The exterior curtain wall continues to rise and the interior build-out continues to move forward at One Rincon Hill. At the same time, the new new word on the street is that the first wave of closings and move-ins (floors 8-27) won’t likely occur until January 2008 (rather than by the end of this year as originally planned or as we last reported).
Also rumored: closings and move-ins for floors 28-60 as early as March 2008 and sales for tower two commencing in April (2008). Oh, and that they’re shooting for a rather significant bump in prices for choice units in tower two as well as tower one reservations that fail to close for one reason or another (more on this Monday Tuesday (9/4)).
∙ One Rincon Hill’s Fall Newsletter And Update [SocketSite]
∙ One Rincon Hill “Rumors”: Construction, Closings and Time Capsule [SocketSite]
I wouldn’t be surprised if move-ins don’t take place until even 2Q2008. It is rare that highrise condos get finished on time. Seems like the usual delay is something like 6-9 months after original estimated completion.
What is the word on the street about when the second tower will begin construction?
[Editor’s Note: At one point a rumored ground breaking by the end of 2007, but we’re currently expecting early 2008.]
What are the implications of the jumbo mortgage “crisis” on the future tenants of these towers? I assume most people only had a 3-6 month rate lock on their mortgages. When it comes time to actually get their loan, what kinda jump will they be looking at in their monthly payment?
This delay can only be seen as a good thing. It will allow for more time for this liquidity crunch to loosen up and possibly for the Fed to lower ST interest rates, and it will, eventually.
The market is simply overreacting as a panic move right now (and it’s not like this is the first time that’s ever happened) and once it corrects, things will normalize somewhat.
Agree with AC. I would take those estimated move-in dates with a grain of salt.
Infinity estimates first move-ins in Feb, but expect that to be more like March-April. We may actually see simutaneous move-ins at both Rincon and Infinity!
Having said that I wonder how many buyers will be affected by the mortgage mess. Anyone know what is the ratio of investors vs primary residence buyers at OneRincon??
I imagine the investor number could be quite high…
Could this have anything to do with the fact that a large chunk of the buyers probably couldn’t close if they finished in time? So everything slows down.
They are shooting for “significant” price increases in this market? It will be interesting to see how that plays out.
“Could this have anything to do with the fact that a large chunk of the buyers probably couldn’t close if they finished in time? So everything slows down.”
Yes, which, from the developer’s perspective, is a good thing. Better to have a delay in collecting your mortgage proceeds than to have cancelled contracts, dropping prices, and uncertainty as to whether he can turn a profit.
It’s smart, really.
As everyone knows they have gotten a lot of people scrambling to get out of their deposits. Whats 5% when you might be upside down on the first day. Looks to me like they are just trying to prep people for the fallout since a lot of those pre approvals are no longer valid (probably more than 40% of them). their only hope is to try and convince that the prices are not going to drop 20% like they have a very real possibility of doing.
when do you typically sign contracts, transfer titles, and take out the loan when buying from a developer? at move-in, or prior? is there an escrow stage?
To those in-the-know regarding the rincon/infinity deposits: what’s the latest one can wait before closing on your condo? I can’t imagine anyone who needed to would back out before that date, unless there are some additional penalties.
Presumably you need to close before “move in”.
thanks in advance (I have no condo experience)
As everyone knows they have gotten a lot of people scrambling to get out of their deposits.
Is this true? I’ve not heard this (though I suppose I wouldn’t be surprised).
[Editor’s Note: Of course “a lot” is quite subjective, but we haven’t caught wind of any mass scramble.]
On the two condos I have bought, I signed the documents and received the keys just afterward (same day).
Since probably 80% of buyers are using local lenders (Wells, WaMu) I am sure the developer is getting mortgage market updates from the lending agents. And I wouldn’t be surprised if the developer decided to slow down construction until the credit crisis passes.
“It will allow for more time for this liquidity crunch to loosen up and possibly for the Fed to lower ST interest rates, and it will, eventually.”
It’s possible but far from a foregone conclusion. If buyers are looking for a reduction in mortgage interest rates to afford their units they may be sorely disappointed.
“The market is simply overreacting as a panic move right now (and it’s not like this is the first time that’s ever happened) and once it corrects, things will normalize somewhat.”
