CFAH

25 Mercedes
Two years ago 25 Mercedes Way was listed for $1,895,000 and sold for $2,200,000. Six months ago 25 Mercedes Way returned asking $2,099,000. And five days ago the sale of 25 Mercedes Way closed escrow with a reported contract price of $1,765,000.
That’s a $435,000 (19.8%) drop, not including the cost of that new kitchen, for this Joseph Leonard designed Arts and Crafts home in District 4 (Ingleside Terrace).
We’re Buying It (The Description Not The House) [SocketSite]
Still An Architectural Work Of Art, But Still A Bidding War To Be? [SocketSite]

Comments from Plugged-In Readers

  1. Posted by anonn

    25 Mercedes sold last week for 1.765M. It really did take a 20% hit since 5/17/07. Wow. Think there was a competition premium? It was listed for 1.895M last time around, so it has just sold for 6% less than its last list price. And before anybody tries to paint the last listing pricepoint as manipulative, have a look at values in Ingleside Terrace for houses over 1.5M dating back the last 10 years. It was very much in keeping with traditional neighborhood prices. But still, 20 percent in two years is very rough.

  2. Posted by Joe*

    So, anonn, are you seriously arguing that the market is down only 6% rather than 20%? Of course not. This is simply a non sequitur. The former “list price” is irrelevant because (1) “list prices” change as properties get re-listed, and (2) list prices reflect all sorts of strategies and have little to do with the anticipated selling price; you know full well that sellers expected bidding wars, which is exactly the “competition premium” you talk about.
    The actual market price today is down 20% from two years ago. You can call it a “competition premium,” a “bubble,” or whatever you want. They all mean the same thing. Real prices, what buyers actually have to pay to buy a place, are now much lower than they were. One can argue about how much lower and how the crash is distributed across the city. From this data point, down 20% looks pretty reasonable in nice sections of town.
    * (f/k/a “anon.” Now, I’m not “anonymous” anymore according to the logic of some).

  3. Posted by LMRiM

    20% loss for 25 Mercedes is about in keeping with the average value decline – apples to apples – in that part of District 4. 25 Mercedes had some remodeling (new kitchen and maybe some refurbishing of the bathrooms) since last sale, but it’s basically an apple imo.
    Assuming standard sorts of transaction/selling costs on the way in and way out, and a lowball of $25K for the kitchen and general updating, it’s looking like at least $550K died and went to money heaven here. (I was in the house when it last sold in 2007 – I’m pretty sure that I recall a wall that was removed for the kitchen.)
    It is sort of shocking to see this sort of loss, but that imo is only because so few people are willing to realize the loss. Most places out there purchased in 2007 would show similar losses imo. But many are pulled off the market when they fail to sell, and many purchasers of course resign themselves to “waiting it out”. Good luck.
    LOL about the “competition premium”. The house was deliberately underpriced in 2007. The buzz at the open house was that it would generate huge overbids and be sold instantly (which is exactly what happened – I think it was the obligatory “2 showings and offers Tuesday” sort of spiel).
    Anyway, congrats to the seller here. $1.765M is still at least about $500K above intrinsic value for the house, and so it shows that there are still buyers out there willing to catch knives. I’m sure that if I had met the 2007 purchaser at the open house (maybe I did?) and told him that intrinsic value was no more than about $1.25M and that therefore any purchase was extremely risky, I would have been called a “fair value baloney salesman”, lol.
    BTW, there’s no reason to think that the current purchaser is not “overpaying”. And I actually think (from living out there) that it would have sold for even more than $2.2M in 2006.

  4. Posted by Geo

    Thanks for the info on 25 Mercedes. It is a great piece of real estate, and at $440/ft² for an architecturally interesting piece with a good view seems reasonable.
    It is a tough outcome for the sellers on top of everything else.

  5. Posted by anonn

    Actually, like I said, the 1.895M list price is very much in keeping with traditional price structuring for finer homes in Ingleside Terrace. The 300K+ overbid is the anomaly. Look it up if you do not believe me. I really don’t need to “argue” anything. As for “arguing” that prices are down more like 6% than 20% for much of the city, sure, I’ve been saying that all along. LMRiM says that 20% declines in that neighborhood are what’s occurring these days. Well, I see precisely two sales since 10/15/08, one of which 245 Ashton, is a different sort of home but basically an apple + a kitchen “update.” It sold for only 8K less than it did in 2007. Regardless, I think we can all agree that spending 300K over asking for any object of value is a bad idea if the endgame is to hold it for two years and then test the market. I don’t care if it’s a painting, a car, a musical instrument, or property. Of course we don’t know the backstory here, and calling something an “endgame” in hindsight isn’t fair.

