The sale of 260 King Street #957 closed escrow yesterday with a reported contract price of $645,000 ($584 per square foot).
Official industry statistics will report yet another over asking sale (by $100), while we’re left to report a new Beacon “comp” at roughly 25% less than what was previously paid (tax records suggest a price of around $860,000 or $782 per square foot). Do keep in mind, however, that this bank owned sale (note 1) didn’t include any appliances or even many of the fixtures (note 2).
And as always, let’s not forget those invitations to the housewarming, we’d love to see what you did with those shades.
∙ Bank Owned (With Big Windows) At The Beacon: 260 King #957 [SocketSite]
∙ Window Coverings: Can You Beat The Heat And Help A Reader Out? [SocketSite]
“Dead Cat Bounce”, still no sign of bottom out.
Always have people like to catch the “Falling Knife”.
Wait until the end of second snow season at Tahoe.
I don’t see how a 25% off previous purchase price is a dead cat bounce, but falling knife might work here, especially if the new owners need to spend a lot to replace everything removed from the unit.
but let’s be real, with the economy sliding further towards recession with the release of todays job numbers, which were not only down for June but revised May’s numbers down as well, we will likely start to see an acceleration of price declines as the newly unemployed struggle to make payments and the still employed cut back on spending creating even more job losses.
It’s gonna be a long second half of the year.
There was a time when jobs drove real estate: when the aerospace industry collapsed in LA, prices fell.
Then, for a few glorious years,jobs didn’t matter: toxic mortgages took the lead and drove prices ever higher.
Now we have neither. SF office space absorption will surely be negative (i.e. no hiring) and even Wachovia has now done away with option ARMs and is desperately trying to wean people who have them off of them.
The first mortgage was only $533K, well under the 645 that was paid. This wasn’t the case of an option arm: just someone who got in over their heads (with a second mortgage and a HELOC, no doubt, and probably using the HELOC to pay the mortgage for awhile) and couldn’t sell when they needed to. Most likely job related.
It’s hard to see how even the lower price these people paid is sustainable in the new, new, new economy.
So much for the $1000/sf SOMA condo myth. Anyone “mark to market” valuing a condo around here should knock off 25%.
Even though this is a large unit, it’s a very awkward floorplan (i.e. long halls, skinny living area/hallway). Evaluating this unit on a square footage basis would not be prudent.
I predict Mission Bay units will be $1000/sf with in 5 years.
I have no data or physical evidence to back this up but that seems to be the way this blog works.
I’m also not an economist, real estate agent, bear or bull and I approve of this message
good point Paul. I’ve seen several remodels while that were up to 2,500 sq/ft were nothing but small narrow corridors leading to many small little nooks and crannies.
Doesn’t matter if you evaluate it using dollars per square foot or renminbi per ping. The fact is it sold for 25% less than last sale. The floorplan is as awkward today as it was during the height of the bubble.
And I don’t believe the lack of appliances is skewing the stats that much. From what I can tell, nothing has sold at the Beacon for over $800 per square foot since last October. All sales since have been in the $700 or even $600 range. Comps in ’06 and ’07 were easily in the $800 and even $900 range.
“badlydrawnbear:I don’t see how a 25% off previous purchase price is a dead cat bounce…”
Dead Cat Bounce mean the Sales Volume, not the price.
It’s a one-time deal, therefore I don’t think we can deduct anything from this. It will hurt the comps, no doubt, but the SF is not yet swamped by REOs like some other BA zones.
I’m still surprised that a corner unit would go for that price.
This is not truly a “comp” in the appraisal world because this is a foreclosure sale. Also, this is a west and south facing unit with a glass wall, and is the hottest(I mean temperature) unit at the Beacon.
Well, the issue is: in distressed areas where forclosures make for a big chunk of the sales, can appraisers still remove foreclosures from the comps?
After all, it’s a mark-to-market action.
Comp or not, a prudent buyer would surely be looking at this sales price (taking into account the lack of appliances etc) if they were interested in making an offer on a unit in this building.
Anyway, the whole building is challenged in terms of ventilation, imo, although clearly this unit is in the worst spot in that regard.
Foreclosure sales are not truly comparable because the seller is under an urgent necessity to sell. The interest of the bank is to recover the remaining balance of the loan and is not attempting to get the maximum amount that a property can potentially fetch in a market in which neither the seller or the buyer is under duress. Furthermore, the foreclosed property is not being marketed to the same extent as other properties in a regular sale.
This is the reason why a professional appraiser would contact the seller and buyer to find out the circumstances behind a sale, and does not just simply gather the comps and render an opinion. In addition, although the use of a unit value (i.e. the price per square foot) to appraise a property is a typical approach, the configuration of the unit also enters into the equation.
The present market tells us that in the Mission Bay and South Beach area, a one bedroom unit ranges between high $500,000s and high $600,000’s, and a 2bd/2bth unit with a mediocore view ranges between high $700,000’s to mid $800,000’s, and a 2bd/2bth unit with a spectacular view and an average size would range from the high $800,000s to the mid $1,000,000’s. So, the point is, the size of the unit is only one of the determinative factors of the price, but it does not tell the entire story. In this case, it is a combination of the multiple factors that caused this sale to commsumate at this price.
