It’s a top floor, two-bedroom, and seismically retrofitted condo with 2 car parking in the Marina. Its list price was recently reduced $46,000 (3.6%) after just over a month on the market. And a sale at its current list price of $1,249,000 would represent annual appreciation of 4.4% since its purchase for $1,150,000 on 4/14/2006.
Yes, it’s almost apple time (which shouldn’t be confused with Hammer time).
∙ Listing: 3342 Divisadero (2/1) 1,492 sqft- $1,249,000 [Monica Pauli] [MLS]
I say enough with the threads about reductions in Marina condos or whatever about 1Rincon. This site is the best. You can do better than this.
I am taking an opposite view. I am beginning to think San Francisco is no longer as expensive as it thinks it is. Take a unit like this, in this location and put it in a similar very desirable neighborhood in Boston or Chicago and I could see where you would have to spend 20% MORE. With SOMA lofts now selling in the 650,000’s and 2bd full floor flats with parking in the Marina selling for this price, I don’t think the San Francisco market is as out of balance as many claim. I have a former business partner who just paid 1.4m for a flat similar to this for his mother in the Lincoln Park area in Chicago where they are still digging out from winter.
Well, right now, there is a lot of inventory showing up in that area, so I think buyers are being very cautious. On the other hand, 3700 Divisadero went into contract after just a few weeks for about $950k. At first glance it looks like few condos in 94123 over 1 million are going into contract.
$1.25MM for a kitchen with a free standing range and OTR microwave just feels wrong. I would think a small investment in a pro or at least higher-end kitchen would benefit this property immensely.
Anonoldtimer,
I’m very knowledgible about Chicago Real Estate and must disagree with your comment. Condos in Lincoln park are much less expensive and aren’t selling very well. What is the address in Lincoln park your friends bought? I find larger, deluxe condos on Clifton, Howe, Dayton, and Kenmore around $550-$650K.
Cary
Cary:
the big difference between Chicago and SF in my opinion is the breadth of properties.
in SF, there is not much inventory, and so much of it is the same.
it’s mainly 1-2 BR condos. most are very similar in style (either new “luxury” condos or old victorian flats as an example)
Chicago is much more diverse.
You can get anything from a studio condo up to a full floor 5+ BR condo/townhome and even a home.
you can get new, old, modern, classic, redone, not redone, and so on.
thus, the price ranges in Chicago are much wider than they are in SF.
I will tell you, I just got rid of my Chicago apartment last year in the Lincoln Park neighborhood. Anything near the water (like on or near Lincoln Park West) was definitely priced high, at least $1000/sq foot.
but if you go inwards (near Depaul or Children’s Memorial as example) then it cheapens quite a bit.
again, the difference is the breadth of properties. chicago has it all. SF doesn’t really.
the other difference, the last year Chicago RE has really taken a downturn, especially the 1Br and 2 Br properties.
This is a nice place – don’t let the emotions of market get the best of you.
exSF-er,
I agree there is much more inventory available in Chicago. That’s why I take exception to Anonoldtimer’s post. Prices are much lower in Chicago.
I looked in the MLS to confirm may statement. 2430 Lakeview, on Lincoln Park, a 5500 sq.ft. 5 BR 5.5 BTH co-op, sold for $2.5M recently. 2440 Lakeview, next door, 2850 sqft sold for $1.38M. 460 Rosylyn, 2500 sqft, sold 3/7/08 for $915K, and 441 Rosylyn, 3 BR 2.5BTh, approx 1800 sqft (my estimate) sold 12/26/07 for $662.5K
Cary
my estimate: this will sell for $1,150,000. the price level is about the same between 4/4/06 and 4/4/08.
BTW, if the realtor or seller is reading this blog, I would be willing to take this property off your hands if you drop the price 35% to $812K. I’m a really nice guy and would treat the condo well if that matters.
I thought the downturn wasn’t affecting the nice areas???
It seems like you can get more Square Footage for your money in Chicago vs San Francisco!
I think the killer for this particular condo is only one bathroom. Two bedrooms call for two bathrooms, or at least one and a half. The two parking places nearly make up for it, but not quite.
I wholeheartedly disagree with blahhh – i think apples to apples comparisons are a huge service that Socketsite offers. Do you know how hard it is to research and find apples to apples resales like this? They don’t just feature them on the front page of the MLS you know. In fact, realtors are more likely to hide this kind of info as it gives a barometer for their current sale price and some pretty hard to refute evidence of the current market. This kind of market info is the missing piece that the macro indicators like Dataquick, Case-Schiller, & CAR cannot measure. The Socketsite discussion can also add pertinent info as to the motivation of each buyer/seller which may have affected the price unusually. More please.
I gotta second Miles – the apples-to-apples comparisons are the most useful SS posts. Not only are they fundamentally more informative than CSI (which covers the whole Bay Area) and median prices (which are strongly affected by mix), but, unlike those other two things, they aren’t available publicly. Keep it coming!
