy when the time comes? Then, once they have bought, you can drop the price to 800. And who knows, it might still sell at $1000: you don’t have that many to sell, and people do overpay.
    If you are a smart businessperson, you’ll choose b.
    Call me when you and all the other option holders that finally purchased are locked into a contract and then, and only then, will you know what the actual market price really is. Every other developer in town is dropping and only the places with a high amount of option holders are raising. Uh huh. Real believable.
    This isn’t a market: it’s theater and you are the patron. And I’m not disgruntled, I think it’s hilarious. I hope your place is worth $1500psf when you sell. Really, it doesn’t impact me at all.

  20. Posted by Anonymous

    tipster: thank you for bringing some reality back into this discussion. As you said, hilarious to watch.

  21. Posted by Buyer

    I think the doomsday scenario is laughable. Yes, if the market crashes more this year than it has ever fallen in a single year then people will be running from their $50k plus (5%) deposits. But I don’t think these mortgage issues are going to cause people to bail out.
    If you put down $50k on a place and have trouble getting a loan your don’t have $50k to walk away from. You will make it work by trying many lenders, paying a higher interest rate, getting a second job, etc. Maybe afew people can’t get the loan, but those will quickly be replaced by other buyers.

  22. Posted by InfinityBuyer

    Selling? You mean offering.
    No I meant “under contract”. Since I went into “contract” last summer, the same units on lower floors are been going “under contract” at $100k-$250k over what I went under contract at. So even if the developer lowers prices, a lot of people will have a buffer to protect the value of their property.
    Call me when you and all the other option holders that finally purchased are locked into a contract and then, and only then, will you know what the actual market price really is. Every other developer in town is dropping and only the places with a high amount of option holders are raising. Uh huh. Real believable.
    Ummm Tipster, you must be mistaken to think it’s only a reservation at Infinity. In fact Infinity buyers are locked into a *hard contract*. So do we now know what the actual market price really is??
    You doomdays scenarios so far holds very little water. Name a development in SF where they had 20%+ drop out rate on hard contracts with 5% nonrefundable deposits?
    Name a place that had to drop prices 20-20% on 20% of their inventory? I know some developments are dropping prices or offering incentives, but I don’t think it equals a 20% drop in price.

  23. Posted by tipster

    If you put down $50k on a place and have trouble getting a loan your don’t have $50k to walk away from. You will make it work by trying many lenders, paying a higher interest rate, getting a second job, etc. Maybe afew people can’t get the loan, but those will quickly be replaced by other buyers.
    Hi ha! Good one. That’s what the investment companies told the investors about every single mortgage holder for all those other (non-infinity) homes that are now in foreclosure. How’d that work out for them?
    Infinity buyers are locked into a *hard contract Ha ha!. Hard contract? When the so called buyers cough up the other 95%, then we’ll talk about just how locked in they are. Until then – not.
    20% of the buyers not qualifying is not a doomsday scenario by any stroke of the imagination. I think its is a best estimate scenario. 80-90% would be a doomsday scenario. And we’ve never had a situation where people priced their units when my dog could have gotten a mortgage, but had to cough up the cash when mortgages are much tougher to get.
    You priced your unit in Euphoria times and you’ll have to come up with the cash in what may be recession times. Could prices fall by 20% between those two times? Easily: maybe more.
    The speculative value of homes (the difference over the net present value of the rental value of the home) could easily fall by 50% (the speculative difference, not the total price), and that could easily hit 20% of the total. The speculative portion of homes has fallen that much in the past, but the speculative value has never been such a high proportion of the total value, so the drops were relatively minor – 10% or so. This time, the same percentage drop in the speculative value will produce much larger drops in the total value because the speculative value has gotten so far out of hand.

  24. Posted by anon

    “Infinity buyers are locked into a *hard contract Ha ha!. Hard contract? When the so called buyers cough up the other 95%, then we’ll talk about just how locked in they are. Until then – not.”
    When buyers cough up another 95%, isn’t that called a PURCHASE?? And while we’re on the subject tipster, how do you define a contract?

  25. Posted by Sean

    Looks like Tipster has spent a better part of his day defending his [Removed by Editor] logic.
    “Did you say Pre- qualified?!?! Not even pre approved, just pre- qualified!!!!”
    Before you run off with your victory, I meant to say pre-approved. My mistake but you sure ran with it. You say it’s hilarious and you’re not disgruntled. Do you still think it’s hilarious that you actually spent time in your day to respond to my typo?
    Why so mad?

  26. Posted by anonymous

    Ok, here’s what’s going on.
    There’s a lot of bitter (in some ways rightfully so) people who cannot afford to buy any real estate in SF, let alone 1 million dollar condos. Middle class people can barely afford to live in this city and yet all of this high-rise building is going on and 95 percent of it is for the super-wealthy, many of whom are buying second or third homes. Many will use these condos for a few weekends a year. There’s very little BMR and in order to obtain it you have to enter a lottery where your chances are very slim and once you own it, it basically never appreciates in value.