  6. Posted by flaneur

    Not exactly an Apple to Apple comparison. NoeValleyJim pointed out that “the seller, who is an architect, decided to hold onto the adjacent lot. The adjacent lot is smallish, about 3000 sq ft, but there is no reason that someone could not build something there, and if they did, it would dramatically change the feel of the house, which is currently set away from its neighbors.”

  7. Posted by Debtpocalypse

    Nice apple.
    Reminds me of something Mick Jagger once sang of apples: “Don’t mind the maggots.”
    “Shattered, shay-oobey….”

  8. Posted by Trip

    Yeah, that place was pretty expensive to live in. Using missionite’s calculator (which seems as robust to me as anything out there), it looks like total cost to own this place for a little under two years was about $780,000, or $35,000/mo.
    But I agree that the owner did well (from the standpoint of cutting one’s losses) by selling now and at the price he got.

  9. Posted by LMRiM

    Sorry you didn’t get a chance to pick 25 Mercedes up at $1.5, Geo. Patience, you’ll find an equivalent for less I bet.
    It’s a beautiful house, and I like the area a lot, but $2.2M in 2009 gets you a renovated large house right on St. Francis Blvd like 340 St. Francis (larger than the indicated 3250 sq ft). I think 340 St. Francis sold after a long time and a price reduction – do you know what it sold for?

  10. Posted by LMRiM

    flaneur,
    The lot mentioned by NVJ was retained by the 2007 seller. So, there’s no difference 2007 versus 2009 regarding lot size. The only real changes were kitchen (remodeled) and some general light updating from what I can tell.

  11. Posted by anonn

    …” NoeValleyJim pointed out that “the seller, who is an architect, decided to hold onto the adjacent lot”
    Oh, that’s a big deal. Sorry. That’s the problem with resurrecting older threads. Even though you read it before, you should probably read it through again. A vacant 3000 foot lot in that area could probably get several hundred K pretty easily.

  12. Posted by Geo

    BTW, there’s no reason to think that the current purchaser is not “overpaying”.
    True, but there is no reason to think they are over paying. The buyers are certainly taking a view of the market based on their info, judgement and time horizon. They may be right, they may be wrong in the end, but that is what makes a market.
    If they have a stable job and plan on living there for 10 years+ and that is certainly a house an neighborhood to do it in, then not such a bad take on the market – figure another potential 15% decline from here, and then 3% appreciation/year it gets interesting. Also depends how much “rent” you are willing to pay to live and enjoy such a fine home. We all have different tolerances for that as well.

  13. Posted by LMRiM

    A vacant 3000 foot lot in that area could probably get several hundred K pretty easily.
    Uh oh, I’m sensing an attempt to derail the thread with nonsensical information 😉
    The lot mentioned by NVJ was retained by the 2007 seller. 25 Mercedes has the same lot footage in its 2007 sale and in its 2009 sale. As I mentioned to flaneur (ignored by anonn, who imo is mostly interested in “explaining away” a 20% decline), there is no “apples to apples” issue with regard to lot size when the 2007 and 2009 sales are compared. Just a 20%+ value decline (granting some small value for the remodeled kitchen), otherwise a 19.8% decline.

  14. Posted by anonn

    Don’t be like that, man. Seriously. I read flaneur’s post. I saw that it was NVJ who said that, and I assumed it to be true. I’m just like anybody else who doesn’t research each and every thing that gets said on here. And that’s the problem with blogs. Bad information gets internalized if you don’t watch it.
    I’ll take your word for it, OK? Your post was simulataneous to mine. I did not pointedly ignore it.
    Lose the arch and condescending tone for once, guy. I’m not trying to paint anybody as ignorant or derail anything. This sale is a very interesting property. I wanted to talk about it. Sorry!

