3324 Octavia: Kitchen
Withdrawn from the market last month, 3324 Octavia #4 is back, only this time with zero official days on the market (versus almost 60) and an “original” list price of $749,000.
This one-bedroom condo in the Marina features stainless steel countertops in the kitchen (a look we rather like) and an oversized shower in the bathroom. And yes, a list price that remains $1,000 less than what the sellers paid three and one-half years ago (7/16/2004).
∙ Listing: 3324 Octavia Street #4 (1/1) – $749,000 [MLS]
While One Marina Data Point Closes Escrow, Another Is Withdrawn [SocketSite]
Another Apples To Apples Comp In The Making (In The Marina) [SocketSite]

35 thoughts on “An Apples To Apples Comp To Be Is Back On The Market In The Marina”
  1. That’s a Marina Gold Box (not on landfill) very good location, not on a busy street, and it looks like the owner put in about $80K in upgrades, that the new buyer gets for free by buying at the tail end of a bubble.
    The owner paid at least $40K more to own than they would have to rent, loses the $80K in upgrades, and $50K in commissions. Total loss is $170K. They may have been able to paint the walls, but wow, how much more fun they could have had for $170K.
    Too bad no one can say they overpaid: that was really the going rate back then.
    Too bad no one can say that the buyer should have expected to lose money on a one or two year holding period. This was a 3.5 year holding period, purchased relatively early in the bubble. And they still lost their shirts.

  2. This is a great example of the freedom of renting. As a renter, you know how much you are paying each month to live and you can have a diversified stock/bond portfolio. Anyone whom has a good portfolio knows that you need to balance your stocks/bonds across various industries (real estate, financials, etc.), and include your job (if you work in biotech, you should not invest in biotech) in the equation. I hope that these buyers had about a million dollars invested in the market to balance out their portfolio. A home mortgage should be included in the equation, because people do use it for retirement and hope that it increases in value like a stock. People used to think that RE only goes up, but like any stock, it can go down, too!
    I was going to buy a condo in the city, but then realized that my portfolio would not be balanced, because I would have too much invested in the SF RE market.

  3. The purchase of this 1/1 condo in 2004 is turning out to be a significant source of wealth destruction for its owner. And this was in a time of generalized appreciation and easy credit. I shudder to think of the destruction that will go on over the next few years to the wealth of anyone purchasing it at something like 250-300 times (roughly) equilibrium monthly rent for a similar unit.
    OT – if anyone is following the unravelling of the equity markets, it looks like a very large shoe is about to drop on the credit complex, with the demise of the monoline insurers (take a look at the charts of ABK and MBI – they are things of sublime beauty). This is a very large deal. IMO, FWIW, the US generally is getting to about the 3rd inning of the credit/leverage unwind with the unravelling of these insurers. SF is not even out of the first inning yet.

  4. If the stock market starts tanking in earnest, watch out! Marina real estate prices will be cut in half within a few short years.

  5. I’m shorting AMK and MBIA. I’ve made a killing the last couple of days. ‘m going to ride them to the ground.
    Any thoughts on what happens next and how to play it? The re-insurance industry? Etc.

  6. Is this a short sale? Is it required for the seller to disclose whether or not this is a short sale? And also, if the seller has to reduce further, how will this work if they all of a sudden have to sell short whereas the asking is not short? The seller would either have to write a check or get the lender(s) to agree to a short sale, no?

  7. $80K upgrades Tipster? This is the beauty of upgrades, as most people always believe it’s much more than it really costs. It is generally always a good idea to spruce up a place with upgrades.
    $750K 1 bedrooms are a more difficult segment, but I actually think with the new year, it’ll finally sell. I saw the place, and it really is a pretty nice unit, just not that big.
    In terms of ‘losing’ money. Whether you rent, or own and sell at the same purchase price, you are always going to lose money. The question is, how much? One shouldn’t get giddy about ‘losing’ less. One should only get giddy about making money!