All things being equal this seems like a decent property and is nicely done. I don’t like that part of Divis or Chestnut really and I personally would never buy in the Marina due to the liquification issues — retrofit or otherwise – it’s just not worth the risk considering you cannot afford to buy quake insurance down there. What do the insurance companies know that I don’t. Forget it. Still, 12 months ago I’d of said this place will fly off the market.
Now, I don’t know. I really think buyers that are not well funded (i.e., most normal people) are not going to be making rash purchase decisions and the back to back Alt-A / Neg-Am loans that a lot of agerage buyers were using just aren’t available. So as much as the SF market has not really felt the brunt of what is factually happening across the country — it’s really hard to tell what is going to happen with all these Apples.
The wiser part of me that told me to rent in 2006 likes to think that this is the wake up call we’ve been talking about since that point, but I honestly don’t know.
And as for the first poster crying about all the ORH and Apple to Apple posts — lot’s diversity here although the editor certainly leans in a certain direction — nevertheless – the community has spoken and people care about these topics – obviously.
I have been reading this blog for a while now, but its unclear what majority of blog users favor: cheaper or higher housing prices?
Oh, I’m about 90% sure I know one of the owners.
Young, attractive couple, I think he works in financial services (the wife was an acquaintance, so I’m not sure about the husband). I haven’t seen her in over a year. If it’s them (they bought an upstairs condo on the same side of the street on this block around that time), they had the kitchen put in shortly after they moved in. She didn’t mention the bath, but it looks like the same vintage, so I’m guessing they had that done as well (I didn’t see permits on any of it).
Obviously they didn’t go overboard on spending, it looks like they probably put in around 60K (assuming they redid the lights in the living room) and had 2-3 miserable months while it was done.
So I’m guessing the husband was laid off or sees the handwriting on the wall in financial services and wants to get out of this burden. It looks like they just added up their costs, included the realtor fee, added something to throw in the obligatory 3 years of condo association fees and listed it for that price.
And now it hasn’t sold, but they need to sell it so they are about to eat most of their remodeling costs. Really sad: they are a very nice couple. I remembered thinking they were nuts when I found out they bought it in 2006 when it was all but certain that . So they paid at least 1.5x what it would have cost to rent it (I’m guessing I/O loan), lived through a kitchen remodel, which they have basically given away for free. *If* it sells at this price.
I never saw the inside of the house so I’m not 100% sure it’s them, but 90% sure it’s them.
Tipster’s analysis seems right. By setting the price too high (at their rough “breakeven” point), and now having to drop into a loss position signals to the market that there is ZERO demand even at the new lower listing price (or else a deal would have been cut). Smart buyers will take notice of this.
BTW, did anyone figure out what happened to 3324 Octavia, another less than ideal condo (1-bedroom – here, as noted above, it’s basically a 1-bed too because there is only 1 bathroom), but one which is in the best part of the Marina?
https://socketsite.com/archives/2007/12/another_apples_to_apples_comp_in_the_making_in_the_mari.html
It looks like that one perhaps has been in contract for a while, but hasn’t closed? I can’t tell, but it looks like in that one (as here in this Divisidero property) the owners paid 1.5-2 times the equivalent rent only to eat a capital loss in the end. As I said, if anyone has a sales price fo 3324 Octavia, I would love to know it.
“So they paid at least 1.5x what it would have cost to rent it (I’m guessing I/O loan), lived through a kitchen remodel, which they have basically given away for free. *If* it sells at this price.”
Considering a place like this went for about $2500/month in rent in 2006, I’d say they paid almost 2.5x what it would have cost to rent it.
If they get the listing price, their annual appreciation will be 4.4%. That’s pretty good, no?
Spencer will pay $812k for it. I fell like a bidding war. I will pay $850k!
Cary:
agreed. SF is overall more expensive than Chicago, not including the “name” properties.
(like the Chicago Spire, etc)
location, it’s yours. it’s not worth $850K to me.
It always amuses me that according to most posters on this site, people only sell for reasons of panic, getting in over their heads, lack of financial wherewithal, getting laid off….
What people seem to forget is that this is a HOME we’re talking about.
Some of my neighbors are moving. Why?
– Couple in a one bedroom with a toddler just got pregnant again, and they need a larger place.
– An older couple moved into a condo in SF for the first time a couple years ago, realized they don’t like city life, and want to move back to a house in the suburbs where things are more comfortable for them.
– Another neighbor’s mother has gotten sick, and she has decided to move out of state to be closer to her, to take care of her.
I’m sure several of you will be excitedly analyzing the REAL reason each of these people are moving, but sometimes it’s just a home, you know? There is a world outside of real estate speculation….
