The view from 400 Beale #1212
Okay, so here’s the “plugged-in” scoop on that “short sale of a Rincon Hill condo” that was mentioned in the Chronicle this past weekend: It’s a two bedroom condo in the Bridgeview (#1212); it was originally listed for $849,000 and then reduced (twice) to $799,000; and as the listing notes, “Price reduced! Seller motivated. All reasonable offers considered.”
And while the article reports that this property was eventually auctioned off, it’s currently listed as pending on the MLS (which leads us to believe it never actually hit the auction block). That being said, Damion Matthews’ insight is important, “the increase in short sales has led to a problem. Many lenders are so busy that they don’t respond to short-sale offers.”
∙ Listing: 400 Beale #1212 (2/2) – $799,000 (In Escrow) [Pacific Union]
Real estate short sales: “win-win” or reward for failure to live within one’s… [SFGate]

51 thoughts on “The SocketSite Scoop On That Short Sale In Rincon Hill”
  1. Short sales!? In SF!?
    Land of “real estate only goes up” and “buy now or be priced out forever”. LOL.
    These 800K condos will be selling for 400K by 2011. You heard it here first.
    Mark your calendars for May 2011 so you can tell me what I fool I was to beleive that.

  2. “These 800K condos will be selling for 400K by 2011. You heard it here first.”
    As much as I’d love to see this happen (I’m currently a renter, trying to get into the housing market), I don’t think there’s a chance here. It seems that developers are doing a great job of keeping a tight supply (postponing developments, etc) and the city councilmembers aren’t helping, by dragging their feet constantly.

  3. The fall in prices will have nothing to do with local inventory and everything to do with national lending standards. Once price appreciation stops it will become blindingly obvious that making loans to people who have no capacity to ever pay them back is not a good long term business strategy. The subprime lenders have already begun to implode and the survivors are tightening their standards. Alt-A is next. The price of any asset is set by the ability and willingness of someone to pay that price. Ability was artificially boosted over the last 5 years by the collapse in lending standards. When lending standards tighten that ability will go away and prices will have to fall to what people are able to pay under the new standards.
    The usual reply is that people will just hunker down and not sell. True. But they bought the most expensive thing they could afford given the teaser rate. When that resets they will no longer be able to hold on to it. They’ll try to rent it out but they will quickly find that market rents will only cover half their PITI (after mortgage deduction). So they will bleed for a while and then they will walk away and be foreclosed.
    2011. Half-off. Not just these condos but everything in the city. You heard it here first.

  4. What planet are you on Diemos? Look at SF prices for the last 20 years. Prices have steadily increased. Sure, there have been dips but they maybe lasted a year or 2 at the most. Appreciation may not be as dramatic in the near future, but they will continue to increase. SF is only 7 by 7 and there is an even a smaller part of the city that people are interested in living in. I do think, however, that the new developments may not be the best investments long term, since you pay a premium for new construction.

  5. Front page LA times 5/9:
    Plans for a $1 billion 76 story high rise condo complex “Park Fifth” in downtown Los Angeles expected to be tallest building west of Chicago.

  6. “What planet are you on Diemos? Look at SF prices for the last 20 years. Prices have steadily increased.”
    SF prices went down 15% between 1989 and 1996 – in nominal terms. After inflation what would be closer to 40-50%.
    So 94114 you might want to check on the planet you live yourself.

  7. And did prices recover in a short time or have we been on a downward spiral ever since? Get real.

  8. I don’t think we’re looking at prices crashing any time soon. However, even a price stabilization bodes well for the consumer, as the price of a condo in real terms will decrease.
    What I’m banking on is that this will continue to occur, while my household income rises at a rate more rapid than inflation. Its a gamble, but we’ll see.

  9. I have a few comments. The first is it totally depends on what segment of the market you’re talking about. Once you get above say $1.5 million for a condo, none of this stuff matters. For most people in my building that have a condo that expensive, this is their second, third, or fourth home. They have many $100k or $200k vehicles and probably bought their place with cash or certainly didn’t do any crazy financing.
    Also, California population is growing like crazy, already at 38 million. Commutes are just going to get worse and worse, and the value of nice high-floor condominiums with a bay view will increase in value. Places in the suburbs where commutes get 30 minutes or an hour longer each way are going to decrease in value dramatically, you heard it here first.
    And on a global scale, $1000 / foot is cheap. London is currently topping out at $5000 a foot and NY at something like $2500-3000.