  8. hold on there smug. for the nicer areas to get cut in half you are first going to have to see the marginal ones drop much further (yeah bernal, i’m lookin’ at you). as painful as the retrenchment may be, the wealthier enclaves will tend to be able to withstand the carnage for much longer (simply by cutting down on cavier and aspen trips for example..).
    so for all the people out there cheering on the coming storm please remember that the less wealthy will get hit earlier, harder and longer. of course its not as much fun to dance on the bones of the weak now, is it?

  9. @SFHawkguy-
    I don’t believe sellers/agents are required to disclose whether the sale is a short or a REO, at least not in an MLS listing, although it obviously comes out in the negotiation/paperwork. If the offer is less than what is owed, the seller does not write a check on the difference – the bank eats it and the seller’s credit record is negatively affected. Historically, that delta was considered income for the seller, and they’d have to pay taxes on it, but even that is now being legislated away. At least that’s what I’ve read.

  10. Maybe you’re right anon. Losing less than the next fellow isn’t cause for jubilation. A quiet satisfaction might be called for, no? After all, a person that rented as opposed to buying this condo would have “thrown away” a good amount on rent but would not be in as bad a situation.
    But, you forgot to mention another emotion. If one is giddy when one makes money and should be more reserved when one simply loses less than the other guy, what emotion should one display when one loses one’s shirt?
    There are a lot of buyers of this type of housing (one bedroom condo) where losing 170K is the equivalent of a good couple of years of take home income. That will take even a steady, well-employed 6 figure earner a number of years to recover.
    If a person is in this situation and makes less than say, 100K, they are in a world of hurt.

  11. Guys, all this talk about losing money on rent is silly! You pay your money, and in exchange you receive your consumption item, i.e., the utiity value of having a roof over your head.
    I mean, do you throw your money away on lunch? When my angel investor friend and I go to McDonald’s in the Corte Madera mall in Marin (my friend who RENTS his $1.5-1.75MM home in Mill Valley for $2.6K per month – that one’s for you, fluj, who wrote about how renters don’t have money :)), I pay my $1 and get the special parfait. Did I throw it away?
    Now, if someone comes along and pays $3 for that parfait, well, you get the idea…..
    I’m not a bear on real estate – just real estate at these prices. In general in a credit inflating universe, buying a consumption item and assuming that someone will come along and buy it from you at a positive real return has made sense. If you think the credit complex will continue to expand to the moon, it may well still be a good bet. But never forget that real estate is NOT a productive asset. It does NOT appreciate due to intrinsic characteristics, as a cash-flow positive business (for example) would. Everyone needs to make the determination for himself as to the proper multiple to utility value (p/e in stocks, rent/price in residential real estate) to assign to the valuation exercise. If one is not thinking in these terms, and I am right about what’s coming, it could be like a mallet to the head for many.

  12. Satchel – the post is regards to Tipster’s post on losing 170K owning. Well, it’s the same concept. You get to live in a nice 1bedroom MGB condo for that price for the last 3 years, just like rent if you do not make a profit.
    One interesting tidbit that the senate is mulling is raising the jumbo mortgage loan from 417K to 650K now. That would be a huge boon. Wonder if it will pass.

  13. anon,
    “You get to live in a nice 1bedroom MGB condo for that price for the last 3 years, just like rent if you do not make a profit.”
    Exactly. You just paid AT LEAST $4700 per month in CAPITAL LOSS (could be more if the price goes lower), PLUS whatever your net mortgage interest/opportunity cost of money/property tax burden was during this period, maybe another $3K per month?
    Congratulations, you just bought that $1 McDonald’s parfait for $3! 🙂

