Folsom Rausch Lofts (1150 Folsom)
After just under two months on the market, the list price for 1150 Folsom #1 has been reduced $97,000 (9.8%) and the listing now notes: “Subject to lenders approval of short sale.” Keep in mind, however, that a sale at the reduced asking price of $895,000 would still represent annual appreciation of 3.3% over the past couple of years (purchased for $829,000 in October of 2005). And yes, you can figure it out.
∙ Listing: 1150 Folsom #1 (2/2.5) – $895,000 [MLS]

15 thoughts on “A Folsom Rausch Lofts Short Sale (Assuming 3.3% Appreciation)”
  1. Looks like someone has been extracting their equity.
    Or, in english, pre-selling their home to a bank for a lot more than it’s worth. Ah well, another loss that the taxpayers will ultimately pay for.

  2. The bank actually has a little leverage here, although I agree with the basic sentiment of diemos.
    A little noticed fact of the recent tax legislation regarding foreclosures and short sales should dispel any idea that the banks are not in control or that Congress is actually trying to offer breaks to homeowners.
    If a home “owner” throws the keys out the window and walks away, under past and CURRENT law, he runs the risk that he will be 1099’d by the lender for the difference between the loan amount and the amount recovered by the lender in foreclosure, thus incurring a tax liability.
    The recent Mortgage Forgiveness Debt Relief Act of 2007 – signed with such fanfare – only “forgives” the tax otherwise owed when the lender CONSENTS to the short sale. It’s a balancing act of course, but the lender is in a fairly good position to understand the borrower’s financial position, and will thus hold the threat of a 1099 to “force” the borrower to come up with a cash payment to offset some of the lender’s loss. Anecdotally, I am hearing that that is exactly what is happening. Otherwise, no consent; then foreclosure; then 1099 to the borrower, and he can deal with Uncle Sam….
    Once again, the banks are in charge. Congress and the Fed could care less about borrowers. All bailouts are for the benefit of the LENDERS.
    You have to tease out the implications, but here is the press release from the White House:

  3. By the way, state income taxes (not insignificant in California) are still owed on forgiven debt after a short sale, notwithstanding this change re federal income taxes.

  4. What evidence is there that taxpayers will pay for this? Banks are taking billions in write downs and going begging around the world in order to make that happen. Constantly crying wolf does not advance your agenda.

  5. Mole Man, this is the type of property that economic stimulus packages and conforming limit games are intended to help. Except that now the credit is backed by the US taxpayer (we all know who’s going to bail out the FHA if they take on too much toxic sludge).
    Constantly sticking your head in the sand doesn’t advance your agenda. 🙂

  6. I’m not very familiar with this part of town, and don’t know anything about this building.
    Can anyone who is familiar with this area estimate what you think this will ultimately sell for? It’s already off ~10% from its original listing, so I’m guessing it’s got further to go.
    Can we safely say yet that for this particular development, most if not all of the purchasers who bought here after 2005 have now suffered capital losses? (I’ll note that this seems like a pretty large unit, and so should hold its value better in a downturn. If there are smaller 1/1.5s, for instance, I would assume they’re down more.)

  7. Sorry to hog up this thread (I’ll stop after this – I promise), but this is just TOO RICH! Check out the actual words ostensibly of the owner, responding to a question on Zillow. The delusion, and foolishness – you simply cannot make this stuff up!!
    “I have done extensive research for SOMA. Currently, the price per sq ft ranges from $550-600. At $600 a sq ft, my home should be priced at $1,050,000. I was curious to see if I could get a little more consdering the condition of the property. So, to answer your question, there have been some upgrades. But more importantly, the space is probably one of the best in the city for someone who wants a true luxury, urban environment. Additionally, I would sell with everything included (furniture, housewares, etc). The price of $1.1M is what I was planning on selling it for in the spring of 2009. Since this is a “make me move” scenario, I was just seeing what was out there. Besides, the home shows perfect. Hopefully, that answers your question.

  8. “I’m not very familiar with this part of town, and don’t know anything about this building.”
    I know the area and the building. For what my opinion is worth, I actually really like this building. Not an architect, but it seems to be very well built, good materials, layouts, etc. And this unit is huge and seems very nice inside.
    The area? Well, that’s another story. This would be a decent value for $895K….if it was 3-4 blocks east of its current location. Not going to speculate on sales price, but it wouldn’t surprise me if a valley commuter picked it up at/near this price.

  9. This is a lovely loft development designed by Sternberg-Benjamin Architects. A lower corner tri-level with great big open space at street level.
    Lots of windows and light. The kitchen is gorgeous with yards of green counter space and great light. It can be a bit noisy, but if you like central SOMA neighbohood this is a wonderfully scaled space.
    I was the leasing agent for the original developer.
    The first tenant combined unit #1 with the one next door and ran an ad (?)agency out there. That was a killer space.
    It would be great idea for the person next door to buy and expand to the corner.
    Hmm Maybe I should call them.
    I am a big fan of the Sternberg-Benjamin projects.