Normalize to what? The last 5 years have been abnormal in terms of interest rates and housing prices. I would hypothesize that what is currently happening now is that the market is in fact normalizing.
Don’t be too surprised if lots of people decide the risk is not worth it and forfeit their deposits and walk away from their purchase contracts.
“Since probably 80% of buyers are using local lenders (Wells, WaMu) I am sure the developer is getting mortgage market updates from the lending agents. And I wouldn’t be surprised if the developer decided to slow down construction until the credit crisis passes.”
True. The developer can’t afford to let a full bailout happen so he’s going to work closely with the marquee mortgage lenders to make this thing work. The complexion of the market will likely be very different by the spring of 2008. They just need time for this panic mode to pass.
Underwriting standards need to be tightened up, and confidence will be restored in the secondary market. Everything will follow from that.
“Don’t be too surprised if lots of people decide the risk is not worth it and forfeit their deposits and walk away from their purchase contracts.”
Don’t be too surprised if you’re wrong. Normalize to where rates (and I mean the risk portion of rates, not the cost of money) should have been all along had underwriting standards been anywhere near adequate (i.e., income and asset verification, at least a 10% down payment and an otherwise fully documented loan).
If there are people who have written contracts with ORH that were expecting to get that “easy money” (i.e., with underwriting standards like they used to be), those people will most certainly have to walk away. If those are the people you are referring to, then I don’t disagree.
I don’t fall into that category so that’s where I’m coming from.
Having represented 16 Buyers at One Rincon Hill, I can tell you that none of my buyers intend to back out of the contracts they are in.
Before I get flamed, I am just giving out the above simple fact. I am not trying to sell anything, I am not making any representations about One Rincon Hill, I am not making any predictions, and I am not trying to speak to you directly through this blog. Take a chill pill before you flame me.
Maybe the spring of 2008 will have us back to abnormal conditions again, which everyone now thinks of as “normal”, but when the mortgage originators lay people off and shut offices, it tells me that, at least people in the business think this is going to be very long lasting.
Countrywide was among the holdouts, and they threw in the towel this week. And about two major mortgage originators a day are tossing thousands of people out of work. With the costs of starting back up, retraining, etc. being as high as they are, you don’t lay people off and shut offices if you think the downturn is going to be short and happy days will be here again in the spring of 2008.
That’s not to say that things aren’t abysmal now and that they may or may not be a bit better in the spring, so “suddenly” One Rincon finds a delay in a schedule only recently announced.
But with all of the layoffs in the mortgage business, and the continual tightening, One Rincon may not find that this sudden “construction delay” helps anything, other than to postpone the inevitable.
I do LOVE the “instant equity” attempt by the admirable one rincon sales force: “prices will be higher (in a mortgage market that has turned 180 degrees – how so, we’d like to not explain), so don’t walk away from your contracts, suckers..I mean buyers, you’ll get “instant equity” when we raise our prices.
Those guys are, like Enron, the smartest guys in the room. Hold onto your wallets.
“Having represented 16 Buyers at One Rincon Hill, I can tell you that none of my buyers intend to back out of the contracts they are in.”
I wouldn’t worry about getting flamed, Paul. The blow hards are always present and they usually don’t have the slightest idea what they are talking about, but let’s at least give it up for the 1st amendment and Socketsite for providing a forum for both the credible and the blow hards.
Insiders like Paul and other agents that represent buyers at ORH are likely more credible than some fool touting percentages of dropouts, etc., as though they have any basis in fact.
This, in my personal opinion, will be the crucible for the San Francisco market….when it comes time to put ink to paper on all the new condos in Soma, we’ll see how many people can actually afford them at the going rate using traditional financing.
To Paul:
I wouldn’t flame you in fact I think you are 100% correct. Of the 16 buyers you represented none “intend” to back out. However, how many of them are using jumbo loans to finance their purchase. The truth is, they won’t have a choice because either 1) their lenders are out of business. 2/3rds of all mortaged lenders will be according to recent projections and 2) If they are in business they are not going to want to be in non government backed paper which is why the jumbo market is seized. So they may “intend” to close but they can’t without mortgage companies willing ot lend.
“So they may “intend” to close but they can’t without mortgage companies willing ot lend.”