  15. Posted by Geo

    LM: 340 St. Francis has not closed escrow that I have seen.
    I will try to be patient, but that was a fine house at an ok price point for the market right now I think.
    On the lot next door, as though the neighbors would not fight that tooth and nail…

  16. Posted by aj

    did anyone see that the house on Chestnut and Lyon that was listed for $1.7 sold for $1.4 (almost 20% under asking)

  17. Posted by tipster

    I agree with Anonn. The market has NOT gone down. The “competition premium” has just gone away. See how easy that is, because, as we all know, real estate never actually declines in value.
    It is only the “extras”, like the “premium” that is really nothing more than the difference between asking price and selling price, that has gone away. Sure, you can’t get a “premium” any longer, but otherwise, prices have NOT gone down. See how easy that is!
    Now, let’s say, for example, this home was priced at $1. Because there is no longer a competition premium, it would sell for $1.
    If none of this makes sense, it’s because it doesn’t.

  18. Posted by ex SF-er

    (f/k/a “anon.” Now, I’m not “anonymous” anymore according to the logic of some).
    Welcome *Joe. I personally am one of those who like that you named yourself. not for anonymity reasons, but for continuity.
    posting under a unique moniker allows us to know the difference between you and other anonymous posters. it makes dialoge easier. it makes the threads more valuable. it makes cross-thread ideas more interesting and valuable.
    it also lends weight to your arguments IMO. If you under your moniker consistently post a certain way then we can all use that info to better understand your typed words.
    some people are malicious, some are idiots, some are wise or knowledgeable, some are trolls. If you post consistenlty under one monider then we can help to understand what you’re really saying behind the typed word.

  19. Posted by 45yo hipster aka PAM-LiM

    I’d like to see more data on sales in that hood plus/minus 6 months (when this went for $2.1 with the overbid.) Cause I am also sensing that the buyer in 07 overpaid. Withought looking at those comps you can’t assume a 20% drop for that hood or for prime SF. You can only claim that that specific house dropped by 20%, and if the buyer overpaid, it tells you little about overall price declines in that hood. I would not dismiss what anonn is saying, but we need to see good data first.

  20. Posted by tipster

    aj,
    Do you have an address?

  21. Posted by steve

    This is why I like apples. There’s no “mix” or “beauty pagent effect” to argue over. Just a house and, assuming it was well advertised, a market.
    Of course, you can debate what that apple means for a street, a district or a city, but the overpaid argument seems silly. It was a comp on the way up, inflating the bubble to record size; it’s a comp on the way down.

  22. Posted by resp

    schadenfreude central.
    we’ll the last poster of the 2007 thread was certainly correct that the original bathrooms were still working. lotta money fit down that toilet.
    interesting that no building permits for kitchen or anything else here were pulled in recent history.

  23. Posted by Geo

    Now only if 43 Clifford Terrace would have a reasonable price, I could get my A&C/Deco dream house..

  24. Posted by anonn

    ” The market has NOT gone down.”
    But I didn’t say that. I said it has gone down by about 5 to 10 percent. I also said — repeatedly — that the 1.895M list price the last time around was in keeping with other fine homes in the area, and that 305K over asking was the real exception. You can dispute those facts if you like, Tipster. LMRiM said that the 1.895M list was a teaser. Maybe it was given that particular spring’s market. Perhaps there happened to be 10 buyers for that particular neighborhood at that moment in time — but it sure doesn’t appear to be a teaser price in the context of the neighborhood’s historical performance. Look at the prices for 4-E 1.5M homes over the last 10 years. It’ll display data that is very much in keeping with what I’ve said. Only two other properties ever even went for 2M+ over there, both on Cedro, and 99 Cedro went for 2.4M and 95K under asking in June of 2008, and 135 Cedro went for 2.95M with an asterisk in May of 2007.
    You guys all complain when I get acerbic. But here you are. Three or four derisive blasts already this morning, and counting.

  25. Posted by Salarywoman

    You don’t need permits for a new kitchen unless you are changing something (plumbing, electrical) inside the walls, floor or ceiling. Ditto for new bathrooms.

  26. Posted by sparky-b

    Salarywoman,
    You need permits for kitchen and bathroom remodels. You don’t need drawings, but you need permits.

  27. Posted by location

    “I also said — repeatedly — that the 1.895M list price the last time around was in keeping with other fine homes in the area, and that 305K over asking was the real exception.”
    You couldn’t buy this property for 1.895M two years ago. You needed to pay 2.2M. Since then, the price of this home has dropped 20%.
    You are probably right that listing prices are down 6% from their peak, but I’m not understanding why that is relevant. The important thing to me would seem to be sale prices.