  10. I agree with 94114 the ‘overtime’ prices rise. But I also agree with Diemos that in the near term the market is falling.
    We can see from the rise in short sales/foreclosures many recent buyers cannot wait for prices to increase ‘overtime’ becuase their ‘exotic’ mortgage is adjusting now.
    It is clear that many people were given loans that they could not afford, even in the short term.
    Diemos is right that the coming credit crunch is going to drive prices down since the pool of buyers will shrink and the amount they can get approved for will also decline as risk returns to the lending market.

  11. Real estate doesn’t crash like the stock market does (or used to before breakers). I’ve followed, analyzed, and plotted city prices, incomes, etc. as obsessively as anyone else. My prediction? As bad as it gets, would be tough for prices in the city to ever fall below $550-600/sq. ft. I just don’t see it, barring a second Great Depression or some other economic catastrophe.
    Most likely they’ll drift along and/or fall slowly for the next 12-18 months. Old saying that “Real estate prices may rise like rockets, but they fall like feathers.”

  12. “And did prices recover in a short time or have we been on a downward spiral ever since? Get real.”
    My point was that prices go up and – yes – they also go down. They’ve been going up for a long time now. Guess what’s next?
    Get real!

  13. It’s amazing that people still think they’re going to wait for the market to crash and then pick up property at bargain basement prices.

  14. Actually the fact that people are waiting in the wings to pick up property still means there’s money that’s not invested. Diemos, whether he/she realizes it or not is an indicator that while there will be short term softening, the likelihood of a crash is a smaller percentage.
    It’s when people like diemos decide to buy is when we all should start bailing. That means most/all money that will go into the market is already there.

  15. Why does the Real Estate Industrial Complex always try to prop up the San Francsico housing market by comparing us to New York and London. If only! Those are completely different markets than San Francisco. I think Boston and Vancouver are better comparisons. We have ONE subway line running under Market Street and some people think that makes us a major player on the world real estate stage.

  16. “Why does the Real Estate Industrial Complex always try to prop up the San Francsico housing market by comparing us to New York and London. If only! Those are completely different markets than San Francisco.”
    Well, although they are different markets in terms of sheer size, keep in mind that they are probably better comparisions in terms of where people would like to live. Take a look at this Fortune magazine survey of the cities that most MBA’s would like to live:
    You can see the SF ranks just below NYC as the top domestic city and far ahead of Boston. I think that says a lot. Also, we shouldn’t think of SF as a vaccuum city. Many people prefer to live in the city and commute down to the peninsula, silicon valley, or east bay for work. If you take the entire bay area into the picture, its the 4th or 5th largest metropolitan area in terms of population (depending on whether DC and Baltimore are considered the same metropolitan area). Also, taking into account average salaries and the prevalence of top jobs (Private Equity and Venture Capital are huge here, and SF is considered the top consulting city on the West Coast, and don’t forget about the high tech industry), we do have one of the leading economies and it would be fair to lump SF with NYC or London, even if the city itself doesn’t have the sheer population or public transportation of either.

  17. “SF prices went down 15% between 1989 and 1996 – in nominal terms. After inflation what would be closer to 40-50%.”
    Actually no. According to SFAR statistics previously used and linked to by Socketsite:
    Average sale price, single family home, SF:
    1989: $362,438
    1996: $365,276
    Average sale price, condo, SF:
    1989: $295,371
    1996: $315,050

  18. High price property purchase in major cities in California, especially SF, Los Angeles and San Diego, is now nothing more than financial Russian Roulette. Insurance companies have tightened their standards and ALL of these cities are prone to serious earthquakes. Once the next one hits a major city (similar to the Northridge earthquake in 1994) insurance companies will abandon covering ANY future earthquake property damage in droves. Because of the rapid and ridiculous rise in property prices, mostly the result of loose money policies ushered in by Easy Al Greenspan, people who bought property starting in 2000 and who have very little or no equity in their homes will be unable to pay for damage. It isn’t a case of IF it happens – it’s a case of WHEN and it WILL happen. Economically, we are living in very dangerous times in California and I feel most are oblivious to just how serious the dangers really are.

  19. I cannot argue with what you are saying SFhighrise, but that does not justify the cost of housing, especially when it comes to SOMA condos. Let us not forget the elephant in the room we up here all tend to ignore which is the Los Angeles/Orange County area which is far more important, diverse and affordable. My gripe was that London and NYC are often times (including on this thread) used by realtors to justify the current outrageous housing costs. Move away for 7 years from S.F. to NYC (like I did) and you will realize that S.F. is almost invisible compared to Chicago and L.A.

