It’s not one of the thirteen distressed listings Damion pointed out on Monday (nor either of the two we pointed out the week before), but it is another potential short sale. And it is located in District 9.
Located in the developing Central Waterfront and along the 3rd Street Muni line, 2011 3rd Street #6 was purchased for $689,000 in October of 2006 but just hit the market for $620,000. And at roughly 1,275 square feet, that’s under $500 per ($486.27 to be exact).
∙ Listing: 2011 3rd Street #6 (2/2) – $620,000 [MLS]
∙ Thirteen More “Anecdotes” Of Distressed Listings In Districts 8 And 9 [SocketSite]
I’ve been in that building for an open house a few years ago. All I can say is those entries through the walk in closet in the bedroom are scary. Every child’s worst nightmare – direct access for the monsters to get in your closet.
The lower end of any market is always the first to drop, the hardest hit, and the last to rebound. A year and a half from now, you’ll be laughing on the floor that even $486 per square foot is insanely high.
I remember this sale. Even with all the market euphoria, I felt that this was a foolish purchase. It was the same way with 950 Harrison Street #202 which was discussed yesterday. The mistake was so obvious – $700K for a one bedroom on Harrison and 5th wasn’t a smart purchase. The question remains unanswered though as to whether individual acts of delusion (such as this) add up to market collapse. You can pinpoint these sales as examples of the most outrageous District 9 mistakes certainly. These buyers lost $80K-100K each the day they closed escrow but can you extrapolate these examples across all of District 9? Does it mean waves of foreclosures across the area? I’m not convinced of this.
Well, I am an uber-bear on SF real estate at these price levels, as is obvious, at least on an investment level. But I would LOVE to see “success” stories too. Can anyone point me to instances where an SF property was purchased from about mid-2004 onwards and then resold for a profit? I am not talking about substantial remodels – I mean true apples-to-apples comparisons. Given how much the median SF price has risen over this period, it really shouldn’t be that difficult, and I know they must be out there.
I would encourage the many realtors who visit this site to offer some tips that can be featured, along these lines. I have been looking in my area (small part of District 4) and I have yet to find a single example. But I have found numerous examples of people who bought in 2005-06 (generally to flip), who have now “got stucco’ed” with their investments.
Scurvy, it might be true historically that in a downturn the lower end was the first to drop and the last to rebound, but I don’t see that happening here. The median listing price right now for SFRs in SF is $779K and for condos $654k. So this place, and lots of other examples of significant drops that have been posted here, seems to be right in the middle of the market (I suppose you can argue that the listings are heavy at the low end right now, but I don’t see that — median for condos in Pac Heights is $629k and Noe is $719k — and it would beg the question of the definition of “low end” regardless).
I don’t see prices collapsing at any level, but I also don’t see any market segment really being spared. With jumbo loans much less widely available and much more expensive than conforming loans, one might predict the upper end will be hit harder than the lower end (just a prediction — I don’t see that yet either).
Satchel, I agree with your view of the market, but poke around on Redfin and you’ll find lots of places bought in ’04-’06 that were then resold for more. Here is one — 49 Moulton in the Marina: sold in July ’04 for $1.475M and again in September ’07 for $1.615M (I don’t know if this place was remodeled). Prices just peaked in SF in early ’07 and the real crunch seems to have just started toward the end of ’07. I would be more interested in seeing if there are any very recent sales of places that saw appreciation since mid-’04.
Satchel, I think you’ll find that most houses and condos purchased in ’04-’05 and sold in ’06-’07 will show gains. One really drastic example that springs to mind is 465 Hoffman. It’s a fixer nobody did anything with. All they had was a demo permit, for three sales, until recently. It went from 840K to 1.035M to 1.15M. Then someone finally worked it out with the architect and marketed with permitted plans. They wanted $1.62M but it has been withdrawn.
Your apples to apples idea is a little flawed though. Why should people bet on appreciation? If the plan was to sell from the outset, they likely did some sort of rehabilitiation.
620K, now, for 2 br 2ba right at the heart of the biotech developments? With Bakar fitness right there? My gut is that this one is going to get snapped up if it is at all decent. (I wish it had more pictures.)
fluj,
Thanks for that info. That’s interesting info about that property. Looks like the r.e. agents are making a killing off that property! (Just kidding :))
“Why should people bet on appreciation?” Well, easy, at least for my neighborhood. Because they are paying between 2 and 4 TIMES what it costs to rent the equivalent property! It adds up. There are a number of St. Francis SFH properties on craigslist recently at asking (wishing) rents of about $4-4.5K per month. It would cost $1.5MM (at least) to buy these.