Everyone is just assuming (I guess it’s the glass is half empties vs. the glass is half fulls) that the credit crunch will persist and even worsen in the next 6-8 months (which I’m not saying it won’t), but the reality is, the predictions that people are making about what the state of the mortgage lending business will be like after that time period are utterly useless and should be ignored.
All of the blow hards are touting their predictions as though the closings are supposed to take place next week. If that were true, you’d have a leg to stand on, but my guess is that the first closings won’t happen until Feb. 2008 (which is 6 months away).
That’s a long time in market terms. So spare us the soothsayer garbage, because no one (myself included) knows what’s going to happen in the market over that period. If you did, you wouldn’t be on this blog, you’d be out on the South Pacific in your 100ft yacht because you’d be a wealthy stock market player.
Why are people saying the jumbo market has dried up. It hasn’t dried up at all. Rates for jumbo’s have increased over the last 30 days but you can still get a jumbo loan. I was just approved for a jumbo with 5% down at a rate below 7%. Not preapproved…fully approved. I think many of you are misinformed about where the lending market truly is.
Cooper explains why it is a fair bet that a number of buyers who really want to close will not be able to because they no longer meet the now-tightened lending standards. You can add to that the investors or flippers who were betting on continuing appreciation, but now see the market is going the other way, to back out. At present, they may intend to close. But let’s see if that intention changes when the direction of the market becomes more clear by the decision date.
“Anyone know what is the ratio of investors vs primary residence buyers at OneRincon?”
From thefrontsteps.com:
“According to the sales office a good 30-40% of sales so far have been investors, another 30-40% second home purchases, and obviously the rest are people purchasing as a primary residence.”
http://thefrontsteps.com/2007/07/25/one-rincon-hill-topping-off-at-631ft-bonus-post/
Since “second home purchase” is just another word for “investment”, there are 60-80% of investors in ORH. What it means is that most of the demand is artificial. Not a pretty picture.
Anyone predicting that both pure investors/flippers and the buyers that cannot meet the tighter underwriting standards will simply walk away, I think that’s about the only thing you can count on.
And quite frankly, that’s the way it should be. The willingness of the mortgage lenders to lend to this category of buyers is what got us into the this mess in the first place. That, coupled with the fee greedy investment banks and hedge fund managers that have dumped this toxic waste out into the market.
It doesn’t require a lot of soothsaying–these mortgage companies are out of business. And days of jumbo loans with no documentation and only 5 or 10% down (let alone zero) are long gone. Is it possible they may come back? sure–but within 2 years. probably not. The mortgage companies and loan programs that used to exist to make these loans are gone. And some jumbo loans do exist with spreads only about .75 above the regular mortgages but the effective rate is much much higher because you actually have to have income to support this loans, with an actual 20% deposit and real assets. so while people will have good intentions to try and close, the loans they thought they had to close on these units are just no there.
Holy crap!! 80% flippers/investors at OneRincon??
Now it’ll be VERY interesting to see how many of those folks decide to close on their units with the market going south…
Also, 16 buyers in a complex of several hundred is hardly a gauge of the market or even of the buyer’s ability to close at OneRincon. Maybe Paul represented some financially well off buyers or savvy investors.
Anyway you see it, that 80% number is frightening.
oh and one more thing….
I think the % of pre approvals that are expected to fall through because 1) either the financing conditions have changed 2) the loan program is being eliminated or 3) the mortgage company that preapproved the loan is out of business should be disclosed to those currently with deposits. If there was ever a material change in the environment this is it. If I had a contract and say 20% or 40 or even 50% of the buyers who had put deposits down were no longer viable offers –that is a material change in the marketability of the offering and needs to be disclosed to all who have put deposits down.
p.s. them coming out with this “hey we are going to raise prices” is a pretty good clue they already know it’s bad and are trying to avoid a calamity
But we don’t know what % of these people are 0% equity flippers. Those are the buyers that will be weeded out.
You’re assuming that all 80% are in that category. And as for the 2nd home group. Most people able to buy a 2nd home of this type are likely well off enough to not have to worry about not being approved for a mortgage. And I’ll say it again, no one (and I mean no one) has a clue what mortgage rates are going to be like in 6-8 months.
That’s the variable that will affect this entire issue. The people who can’t get approved I suspect is smaller than people think given that this is a high end property.