That is not a 60K kitchen remodel. Paint grade cabinets, we assume granite counters, and no custom tile work? If it cost 60K, then yeah, they’re gonna take a loss. But yall just love to predict losses any way you can. That certainly wasn’t 60K well spent if in fact that’s how much it cost. It looks like a 15K kitchen remodel to my eyes.
Foolio, how is 1.249 not more than 1.15? your downturn comment made zero sense.
Fluj,
Let’s see if they get their reduced asking price first, although they probably will because this place is just so nice.
Read my downturn comment again. It was my description of the general state of the market, not this place in particular. Hopefully these folks at least break even, although others have run the math suggesting that may not happen.
it looks like they put in recessed can lighting and a granite countertop, two new appliances and that’s about it. If they get their asking price they’ll probably be breaking even.
“That is not a 60K kitchen remodel.”
Never said it was a $60K kitchen.
Kitchen $20-25K (with the front loading washer/dryer, they have at least $5K in appliances), 1 bath $15K (a guess – hard to tell what they did), livingroom ceiling and electrical $5K, floors $5-10K and paint $3K, other miscellaneous fix it stuff you always seem to find in Marina condos $7K: I eyeballed it and thought, $60K.
Pulled it out of the air – could be off, probably not by much.
I’m sure they spent a lot more than 15K.
Yall just love to minimize losses any way you can. 🙂
“Hopefully these folks at least break even”
Look, not to be too argumentative here, but why should we hope this?? These owners obviously bought a “starter” property. They paid at least 1.5 times what it would have cost to rent an equivalent property, perhaps 2 times or even more. I mean, do you think they were intending to live there for 10 years, with 1 bathroom and all? Perhaps, but I doubt it.
Attitudes like that (again, no particular knowledge of the owners here, but all will agree that this is a common attitude – if it weren’t, it would cost MORE to rent these starter properties than to buy them, which, BTW, is the way it SHOULD be) have led to an inflationary spiral in house prices, which has not been good for the economy, in case anyone hasn’t noticed!
I for one hope that they DO take a loss. Poor capital allocation decisions should be punished. It makes people think twice about making that mistake again, and recognition of the risks leads to a more rational housing market and – by extension – economy.
Remember, the issue here is rent v. buy and the NATURE of the property. While people should be willing to pay MORE to buy a nice property that they could easily imagine living in for 10 years at least (premium for stability of living arrangements, value of the imperfect hedge against inflation that housing provides, etc.), people should not regard housing as a one-way ticket to riches. Because they paid so much more to buy this modest place than to rent equivalent digs, these owners almost certainly were making a speculative bet. What’s the big deal if the market (correctly) punishes these bets when they turn out to be wrong? (we’ll see of course if they get out whole or have to absorb a loss – tough to tell just yet I guess.)
“Poor capital allocation decisions should be punished. It makes people think twice about making that mistake again…”
This sounds a little harsh to me. Not everyone should be expected to be a financial and economic whiz.
The sad thing is that there does not seem to be any professional fiduciary to turn to for advice in times like this. I recall so-called financial advisers egging people on to invest in tech on margin in 1999.
It would be nice if Joe and Jane Average could hire someone who understands finances to offer impartial advice. So far I have not found such a person. Everyone wants to work on a commission based on the portfolio balance. To me that seems like a big conflict of interest. Why can’t one hire a financial expert on an hourly basis just as one hires legal help ?
Until then I look forward to hearing from Ex-SFer, Satchel, Dude, fluj, tipster, Frederick, JW Baker, badlydrawnbear, and all who post their insight here.
Mouse in one hand, salt shaker in the other, I thank you all.
I agree with Satchel, let people who paid $1.15 MM for a two bed one bath lose out, it only helps them not make the same mistake in the future. Who knows why they are moving, but I won’t feel bad for them if they lose 50k on the deal, they are the reason I don’t own a place.
Satchel – In your hood, what do you think happens to 1 Santa Paula Ave, I saw the fist price reduction already came. The place looks nice inside, I like the property.
@Milkshake,
Hear, hear. As someone without a finance or econ background, I’m following these discussions to educate myself about what the financial system is really about. My experience relying on brokerage professionals or other financial “experts” has not been good. I don’t plan to make moves based on what anyone here says – but there are significant pointers to where to look for more understanding. Still, I know I’m an amateur but have to look out for myself and family all the same.
“This sounds a little harsh to me. Not everyone should be expected to be a financial and economic whiz.”
And that’s exactly the thing, Milkshake! I’m not an expert on growing wheat and turning it into bread, yet I trust that the loaf of bread I buy is fairly priced. And, you know what? Because it is a (relatively) free market without “ginormous” subsidies (I know, there are some, but nothing like Fannie/Freddie, tax deduction for ONLY mortgage debt from 1986, capital gains exclusion from 1996, etc…), the loaf of bread is fairly priced.
It used to (sort of) be that way with stocks as well, and again, without the overwhelming distortions of government and the Fed, companies used to actually pay dividends in excess of the risk-free rate! Imagine that!
