CFAH

1580 Masonic: Exterior
1580 Masonic closed escrow on 12/19/07 with a contract price of $3,050,000. It’s yet another example of a San Francisco home officially selling for “over asking” (by $55,000 or 1.8%). At the same time, it’s also an example of an Ashbury Heights home selling for $450,000 (or 12.9%) less than what the sellers paid for it in March of 2006 ($3,500,000).
Do You Think They Thought They Paid Too Much For It At The Time? [SocketSite]
Could “Priced Right” In Ashbury Heights Be Less Than What Was Paid? [SocketSite]
Sometimes It’s Simply The Small Things: 1580 Masonic [SocketSite]

Comments from Plugged-In Readers

  1. Posted by Scott Pierce

    So what is the point here?
    Real Estate, like any investment, can very easily be down in the short term. If you are buying to sell just a year later, you have an exceedingly flawed strategy (for the most part).
    They bought it a year and a half ago and now had to sell. So they pay the price.
    Trying to extrapolate this to the entire SF market because of this example is a huge stretch. And a weak argument.

  2. Posted by akrosdaybay

    For too many year people drank the ” Real Estate never goes down” Kool-Aid. Then came the “Bay Area prices never go down” Kool-Aid. Then the ” SF real estate prices never go down” Kool-Aid. Now it is the ” Real Estate is a good long term investment, and a bad short term investment” Kool-Aid.
    Ask Japan about the 18 year decline in Real Estate. After which will come the ” It is different here” Kool Aid.
    People in the real estate industry are running out of Kool-Aid.

  3. Posted by james

    1580 Masonic closed escrow on 12/19/07 with a contract price of $3,050,000. It’s yet another example of a San Francisco home officially selling for “over asking” (by $55,000 or 1.8%). At the same time, it’s also an example of an Ashbury Heights home selling for $450,000 (or 12.9%) less than what was paid for it in March of 2006 ($3,500,000).
    this should have read:
    1580 masonic goes for 1.8% over asking but 12.9% below what they paid in march of 06.
    it was kind of confusing the way our esteemed editor phrased these two sentences.

  4. Posted by Satchel

    Forget about buy v. rent calculations. These guys (or their lenders) just ate a $600,000 capital loss (including 5% commission). Who knows exactly what their carrying costs were – but note that acquisition debt in excess of $1MM is not deductible. Maybe 6%, maybe 8%? (you have to include property taxes, insurance, and some small maintainance costs as well).
    Did they pay all cash – well, that would have been even more foolish in hindsight, as it would have been almost impossible NOT to earn at least 7-10% on a well-diversified investment portfolio over that period.
    So, in the end, a true cost estimate of $1MM to live there for 16 or 18 months is probably not that far off the mark.
    This is starting to get really fun to watch! Every bubble ends the same general way…. although the particulars of each asset class and market are what makes the unwind so fun to watch and (try) to predict.

  5. Posted by Michael

    In a normal market real estate isn’t a good short-term investment strategy because of the high transaction costs not because investors expect property values to drop over the course of a couple of years.
    Don’t blame the sellers, this place was on the market for at least six months so it’s not like they only had a few days to arrange for a quick sale.

  6. Posted by Jimmy (Bitter Renter)

    Ooh, can’t wait to see the rent-vs-buy on this one!!
    I’m guessing something like $50k a month to buy? Vs. maybe $15k/mo to rent?

  7. Posted by mktwatcher

    Perhaps the owners simply figured out they bought at the top of the market and needed to get out before this massive loss got even worse. It actually surprises me ( and perhaps it’s part of the continued cheerleading effect ) that there aren’t more people exiting while the values are holding up. Then again, not many people can claim to have sold their tech stocks at the top of the market and there is this phenomenon of people being unwilling to take their losses once their “investments” begin to slide in value.
    Repeat after me: It can’t go any lower, it can’t go any lower, it can’t go any lower….