Things I’ve learned in this thread:
1. Raising prices means a calamity is imminent.
2. Lowering prices also means a calamity is imminent.
3. There is actually no such thing as a second home.
4. Mortgages are no longer available anywhere, for any reason, to any borrower.
5. When seeking facts to report on a blog, simply copy them from yet another blog (and an unverified source at that).
6. When making a point, it’s usually a pretty good idea to make a number up and present it as fact.
7. Corporations don’t lay people off to maintain profitability — they do it solely to signal that they’re going out of business.
8. A construction delay on a tall tower is really just a brilliant scheme to time the credit market.
9. Probably 80% of ORH buyers are borrowing from local lenders… just because 80% is a neat number.
10. The sales office is always lying.
Seriously… we went from one TOTALLY AND COMPLETELY unverified source — a reference to a blog, using an unverified and unnamed contact in the sales office — claiming 30-40% investors, 30-40% second homes and the remainder residents to “Holy crap! 80% flippers at OneRincon??”
I thought from reading this thread that the sales office is always lying…? Guess I better keep reading.
Well amused, it is just a blog after all and how is any of this info is really verifiable? Even Paul Hwang may be pulling our leg 😉
Another thought.
Even if a majority of those 80% investors do manage to close, how many of the residents will be renters vs primary homeowners. I would hate to live in my million dollar pad knowing 9 out of 10 residents are renters or empty units.
People talk about creating a “community” in Rincon Hill. When you have a building full of renters and maybe 10% primary occupancy, it’s kind of hard to envision a neighborhood community…
[Editor’s Note: We’ll simply note that all “blogs” are not created equal (and that we’re ignoring that 80% figure).]
1. No raising prices are not a sign of problems. Just pretending that you can
2. Lower prices isn’t a sign of calamity unless you have a lot of investors buying say 70% or a lot of zero down buyers. Banks don’t like financing properites that are upside down.
4. Mortgages are plenty available. Especially prime conforming loans. But for sub prime or jumbo they are become a lot more scarce and are a lot more strigent requirements.
5. Who says the #s that person posted on the # of investors/2nd homer owners is unverified. If you are from the Rincon sales office and can you verify the numbers for us?
6. You are repeating yourself. See 5 above.
7. That makes it sound like a lot of mortage companies are not going out of business or eliminating large bulks of their mortage operations. Look at the top 10 originators last year. Countrywide has rumors of bankruptcy last weekend, if the Fed had not intervened it might have been a reality. People were pulling out their bank deposits at CFC.
8. No they delayed the tower because they are worried the market is oversaturated because it is.
9. Wells fargo, cfc etc are national lenders.
10. It isn’t always lying but they tend to hype their product, try and get people into overly excesive loans and try and push prices up which is part of the problem
Even if a majority of those 80% investors do manage to close, how many of the residents will be renters vs primary homeowners. I would hate to live in my million dollar pad knowing 9 out of 10 residents are renters or empty units.
This is really the issue. I would bet that most of the new buildings going up are going to be at least 50% renters. When I bought my last place I thought because I had paid an above average price for it, I would at least not have a lot of renters. WRONG! In a few years it was at least 50% renter-occupied. I’m sure the same will happen to ORH and Infinity.
Hey RinconHill_Res – here’s a prediction on the mortgage market from a credible source – Friedman Billings Ramsey. It’s going to take a lot of money and at least a year for the mortgage market to figure itself out.
http://www.reuters.com/article/bankingfinancial-SP/idUSN2242667220070822?sp=true
[Editor’s Note: We’re co-opting this article as a jumping off point for a general discussion regarding the current state of the mortgage market (and how long the impact might be felt). And now back to One Rincon Hill…]
I honestly don’t know how accurate the 60-80% estimate is. But it comes from an extremely bullish website. They can’t stop talking about how great and unique SF market is, and how there are millions of potential buyers trying to get properties at any price. This is not a source of information that is likely to inflate the number of investors.
BTW, the number might be even higher. A lot of people fraudulently claim primary residence on their mortgage applications, so it seems logical to assume that at least some of them would lie to the sales office too.
The way I look at it, the demand for the new units can come from 4 different places:
– Current owners (SF residents), planning to sell their SFH/condos and move to the new units. That would create new supply on the market.
– Current renters (SF residents). That would increase the vacancy rate and push the rents down.