  28. Posted by anonn

    Of course that’s true. It took 2.2M to take this one down. But 1.895M sure looks to be in keeping with what the neighborhood had ever supported. If people are going to spend 16% over asking and then sell within two years time, a poor result like this one shouldn’t be at all surprising. Is it surpsing to anybody? I doubt that it is. Looking at what this neighborhood has ever done, such a move might not even have panned out had they bought in ’05, and sold in ’07. Because the neighborhood didn’t really support it … 2.2M was never going to bring ’em in like 1.895 would! I also wonder how many of their “losing” competition wound up buying something else and are still living in their homes?

  29. Posted by EBGuy

    From my post on March 15, 2009:
    Okay, here is the “real SF” using the REO Ratio* as determined by stats from Trulia. Anything north of these neighborhoods is in, anything south, including these neighborhoods, is out.
    REO Ratio (1 or greater) line from east to west:
    Hunters Point, Silver Terrace, Portola, Mission Terrace, Ingleside, Ingleside Heights

    Ingleside Terrace now has 2 foreclosures to 2 homes for sale; therefore, it is now longer part of real SF (which coincides nicely with this confirming sale). Sunnyside is now also persona non grata in “real SF”.
    The Outer Richmond and Sunset districts are still in “real SF”, but will probably be the next two neighborhoods to fall.
    * REO ratio = #foreclosures/(#resales+new construction)
    #foreclosures on Trulia captures current bank-owned as well as NOTS and NODS (which may not end up being foreclosed upon)

  30. Posted by Legacy Dude

    …and 1.895 was never going to bring them in like 1.5 would! I also wonder how many of their “losing” competition wound up overpaying for even bigger homes and losing even more money?
    Don’t get defensive, anonn, I’m not trying to poke fun or instigate. Just highlighting that the “what if” scenarios are irrelevant on both the down- and upside. Fact is that this is a 20% hit in 2 years on a very “real” and “prime” piece of SF. I bet we start seeing more and more anecdotes like this, too.

  31. Posted by anonn

    I am not defensive at all. This property took a 19.8% hit after a very large overbid from a list price in keeping with neighborhood values, a two year hold, and a sale into a worse market. No question about any of that. It is a nice neighborhood, but a lot of people would disagree with calling it “prime,” because it isn’t remotely central. (I have forgotten what the Socketsite definition of prime is. Probably anywhere expensive.) I find it interesting that this one generated so much more attention than the Hoffman street property, which was equally surprising albeit in the other direction.

  32. Posted by 94114

    “I find it interesting that this one generated so much more attention than the Hoffman street property, which was equally surprising albeit in the other direction.”
    Let’s face it. People on this site love to see people lose money in SF real estate.

  33. Posted by Debtpocalypse

    If people are going to spend 16% over asking and then sell within two years time, a poor result like this one shouldn’t be at all surprising. Is it surprising to anybody? I doubt that it is.
    I think your question was meant to be offered rhetorically. But at the same time, I think it merits an answer, since you’ve asked it.
    I would suggest that there were plenty of people two years ago or more who believed that reliable annual gains in residential real estate had become an entitlement of ownership. And I think that if you had polled all Californians who purchased in April 2007, the year this property was originally “overpaid for,” that the vast majority would have assured you that, two years down the road, they would be easily able to sell the house for more than they were paying.
    That was why it was a bubble: the purchase decision was aggressively pricing in future appreciation.
    So, yeah: I think there are plenty of people who are surprised. Including the bath-taker of this specific property….

  34. Posted by anonn

    “I would suggest that there were plenty of people two years ago or more who believed that reliable annual gains in residential real estate had become an entitlement of ownership. And I think that if you had polled all Californians who purchased in April 2007, the year this property was originally “overpaid for,” that the vast majority would have assured you that, two years down the road, they would be easily able to sell the house for more than they were paying.”
    Sure. People thought that future gains were likel in 2007. People who bid 16% over though? They needed to take that overbid into account. We were not experiencing double digit appreciation in 2007. Further, when you get down to it, I would suggest that this particular series of events resembles what happens when you do not heed an old, old adage. That is, “Don’t buy the best house on the block unless you plan to stay for a while.” That is an ancient real estate CW, and in light of it, it renders this sale somewhat predictable. I think they had the list price right. I think they overpaid by a substantial margin. I think that if they actually were to stick around for 10 years like somebody who makes such a purchase should do, they would probably actually see a gain.