  8. Posted by amused

    akrodaysbay –
    Think there might be a possibility that the Japanese decline was 18 years long because they really went out of their way to earn it? Their credit mess was 10X what our is. Our was caused by rose-colored glasses and short memories. Theirs was a national insanity. Tariffs. 100 year bonds.
    Ginza was seeing prices of $139,000 per square foot. If that happened to my place, I would be the proud owner of a $298 million home.
    So… 18 year decline in SF? I’m going out on a limb and calling that unlikely.

  9. Posted by fluj

    We went through this before. The sellers bought a place across the street and were carrying two mortgages for quite a while. They tried to sell this off and makes some money, then they tried to get their money back, then they figured, heck with it and took a loss.
    It doesn’t amtter if it’s an explosive upward market, buying a property and doing little or nothing to it in the way of upgrades, and then selling it in a calendar year is going to generate a loss. This one actually even had some defects as well … it wasn’t exactly in a pristine state either of the two times I saw it. Plus it’s nearly at the top of Ashbury Heights, yet it has no view. Clearly they overspent.
    And remember, this one was listed at $3.8M when the sellers picked it up. They actually bought it for 300K under asking. In a nutshell, this property illustrates nothing. Look at the 17th street property in the same neighborhood. That one sold for a record price, $3.9M, three weeks ago.
    So which is it? Ashbury Heights getting hosed, or Ashbury Heights going gangbusters? hahahhahah

  10. Posted by Anon

    “Clearly they overspent.” I suspect this will be a common refrain describing anyone who tries to sell a place purchased in SF over the last couple of years. It’s a convenient expression of denial.

  11. Posted by fluj

    You just skimmed what I wrote and then came at me sideways.
    What do you know about this micromarket?
    Because I’ll tell you this. They paid $3.5M for a place without views and with smallish bedrooms. They tried to sell it in a year with no upgrades. Look it up. Like I said, IN ANY MARKET THAT MAKES LITTLE SENSE.

  12. Posted by Michael

    This place sells for $500K less than almost two years ago and it “illustrates nothing”? Right.
    Not holding for long enough to offset transaction costs and having the value drop by 13% are not the same things.
    Were they represented by a realtor when they “clearly overspent” two years ago? Wasn’t $3.5M a “new record price” for this place in 2006?

  13. Posted by fluj

    Well, if I was their realtor and they told me they wanted to sell it in a year without doing anything to it I would have told them to walk away. I highly doubt they told their realtor that!
    OK, so this illustrates a falling luxury market for the neighborhood? Then what does the 17th street property illustrate? A rising market? In the same ‘hood? Actually, street to street, this property is a better neighborhood. No. This shows me one thing. Don’t spend a record price in Ashbury Heights with no views. Don’t do it tomorrow. Don’t do it yesterday. Don’t do it in spring of ’06.

  14. Posted by akrosdaybay

    amused@3:48 PM
    see ” It’s Different here” Kool-aid reference above.
    Japan didn’t have a global credit contraction to deal with. I am not calling a 18 year decline. But the decline that has started will be about as long as the upward trend.
    If the upward trend of this bubble was 5-7 years. I would expect a 5 year downward trend. Cracks are already showing in SF real estate.

  15. Posted by Satchel

    fluj,
    “OK, so this illustrates a falling luxury market for the neighborhood?”
    In a word, yes. At least it’s one data point.
    “Then what does the 17th street property illustrate? A rising market? In the same ‘hood?”
    Not sure. What did that 17th street property sell for in March ’06? Maybe it’s just a nicer house. And maybe it would have sold for $4.5MM had it gone up for sale in March ’06.
    Apples to apples. That’s the key. No renovation. That’s another key fact to look at. I’m not an expert in Ashbury Heights, but I fancy myself a bit of an expert in my very small part of District 4. In St. Francis Wood and Monterey Heights (my little areas of expertise), prices on an apples-to-apples basis are approximately where they were in late 2003/early 2004. Some are slightly up, some are slightly down from that point in time.
    Now, that’s a loooong time with no appreciation, IF you are paying between 2 and 3 TIMES what is would cost to rent an equivalent place.
    I would welcome any info on SFHs in District 4 that have shown significant appreciation since early 2004 and which have NOT had massive renovations done. I have a list of disappointed sellers, and it’s growing larger by the day, but I am open to counter-evidence.
    We’ve seen on SS a number of places now where sellers are taking large losses in a market that supposedly has been going gangbusters. If you have apples-to-apples comps that have sold twice between 2004 and now, I would love to see them. For all the realtors on this site, please give us the addresses.