– Out-of-town buyers. That’s the only category that would be a positive development for the local real estate market, since it absorbs the units and doesn’t create any local extra supply.
– Investors. That means increased supply 1-3 years from now.
The main reason high number of investors is bad news, is because it suggests that there is very little actual demand for these units, at least at the current price level.
A few thoughts:
I have a few friends moving into ORH. All plan on LIVING in ORH.
All put exactly 5% down.
All still plan on closing.
So my “data” agrees with Paul Hwang’s…
that said:
none of the 3 can afford ORH if their current loans don’t go through. They’re all very nervous about this.
they have already put down $40,000 to $60,000 deposits (5%) down that they lose if they don’t close (I tried to tell them to change the contract in case they couldn’t close, but they didn’t listen) so they feel trapped into trying to close and are crossing their fingers.
ALSO:
remember, ORH won’t delay just because of the current mortgage illiquidity problem. Just the opposite in fact.
To operate, ORH has to take out so called bridge loans and other loans to get the building built. When all the units close, they pay off the loans and the rest is profit.
If the dawdle too long, expenses go up and they may find themselves without financing. also, as they delay, interest rates rack up…
So I would argue that ORH delaying has little to do with the current meltdown UNLESS they are having problems financing their build. That would be grave indeed… (if they lose funding and go BK before they can get people in that building)
BTW:
I can’t believe anybody thinks that lending isn’t tightening significantly!
Just today:
1. Lehman Bros (largest Wall St underwriter of Mortgages) just closed their subprime unit today and laid off 1200 workers
2. Accredited Home Lenders (another subprimer) also cut 1600 workers today
3. HSBC is laying off 600 mortgage workers (in Indiana)
4. Capital One is closing down Green Point.
every day, we get a deluge of stories of Jumbo and Subprime and Alt A lenders going down.
clearly, this is not good for those wanting to take out a home loan!
the builders are doing no better.
All the big builders are having significant cancellation rates. this is across most markets, and most products (SFH, Towers, etc)
just today, Bob Toll said:
“In single-family communities, we typically do not start a home until we have a contract in place and a significant non-refundable down-payment. … Even with these policies, during this downturn, we have experienced a much higher rate of cancellations than at any time in our twenty-one-year history as a public company.”
**(today I’m not putting in the links, because when I do that it gets flagged as spam by socket site)
–Lehman/HSBC/Accredited story from Bloomberg
-Bob Toll’s quote from his 3rd quarter Earning’s report.
[Editor’s Note: Multiple links do in fact tempt our spam filter, but rest assured we’re working on getting you white listed (so please link away). And in the meantime, we have gone ahead and added a few of the links ourselves.]
Here is a good article on the current state of the mortgage market. It’s a little dramatic. i.e. i think its bad but not this bad (I hope).
The tone in the mortgage market is “exceptionally cautious,” Lonski said. “You’re looking at what will be in all likelihood the worst case of home price deflation since the 1930s.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEwM_qB6qOBI&refer=home
“The main reason high number of investors is bad news,”
(scratching head)
I’m not flaming you, just confused. If investors who have already paid choose to close next spring that means that they expect rental income to cover mortgage payments and/or they expect capital appreciation over a reasonable time frame. Good, yes?
I have a 9 month lock at a new development. When it comes time to close I have a few options:
. If I can find a better place for at least 3% less than my current offer I’m financially better off walking and buying elsewhere.
. I can renegotiate.
. I can hire an appraiser to value the condo at a possibly lower price than what I offered. My loan won’t be approved for more than an appraised price.
. If prices remain firm in SF I’ll close with the original loan terms and offer price.
. I might be able to find a “material change” that will get me out of the contract entirely.
Overall, these are a lot of hedges against the possibility of a falling real estate market. In any case I’ll be living in my new home for at 5 years as an absolute minimum so I’m not going to split hairs on sales prices. Luckily I have some time to get a feel how the current situation will play out in SF before I decide what to do.
I believe that California law sets a limit of 3% of the sales price (or the actual deposit, whichever is LOWER) as the ceiling that a seller can keep if the buyer walks away. If the market price has tanked by that much and/or the loan you now can get is more expensive that you thought when you signed up, it may very well be worth walking away from that 3% (not 5%). I have no idea how iron-clad the ORH contracts are, but you may even have some ability to walk away without forfeiting anything.