In housing, pricing is a disaster. You have on average, well, “average” people buying assets that are gigantic relative to their earnings capacity (even here in SF, again on average). It is NOT a fair fight! The Wall Street guys and the Fed conspire to inflate asset values so that they can get in between the cash flows and extract a huge spread without anyone noticing. When the inflation must end (just as with tech stocks), the smart money is off to the next game, leaving the population holding the bag. It happened in real estate right in this city before. Talk to some old timers. I recently talked with an old guy whose family bought a nice SFH in the 1920s in Westwood Highlands. Ask them what the next 30-40 YEARS were like…..
Precisely because most people are not financial whizzes, they have no way of thinking about asset valuation, and so are led by the nose by the price action. Real stories of loss, while unfortunate for those sustaining the loss, serve a very useful role in making average people aware of the idea of risk versus return. Not too many piled back into tech stocks after 2000. Unfortunately, many piled into real estate after 2003, and that is not turning out so well in most of the country (and soon to be obvious here in SF as well).
Oh well, it’s always the same. It’s not a conspiracy, but rather a very smart group of people all acting within their own self interest, and to whom the people have given the monopoly on credit creation. That is how the wealth is taken from the population (as the source of all wealth is ultimately human labor): first by inflation (to the point where the population either borrows to purchase the inflated asset as in houses, or buys outright the inflated asset as in tech stocks 1999, in each case trading its wealth – the fruits of its labor – for the bubble asset); then by deflation. Sometimes the cycles (as in real estate) are agonizingly long…..
Tipster –
I’m going to go out on a limb here and theorize that you’re not actually a detective by profession. Your post is utterly and completely absurd. You place hypotheses on top of guesses, and then compound your nonsensical garbage by licking your finger and sticking it in the air.
To wit:
“about 90% sure”
“I think he works in financial services”
“haven’t seen her in over a year”
“If it’s them”
“She didn’t mention the bath”
“it looks like the same vintage, so I’m guessing they had that done as well”
“it looks like they probably put in around 60K”
“assuming they redid the lights in the living room”
“So I’m guessing the husband was laid off”
“It looks like they just added up their costs, included the realtor fee, added something to throw in the obligatory 3 years of condo association fees and listed it for that price”
“So they paid at least 1.5x what it would have cost to rent it”
“I’m guessing I/O loan”
“I never saw the inside of the house”
“I’m not 100% sure it’s them”
Do everyone a favor and keep the wild speculation to yourself. Some of your friends here tend to pick up your uninformed guesswork and use it as fact.
milkshake, commission tied to portfolio size isn’t necessarily a conflict of interest, is it? if your advisor doubles your invested money, they get paid twice as much. that seems like your interests are very much aligned, right? i will agree, however, that it seems like there should be more sane, risk-averse wealth management info out there for general consumption.
satchel, why do you consider octavia to be a better part of the marina? divis area has great access to chrissy field / presidio & chestnut shops. i guess i’m not very subtlely talking my book. 😉
Actually, he works in real estate. Google is your friend…..
Satchel, you’re right (of course) about the harsh economic realities slapping the current owners of this house back into fiscal reality, but it just seems wrong (to me) to actively root against them.
Guess I’m too much of a softie to be a capitalist…
@Bunk – Good to see you back. 1 Santa Paula is for sale – the one right next to it is for rent (I think it is 10 Santa Paula, but don’t quote me!). The wishing rent has been reduced from $3900 to $3500, and it’s been empty for months. That big house you looked at out on Darien (3500 sq ft 4/4, with two living rooms)? That’s still vacant at wishing rent $4800, now going on about 9 months’ vacant at least. I’ll post some funny stuff about 1 Santa Paula later, when it won’t be such a diversion from the topic of this post, as well as some rental insights from the last few months out here (didn’t realize you were still looking!).
@marina girl – sorry, I was just going by what I heard on the blogs, etc., that the 3324 Octavia property was in the “gold” part, not on liquifaction sand, etc. I don’t really know the area street by street, but I LOVE Crissy field for dog swimming, even after they supposedly cracked down (they never did in my experience….) Nice part of the city if you can walk your dog to that beach! (We’ve got an equally nice place for dogs out here – Ft. Funston, but you do sort of need a car to get there from most neighborhoods.)
BTW, does anyone know what happened with 3324 Octavia?
marina girl – Yes, there is a loose correlation between portfolio size and commission. In reality though an advisor doesn’t just double the valuation of your portfolio on their own : the market has to help ! Also note that the advisor makes a commission even if they make very poor choices. For example if S&P goes up 20% and the client’s account goes down 10% then guess what : the advisor still makes almost the same amount as they did the last year even though they made some stunningly poor decisions.
In most cases the portfolio will change a little over the year and the advisor will get a little more commission. Some advisors makes most of their money via kickbacks from promoting certain products as well as trade commissions. So an advisor acting in their own interest will have you trading often and into their favored instruments.
