After almost ten months on the market, 2021 Webster closed escrow yesterday (5/20/08) with a reported contract price of $2,425,000. And while that’s 30.6% under what was originally being asked, it’s also 5.7% over what was paid for the property on 1/27/07 ($2,295,000). The sale represents annualized appreciation of 4.3% over the past 16 months for this single-family home in Pacific Heights.
Over in Noe Valley, 1024 Sanchez closed escrow a few weeks ago (hey, we do our best) with a reported contact price of $991,000. Purchased for $965,000 on 8/4/06, the sale represents annual appreciation of 1.5% over the past twenty months.
And the change in Noe Valley’s “median sales price” over that same period of time?
∙ From The Future To The Past (Tense): 2021 Webster Cuts Again [SocketSite]
∙ Is It Simply The New New Strategy, Or Is It Actually A(nother) Sign? [SocketSite]
With the purchasing costs, mortgage, taxes, these 2 apples-to-apples are under the water by a few points.
That’s not too bad.
both under water
How do you figure that 2021 Webster is under water — depends on what the commission was as well as closing costs. Either way, it’s close — and a 5+% appreciation in the last 16 months in this market is impressive no matter how you cut it.
So this represents flat prices over the past year or two. It also seems to jibe pretty well with what Dataquick and the top tier of Case-Shiller is showing too (i.e. – prices flatish to slightly down on a YOY basis).
It makes you wonder when that fabled 20% price drop is coming.
flat prices + high inflation = ???
Wow, can’t believe Webster sold for $2.45mil! The seller made out. Pretty good gain, given it would cost $8-10,000/month to rent, and you’d be -100% in that time period with nothing to show for it.
“flat prices + high inflation = ???”
Given that inflation is currently running around 3-4 percent, it still doesn’t equal much of a drop. I also didn’t realize that the price crash predictions were indexed to inflation.
“Wow, can’t believe Webster sold for $2.45mil! The seller made out. Pretty good gain, given it would cost $8-10,000/month to rent, and you’d be -100% in that time period with nothing to show for it.”
How much did the owners pay the bank over this time i.e. interest? probably $10,000 per month!
holding cost for webster = $14k/mo
increase in value = $130k
transaction cost = $140k+
seller lost money. could have rented for $13k/mo and come out ahead. only good for the realtors and lenders.
“I also didn’t realize that the price crash predictions were indexed to inflation”
some of them are, some of them aren’t. If you’ve read my posts I’ve been very clear that the majority of the losses would come due to inflation, and would come over a long period of time (5-10 years).
Other posters predict armageddon with 20%+ nominal drops in price. I doubt that but would not exclude it out of hand.
I have always thought that 2021 Webster is a phenominal property. A lot of the RE pron I usually yawn over but I love that property even though it has some quirks. I’m not surpised it went for more than its previous purchase price.
as for the owners losing money? they seem to have done ok with this property. certainly didn’t make any money, but also didn’t lose an unaffordable amount (if they could afford this property they can afford to lose a few bucks).
the only way they would have gotten killed is if these properties were unoccupied while they were on the market. (I have no idea if they were being lived in or not while for sale). Those monthly holding costs really add up…
I have a friend battling that right now. They don’t want to drop their price… but every month it’s another couple of thousand bucks they have to pay for an empty house. it’s something to think about for those of you out there selling… if your home is unoccupied you may want to consider dropping the price a little quicker so that holding costs don’t eat you alive.
and to beat a dead horse: it’s always so surprising how often these properties churn. 1024 Sanchez was owned a whopping 1 year 7 months before it was put back on the market. 2021 webster bought in January 2007. put on the market in Summer 2007. sold in spring 2008. I guess we just have to wait until later this year until it’s on the market again?
Kinda backs up what we already know about the SF market.
Single family home prices are pretty steady for the last year or two, no signs of any falls. But, yes, I hear you, probably some small falls in real terms.
Condos however, different story with definite signs of downward pressure on prices.
Kinda shows the near-total irrelevance of the Case-Shiller index for SF to be honest. SF is definitely doing alot better than even the top-tier of that index.
REpornaddict and SF-er, let me put both your arguments into a third one:
1 – These properties have a very high turn-over.
2 – Prices are flat.
Chances are a lot of them are “investment” properties or in plain english speculative conducts. Looking at the flat prices, people who jumped on those in 2006-2007 lost some money (a few 10s, no big deal but enough to feel a bit burned in retrospect). Maybe the people who bought could afford them, maybe they couldn’t.
In any case, this kind of short-term buy-and-sell demand will deplete itself as prices go on flattening out or straight-out decrease. That’s less demand for you. And you know the rules of supply and demand.
The only speculators who will win in this market will be the “sweat equity” investors.
REpornaddict, Case-Schiller excludes condos, which you note have fallen far harder than single family homes. So Case-Schiller likely understates the scope of the real hit in prices that SF has experienced. Take a look at the thread on 246 2nd street.
Observer:
Case-Schiller likely understates the scope of the real hit in prices that SF has experienced
Case-Schiller is down 17% YOY or something..are you seriously saying you think this figure understates the hit that SF has experienced???
With all due respect, I think you are sadly mistaken.
Assuming the seller put 10% down to purchase the property, and giving the seller the generous assumption that they got a rate of 5% on the loan, then the seller lost approximately $213,753.30 over the course of 16 months.
Compared with renting a property for $9k a month, the seller lost $91,120.93, or $5695.06 a month.
All figuring used to calculate these numbers here:
http://spreadsheets.google.com/pub?key=pM4Gw0s2zSeAkuPk0s7stYQ
Missionite, nice to hear from you! Thanks, once again, for pointing out the fallacy of the argument that paying rent is just money out the door “with nothing to show for it.” Net dollars out the door are net dollars out the door, regardless of whether one is renting or buying.
2021 Webster is a very good illustration of how the real costs of buying/owning are not obvious. On paper, it appears that the 1/07 buyer came out nicely ahead with this purchase (4.3% annualized appreciation — $130,000 gain). But once all the real costs of buying, owning, and selling are factored in, you show that this person suffered a substantial loss, and even with the decent appreciation this person would have been come out far ahead (strictly from a financial perspective) by renting.
I own my place, but with the continuing tremendous disparities between selling prices and rents, the only financial justification for buying in this market is the expectation of very significant appreciation. Does anyone really expect that in the next few years? Of course, there are many non-financial benefits of owning. And if you expect to hold much longer (7-10 years or more) than it is not unreasonable to expect appreciation, but it is just a guess as to what that will be. And appreciation is not guaranteed even in that timeframe given the very real possibility that we still have much farther to go before price declines turn around.
Thanks Trip,
I never left. I just go through phases of feeling like posting or not. Occasionally I am brought out of the woodwork by a woefully misinformed and deliberately arrogant comment such as we have here by Prime.
If you care for my perspective, you might also enjoy some of my posts here:
http://www.submedian.blogspot.com
I should add that even though it doesn’t make financial sense, I am currently preapproved for a loan, and am actively looking for a home for my family to grow into. The plan is to find a place we can live in for ten years or more.
However, I do not have any illusions about the financial soundness of this decision, and I recognize that I very well may come out behind from a financial perspective, even over a ten year period.