  35. Posted by Legacy Dude

    “I find it interesting that this one generated so much more attention than the Hoffman street property, which was equally surprising albeit in the other direction.”
    Let’s face it. People on this site love to see people lose money in SF real estate.
    ———————————————-
    The Hoffman property was a remodel, and not an apple. And it went for a measly $11K over asking, or less than one half of one percent of list (we don’t even know what the all-in cost was, either).
    Meanwhile, this place loses 20% in 2 years, to the tune of HALF A MILLION DOLLARS, and they’re now “equally surprising” data points? Please define “equally” as used in this context.

  36. Posted by LMRiM

    LOL about “they overpaid”.
    How about this guy, 845 Monterey, which just closed at 20% under its 2007 price ($790k versus $998K):
    http://www.redfin.com/CA/San-Francisco/845-Monterey-Blvd-94127/home/692492
    Sure, the property had issues – the same ones it had in 2007, when it last sold, and without an overbid. Did they “overpay” in 2007?
    Or, how about this property in Sunnyside, 199 DOM and asking 14% less than its 12/2005 sale price:
    http://www.redfin.com/CA/San-Francisco/630-Joost-Ave-94127/home/1938905
    Was 2005 the peak? Is it fair to say that that one is probably down 20% from its peak too?
    Or, what about this one, 138 San Felipe, which is now asking 13% below its 11/2007 selling price:
    http://www.redfin.com/CA/San-Francisco/138-San-Felipe-Ave-94127/home/1043369/sfarmls-351735
    And let’s not forget the another nearby District 4 property that was featured on SS, 10 Fernwood, which closed in 2009 at 25% under its 2004 price:
    http://www.redfin.com/CA/San-Francisco/10-Fernwood-Dr-94127/home/1377889
    Considering that most people are very reluctant to take losses, I’d say it’s pretty likely that on average the value of properties out there in the nice parts of District 4 are down 20% from peak. Sure, some properties will perform better (and these are more likely to be sold) and some will have performed worse. Actual selling prices are likely to understate the value declines because of selection bias (many properties are pulled off or the owners give up thoughts of trying to sell and continue to pay on depreciating assets).
    Sure, all these purchasers “overpaid”. Everyone did in SF. They still are – it’s just that now there are fewer of them than in 2004-2007 and they’re not quite overpaying as egregiously as the earlier cohort of buyers. Owners who are thinking of selling imo need to get out ahead of this trend decline if they think they will want (or need) to sell in the next 10 years. I really think it will be 10 years at least before we see the sorts of prices that prevailed 2004-07.

  37. Posted by anonn

    “Please define “equally” as used in this context.”
    Because 22 Hoffman is right next door to a firehouse and it got 900+ a foot, in this market. That is “equally surprising,” at the very least, IMO as a house that’s selling for 6% less than its very much in keeping with neighborhood values list price after two years.

  38. Posted by Trip

    I don’t really know this area well, but this place a little east of here in Forest Hill Extension caught my eye because it was last sold on the very same day as 25 Mercedes — 5/17/07 for $1,600,000. It was listed for sale on 1/30 at $1,349,000 and just reduced to $1,249,000. Pretty good-sized (2944 sf) 4BR/4Ba place. The redfin $/sf chart shows quite a remarkable drop over the last year (sample size may be very small — dunno). Anyone know what is going on in this area?
    http://www.redfin.com/CA/San-Francisco/86-Idora-Ave-94127/home/1800307

  39. Posted by Rillion

    I bought in early 2007 and I was already starting to see properties that were lingering on the market and seeing some asking prices reduced. I was surprised that on one place I bid on someone else outbid me (I didn’t bother to counter). I ended up buying a place a different place where I was the only bidder. So even in 2007 there were buyers out there that realized the market had softened and were no longer willing to overbid on properties assuming that prices would continue to skyrocket.

  40. Posted by sparky-b

    Trip,
    You don’t know the area well if you think Idora is a “little east” of Mercedes.