  20. “Move away for 7 years from S.F. to NYC (like I did) and you will realize that S.F. is almost invisible compared to Chicago and L.A.”
    Agreed, but lets break this down one step further. I’d say one of the reasons why New Yorkers think highly of Chicago is due to its proximity. Its a short 90 minute flight there, as opposed to a 6 hour flight across the country to SF. Chicago is the closest “major” business city to New York in distance.
    LA tends to garner respect from New Yorkers due to 1 – its population (metro area of 16 million is close to NY’s of about 20 million) as well as its publicity (thanks to the entertainment industry). You have to remember that this industry, while generating a high amount of wealth, serves a relatively small sector. What you have in LA is the largest gap between rich and poor in the country, if not the world. You have a few small swaths of very wealthy areas (West LA, parts of Orange County, etc) and then you have the rest of the LA basin, which in my opinion is not a very pleasant place to live, despite the nice weather. Sure, LA is larger and more diverse than SF, but I think there are far more opportunities to make wealth up here in the bay area.

  21. “Let us not forget the elephant in the room we up here all tend to ignore which is the Los Angeles/Orange County area which is far more important, diverse and affordable.”
    No doubt, LA/Orange County dwarfs the San Francisco Bay Area in many ways, but only because it is so huge. That doesn’t make the SF Bay Area unimportant– the San Francisco Bay Area is as central to tech industries as LA is to the entertainment industry.
    LA is no longer particularly more affordable than SF for comparable real estate. Average rents for LA/Orange County are higher than for the SF Bay Area. While the median price for a home in LA/Orange County is still lower than than the median in the SF Bay Area (but no longer by much), if one compares SF, Marin, and the Peninsula to comparable parts of the Westside of Los Angeles, or if one compares parts of the East Bay with similar neighborhoods in LA, one will find that LA real estate is similarly outrageously priced.

  22. “What planet are you on Diemos?”
    I’m pretty sure this is earth. Although maybe I should’ve taken that left turn at Tau Ceti.
    When I think about economic fundamentals it comes down to this:
    If you want a place to live you can either rent or buy.
    If you want an investment you have to buy.
    So the difference between monthly cost to buy or rent the same place is a measure of how much speculation is in the market versus fundamental demand for a place to live. That ratio should be 1 if there is no speculation. It’s currently 2 in SF. In some parts of cali it’s between 2 and 3.
    Once it becomes clear to Joe six-pack that appreciation has stalled and the pixie-dust of guaranteed 20% per year appreciation clears from his eyes he’s going to see that condo in a new light.
    He’ll say to himself, “Hmmm. I can buy this depreciating asset and pay a lot of money to live in it. Or I can rent for half the monthly cost and live there. Hmmm. I think I’ll rent for a little while.” Once this psychology takes hold it won’t end until that ratio gets back down to one. That’s where my predicition of half-off comes from. Perhaps I’ll be unlucky and the gov will crank up inflation and rents will rise to bring that ratio to one without any depreciation in housing prices. My view of the current US economic situation is that that is going to be tough without crashing the dollar.
    “It’s when people like diemos decide to buy is when we all should start bailing. That means most/all money that will go into the market is already there.”
    I’ll buy when that ratio hits 1. If it never does then I’ll happily rent for the rest of my working career, save my pennies and then go buy a place somewhere cheaper when I retire. I’ve already got enough saved for a downpayment to buy a house in Denver (or some other reasonable place) outright.
    Markets can stay irrational far longer than any sane person can predict but they eventually revert to mean. Trees do not grow to the moon.

  23. I’ve seen alot on this board about SF vs. NY, and I thought I’d weigh in. While I agree that we aren’t either of those two cities (NY or London), there are some things that keep SF home prices high. First of all is population density. We have the 2nd highest density of a major city in the US (below NYC). It’s higher than both London and LA, which speaks to the scarcity of land and property. Secondly, we have a relatively affluent population. Median Salaries in the San Francisco MSA are among the highest in the country (for a major city). I believe they rank right up there with NY, but I can’t confirm that doing a quick google search. Finally, SF is a very desirable place to leave with arguably better weather than both London or NY. The economy is not as large or diverse as some cities, but from a density standpoint – it’s a powerhouse.
    I’d be highly suprised if prices dropped 20%… let alone 50% as Diemos suggested.