One way I could see a commission based system really be aligned with the clients interest is to base the commission on the difference between the portfolio’s gains and some equivalent “throw the darts” strategy. For example if the client agrees that they want to maintain a portfolio in 50% large cap stocks and 50% muni bonds then a blended average of all products available are compared against what the advisor actually achieved. If the advisor can beat random guesses, then he/she deserves their commission. If they fail to beat throwing darts, then what exactly are they doing ?
This is similar to the discussions here in the past on whether a realtor acting as a buyer’s agent would try to influence a higher price in conflict with their client’s wishes. Every time that comes up, fluj will correctly point out that the small difference in a higher price doesn’t really make much difference to the realtor. What a higher offer price really does is increase the odds that the offer is accepted, a transaction occurs, and the realtor can focus their energy on other clients.
oh, well sure, if you value a stable foundation, then octavia is the better spot. but i don’t think a stable foundation fits the character of the people in the marina at all. talk about an architectural disconnect!
my neighborhoodly take: seeing sales below $1mln bodes poorly for this place’s $1.25 pricetag. could be worse. could be my money!
Sigh, I just looked them up. I have the right couple, tho I clearly didn’t remember the husband very well, as I stated. Now I’m really sad for her. She’s the nicest, sweetest person you could meet.
Honestly Amused, I’m scrupulously honest and I state where I am making an assumption and people are free to use the information however they want. I can’t possibly see how you can find fault with that. It’s not like I gave out rosy January Medians for LA when the more recent February numbers were absolutely a disaster. Where were you, oh protector of the sanctity of the Internet, when that little tidbit came out, hmmm?
In any event, we now know (unless she lied to me about the contractors!) that they spent some money fixing the place up, so it isn’t quite an apples to apples comparison (tho the lack of permits made that assumption a reasonable one), and they are, in all likelihood, going to lose money, and that they really have very little annual appreciation if it sells at asking. Although it was clearly noted as speculation, the bulk of it is looking pretty close to accurate.
They are going to lose a lot of money, a lot of time, and the unpleasantness of living through a remodel. When I was their age, a $50K or more loss would have really stung. And that’s really, really sad for her. They are both so young. They are the first victims I know of in the city to get so royally screwed that way.
As much as I agree with Satchel’s basic premise that punishment is good overall, wow, does this ever hit home. Think of the nicest person you know getting hit with a 50K loss in their 20s, and you’ll see what I mean.
“Think of the nicest person you know getting hit with a 50K loss in their 20s, and you’ll see what I mean.”
How can someone in their 20s afford a $1.15 million property in the first place?
I agree with the sentiment that when you know someone who gets stung, you feel bad for them, but it is also true that the market needs to correct. I feel like I have done my part, and I think SS does it’s part to help educate people as to the risk and help them NOT make that decision in the first place, or at least understand the underlying risk.
I am in my mid 30s and have quite a few successful, well off friends in the same age category, and very few of us bought places in this ridiculous “buy or for ever be priced out” hysteria. I have exactly two friends who did buy in the city, one just sold his place for a great 150k profit in two years of ownership(in Pac Haights), but if you look inside the numbers, he really just broke even versus renting and the guy was anxious about it for a year. The other still owns and makes enough that it does not matter so much for him.
Point being, it is sad at the individual level for people that are getting caught up, but anyone buying 2 and 1’s over a mil are going to recover just fine. But, there is no reason not to trumpet prudence to anyone getting ready to jump off the cliff and buy. All reasonable data shows that unless you can stay in the place for a long time, it is not a very good investment of your capital. And, by the way, now you actually need capital to buy a place, a year ago, you really didn’t need much. I think that is the whole pint of this forum, at least it is for me.
So, tipster, I feel bad for your friends, but I don’t feel bad in general for those who have chosen poorly to follow the masses.
Satchel – Would love to hear about those properties, I am still looking and have seen all of them, can’t believe the Darien prop sits there like that and they won’t even contemplate lowering the rent, I asked.
“Protector of the sanctity of the Internet” doesn’t fit on my new business card. Can you come up with a pithier version? But the idea’s right.
Regarding the January Medians for LA (whatever those are) I’ve said it before, and here it is again: I really, honestly don’t give half a shit about the medians. I don’t interpret or argue numbers. I’m not particularly good at it. And unless blood runs in the streets, it’s an abstraction to me.
I’m glad you see yourself as scrupulous. But think again about this person — a person that you know, no less — and how you’d feel if you were her. If people were making uninformed public speculation about MY private affairs online, I’d be pissed. Especially if they were both assumptive and pity-fueled.
All they’re trying to do is sell their condo. Comment on the property, or don’t. But putting their personal information (however abstract) into play is not my definition of “scrupulous”.
