Purchased for $769,000 in February of 2007, 55 Sierra #C101 was bought back by the bank with a loan balance of $665,076 in February of 2009. A week later the Sierra Heights condo returned to the market asking $719,900.
After two weeks on the market the list price was reduced to $699,000; two weeks later to $669,900; two weeks later to $619,900; and two weeks after that (and five days ago) to $589,900. A sale at asking would represent a 23.3% drop in value since early 2007.
And while it’s not “prime” Potrero Hill, nor one of the nicer Sierra Heights units we’ve seen, it is apples to apples and a three-bedroom condo under $600,000/$415 per square foot.
∙ Listing: 55 Sierra #C101 (3/2) 1,424 sqft – $589,900 [MLS]
∙ New Developments: Sierra Heights [SocketSite]
Ouch.
How’s that for a value-added comment.
[Editor’s Note: Not so much.]
I can’t see what kind of loans were on this place exactly, but it looks like Wells Fargo ate it here. Good thing they have Uncle Sam to make everything better 😉
According to prop shark, Unit 201 (~1500sf) sold 9/2006 for $829K ($547 psf) and 301 (~1450sf) sold 11/2006 for $779K ($537). I hope these were all zero-money down deals. It made no sense back then for people to make downpayments, and anyone who did is now discovering why it made no sense.
I’m surprised C101 hasn’t been snapped up. After all, prices are only down 5-10%, so it would seem that there is some “instant equity” here 😉
More evidence that the basics got thrown out during the boom; location location location. I’ve been in this building and that awful central courtyard looks right up at the projects on the Potrero hillside. Don’t want to open up a discussion on public housing, but I think we can all agree it’s less than attractive. If prime areas are now $700-$800 psf, than no reason this neighborhood shouldn’t be a whole lot cheaper than that.
How grim and depressing! Looks like bad public housing trimed out in stainless steel. UNGLEEE!
WTF is up with the HOA fees on some of these places?
$540? For this?!?!?!
HOA = high cost of 24 hr security is my guess.
What am I missing that all these sophisticated folks posting earlier today are taking as a given?
Even if the previous buyer didn’t make a down payment (because “it made no sense back then for people to make downpayments”), just from it’s face, the previous buyer had a substantial amount of skin in the game at the time of the bank buy back:
(($769,000-$665,076)/$769,000)*100) = 13.5% of the total February 2007 purchase price was “in the first loss position”, to use that lovely phrase.
If I were at the bank, I’d hire a property management firm and lease this place for a while, if that’s possible. But I (obviously) don’t know anything about real estate.
Brahma, don’t forget second mortgages.
What Trip said. Prop shark shows that Wells ate it, in that it bought the property back (presumably) for the value of the first loan ($665,076). Any junior lien gets extinguished at the foreclosure sale.
From the amount (considering the fees that get tacked on in foreclosure and leading up to it) it looks like the first senior Wells loan was fo 85% of purchase. Maybe it was an 85-10-5 sort of deal, where the purchaser put down 5% (obviously I’m just speculating). If that’s the case, that’s not too bad. You can usually live for free long enough while the default/foreclosure process unfolds to “recoup” the downpayment value. Could also have been a straight 80/20 deal with $0 down, and the payments are so behind that the fist loan has accreted to the roughly 86% shown by the foreclosure buyback. As I said, I can’t see the loans, but I am sure that there are some plugged in people who can. In that case there is nothing to “recoup”.
I’ve got an acquaintance in Novato who made the terrible mistake of putting about 10% down on $750Kish place back in 04 or 05. But she feels like she’s broken even already – she’s only made 2 of the last 14 payments (and no taxes either), and the house in now up as short sale and is getting *Multiple Offers!!*, around $370-390K. The USG is eating that one directly, because the original banksters were Indymac.
I know it seems immoral to many. Not to me. This was all a big game – the USG and the banksters set up the rules, you either play by them or not. The real immorality was inflating credit to the point where average people had to enter into a very dangerous game (that they didn’t understand) just to obtain the sort of housing that their parents would have found no great burden. You could inject your own ideas of personal morality into the whole process, but imo that’s just being a sucker. The rules were set in the paperwork – no need to add more after the fact 😉
Thanks Trip and LMRiM, I overlooked the option of a second. Interestingly…
LMRiM said: “This was all a big game – the USG and the banksters set up the rules, you either play by them or not. The real immorality was inflating credit to the point where average people had to enter into a very dangerous game (that they didn’t understand) just to obtain the sort of housing that their parents would have found no great burden.”
You still always manage after a year and a half of commenting on the exact same subject matter to put in a new point in like this that always hits home. Great stuff.
At some point I’ll pick up on that guitar discussion as some thread here peters out. Just a bit late here and all on my side of the Socketsite–plus super tired as have found myself an accidental vintner and it is tough stuff. Cheers.
$415/square foot is impossible. According to developers and realtors there is a floor to how far condo prices can fall in San Francisco because the cost of building is so high here that prices can’t fall below that point otherwise the developers would lose money…
https://socketsite.com/archives/2009/04/one_rincon_hill_update_70_sold_and_reneging_on_developm.html
Wow, Brahma, all this tightening of underwriting standards surprises me. It makes business sense, of course, but not bailout sense. As long as the lenders can fob off the loans to the GSEs, what do they care? Perhaps there is a realization that all the knife-catching going on is just setting things up for yet another round of foreclosures and the cheap money used to (largely) clear out the subprime phase should now be cut back before we go too far again.