  24. Mike,
    Most of us already don’t have earthquake insurance. Most private providers don’t offer it or have steep deductables that it doesn’t make financial sense.
    That train left a long time ago and we’re still here.
    As for non realtor, we just have to face the fact that SF is slowly becoming the expensive neighborhood for the Bay Area. Prop 13, rent control and anti-business (and pro-tourist) policies have conspired to make SF a bedroom community. If you’re going to compare apples-to-apples, it’s New York Metro Area vs. L.A./Orange County metro area vs. San Jose-Oakland-San Francisco Bay Area.
    Comparing SF alone to NY and LA isn’t appropriate.

  25. Boy has this thread diverged from its topic…
    One item left unmentioned is that, compared to other major cities, San Francisco has a disproportionate amount of red tape and dogmatic, protectionist legislation, which helps keep real estate prices artificially inflated. New York and Chicago can build a 40-story tower in the time it takes to change a leaky faucet in San Francisco.

  26. Ok – well lets compare apples to apples here. Bay Area vs. Bay Area. It’s not the prettiest layout of data but as you can the Bay Area is significantly off it’s own historical averages in key trackers of affordibility.
    4Q 2006 1yr Ago 5yrs Ago Average Dev. from Avg.
    Percent Income 47 48 36 35 +34%
    Mortgage/Rent 1.9 1.6 1.2 1.3 +46%
    Price/Income 8.0 8.2 5.9 5.9 +35%
    Price/Rent 393 336 222 252 +55%

  27. Sorry to move this away from initial topic. I appreciate the info. however in the responses because it helps me feel more confidence about the economic future of real estate in the Bay Area. I do also agree with Dude that if more housing were allowed to be built in this region, prices would not nearly be so high even if incomes are still nationally near the top.
    Just for fun, look at what is happening to real estate on Oahu. High incomes, high density, desirable location, almost no buildable land left, and housing values are off almost 20%.

  28. non realtor –
    Big difference between here and Oahu? The economy in Hawaii has been stagnate for quite awhile. High incomes, high density, desirable location, and almost no buildable land don’t mean as much when there aren’t new people being drawn to the region because of a vibrant economy.
    In spite of not getting the crazy media coverage that we got in the late ’90s, the economy in the Bay Area is booming right now. Sili Valley is adding more jobs now than most metros could ever dream of. My company has more than 100 open positions right now – and the starting pay on those positions is around 7% higher than it was last year – that is extremely significant wage growth.

  29. that doesn’t change the fact that home prices are not support by wages.
    It is a disconnect that cannot be sustained. either wages must rise to meet home prices, home prices must fall to meet wages, or some combo of the two.

  30. Very true – but I think it’s going to be some combo of the two.
    And we’re never going to be at the same house price to wage ratio as other parts of the country – unless the economy starts to tank here, the press stops filling everyone’s head with “Renters = second-class citizens”, or we decide to fill in the Bay for more buildable land near the jobs.

  31. One thing that has been made perfectly clear from this thread is that nobody is predicting that SF prices are going to appreciate in the short term. The only debate is whether they will fall, how far, and for how long. That is a monumental change in mindset from the last several years. With the consensus (not unanimous, but nearly so) that there is no likely financial upside to buying immediately and potentially a huge downside, that lowers the demand-side of the equation considerably. No flippers. No high risk borrowers (who can no longer get financing anyway). No renters who are happy with their rental but don’t want to “miss out.” That can only make prices go in one direction. So I think the only real debate is how far.

  32. It’s still going to depend on the location in the city and the type of property. I’ll bet you prices hold steady or even appreciate for homes in many areas such as Noe Valley. I’m not so sure about SOMA/South Beach.

  33. Look how serious a few guys are trying to sound like with all that numbers and all. The prices stayed flat in the 90’s, really??? That just sounds so frightening!!! I bet if posting photos is allowed here we’d see 2500×2000 pictures of poor folks dragging their suitcases on a rope after getting kicked out of their homes. So much visual entertainment we are missing, such tragic.
    I’ll try to make myself useful and start by sharing a pattern that I discovered through many professional buyers I encountered or worked with: those who are saying the worst possible things about real estate, in the mean time, are most often the ones who are buying like crazy. And I guarantee you we have more than 1 or 2 of these up in here.

  34. From 1988 to 1995 prices stagnated such that inflation took away 30% or more of the value. Homes of good taste or in nice areas tended to sit on the market for long periods because people did not want to pay really high prices for premium housing.
    Back in 1996 there were mansions and other high end housing available for a million dollars or so. After ten years such a place should cost around $1.3 million or a bit less, yet today the same properties are moving for $3 million or more. The high end sure looks safe from here–NOT! Look out below!