Regarding 3324 #4 Octavia, it still shows as active-contingent since Jan 28 with the list price of $749K. Shows that it previously sold in July 2004 for $750K – a whopping $201K over list.
t’s not like I gave out rosy January Medians for LA when the more recent February numbers were absolutely a disaster.
Please. I cut and pasted from an LA Times blog.
Absolute disaster? Hardly. Similar to here? yup.
I still can’t quite come to grips with the concept of buying a $1.15M condo in your 20s. I spent most of my 20s as a penniless grad student swilling beer in dive bars in Cambridge MA… real estate was just about the furthest thing from my mind at that time.
In fact, I can’t quite come to grips with paying $1.15M for a condo in my 30s either. Maybe in my 40s…
I might be missing something here, but doesn’t the idea of someone just a few years out of school being able to buy a $1M+ starter condo strike anyone as even a teensy bit unusual?
I do agree with fluj we’re seeing no “absolute disaster.” We’re just seeing a long, steady price decline — maybe 1% a month, a little steeper if you buy Case-Shiller. About the same as LA.
@amused: Here’s what I have learned from this thread: if you are a beautiful twentysomething woman with a great life, condo, job, and husband, DO NOT talk adventures in real-estate with your jealous, creepy old neighbor/coworker 😉 😉
“As much as I agree with Satchel’s basic premise that punishment is good overall, wow, does this ever hit home. Think of the nicest person you know getting hit with a 50K loss in their 20s, and you’ll see what I mean.”
I would argue that a couple in their 20s has no business buying a $1m+ home, regardless of their income. But especially if they are speculating.
I would also argue that its better to get a tough fiscal lesson in your 20s, while you ahve time to recover and can hopefully guide your decisions as you mature.
I want hear the story about 1 Santa Paula.
I inquired about it last year, saw it on a broker’s site. The broker said the owner had it on the market, didn’t get the offer he wanted, so he took it off and would do more remodeling (making the artic rooms legal?).
Even at that time, it seemed that the owner spent a lot on remodeling, including some foundation work. (digged from propertyshark)
Well, so now it is back on the market….for $25K less (I believe it was listed for 1.4M before).
Satchel, if you have more story to add to it, please share.
Also, I’d argue that if these people are looking at anything more than just a small 50k loss (as a % of purchase price) and have no equity built into the place — they should really consider taking the place off the market — stop paying the mortgage and wait the 8 or 9 months it will take the banks to send them their notice of default. Cancel the phone and ignore the registered mail. We’re probably 3-4 months away from the Fed / Gov coming up with some rules to prevent people in default from losing their homes. What will be really sad are those ignorant people that bought high and sold low before the bailout comes to save them.
I’m not even kidding — the estimate is 15 to 20 million homes will have loans exceeding house value within the next 12 months. People are going to start walking away from homes and the social stigma associated with it will more than likely be mitagated bythe fact that “everyone is doing it”.
So these people should just batten down the hatches and stop paying the mortgage (or at least put the mortgage in a quasi-escrow) and see what the goverment comes up with down the road. There will be a time sooner than later where homesowners are going to start negotiating with the banks for some sort of forgiveness. At least they should go for a short-sale.
Speaking of which, wasn’t it Monica who represented that condo in Soma that was a short sale? What ever happened there? Seems these Monica Pauli listing always cause a stirr on SS. 🙂
I was just about to post the same thing about Monica Pauli. This discussion has kind of gotten out of hand. Once it devolved into a discussion about people being “punished” for buying a house, this thread lost all meaning.
The absolutely ridiculous direction that some of you have taken this thread to is really very disturbing. One could only hope that when one of you finds yourself in a similar situation that the rest of the world would not occupy themselves by speculating about your personal life, loss of finances, wealth, whatever – and kicking you in the teeth.
I completely agree with Sleepiguy. What a shame.
There seems to be a lot of schadenfreude about the sale price of this house. Why should anyone enjoy the fact that this young couple might be losing some money? “They shouldn’t have spent so much.” “They overpaid in the first place.” “Why is a couple in their 20’s spending $1.5M on a place?” They both may be well-employed, they may have gotten some help from their families, and
they thought the San Francisco market was a good investment. Let’s stop blaming them for the much larger problems of this economy.
Satchel is a doctor who looks at the screaming baby who has just put his hand on a hot stove and is happy the baby feels pain because otherwise the baby would soon lose his hand.
Those who sympathize with the baby do not want the baby to feel pain, but of course, in the long run that would be very bad for the baby.
If there were no pain this couple will feel for making such a foolish decision as to purchase a property when nearly every indicator said it would fall, more people would make even more foolish decisions than this couple did.
There should be consequences for acting financially stupid or irresponsible, because then everyone would just waste all of the planet’s resources and those who need them wouldn’t have access to them. I hate to see this as much as I hate to see a baby cry, but those of you who would attack the doctor for feeling glad that the baby feels pain are way off base.