Check out this hilarious article in the bog roll they call “The Potrero View”.
http://www.potreroview.net/news10149.html
“WTF is up with the HOA fees on some of these places? $540? For this?!?!?”
I agree it sounds high, but maybe it includes insurance. I pay a little over $200 in Cow Hollow for a newer, larger condo, but that does not include the insurance.
“what do they care”
Because if the loans go south in the first year, the originating bank has to buy them back. And the GSEs are absolutely exercising that put option these days, because so many of them are going bad.
Note that Wells is doing this mostly for broker-originated loans (i.e. the wholesale division) because the brokers can advise the borrower to lie. They have probably taken away all incentives for their in house people to do that, so they don’t need to be as strict.
Ahhh, tipster, I didn’t know that. With the reports on high defaults (many with not a single payment made) on recent loan vintages, that does help explain things.
If I were at the bank, I’d hire a property management firm and lease this place for a while, if that’s possible. But I (obviously) don’t know anything about real estate.
banks are not in the business of property management. Banks are in the business of lending.
A bank has a hard time doing things like property management, if for no other reason than it is difficult from an accounting and regulatory standpoint. details are complex and not worth going into here, especially since I don’t know them well enough to comment… but REO’s cause issues when you’re talking about accounting, capital ratios/requirements.
I don’t think you can transfer an REO off the NPL list just because you have someone renting in it.
$415/square foot is impossible. According to developers and realtors there is a floor to how far condo prices can fall in San Francisco because [wishhful economics omitted]
There is absolutely no floor to prices, which is why you can buy a home in Detroit for $500.
I think most SSers will agree that this unit is no more than average, in terms of desirability, for all owner-occupied units, both SFHs and condos — in this zip code.
Now, what purchasing power is available to buy this inventory? If we assume that homeowners form the top 1/3 of incomes, then, in this zip code, the “middle” of this third corresponds to households making between 100-150K.
Assuming a price to income multiple of 3, that corresponds to a purchasing power of 300-450K, or about $200-311/sqft.
In other words, if you are going to be addling “middle-ish” housing inventory to this particular zip code, then you should be aware that the available demand for your property is $200-$300/sqft.
If you cannot afford to build at these prices, then find another line of work, because the fact of the matter is that at their current incomes, the households in this zip code are housed, so someone is able to provide them with housing at a price that they can afford — it’s just not you.
Now, if you believe, as I do, that this unit is actually closer to the bottom third of all inventory, then the purchasing power drops to 75-100K income range, or about $150-$200/sqft. My prediction is $200/sqft will be the real long term “value” of these units, unless the demographics of this zip code change substantially.
tipster wrote:
heh…a put option…heh…I love it, a huge chunk of the U.S. Economy is turning into just another securities and derivatives market. 🙂
Obviously I’m not a banker, but one could observe that the practice, common during the bubble years, of slicing, dicing and julienning a package of loans and then selling it off as a set of mortgage-backed securities is probably either no longer an option or a severely constrained one since the market for those types of securities has contracted significantly.
Btw, the average FICO score in California is 690.
I like this complex. The western part of the building has large flats, with good open layouts, large closets, and sizeable bedrooms and bathrooms. For a budding family, its a smart choice (at the right price point)
If you cannot afford to build at these prices, then find another line of work, because the fact of the matter is that at their current incomes, the households in this zip code are housed, so someone is able to provide them with housing at a price that they can afford — it’s just not you.
I think it’s more like at a certain point, and for a period of time, nothing will get built. Not, “get out the kitchen if you can’t stand the heat.” If nobody can afford to build and turn a profit nothing gets built. Existing inventory is a different component and you seem to have conflated the two.
Robert, I could be wrong but I’m fairly certain Michael’s point was made in sarcasm. It has been often stated here that prices at [pick your development] cannot fall below $X/sf because otherwise the developer would lose money, and I think he was poking fun at that position. Obviously once costs are sunk, they are sunk, and they cease to have any bearing on where the market will value (i.e. pay for) a unit.
Your point about the inherent connection between income/purchasing power and prices is certainly valid, and this declining market is a rude lesson to those who ignored this point in recent years or who failed to realize that the unsustainable increases in purchasing power caused by no-down, no-doc, I/O, neg-am easy money was, in fact, unsustainable.
This building is next door to projects. Literally. Gunshots in that area are pretty regular occurrence at night. A site of triple homicide 2 years ago is half a block away. The building had an incident when a bullet hit through the wall into the kid bedroom. I am sure disclosing all that during the sale did not help to attract buyers.
I’ll echo Matt’s sentiments. I drove by this project yesterday, and it is literally right next door to the projects. It’s a shame, because it looks like a fairly nice development with some good views.
As I was driving down and about to make a left onto Sierra, a couple of locals drove past me in a Mustang and I coule have sworn the FRONT window was tinted.
In light of the last 2 comments, I thought I will mention this $1M+ listing on the same block, a few houses down around the corner:
http://www.redfin.com/CA/San-Francisco/580B-Missouri-St-94107/unit-B/home/1851063
I foresee large reductions… new neighborhood comps.
Apparently apt 101 sold for $569K
Down 26% from 2007.
They should erect a monument to the 2007 buyers in SF: “Never in the field of financial bubbles have so many sacrificed so much for so little….”