  41. Posted by LMRiM

    Trip,
    That’s a nice area – tucked in between Laguna Honda and Woodside, and close by to St. Brendan’s (one of the old line SF Catholic schools/parishes with a reputation for being a little “snobby”).
    20% decline is exactly what our good friends in Forest Hill Extension (right near Ulloa and Claremont) discovered when they had their place appraised for a refi very recently.
    Looking at the sales history of the Idora property, I’ll bet anything that the current sellers couldn’t resist the “new renovation smell” and way “overpaid” in 2007. It sold in 2004 for $800K and then for $1,600K in 2007 – I bet there was a subsequent remodel that snared the 2007 victim (now looking to get out at 22% under purchase price).

  42. Posted by Trip

    sparky-b, you’re right — northeast (as I said, I don’t know the area . . . ). My world tends to evolve around the eastern half of the city and Golden Gate Park.

  43. Posted by anonn

    Forest Hill Extension never got to a point where sales over 1.3M were all that commonplace. When the current sellers bought that property for 1.6M, they paid 105K over asking. The tax records from then show 1931 square feet, so that’s like 830 a foot? You’re seeing 2400, so they must have legalized a basement space or something. Either way, it was very spendy for an area that typically sees well under 600 a foot (the 71 1M+ sales since 2000 read 573 a foot on average). The lot is a good size one for San Francisco at 25 X 120 or so, but it seems as if the bigger ticket items over there typically have larger lots too.
    You’ll probably read this and go, “Oh yeah. They overpaid. Typical” or something. But I’d like to point something out. For all the people who overpaid on a property in a competitive situation there were five or six other potential buyers who did not overpay. The “losing” bidders. Many of them probably went on to buy something else for a more sensible price, and have longterm plans to stay, as most people do.

  44. Posted by The Milkshake of Despair

    Perhaps those losing bidders received “the loser’s blessing” that is paired with the winning bidder’s “winner’s curse”.
    I know I received the loser’s blessing a couple of years back. No buyer’s remorse here. Whew !

  45. Posted by steve

    The “losing” bidders. Many of them probably went on to buy something else for a more sensible price, and have longterm plans to stay, as most people do.
    Alternately, after the disappointment of losing 3 or 4 times, and encouraged by their agent, they could have paid an even higher premium to buy in ’06, ’07 or early ’08.

  46. Posted by eddy

    Gotta love the facts here. I love to see people lose money on sf real estate! 🙂
    Very surprised to see these types or realized losses. There simply must be a story here other than a seller who can take this kind of loss over servicing a losing loan.

  47. Posted by Legacy Dude

    “selling for 6% less than its very much in keeping with neighborhood values list price”
    What does this even mean? Hey everyone – I just checked, and 25 Mercedes sold for about 500% more than $350K, which was an altogether not uncommon listing price in this area around 1988. I’m sure that’s little solace to the folks who just imploded half a mil. But at least the people who didn’t buy this house but bought some other one are happy. Probably. Or at least less unhappy. Unless they just imploded 3/4 of a mil.

  48. Posted by Mole Man

    Let’s face it. People on this site love to see people lose money in SF real estate.
    Dude, there was a bubble. It popped. Get over it.

  49. Posted by anonn

    “What does this even mean?”
    I think it’s pretty clear what I meant. Your 1988 example is silly. Other sales were occurring here and there, creating a contemporaneous idea of value. But the neighborhood never supported this sort of sales price. Of the 167 properties sold in Ingleside Terrace since 2000, only 13 have sold for 1.5M or more. Only three, ever, including this one went for above 2M. The other two are on colossal lots (9,000 and 11,000 feet to Mercedes’ 6000 and change) on the best street in the neighborhood, Cedro. Twnty five Mercedes is a lovely home, but its purchase price was pretty much an unprecedented maneuver for the area. Then they held it for two years only, and so have paid for their mistake.
    Even if you consider the list price manipulative, which I do not for the reasons I’ve mentioned above, consider this. They priced it at 1.895M. If they were really angling for well into the 2Ms, don’t you think they would have priced the property at 1.995M or similar? Of course they would have. They were angling for mid 1.9s or 2M at best. Well, it went for about 250K more than that.

  50. Posted by RenterAgain

    Anonn,
    I can’t speak to the comps in this neighborhood. But I do have a bit of experience with watching houses being priced strategically to generate overbids. When I was house shopping in the East Bay for a house in the $500K price range (early in the bubble), it quickly became apparent that I needed to look at houses priced under $400k, because every “nice” house ended up selling for $100k over (yes, 20 to 25% over list price).
    In Noe Valley, the strategy circa 2006-2007 for small but decent SFRs seemed to be to price at 900K-950K and sell for $1.05M to $1.15M. My friends set their asking price at around $800K and sold their house for about $1.1M, and there was only ONE bid.
    So it doesn’t seem outrageous that a house priced for $1.9M would sell for more than $2.2 at the height of the bubble. As someone pointed out earlier, this was certainly a comp at the time. The listing price is irrelevant.