  10. This block of Folsom is a great area to live. There are several decent restaurants, it’s close to both 280 and 101, and relativity close to downtown (w/ in walking distance). With all the mid-Market redevelopment going on over the next couple of years, I think this property value will increase. Plus, it doesn’t have that awful sterile feeling of the new developments around south beach.

  11. Hello Mole Man,
    Don’t got no fancy research but my back-of-the-envelope calculation goes something like this:
    $20T residential real estate backed by $10T in loans. Assume a 25% decline over the next several years, that’s a $5T loss that someone has to eat.
    Now, 50% of homes have no mortgage so homeowners get to see some unrealized gains go away, about $2.5T
    For the homes that have mortgages let’s assume that half the loss is eaten by the homeowner and half by the lenders. That’s $1.25T loss for the lenders.
    If the loan is held by a bank then the shareholders are in the first loss position. When they run out of money the depositors take the loss except they are FDIC insured so the taxpayers take the loss.
    If the loan is securitized and has been insured then the insurer is in the first loss position. Unfortunately the insurers have no money so they pull out their pockets and declare bankruptcy.
    If the security is guaranteed by Fannie and Freddie then they take the loss. They currently guarantee $4T of loans which is 40% of the total so let’s assume they’re on the hook for 40% of the loss, $500B. They have $42B in capital so the taxpayer is on the hook for $450B there. Next in line is the pension fund / bond fund that purchased the securities. If the loss makes the pension fund insolvent then their liabilities get dumped on the PBGC which is funded by the taxpayer. If they are a state/local government pension fund then the taxpayers get to make up that loss.
    So, I stand by my position that this will make the S&L crisis look like a picnic. We will wax nostalgic, “You remember how incensed people got over a measly $130B bailout during the S&L crisis?”

  12. Excellent analysis diemos. If I could add to it just a bit.
    First, 30% declines are in the bag. That would only bring us back to 2002/03 pricing nationwide (using OFHEO or Case-Shiller data, respectively). That would be approximately a $6T loss, and it would bring the Fed Z1 housing value data back into trend (adjusted for median CPI inflation). Beware of an undershoot!!
    Second, only about 32-34% of homes are unencumbered by mortgages (there are ~75 million owner-occupied homes in the US, of which ~51 million are encumbered). The implication of this is that the value loss falls proportionately more on the morgaged homeowners.
    Third, there is strong reason to assume that much of the “equity” in the areas that have undergone the most impressive dollar changes (especially the coasts) are the “most” encumbered, both because new purchases were financed with 100% LTV funny money, and because of a rampant HELOC and refi culture that is more appealing to the high value areas (large loans are more “efficient” because the relatively fixed cost of refinance is outweighed by the benefit of more $$ available post-financing to the borrower – it was also more “juicy” for the lender).
    Fourth, the latest data I’ve seen show the Fannie/Freddie monster as holding, or guaranteeing $4.9T. Additionally, FHA Secure is rapidly ramping up the share of direct government FHA. Finally, do not forget about advances directly by the FHLB system directly to slime like Countrywide and WAMU, especially in recent months. The data I’ve seen indicate in excess of $1T of slime sitting right there with the USG. All in all, the taxpayer is on the hook, either directly or indirectly through a presumed GSE backstop for roughly $6T, or 60% of mortgage debt. The only saving grace here is the loans are likely of SLIGHTLY better quality in aggregate.
    Last, I’d just add that this has all been a very sick, and very stupid episode. The idea that residential real estate can suddenly “support” higher leverage because of its higher value (or more “efficient” financing) is silly. A house does NOT generate income! It is the borrowers – people, ie, their LABOR – which must support the higher leverage. People are not suddenly 100% smarter or more productive since 2000 (incidentally, that 100% number is the INCREASE in mortgage debt from 2000 through end 2006 – latest data I’ve seen). If the housing bubble is any indication, I’d say they are stupider and less productive than in 2000.
    All this loss coming shows just how desperate the USG will be to foist the loss onto homemoaners wherever possible, by selectively “bailing out” those most likely to default (those with no or negative equity) and generally slowing down the adjustment in prices in order to “trap” as many homeowners who migh otherwise walk in the face of a swift decline as possible. I agree with diemos’ conclusions broadly, but I will stick with $1T loss for private lenders/investors, with some of this passed onto the taxpayers (maybe $500B), with the homemoaners absorbing the rest of the $5T loss. Some of this will be masked by some generalized price inflation here and there, but I wouldn’t count on much. Hard to get a lot of inflation going in a credit deflation environment – ask Japan. In any event, the “inflation” that would bail out the homeowners would be significant WAGE inflation, of course. Don’t count on that.

  13. I’m sure the USG would like to foist the losses onto the borrowers but there’s a Catch-22. The more they try to get the borrowers to repay their loans the less money they will have for consumer purchases, leading to insta-recession. The USG is the only entity with a magic printing press that can absorb all of these losses. I expect massive monetization but without inflation. The inflation occurred when the loans were made, monetization will mainly prevent a deflation now.
    Excellent point about wage inflation. Stagnant wages with rising commodity prices make it HARDER for the schlubs to pay back their loans.

  14. Okay…whatever the price drop, that stripper pole in the bay window MUST be worth something extra! Am I the only one wondering what that was doing there?!?!?

Leave a Reply

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