First, the buyer overpaid in 2005 during the frenzy and not knowing how much heat this unit could bring because of the western and southern exposure and the glass wall. Second, this is a distressed sale. Third, this is a one bedroom unit. Fourth, the less than ideal configuration. Fifth, the less-than-pretty presentation with all the appliances gone. Sixth, the unit has no blinds or curtains, the heat in the unit was accentuated at the time it was being marketed. With a combination of all these factors, the price it fetched was not out of the ordinary and it’s really not a reliable indication of the pricing direction in this building or in this neigborhood.
“Foreclosure sales are not truly comparable because the seller is under an urgent necessity to sell…”
Does this work in reverse from the buy side ? For example suppose a family has been relocated, doesn’t want to rent, and school starts in a month. They parachute in for a few days, look at a sample of properties, and pick the best one, possibly overbidding so they are running out of time and don’t want to repeat the procedure.
this is not representative of anything. so many *’s related to this posting that it renders it pointless. No applicance or fixtures. Bank held. Strange floorplan and least desireable views of the entire bldg, etc.
Yeah, what is the deal with people trying to compare properties that are *down*? Don’t they know that only works when prices go up?
When prices go down it’s because foolish people got caught up in an irrational market and paid too much for a lousy property.
In contrast, when prices go up it’s because smart buyers got on board in a stellar, appreciating market and see the true value of a wonderful property.
“Does this work in reverse from the buy side ? For example ….”
The analysis of a sale certainly applies on the buyer’s side also. In order for it to be comparable, the buyer similarly should not have any unusal necessity to buy. In the example you gave, that is not duress or an unusual necessity.
Every buyer is motivated by one reason or another to buy; the motivation needs to be one that is atypical in order for a question to be raised about the reliability of a market transaction as a price indicator. The mere fact that there is “overbidding” does not mean it is not market price. In bidding for a property, the buyer is simply a market particpant; he is valuing the property based on the information he has about the property. So long as the buyer at the time of the bidding possesses full knowledge of the market and the nature of the property, the final price would be truly reflective of what the market would bear.
I think Steve’s post is indicative of the mindset of a lot of appraisers over the last few years: always looking for justification for keeping comps as high as possible, but rarely doing the reverse.
And, of course, a competent appraiser would have deduced back in ’05 that units in this building had cooling issues. It’s not exactly rocket science to deduce that all that west- and south-facing glass with no cooling and little ventilation would be problematic. So how was the purchase price justified back then to the lender?
The fear of being priced out forever of something that “always goes up” is what mostly forced people to stretch their finances and go to exotic lending vehicles.
There was panic buying at some point in hot markets and nobody to cool the prospective buyers (especially not the sellers and their agents, not the lenders).
Not that I am feeling particularly verbose today, but just to add another point, this is a good example that the pricing of different units in a building can vary daramatically. There are still many units which have been or are being sold above the original prices in this market. It lends further suppport to the age old wisdom in real estate that location, location and location (even of units within a building) are what dictate pricing. The south/west facing units in this building to a knowledgeable buyer would not be worth as much as a north facing unit, not only because of the view, but also because of the sun exposure.
I don’t see much sign of strength anywhere in The Beacon. Looks like nearly every sale in the last six months there has been for less than the seller’s purchase price. I do, however, believe this is a particularly “challenged” building and may not be indicative of the area as a whole.
Doesn’t matter what a seller’s motivation is, doesn’t matter if its foreclosed or not. If it got SOLD, that means you can use it as a comp, thats what the market rate is….
If a next door unit has better views/better cooling/japanese toilets, that should be added on top of this comps. Ofcourse each unit has its own market value. You only need one over-bid buyer to change comp.
“Doesn’t matter what a seller’s motivation is, doesn’t matter if its foreclosed or not. If it got SOLD, that means you can use it as a comp, thats what the market rate is….”
Do you think if a parent sells a property to his son at half the market rate because his motivation was to treat the transaction as part of a gift, that is “market rate”? Do you think if a grandfather buys a house from his granddaughter at twice the market value because he intends to regard the premium as part of a gift, that is “market rate”? Do you think if lobbyist pays twice the market value for a house to a politician because he wants to bribe the politician, that is “market rate”? I can only wish you luck in your purchase of properties.
yo stevo,
what about the appraisal?
btw, you said
“I can only wish you luck in your purchase of properties”
thanks for that.
Yes, Yes and Yes. Thanks for your wishes. I am still searching for a father/grandfather who can buy me that property.. Does MLS show who bought/sold property for whom and what’s their relationship and reason for buying/selling property? No.
btw I did not know banks adopt people, and give them a home as gift….
There are always individual transactions which you can debate on, but as a whole it will even out.
I have a friend who bought a home in southbay late last yr. Now, he says his realtor screwed him by asking him to out-bid. He somehome found out that the other bid was a sham, and both seller realtor and his realtor are is cahoots. Even though I pity him, I would say he is an ignorant buyer and it was his fault. Will this be considered for comp. Ofcourse Yes. May be many of the transactions are like this. So, motives/relations/stupidity/REO’s doesn’t matter. Its market rate right now….
This would be a great pad for a train-hopping hobo. Yikes.