I know and like the couple, but if they keep acting financially stupid, they are heading for a lot more trouble. This was an important lesson that they probably weren’t going to learn any other way. I’m with Satchel: this isn’t the garden of eden where the world has unlimited resources. Pain (or punishment – same thing) has an appropriate role here.
I like that! LOL! “that’s DOCTOR Satchel to you, young lady…” I think I’ll try that on a realtor at the next open house i go to….
OT – Due to popular demand from John, a few words about 1 Santa Paula, and it does show what has been going on out here.
Bought for $1M in October 2005, fully renovated (perhaps down to the studs – definitely many new walls and some walls removed to open up the kitchen etc), new systems, floors, room added in the attic, new kitchen and baths, light landscaping, perhaps brand new detached garage, some foundation work, new sound wall (it abuts a somewhat busy street, Portola, etc. All in all, a nice, solid 3/2 with bonus room in an EXCELLENT neighborhood. But NO view. Looks to me like a good (but not overboard and garish like many renovations) redo of a solid, smallish house. Potential to add some workshop space in the basement, or a family room (although you don’t need one). I’d guess $125-200K of work, judging by what the flipper (who I stringly suspect has a contractor “connection” – otherwise the work would have been more) initially sought last year.
It went on the market last year, initially at $1.5MM, later lowered to $1.395MM. My wife went to see it twice, and liked it a lot, so I told her to offer what she thought it was worth but to make sure she told the realtor that it was subject to an inspection. I never saw it then, but my wife offered the realtor $1.1M cash deal, no need for buyer’s agent, we’ll sort everything out quickly, etc. The realtor of course laughed. I actually thought that was a fair offer! I mean, the fair value of the property based on income of the area/rents, etc. was about $900K (at most) and I figured the flipper was in it for about $1.3M (after carrying costs), so we split the real loss and each contribute $200K to the credit inflation bonfire!
Well, even after lowering it, they got no bites, and so rented it for a year. Don’t know the rent they got – supposedly neither did the realtor who is now showing it – but I find it hard to believe they got over $4k per month, and likely some bit less.
Now, it’s relisted, initially at $1.399M, now lowered to $1.375M, so I went to see it out of curiosity and talked to the realtor a while. I knew the history of the place, so immediately she had to switch gears from the “we expect multiple bids” line. She said it hadn’t sold last year, and she didn’t know why! Can you believe these people? Hello? Maybe it was the *price”?? As in TOO expensive? This is the sort of analysis that garners a 5-6% commission (even though I know that is split up to 4 ways…)? Couldn’t they think up a better line than “I don’t know why”?
Anyway, the market is worse now than last year, and prices are down out here. Real estate is a funny asset. All you need is one person to fall in love with a place, and you can get an irrational price. But I’m guessing this can’t go for more than $1.25M. There are MUCH nicer properties available now at this $1.3 – 1.4M range around here. 70 Ravenswood at $1.4M (lowered, of course) has a SPECTACULAR view and is much more house, and 154 Maywood (just listed at $1.395M) is even nicer on BOTH counts (view and house) – I expect that one will go quickly. 40 Cerritos in a wonderful part of Ingleside Heights, with a double low, has been languishing for months at $1.395M as well. Believe me, two years ago, any of these properties would have sold IMMEDIATELY in an overbid situation, but today only 154 Maywood has that potential IMO.
So, I’m guessing 1 Santa Paula fails to sell and comes back onto the rental market, to join the house right next door (9 Santa Paula, I think), which has been vacant at wishing rent $3500 for some months now. Unless the flipper is willing to eat a capital loss. We won’t make a cash offer this year that’s for sure!
Sorry for the long digression.
I would rent 1 Santa Paula in a heartbeat at the right price, although on a busy street, I really liked the place, and I believe you do get a decent view from the finished attic.
What I just don’t get is that there are a few rental properties (9 Santa Paula and Darien) that are not only just languishing, but not even actively listed. The owners must just not care at all that they are losing out on a revenue stream. For such a nice and expensive neighborhood, that seems odd to me. Old money, I guess.
Bunk,
Take a look at the property taxes on that Darien property. The owner (who is in a nursing home) pays $900 per year or thereabouts. The grandkids are busy counting the $$ until the asset is theirs (with the grandfathered prop 13 taxes and stepped-up tax basis). Most people are too unsophisticates to understand the concept of opportunity cost. When that Darien property came on the market first (last August or so), I had a chat with the rental agent (who just happens to share the last name with the “owner” – hehehehe). I told him he was crazy if he thought that he would ever get more than $4k a month for the property, and likely less (they were asking $5500 at that time). He told me I didn’t understand the market, that rents were “surging”, demand is strong for large family properties, blah blah blah. Well, 9 months later, there it sits. He would have gotten $3.5k quickly. He could have always just raised the rent after a year (no rent control) if he thought he could squeeze some more out. So, at least $30K already gone in lost opportunity cost, and there it sits, going into a massive recession…..