“[Editor’s Note: We’re co-opting this article as a jumping off point for a general discussion regarding the current state of the mortgage market (and how long the impact might be felt). And now back to One Rincon Hill…]”
The key phrase in this sentence, “the current state of the mortgage market.”
If the building were expected to be ready for occupancy even 3 months from now, I’d be willing to play along, but we’re talking 6-8 months before the first of the mortgage proceeds will flow, so everybody needs to just calm down.
If people could truly predict what will happen (whether good or bad) in the financial markets within a 6-8 month time frame based solely on the current state of a particular market or markets, then we’d all be filthy rich.
[Editor’s Note: Actually, we’d argue that the key phrase is “how long the impact might be felt.” But point well taken and thanks for plugging in. And now seriously, back to One Rincon Hill…]
Oh:
I should also add:
my friends moving into 46th floor (or maybe 47th floor?) were told that they’re still on schedule to move in next May/June 2008.
One of the reasons ORH agressively priced a number of their units during the presale was to sell a mandated number of units in order to qualify for these “bridge” loans. Without preselling a preset number, the developer wouldn’t have qualified for the loans and construction would have halted.
Also, seeing some of the smaller lenders are going out of business, could we start seeing some of the smaller developers like ORH’s going under or at least suffer some financial distress?
Larger developers like Infinity’s Tishman Speyer or Millenium Tower’s Millennium Partners are large enough to finance their own projects, but one has to wonder about developers that need special loans to finance their projects.
Here is my situation,
I got in early and have put down a 3% deposit. Sure, I was stupid and did not ask to add a clause to get my deposit back in case I cannot close but, as meniotned by Gdog, I still have plenty of options. I’m hoping that by the time I would need to decided there should be plenty of precendence in renogitation, close, or drop-out by the time I need to decide. Another beneift of getting a unit 28+ floors up.
I love the building and fully intend on living there but I am not going to close on it if I’m going to upside-down on equity on day 1. Afterall, it’s still an investment.
They’re still building the Millennium as far as I can tell. They’ve been working double-time on the Kaleto restaurants in Rincon Park lately. The wealthy keeping getting wealthier from what I hear. The fundamentals of most companies are still just dandy this week – Target stores profits went up 13% year over year. I wouldn’t want to be an employee at Countrywide, Washington Mutual, or some other mortgage-centric company, but I’m feeling good otherwise – and looking forward to higher interest rates across the board once this flight to safety and Treasuries at any price thing moves aside.
I wouldn’t worry about the health of the market down in One Rincon Hill. Once One Rincon and Infinity closes, the demand will still be there. Yeah, market will slow, but the buildings will stand a premium plus rents will be higher.
The losers in these new buildings are people who bought at BayCrest and Bridgeview. These units are the ones that will sit in the market for a long time!
Regarding renters & second homeowners, in both SF highrise buildings I lived in there were both categories. Maybe 10% renters, 20% at most. In more expensive buildings there will be more second home owners. I love these people! They are rarely home, so their units are quiet and it means less people in the gym and pool, shorter waits for the elevator, and less cars in the garage. They have very high standards and don’t accept shoddily run buildings. The more second home owners the better, as far as I am concerned. Wish I could be in a building with 0% renters and 99% second homeowners.
Anyway, it will be interesting to watch the closing process play itself out in ORH and Infinity….and probably even more so at cheaper buildings.
I still plan on moving into ORH. I plan on putting 35% or more down, it will be a second home, it’s a choice unit, and while it’s too bad that rates have gone up a bit, it really does not have any effect on my ability to purchase the unit. I love the building and plan on keeping it–not renting it–for at least 5 years. I’m sure there are a number of people who also bought at ORH who’s situations are similiar.
one thing that might save the ORH developer and screw all of you committed buyers in this declining market, you don’t have to appraise when you buy direct from the developer on a new project. otherwise, nobody will get their loan closed since you are all over paying for the product.
hang in there. happens to lots of folks. you knew what you were getting into. a 5-7 year vision for a community and don’t expect to make any money on your place until then.
“one thing that might save the ORH developer and screw all of you committed buyers in this declining market, you don’t have to appraise when you buy direct from the developer on a new project. otherwise, nobody will get their loan closed since you are all over paying for the product.”
Huh? that’s news to me.