  16. Posted by fluj

    You know, this property was not only not fixed up, it was painted weird colors and it had some aesthetic issues. Whatever though. I’m tired of talking about it.
    “A market that has been going gangbusters” — and you read that where, exactly? Not on Socketsite. Not in the Chronicle. Probably you didn’t read that anywhere and just employed a bit of hyperbole. Because “gangbusters” was spring of ’06. As opposed to “gangbusters” what we have seen is that isolated properties have seen brisk activity even in fall of ’07. Usually it is due to pricepoint (as in under 850K) in a neighborhood that is safe and desirable, or else it is an immaculate property in a premier neighborhood. Then we see tremendous activity, still. And yes, we talk about it.
    Maybe we are showing cracks. 10 took a big hit. I just don’t see it elsewhere. Everybody likes to point at areas 2 on here, seemingly. I just looked at Parkside. It’s the same ole story. ’06 to ’07. ANd the story is volume down, median up.
    Yall are drinking some kool-aid too. It’s the “Everyone is getting killed” kool aid. It’s black licorice flavor, I hear. Never could stand black licorice myself.

  17. Posted by Dan

    “…prices on an apples-to-apples basis are approximately where they were in late 2003/early 2004. Some are slightly up, some are slightly down from that point in time.”
    That doesn’t sound like much of a bubble, does it?

  18. Posted by Tipster

    For $450,000.00, I could have had a WAY better time than the owners of this place did. 🙂

  19. Posted by joe shmoe

    I think fluj is incorrect. The owner of the building across the street sold 1580 to the current seller. I don’t think the current seller had any trouble carrying the property, but just wanted to move on with life. I am pretty sure either the current or previous seller could carry two mortgages if they didn’t pay cash… Any thoughts on this fluj? You are making up stories about people you don’t know which isn’t a nice thing to do (and can lead to litigation!). [I just live in the neighborhood and this is what I hear, but I think my sources are pretty reliable].
    Did anybody see the analysis in the Chron of how the market differs by district?
    Satchel,
    Applying market theory to real estate markets is kind of difficult because each house or condo is a different fruit. While occasionally bubble psychology takes hold, it only grabs a few market participants. Admittedly those participants can make a market crazy and force those really shopping for a home to pay more, but the investors always have a long time horizon and won’t get dragged into the speculators’ frenzy.
    The psychology of home ownership is generally different than market psychology, particularly family size homes (Did anybody read the NYT article on the family in Brooklyn that finally got around to throwing out great-great-grandma’s unopened mail, they had owned the house since the 1840s and were cleaning up for some much needed maintenance– they still have a hearth in the kitchen that is supplemented by a 100 year old oven and stove). I’d be happier renting in terms of responsibilities and having my money in assets I am more familiar with than real estate… but in terms of having a happy family that feels grounded and will never have a landlord say it is time to move, I own a home. If I lose money on it (unlikely because I plan to live in it a long time, but you never know when employment will force you to move elsewhere), that is just part of the cost of having a family for me.
    I see Ashbury Heights as very different from your neck of the woods. Much of District 4 seems, well, older and truly suburban– it does not seem easily walkable in terms of shopping and restaurants. Ashbury Heights puts you in a spot with convenient access to Cole Valley, Haight Street, and the Castro. Easy access to the N and a host of buses. Maybe I have not given District 4 a real shot, but it just didn’t feel like a fit for my family. [I think of District 4 as driving to work and shop, and once I am talking about driving, why not go for a drive in the country?]

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