Another Look At 1420 Douglass (And A Reader’s “Lazy Noe Indicator”)March 7, 2008
Another plugged-in reader already stole our thunder (and pretty much all our lines), but to sum it all up: 1. Eight months ago 1420 Douglass was purchased for $1,945,000 ($250,000 over asking); 2. Two months ago it returned to the market with a list price of $2,095,000 (and a few “I don’t think it will be on the market for very long” type comments); and 3. Last night the list price was reduced $100,000 (5%).
Granted, the sellers are still asking for $50,000 more than they purchased it for just seven months ago, and we don’t yet have a final sale price, but as our reader notes: “[O]riginally sold 8/09/07, GOOG: $514.73. Today – Not sold, (perhaps) languishing, GOOG: $433.35. Maybe dub dub is on to something with his “lazy indicator”!”
Comments from Plugged-In Readers
Wow, they spent about $900/day to live there.
Hope they enjoyed it!
Standard package for a college grad at 9 months before IPO was 2500 shares vesting over 4 years, if I recall correctly.
TO bad my acquaintance went with Microsoft!
Hate to see what happens if Google ever goes to $100! Never say never!
This posting is such a rich vein to mine! GOOG or the house itself? The behavioral finance aspects (can you say, “winner’s curse”, “loss aversion” and “anchoring”?) or the SF macro/micro issues (what happened to “multiple bids” for nice Noe properties?).
Anyway, for those who care, in doing my chart work this morning after being diverted by a throughly enjoyable market foray into the uppermost regions of the abyss this week, I noticed that GOOG on March 4 experienced its “death cross” (at least a variant – ask 10 traders for a defintion and you’ll get 12 answers!). The 50-day simple moving average crashed through the 200-day, both in a declining trend, having previously crashed through the 65-day. Brokers tell me shares are plentiful for shorting – they’re everywhere! – so the whole world is long and wrong. The smartest short-side hedge fund guys will have already been short from early “leaks” and the technical picture from early January or so. Late-comers and ex-hedge fund small fry like me (without access to inside info) will have jumped on the short side at $560-570 about a month or so ago, when the price fell through the 200-day on no apparent news.
Nothing goes down in a straight line of course, but the technicals – as well as the terrible fundamental picture for the company (not too much actual $$ generated, bloated work force, higher prospective compensation expense now that the stock option game is withering and a massive US recession just about here when you are basicaly an advertising company) – are as promising for short side guys as any I’ve seen in a long time. Again, though, because of the potential for snapback rallies after such a slaughter, smart guys will trade with relatively tight stops.
All I will say is that GOOG better cook up some good news and start kowtowing to Wall Street. Forget hiring – these guys are in reduction mode, believe me. Another earnings miss, without preparing the street well in advance, and this stock price is going to fall into Middle Earth.
No question this place would have been snapped up at this price in Summer 2007. The market has changed — even in Noe. The question is how much.
@sanfrantim: the patented indicator says we are now back to very late 2005 to Nov 2006 prices (the first and second times google hit its current price, although currently it’s only near 52 week lows). Let’s average the two and say May 2006.
With all the time I am saving, you’d think I’d find something better to do than post on a Sat morning 😉
I’d prefer 2006 home prices to the 2006 stock prices we have right about now.
I don’t get it. If prices are down from 1-2 years ago, why would buyers want 2006 or 2007 prices? The reason is, as we all know, prices are up from a and two years ago.
This property and the webster property offer the best apples on the market to tell us where prices are right now. I strongly suspect that if either got an offer at the previous asking price that they would sell. What we’re seeing is a game of chicken with buyers and sellers at a standoff at who will flinch first. This will hold prices for sure as sellers are the last to flinch. Of course, when your neighbor sells ‘at market’ or gets foreclosed / auctions at or below market. Only then do you see the real market.
For anyone looking to actually buy this propery, the sellers (perhaps) unwittingly have given potential bidders a HUGE clue as to the state of the market.