Since when does a bank NOT require appraisals on a property before approving the loan? I bought a condo from a developer before it had a bank appraisal.
And in a declining market, banks would be even more stringent with their appraisal process before handing out mortgages.
Rincon Hill is a luxury high-rise building and not the average housing complex. I believe that most individuals looking to buy in this building must have the means to do it and are not that scared off by interest rate fluctuations as much as the average person. With monthy outlays of $6K upwards a month, you have to have the means; credit score, down payment, and income or trust fund, and maybe some people are buying cash! Some other projects may be a different story as the buyer may be more like me. But to those fortunate ones, I bet this building will be a wonderful place to live and to those who can live there, enjoy!
“If people could truly predict what will happen (whether good or bad) in the financial markets within a 6-8 month time frame based solely on the current state of a particular market or markets, then we’d all be filthy rich.”
Actually, I think many people have gotten filthy rich making predictions like this and betting on them. But I don’t see why their success means we should “all” be filthy rich?
I would agree that the shorter the time frame, the harder it is to predict things. But most of the more well researched predictions of deterioration in the credit markets involve a time frame of a year or longer. It follows that a steady deterioration over a span of a year means a deterioration over 6-8 months, unless somehow the credit markets suddenly improve for 6 months before getting worse again.
If all of this is so unpredictable, how can you be so sure that it won’t be a complete disaster? Isn’t that at least -possible- if (a) consumers start spending less, and (b) job cuts spread to other areas, and (c) this great economy that the Administration has brought us begins to falter? I get the sense, given the 10 posts in less than 12 hours, that there is some trepidation here, or perhaps an effort to talk up the asset value for fear of how far it might fall.
“Actually, I think many people have gotten filthy rich making predictions like this and betting on them. ”
Actually, by definition, at any point of the market, half of the market predict bull, and half predict bear, thus today’s market is the happy medium between the bulls and bears.
So, while half of the market get above-the-index returns, the other half get below-the-market returns.
This happens when the market was red hot, and when the market tanks.
Viewlover, no offense but there were more than a few units in Rincon that were priced at a million or less. Around here, that IS average! Certainly not what anyone would call lux.
For the two-million plus units, that is a different story.
It will be interesting to see how far closing dates get delayed. If rate locks expire before closing, that could be troublesome to all involved.
the developer sets the price on new units when he sells them to you the first time buyer. you do not get an appraisal since it won’t matter. the developer is pricing the product at what he believes it’s worth and nothing an appraisal says or finds will make a difference.
For people who predict masses not being able to close, check how many of those who placed a deposit on ParkTerrace or Palms have bailed out? – None so far. Why do you think ORH will be different?
I find it interesting that people think of ORH as “luxury”. What is so “luxury” about a nice building that is really no different than most modern American Condo Towers. I think here in San Francisco we have become confused between an expensive unit being “luxury”, vs. “expensive”. In most cities, a luxury building would be more like the type of towers that have between one to four units per floor, and not only deeded parking, but doormen who pick up your dry cleaning and walk your dog. (I used to live in one in Chicago) ORH is a nice building, but hardly “luxury”. ORH will be a true test of the current real estate market next year when these units start to close.
sfJames – not sure where you are getting your information but people have bailed on deposits at the Palms. Not sure about ParkTerrace but it sounds like people might be bailing on that development before they even bother making a deposit.
“nothing an appraisal says or finds will make a difference.”
No. My lender (the development’s preferred lender) says that they will not loan for more than the lower of either an appraisal or the contract price. A low appraisal would result in a renegotiation or a way to back out without losing the 3% deposit. So paying for an independent appraisal before closing could be a very good move. However, my lender also said that he’s never seen an appraisal come in lower than the contract price.
“my lender also said that he’s never seen an appraisal come in lower than the contract price.”
I’m sure that’s true. Appraisers know what they have to do if they ever want to be hired again.
well 3 out of 4 approved mortgages are blowing up right now because of appraisals coming in way below what’s needed to justify the deal.
good luck!
“well 3 out of 4 approved mortgages are blowing up right now because of appraisals coming in way below what’s needed to justify the deal.”
James, I would like to look this up as it is interesting. Can you post the source of this data?
Hey, so what happened to the more on Monday/Tuesday?
[Editor’s Note: Make that Tuesday (9/4).]