  14. Satchel, I agree with you that thinking of shelter money as money that is “thrown away” is a bad idea. That type of simplistic thinking was largely responsible for the bubble. My comment was tongue in cheek–that’s why I put it in quotes.
    But to answer your question, I do sometimes “throw my money away” on lunch. This happens when I consume far much more than I should. Like when I buy my lunch instead of bringing my lunch.
    Likewise, many people also spend too much on their shelter. Therefore, anon is partly correct in saying that some “lose” more than others on their shelter. The big factor the last few years is that the upside was so enticing to people. Instead of a consumption item, people actually got paid to live in their shelter the last few years. Now, things are turning. The big “losers” are those that are going to be set back decades because they are overpaying for their shelter.
    And, btw, I would argue that the $1 parfait is throwing your money away. Unfortunately, if we do go into a recession, too many people will be getting their sustenance from McDonalds because it is so cheap. I will gladly spend a little extra for a good quality and healthy alternative.

  15. “$80K upgrades Tipster? This is the beauty of upgrades, as most people always believe it’s much more than it really costs.”
    The Stainless Steel in the kitchen alone had to run $10K installed. Add $15K in appliances, $10K for the floors installed, $20K for the custom cabinets in the kitchen and other areas and the built in TV, $10K for the bath redo, $5K to paint, and I’m already at $70K just for what I can see in the photos. They probably had to do some electrical in the kitchen, so add in $5K and they probably found $5K worth of problems they had to repair when they ripped the old stuff out. I may be off here and there, but I think my 5 second estimate was pretty close. Even if they spent $60K, it’s $60K down the toilet.
    Note also in 2004, you had to bid with no contingencies. Most of these places had about $8-10K in structural and termite work to be done. That should make up for any amounts I’m off on the remodel. I still think $80K is about right.

  16. Tipster,
    Do you know for a fact that the remodel was done by the current buyer and that he didn’t purchase a newly remodeled unit in 2004? Looking at the photos the cabinets and the appliances do not strike me as looking particularly new.

  17. “I was going to buy a condo in the city, but then realized that my portfolio would not be balanced, because I would have too much invested in the SF RE market.”
    Bingo. As I post this at Work I can see several people who stripped their 401K and savings to the bone to be able buy into this bubble and have zero left over to put away after meeting their montly carrying costs. Some people who were enticed to enter this market may never recover financially.

  18. As any economist will tell you, we’re all renters.
    And the way it’s looking now, those of us who pay a landlord so that we can put our capital into the stock market are going to be hurting just as much as those of us who put our capital into our homes. A falling tide lowers all boats.

  19. Given that this unit sold for 465k in 2001, and a similar unit in the building sold for 450k in 2003, my guess is that the renovation happened just before this place was sold for 750k in 2004.

  20. Not every renter went long on U.S. equities. As someone mentioned before, one should be well diversified. Not only does that mean one should not put all one’s capital in SF RE but one should also not put all one’s retirement in U.S. equities. I somehow bet that those that fell prey to the easy money of homeownership also fell pray to putting all their extra capital on going long U.S. equities.
    While a falling tide might lower all boats to a certain extent–some of us will come out relatively better than others.
    My grandparents’ strategy of buying a home at a reasonable price on a 30 year fixed mortgage and having a retirement fund consisting of a pension, cds, annuities and life insurance doesn’t seem like such a bad plan.

  21. You can make money both ways in the stock market.
    Of course you can. Most people, however can’t. All this talk of “if they just rented and put the extra money in they’d be rich” is kind of pointless. The same can be said about any investment that is going down. It’s as pointless as saying “if you’d shorted the NASDAQ in Jan 2000” you’d be rich.

  22. Just as it is pointless to say if you had just bought a house you would be rich. Millions are finding out otherwise. Millions more are going to sooner or later.
    The stock argument only comes up because housing bulls bringup stock market declines as an argument towards owning a house. The bottom line is an astute investor can make money in many more ways than the average person can lose it.

  23. The bottom line is an astute investor can make money in many more ways than the average person can lose it.
    Well THAT’S a revelation.

  24. “Well THAT’S a revelation.”
    It sure is because the discussions here didn’t seem to make that clear.
    BTW I am short on RE and the Stock market. They both fed each other and are overheated.