I meant to post a while ago, but I didn’t realize you were still reading. A few weeks ago a number of nice Mt. Davidson properties showed up for rent on craigslist, in EXCELLENT spots (Pinehurst & Kenwood was one, the other near Upland right around there, and I think there was another too), all of which reduced their asking prices, including one that went down to $2750 asking (wishing). Did you see any of those? I didn’t follow up to see whether they rented or not.
Remember that $4.2K property in Merced Manor (3700 sq ft 4/4, renovated) that I always posted about when fluj talked about strong demand in MM? Yes, you guessed it. Empty, going on 6 months probably. Another house for lease also showed up on that street, and I think that one is still vacant too. Maybe some one who is local could drive by 21st Avenue between Sloat and Eucalyptus and post the addressees where the lease signs are?
Anyway, thank you prop 13 for ensuring an irrational rental market. It benefits people like me who can rent $1.3M-ish properties for $3.1K per month! It also ensures an artifical supply reduction keeping entry purchase prices high. Last, it is a nice subsidy from the pockets of new entrants to long-term residents. the new entrants are beting on the idea that prices will rise so astronomically that they will one day be subsidized handily. Good luck with that bet!
Satchel – I never left, just reading more than posting. I have had a great deal of fun taking some of the flavor you and other poster have put on SS and used against all my friends in finance. With them, things are always bright and sunny. Subprime was “contained”, until it wasn’t, then Fed cuts would get the credit markets working again, until they didn’t, there was never a solvency issue, until Bear fell apart in less than a week. It has been fun watching people back track. It will be the same with the real estate bulls, they are right, until they really aren’t. Anyway, thanks for helping me make better arguments, as there are things I don’t fully understand in todays tangled financial structure and you have helped enlighten me.
I also spoke with the rental agent for the Darien place, he would not even discuss a lower rent. Hmmm, that was 4 months ago, had he rented it to me for my price, I could have stayed for almost 2 years and then he would have just started to fall behind based on his market price assessment. And yes, he could always up the rent anyway. I don’t get it, they have never listed that place on Craigslist.
“the new entrants are beting on the idea that prices will rise so astronomically that they will one day be subsidized handily. Good luck with that bet!”
Or we are betting on our incomes rising faster then the miniscule amount that prop 13 allows taxes to increase. In 30 years when I retire I won’t have to sell my place (my HOA doesn’t allow rentals) when I retire to a no-income tax state but come back to SF every couple of months to visit.
Satchel what about 2750 Ocean Avenue, in contract within 11 days during the holidays and sold in January after a mere 32 days, listed at $1.395 and sold at $1.45M ? Or 2930 24th Avenue? Bought in ’06 for 1.089M, it underwent an interior remodel. Then it was listed at $1.499 and got into contract during the credit scare within 15 days, selling in under a month at $1.52M ?
Hey, if the only Merced Manor property on the market, 3035 25th Ave, listed at $1.429M, doesn’t sell for around that pricepoint (at only 2260 feet it is sort of pushing the $psqft envelope) you may have something to say about M.M. Otherwise you should really consider holding your peace on the subject.
Oh, by the way, that one is apples to apples. It was purchased for $1.287M in June of ’05 and it doesn’t appear to have been remodeled since.
@ Rillion, if you really think analytically about what i wrote, you’ll see that rising prices well in excess of wage inflation really IS the bet the new entrants are making, even if they do not fully comprehend it. But that’s far afield for this thread! Prop 13 is such a fun topic. I have a lot of ideas about it, and I am sure others do as well. I think SS should feature a post about Prop 13 – I think it would generate a flurry of ideas!
@ Bunk – the Darien place did show up periodically on craigs, first at $5.5K, then later at $4.8K. It’s funny, but back in August when I talked with the agent, he did admit that he wouldn’t get $5.5, but was “sure” it would fetch “around $5,000”. He may be right, if he waits long enough…
The game with all these guys is to snag a corporate relocation, so craigs is probably not the first place they think of. The cult/religion of real estate is so strong in the Bay Area (can’t really fault people for this – the secular rise of California in the postwar period combined with the secular advance of credit inflation we have experienced since the mid-1980s makes it almost impossible for people to apply analytical thought to the questions) that almost no one who can afford to pay $3K+ per month of his own dough in cash for an SFH in a non-glamour neighborhood hasn’t already bought a house (or two or three – LOL).
I want to agree with Satchel about Socketsite doing a thread on Prop 13 and how it changes the whole “investment” dynamic of real estate in California. In my firm, there are three people in the last 2 years who have been relocated to other offices (Chicago and Honolulu) and have kept their California homes and either rented them, or left them empty. Why not? Both were bought over 15 years ago, and their cost of ownership is so low. As for the Chicago transplant, he now RENTS in Chicago because it is “cheaper” because in that city HOA fees and taxes are so high. (2.35% taxes on property value usually re-assessed about every 3 years on average).