When this house was sold in August 2007, there were multiple bids. We do not know how high the next bid was (or even whether there WAS a nearby bid) because of the opacity of the auction process and the fact that the auction was run by realtors (with actual knowledge of the bids that were actually there) who had every incentive to distort the information in the interests of getting the highest price (higher commission) or actually “getting” the sale (in the case of the “purchaser”‘s agent – bid high, so we get it!). We DO know that $1.945M was the HIGHEST ANYONE was willing to pay, becuase we assume that the seller – who was a flipper – was only incented by $$. The current owners “won” the auction, and thus are afflicted with the “Winner’s Curse”.
Now, this house has been on the market for about two months. The price has been lowered. It would not have been lowered to $1.995M IF there has been a bid close to $1.995M – a deal would have been struck. Thus, the owners have signaled two things: (1) there is ZERO demand between $2.095M and $1.995M, or else a deal would have been already struck; and (2) by setting a price of $2.095M, the sellers were looking to “break even” after commissions and transfer taxes, signalling that they have “anchored” their expectations of value based on what they paid, and that they are “loss averse”. The house may have been on the market even a little longer than 2 months, as realtors typically call their “best” clients before the listing hits the MLS, telling them, “Have I got a deal for you – not on the market yet, so YOU can get a deal before the bidding war erupts….”
The credit crisis is significantly worse today than in August 2007 (only the very clued in back then understood that the B-(19)29 Supercreditfortress dropped the Little Boy and Fat Man bombs just a month before – the implosion of the Bear Stearns’ leveraged and highly leveraged funds). Today, it is front page news, and the housing market has deteriorated, even in Noe, as sanfrantim noted above.
I don’t know anything about this property or the neighborhood, so I can’t offer an estimate of fair value. However, I will volunteer that using these simple behavioral finance principles, a potential buyer today will – and SHOULD – look for a discount from the August 2007 price. 5% might just be enough to attract a buyer, who will think he is getting a deal, so I am just guessing that this will sell for about $1.85M – if it sells. If the present owners are very loss averse, they will take it off the market and rent it at a huge loss, another common strategy that flows from the misperception that economic losses are not “absorbed” until actual sale.
BTW, assume that this sells for $1.85M. That would mean that over the last two years or so, the realtors will have extracted about $275K in commissions (3 sales), the transfer tax authorities will have extracted around $35-37K, and the Prop 13 people will have extracted somewhere around $35K, for a grand total of around $350K! That’s a lot of scratch to extract from these tired mid-century bones, even if it has been hussied up with “sexy sophisticated” finishes!!
“I don’t know anything about this property or the neighborhood, so I can’t offer an estimate of fair value”
Enough said. So why are you writing about this?
beach boy : I don’t understand your comment. Are you saying that only people who can make a fair value estimate of this property should be posting here ?
I understand Sachel’s logic and it makes sense to me whether he lives at the North Pole or North of Duncan.
And if it sells for $1.955M it will have shown a slight appreciation ….
Many, in my opinion, not terrific Noe properties have recently sold for over $2M recently. I count five since the beginning of March. One of those is Noe’s first run of the mill $3M+ sale.
Satchel’s analysis is not valid. Your other red headed stepchild, 480 Duncan, is pending.
The challenges with this one is that it is QUITE a bit smaller than all the others, and it is on a relatively remote block at the top of Noe.
For those of you keeping track at home, a NOTS was filed on Oct. 16, 2008 and June 3, 2009. RealtyTrac is showing its number comes up mid-April, but don’t hold your breath (haven’t seen it on PS yet).
The Recorders Office is showing that 1420 Douglass was foreclosed on June 7, 2010.
Hmm, maybe I was too generous on another thread about the state of the SFR market in Noe. While not sold yet, so the final verdict is not yet in, this place is looking at more like a 20% discount off peak at today’s asking.
Comments are closed.