  25. anon 1:13 PM,
    Shorting is always tough. But it is NOT tough to recognize a bubble. It really isn’t. Anyone buying the NASDAQ in 1999 was foolish, and didn’t understand how the asset class works. IMO, the same can be said for practically all real estate purchases in the US since around 2002, or so.
    When you have identified a bubble, the only rule the average person needs is the discipline to step back and refuse to pay the bubble price.
    That US real estate (and SF, as well) has been in a bubble has been obvious to anybody. Long term real returns to real estate are approximately 0%, as almost anyone who has looked at the asset class will tell you. (The value is in capturing the owner equivalent rental yield, which has been “juiced” by the government through tax deductions.)
    You can make a lot of money if you recognize there is a bubble, buy early, and sell out to a greater fool, IF you are really smart. I’m not that smart, so I step back.

  26. I like the kitchen, but as often happens the staging has me confused. It appears there is one teapot for making tea and another one for holding the chopsticks? What ever happened to the clearing the clutter rule?

  27. SmugCloud, you’d better start covering those shorts. What’s the point in riding them to the ground? I was short MBI (through stock and options) from 55 to 20. But I covered around 20 b/c the risks to the upside are greater than the potential to the downside. Or do you just want the satisfaction of saying you shorted a stock to 0? If that’s the case, best of luck.

  28. from SF HawK
    “If a person is in this situation and makes less than say, 100K, they are in a world of hurt.”
    Anyone making less than 100K has no business in a 700K home. In fact, one should have a salary or some mix of income of at least 200K to be in a property like this.
    Please tell me that there are not people in SF that have a household income of &lt 100K, are homeowners and bought in last 5 years.

  29. “You get to live in a nice 1bedroom MGB condo for that price for the last 3 years, just like rent if you do not make a profit.”
    Exactly. You just paid AT LEAST $4700 per month in CAPITAL LOSS (could be more if the price goes lower), PLUS whatever your net mortgage interest/opportunity cost of money/property tax burden was during this period, maybe another $3K per month?
    I would like to add that the going rate for rent for this type of apt in this location is $2500/month
    so would you rather “throw away” 2500/mo to rent or $7500/month(including loss)for “pride of ownership”.
    For the extra $5k per month, you can do a lot of fun things

  30. The only listed building permits on this place are from 6/3/2004 (for renewal and final inspection). This indicates that the renovation happened just before the place was sold for $750k in July 2004.
    It appears that the new kitchen and bath installed in 2004 did not justify the price gong from 465k in 2001 to 750k in 2004, as the seller is finding out now, but it is a mistake to assume that the owner lost an additional 80k for renovations that likely were made before the owner bought the place.

  31. The renovations were done by the previous owner and to rent that unit now would be in the 2700-3000 range, if you could find one. There is not a lot of supply in the Marina that is any good (renting or buying). Did it turn out to be not the best investment? Obviously not, but it is easy to say now, what with 20-20 hindsight, that they paid too much in 2004. But at the time, they probably felt they were lucky to get it.
    Anyhow, it will interesting to watch what happens in the more desirable areas – if supply does start to grow. I think it will gradually, but who knows.

  32. I don’t sell short for the same reason I don’t buy on margin. Potential upside is nice, yes, but potential downside is horrifying.

  33. So the price of a Marina Condo is roughly the same (11k on 700+ is negligible).
    Obviously, the cause of this is tighter restrictions on financing, which also seems to indicate that some of the appreciation in the market in the prior few years had to do with people competing for places they couldn’t afford, right?
    What I don’t understand is this: if real estate prices double in five years, it’s regarded as just fine, but if they are static in a period of major economic upheaval (where gas prices triple, and huge amounts of inflation are happening for basic things like food). That’s the end of the world?
    Personally, as someone who hopes to buy a place in five years or so, I would like to see appreciation in real estate roughly commensurate with cost of living and salaries… It’s a home, not a tech stock, for God’s sake.

Leave a Reply

Your email address will not be published. Required fields are marked *