I’ve got a good friend (angel investor) who RENTS. A nice, though a bit smallish, 3/2.5 SFH in the nicest part of Mill Valley that would cost $1.75MM, even in this weak market. His rent: $2.6K per month!
I’ve posted a number of times my situation. $3.1K for a 4/3/2 car garage (approx 2800 sq ft) that would sell for $1.4-1.5MM.
My angel investor friend and I have a mutual friend who rents a very large 4/3 $2.5MM pad (with pool and poolhouse) in Ross for $3.5K per month!
There is a house, 3700 sq ft 4/3 (remodeled everything) in Merced Manor that has been languising on craigs for the past few weeks at a wishing rent of $4.2K per month.
And it’s all over the Bay Area. A very good money manager friend of mine just sold his Oakland home (made all of about 14% appreciation TOTAL (less than 10% after commission and costs)) since early 2002! He is renting in Los Gatos now. Standard 4/2.5 upscale tract home that would sell for about $1.4-1.7MM. His rent: $2.9K.
It gets better. His wife is pressuring him to buy again, and so he went to look at some properties in Los Gatos/Campbell, but he doesn’t want to spend a fortune. He just went to look at a SFH for sale at $1.3MM. There is a tenant currently in it. That tenant is paying $1.2K per month!
fluj, if people are not betting on appreciation, what the hell is going on! My money manager friends and I are always scratching our heads. Is it really that it is just the land of fruits and nuts?
My take is that SF and Manhattan are like high end luxury goods pushed by a city full of brand managers in the form of an entrenched real estate industry infrastructure ( including mythology) that keeps buyers interested. That Prada sweater will keep you just as warm as one from the Gap, but a lot of people are willing to pay multiple X times the price for it.
But if they only plan to be there a few years from the outset, why buy at all? Despite everything else most people who buy generally envision staying longer than a couple years.
Hey, if somebody can rent for $4.2K in Merced Manor a remodelled 3700 foot house that sounds like a pretty good deal. Four years ago Merced Manor was a “locals only” sort of area where its enormous homes sold relatively cheaply. In the last three years that market has gotten hotter and hotter. Nowadays you can’t touch it for under $1.4M, for a smallish home. 3700 feet, all remodeled, would probably be pushing up against the record sales price over there. $1.8M +.
I don’t doubt that there are good rental deals interspersed among exorbitant ones. Your frame of reference doesn’t seem to include central SF locations, though. That’s where people are spending big bucks to rent modest apartments. You can’t even rent a $1Br with parking in Bernal for under $2K. That’s nuts.
Also, Satchel, mixed into another very looooong thread that I wrote too much in, I addressed one of your questions regarding market comparisons for Area 4. I looked at Miraloma Park specifically. YoY 2006 to 20007 there were two less sales in 2007, 76 to 74. Average sale price was up 10K from 935 to 945 and avg $$psqft was up from 592 to 642. There were no giant or particularly low sales prices to throw either year out of whack. The low for ’07 was 660K. The low for ’06 was 700K. The high for ’07 was 982K. The high for ’06 was 954K.
Getting back to this place on 3rd Street, what am I missing?
$700k for a 2/2 with parking on the Embarcadero doesn’t sound like that bad a price, and $620k seems almost downright reasonable.
Maybe I’m just too used to seeing ridiculous SF pricing, but to hear people excoriating the sellers for buying at $700k seems odd to me. Obviously, they’re now in a tough situation and need a short sale to save themselves, but it’s not like they paid $1M+ something. 2/2s all over the city go for more than $700k, right?
Actually, sorry, scratch that. That was page 1 of each year. (I really don’t have time to be doing this sort of thing.) In each year there were a few big ticket sales on the North side of Miraloma Park. $1.875M for ’06 and $1.643M for ’07. Higher for ’06. In short, minus only two sales, Miraloma Park experienced gains across the board YoY.
fluj,
Thanks for all your info! I am not a super expert in Miraloma Park, but I think if you really dig into the data, you’ll see what’s going on. Prices are going down, apples-to-apples. What is happening is that many properties are being extensively remodeled. I ride my bike through there all the time on the way to Twin Peaks, and you’ll be amazed at the number of porta-potties (that’s the giveaway, BTW). Same thing is happening down near Ocean in Balboa Park, Mt. Davidson Manor, etc.