  27. Posted by Nony

    Thanks to all for a very entertaining lunchtime read. Why does everyone think tipster is disgruntled and/or mad? I just don’t see it; what is wrong with hearing both sides?
    There was a good point raised about the future availability of financing and it seems to have been glossed over. 20% may be high, who knows, but there is bound to be some fallout; does no one else here acknowledge that this could have some affect on prices?

  28. Posted by Michael

    There’s a lot of bitter (in some ways rightfully so) people who cannot afford to buy any real estate in SF, let alone 1 million dollar condos.
    Priceless. That’s almost as astute as writing, “the reason some analysts think Google could possibly drop in value is because they’re bitter they missed out on the IPO”. Nope, it has nothing to do with an undiversified revenue base, a growing base of non-performing investments and slowing growth, it must just be that the analysts are bitter!

  29. Posted by tipster

    Ha ha. Yup, I must be BMR. You’re either a cheerleader or you are BMR! Sorry to disappoint: just the interest on my cash is many multiples of the BMR limits. I AM bitter I don’t qualify under that program!!
    Your personal attacks make you look kind of desperate, though. Thanks for sharing!
    As for contracts, I do understand that you have one. I also understand from this forum that there is a liquidated damages provision that lets you walk from it, easily. So very little is at risk: 5% at Infinity and 3% at 1 Rincon.
    The effect is that you have an option to purchase at a set price for a 3% or 5% “out” fee if you choose to terminate. However you want to describe it, it doesn’t change the fact that the developer needs to factor your ability to walk away when he sets his “prices”.

  30. Posted by sf buyer

    All this prediction of doom and gloom and as someone asked earlier – has there ever been a development in SF where the developer had to drop prices over 20% due to the number of dropouts?
    I just don’t see either 1Rincon or Infinity suddenly dropping a million dollar unit to 750k. Those that are waiting for it to happen may be waiting a long long time…
    And say that does happen, does that suddenly lower the value of Watermark, Met, Brannan, Beacon, etc by 20%?

  31. Posted by abc

    Clarification – California’s liquidated damage is 3%, so that’s the % of deposit at risk across all developments in california. Each individual developers may ask for a deposit % higher than 3% in the contract, but it will be up to the developer to prove in court that its damages exceed 3% mandated by state law (very few developers ever bother to go to court to fight for additional damages).
    So despite what the contract says, the true at risk amount for each buyer in california is 3% + any upgrades / option costs (which are non-refundable).

  32. Posted by Dan

    abc:
    You are correct on the law, however, with this market, if there is a fall in prices it will be easy to prove actual damages. If the mortgage issues cause the pull out, then yes, it would be limited to 3%.
    As for the upgrades, however, that adds quite a bit. Just to get moderate quality hard wood floors at the infinity requires a 10k deposit. I met with Infinity to do my upgrades today and found that most people (that are living there and not renting – 1/3 was the number I was told) are getting 30+k in upgrades, that is 15 plus k additional deposit.

  33. Posted by Ron

    Another note on liquidated damages. The developer does not have to prove that actual damages are above 3%, damages are the deposit amount or 3%, whatever is greater, unless YOU (the buyer) proves that the damages were less than the contract amount; not to go below 3%.
    So, the developer can hold the money until you bring a claim, conduct discovery, and show that they did not suffer the damages to equal the deposit amount.

  34. Posted by Home buyer

    Does anyone know if a buyer under contract can select another unit at Infinity or 1Rincon if they decided to get a less expensive unit?
    With all the mortgage problems out there I can see instances where a buyer no longer qualifies for the unit they originally reserved, but still wants to live there. Would the developer allow the buyer to select another cheaper unit rather than have the buyer back out completely?

  35. Posted by anon

    “Why does everyone think tipster is disgruntled and/or mad? I just don’t see it; what is wrong with hearing both sides?”
    Anybody who uses “?!?!” and “!!!!” to punctuate their sentences usually comes off as disgruntled. Maybe that is just me.

  36. Posted by abc

    Ron: California’s Liquidated Damages law does not work the way you described. It’s as follows:
    In California, on an agreement involving the sale of four or less residential units, if the amount does not exceed three percent of the purchase price, the claimed liquidated damages are valid unless the buyer establishes that the amount is unreasonable as liquidated damages. If the amount claimed exceeds three percent of the purchase price, the burden is on the party seeking to uphold the liquidated damages. (California Civil Code 677.)

  37. Posted by Cabrewolf

    abc: Although there is no Cal. Civ. Code 677, your statement is correct based on Cal. Civ. Code 1675(d).
    If the damages clause is greater than 3%, the burden is on the one inforcing it to prove it is reasonable, if it is less than 3% the burden is on the party avoiding it to prove it is unreasonable. Reasonableness, however, does not require that actual damages exceed the amount of the deposit, but only that the deposit was a reasonable estimate of damages at the time the contract was formed.
    More specifically, if the amount actually paid pursuant to the liquidated damages provisions does not exceed 3 percent of the purchase price, the provision is valid to the extent that payment is actually made unless the buyer establishes that the amount is unreasonable as liquidated damages.
    If the amount actually paid pursuant to the liquidated damages provision exceeds 3 percent of the purchase price, the provision is invalid unless the party seeking to uphold the provision establishes that the amount actually paid is reasonable as liquidated damages.

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