  35. Does anybody have any type of handle on the amount of pent up demand for housing ownership in the SF area? To me, it sounds like there may be a lot of people (and cash) who want to own in SF (or the bay area) that are sitting on the sidelines.
    Depending on that demand, wouldn’t it make sense that any downward spiral in housing prices could be very quickly erased if the demand is high enough that it drives prices right back up? It seems to me the more time it takes to start the decline the more pent up demand is created.
    So then maybe the essence of the question is “how desirable a city is SF?” Wouldn’t that drive sales and lay out the next decline/rise?
    I’m sure there has to be a model for this somewhere…

  36. If you really want to play it safe, don’t get married as over half lead to divorce. Don’t walk out of your house, stay home. Don’t risk anything…
    I just bought a great place. The feedback from all my friends is incredible. I am no longer living in a tiny studio and “saving” all my money. I am living in a great neighborhood, in a larger place and living my life now. Will I lose money or gain.. who cares, I’ll be here for a while. I’ll look back at 2007 as living in a big great place and having friend over, instead of misering away living in some old run down place, walking to do laundry, drafty and cruddy. You all can keep doing that, enjoy yourself. What is the value in this? Life is short.

  37. Good for you Blake! I hope you will be an inspiration to all those fence sitters who think the sky is falling.

  38. Actually, getting a house now CAN be a useful strategy as long as you have no actionable assets.
    Buy a house with nothing down and live there until the mortgage teaser rate resets, then stop paying the mortgage and wait to be evicted. In the end you’ll be out no worse than rent as long as you follow a couple of rules.
    Make sure your mortgage in a 100%LTV and pay the PMI. Don’t get an 80/20. Purchase money loans are non-recourse meaning you can walk away and the lender can’t do anything to you other than reposes. HELOCs, refis, piggybacks are recourse loans. If you don’t pay it back the lender can sue and seize assets and garnish paychecks.
    It’s an interesting time we live in when it’s harder to rent an apartment than buy a house. To rent an apartment you actually have to have money saved to pay first, last and security deposit. You actually have to have a job and a good credit report. You currently don’t need any of these things to buy a house.

  39. “Life is short”
    There you go. Great attitude. Just called my Ferrari dealership and put in an order. Car loan of course. Thanks for the inspiration.

  40. Each person can choose their own balance between spending and saving, living in the moment and saving for the future. There is no right answer. Regarding buying a Ferrari, why rebut a reasonable point by taking it to an extreme. You can’t live in a Ferrari.

  41. “Each person can choose their own balance between spending and saving, living in the moment and saving for the future. There is no right answer.”
    There is a right answer: if I can’t afford the house, I can’t buy it. 0% down and 3.5% teaser rates to me means I can’t afford the house. It’s as simple as that.

  42. The 30-year treasury yield was 4.80% yesterday …. and for the 3-month treasury, 4.88%.
    I think the credit crunch is dependent on the willingness of foreign investors from the strong economies of Asia and Europe to continue lending it out. Bank of Japan’s overnight money rate is still 0.50%. So many variables ….

  43. “I just bought a great place. The feedback from all my friends is incredible.” “I am no longer…walking to do laundry, drafty and cruddy.”
    Wow, you’ve convinced me. Those are great reasons to sink 45% of my monthly income into PITI. I’m going to buy a Noe house next week so that I too can receive great feedback from my washing-machine-owning friends.

  44. Jamie,
    My post was a round about way of saying buying a house is more than an investment, I hope you have that experience. So many haters on this board who probably don’t have enough money and just make sad posts. Regardless of when you buy, what type of deal you get, buying a place if a pretty life changing event. Sure, some loser will write something funny to this. But I see a lot of complaing people and I am just trying to provide my input. I am sure if you had that house in Noe you’d be pretty jacked up to have it as well.

  45. “So many haters on this board who probably don’t have enough money and just make sad posts.”
    No haters at all on this board. Just a pleasure to live through Nasdaq 2000 again – just this time without us in the market.
    Enjoy your washing machine!

  46. “I am living in a great neighborhood, in a larger place and living my life now.”
    How sad. I hope you learn what a home is (hint: it doesn’t matter who owns the deed or how large it is), Learn what a life is (hint: a life is not property ownership), and get some real friends (the ones who you can live your life with, even if you live in a small studio).

  47. Renting in a great neighborhood remains much more interesting today. At least half of the mortgage payment. If people enjoy buying it’s perfectly all right, but if life is so short and we don’t care about future, then why give this extra money to pay expensive mortgage instead of using it for traveling, nice restaurants, sport and whatever pleasant activities.

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