The remodeled houses are the ones that get sold (at relatively high prices). Typically, square footage has been added, but somehow this never gets into the tax data, and so it LOOKS like the $/sq ft (on average) has gone up. Standard stuff that all the realtors (and CAR, BTW) know all about but nobody cares. Just as on Wall Street, the LAST thing the selling association wants is an informed consumer, IMO.
Some of these HELOC remodels all over DIstrict 4 are getting stucco’ed now, and the owners are trying to get wishing rents (that they have no chance of achieving). For instance, I just saw 835 Foerster come up on craiglist (for rent) after it failed to sell following what looks to be a HELOC remodel. Wishing rent is $5500. Good luck with that, with nicer SFHs in St. Francis and Monterey Heights available sub-$4K!
Also, on the square footage scam, take a look at 414 Foerster (that’s in Sunnyside). It’s in foreclosure, offered at wishing price $716K, after being purchased for $770K last year. See http://www.foerstersf.com. Now, tell me how they cram all those rooms into 1300 sq ft? 🙂 But, you know, if it sells (I’d offer no more than $300K. Seriously.) you can be certain that the $/sq ft. figure will key off the phony tax record 1300 figure.
Well, like I said, who buys without fixing if they plan to sell? As far as square feet discrepancies, even permitted additions take a year to show up in city tax docs. That’s down to bureaucracy. And as far as the Sunnyside and Miraloma Park languishing properties, hey, pricing something for more than the median is always going to garner resistance. Butting up agains, or going over 600 a foot in those hoods is not consistent with sales data. I’ve been following 985 Foerster too. (It has a smallish cement backyard, but I still think it will go for close to asking sooner or later.)
fluj,
I’ve been commenting too much too on this thread, and I’ll cut it out after this. But if you want to laugh at the Miraloma Park property I mentioned, here the cl ad:
http://sfbay.craigslist.org/sfc/apa/526634124.html
I’m sure the owner would appreciate the coverage anyway, even if I’m sort of snarky about it…
There are also some expensive properties that the developers got stucco’d with near Miraloma Park (they call it Sherwood Forest there to try to make it sound expensive) like 75 Miraloma Drive (featured on SS in the past). They’ve tried to sell that for years and years, and they always give up, and it gets intermittently rented. Next time I’m passing by on my bicycle, I might just ask the tenants what they are paying…..
Oh, and right down the street from 75 Miraloma, it looks like 38 Miraloma also failed to sell and is sitting vacant now for months, but I am not entirely sure. If you know about this property, let me know.
And Satchel, why assume that properties were remodelled in ’07 but not ’06? When did people begin remodelling all over town? I’d say more like 2000-2001 or so. It’s all apples to apples in that sense, my man.
fluj,
Last post, really. “When did people begin remodelling all over town?”
It’s all in the porta-potties, my friend. Years on Wall Street taught me never to trust the statistics. Always watch the “real” indicators. Number of porta potties is as “real” as it gets!
OK, so this started in ’06 you’re telling me? No way.
Sincerely,
Fluj
Portapottie counter since ’96
Satchel,
Hello. According to your post, if your friends are moving in the rental direction (vs. buying) in the near term……..that implies that “they” believe near-term housing appreciation is close to miniscule. On the other hand if they were “betting on appreciation”, then they would be buyers right now.
If you are inquring why even given these facts people are still buying these days at overinflated prices (based on a buy/rent ratio), then that’s probably more a lingering delayed effect of the housing run-up these past few years. I’m sure there’s a decent Sockesite readership right now who are very prudent with their money and have been taking a serious look at buying in the past couple of years….at more realistic prices…..Perhaps they’ve even made a few offers here and there that got overbidded…..
This buyer group will likely be buying on perceived dips and be willing to load up on a high mortgage, because there reference point will be to the pricing situation of the past few years (’05-’07)….i.e., they will say, hey, “I’m trying to buy that dream condo in South Beach or some SFH in the Avenues or Miraloma…….and the price is only $850K now….the seller has dropped the list price by $100K….this is a great deal!” At this purchase price, they are looking at a net monthly+pro-rated property tax bill of $5200+ (and this does not include HOA/maintenance and home insurance).
Assume an equivalent property rents right now for $3K a month, the owners are looking at close to a conservative base-case breakeven point 7-8 yrs out (when considering the net effect of rent vs. buy). So to answer to the original question of “Are these people betting on home appreciation?”……………If these current buyers have a 7-10 year time horizon, then “yes” they are betting on home appreciation.
However, if these buyers are still stuck in the mentality of, I buy a place for a few years (3-5) and I can at least sell it for more than I paid (IGNORING THE TRUE HOME BURDEN COSTS)…..then a rational observer would say they are buying on impulse/emotion or social conditioning of having to own a place………and not buying based on a perceived notion of home appreciation.
Different neighborhood, but on my street in the Castro there has been a portapotty somewhere on my block virtually constantly since I moved in (and renovated) in 1995. There has never really been a let up, even during the dot com bust. And a new one just went in last week, after a portapotty free stretch of all of two months…..
Curmudgeon–
Those weren’t portapotties, they were movable in law units….
And on that note, let’s get back to 2011 3rd Street. Or even 3rd Street. Or at the very least, District 9.
District 9 condo return examples per request. I purchased a 2BR at the Metropolitan (district 9H)for $485K in April 2004 (unit reserved in Sept 03) and sold it in November 2006 for $730K with a NET return of about 50% (probably the best overall return in the building). For the Central Waterfront, a 1BR loft on Illinois bought in June 2002 (800 sq ft) for $399 was sold for $530K two years later (32% return) with the peak estimated value of about $625K. Buy the right unit and you may be able to outpace your neighbors from an appreciation standpoint. I’m a realtor so the impact of transaction costs are not as significant.
you can rent a similar property in the area for $2000/ month and save yourself the downpayment and an extra 2k/ month.
i pay $2150 fr a 2bdrm with parking in Pac heights. i first rented it in 06, so it has not appreciated in renatl prie that much. I am currently looking at moving to a much bigger 2bdrm in telegraph hill witha private garage and large private roof deck for $2400/month.
Spencer, those rental rates seem very cheap? How do you come across them if not word of mouth?
Back on the property in question, yeah, 620K for two levels, 2 br 2ba, 1275 ft in that location seems damn good. Anybody ever work out over at Bakar? It is top notch in my estimation. I doubt there’s a better gym in town. A nice gym is hardly incentive enough to buy a place, of course. But the more perks the better.
spencer,
Just a tip on renting. After you have negotiated the wishing price down a bit, try the approach that you will put 6 months’ or 12 months’ rent in escrow, so the owner knows that he will get it (a VERY big issue, surprisingly, even in the nicest areas of SF, according to a landlord friend of mine who has been in the business in SF for over 20 years).
And, once you’ve got an acceptable rent (whether using an escrow account, or not), the final way to knock a few more hundred off: tell the landlord you will pay cash in $100 bills. Won’t work with every landlord, but I know from personal experience (not necessarily in SF) that you will see their eyes light up!
Best of luck to you!
From reading these posts, it’s obvious that renters are a lot smarter bunch than homeowners. The so called “American Dream” is to buy a house. That’s a crock of s***, the “American Dream” should be OWNING A HOUSE FREE AND CLEAR with no mortgage payment. Bottom line, supply and demand dictates price. BUY LOW!
fluj,
Not sure you are still monitoring this thread, but that Merced Manor place that you thought sounded like a great deal came up again on cl this morning (going on about two months or more now) at the “wishing” rent of $4200:
http://sfbay.craigslist.org/sfc/apa/534299919.html
It’s been empty for a while. For your clients who are stretching to spend $1.5MM+ to live there, you might want to suggest this one to them.
BTW, as expected, I am starting to see a larger number of rental properties coming up, and rents will be falling at least in the parts of western SF that I care about.
Hey, I said “pretty good” not “great.” Thirty seven hundred feet in that hood for ~$4K? That’s a lot of house. The client has an extensive R.E. portfolio and his wife has long wanted to live in that area. They wouldn’t be interested in renting.
“The client has an extensive R.E. portfolio and his wife has long wanted to live in that area. They wouldn’t be interested in renting.”
Why wouldn’t they be interested? If they already have a property portfolio they probably don’t need the write off or additional real estate exposure. They could live where the wife has always wanted for a fraction of the cost of buying and negotiate a multi-year lease if they’re worried about security and negotiate credit for tenant improvements if they feel the need to make it “their own”. Of course no sales commission if they decide to rent.
i not positive but i think multi-year residential leases are not enforcable in california. business lease yes, resi no
when you rent, you really can’t do much in terms of improvements or even cosmetic changes. There are some benefits to owning.
I used to rent a 3 bedroom house for 1800 on 35th in 1996, put $5,000 in cosmetic changes, stayed there 3 years, but enjoyed it. Most of my friends told me I was crazy though. The problem came after the owner wanted to sell. I literally staged it for him and the improvements made the place very appealing. I did’nt want to buy and I did’nt want anyone trampling through where I lived, so I moved. That’s one of the bad things about renting, you don’t call the shots.