  51. Posted by Joe

    “I think it’s pretty clear what I meant.”
    It’s not clear at all. Is this just a variation of “they overpaid, it happens”? So your point is this sale indicates a market decline of 6%, not 20%? Or it does indicate a 20% decline, but you can’t draw any broad conclusions from a single example? So how many apples-to-apples examples would it take? Or is your point something else? Just tell us. You’re beating around the bush every time somebody asks you to explain in straight terms.

  52. Posted by anonn

    It is you who wants to take a single property and declare it as “the market.” How about you tell me why you wish to do that, Joe? Or tell me why it is you wish to make a charicature out of everything I say, as if I’m your enemy?
    In terms of “the market” and the way it works, the 2.2M sale is dead, gone, and useless. I don’t find it irrelevant that the new valuation is much closer to the old list price than it is to the 2.2 sale. After studying what the neighborhood has ever done, I find it very understandable and fitting. Your mileage may vary.
    I’ve not beaten around the bush. I’ve shown that they overpaid about six different ways. As for “it happens,” — no. This one pretty much takes the cake so far.

  53. Posted by Joe

    OK, so the 2007 buyer “overpaid.” Got it. So what concrete evidence would it take to indicate a market downturn in your view? You ignore Case Shiller. You ignore medians for just SF. You ignore repeat apples-to-apples sales. You ignore rising inventory and lower sales volume. All those measures show a steep downturn. Is there any hypothetical evidence that you would accept? Or is your opinion a simple article of faith that cannot be shaken?

  54. Posted by anonn

    Yeah. They overpaid and I feel as if I’ve proven it. As to the downturn, I told you and others that there has been a market downturn to the tune of about 5 to 10 % for most of SF. It’s just that you want me to say it’s 20 %. I’m not prepared to do that. Again here you are with the confrontational language, as if you’re truly angry at me. I did not “ignore” this property. I examined it more thoroughly than anybody else on here.
    I do not ignore medians for just SF. I take that in. I point out that data subsets for neighborhoods are limited in number, so I go back to a mid-October date in order to get 30. Then THAT’s what’s ignored in favor of 2009 figures 14 or 15 in number. (Meanwhile, if I had presented such figures in 2008, and they happened to be climbing, I would have been lambasted.) Also, I bring something else up that is ignored, and that is the experience of the average home buyer in the marketplace, right now. I try to offer up what that perspective is like. But you want to talk about what’s “ignored” on Socketsite.
    I think you want a pat answer. There isn’t going to be one, not in terms of individual properties. Some will still perform well. Others will not. I ‘m glad that you have adopted a name so that you’re accountable enough to be able to reference. But if you’re going to come at me with aggression (???, “ignore” X 5, derisive hypothetical) and attempts at caricature every single time we’re not going to be able to communicate very well.

  55. Posted by Tom

    “Then they held it for two years only, and so have paid for their mistake.”
    I think the psychology is interesting here, as I have seen this thought expressed in a number of places. I think that it is clear in most cases that a two year hold time will result in a net loss(outside of maybe during the huge bubble run-up), but I wonder if cause and effect are reversed in this expression of the thought.
    Or, more clearly, did the buyers make the mistake of purchasing more than they could afford (either by overpaying, via a bad loan product, or sadly, as a result of a job loss) so that this sale is now the result of that mistake (so, just to be clear, to me the real question is did they (a) make a mistake two years ago for which they are accepting the consequences by being forced to sell at a loss or (b) are they making the mistake of choosing to sell now and thus taking a loss)? I would be curious to hear thoughts on the sentiment or reasons for sellers with such short hold times (in general, I don’t think we need to pick on any particular people and their losses). Are these forced sales? Are they simply mistakes in timing by the sellers? I suspect that the implications for future prices would be very different depending on the prevailing reasons.
    Finally, I imagine that downpayments and equity at risk make a huge difference here. If the loss is eaten by the lenders, then the “mistake” two years ago could also be described as a risk that didn’t pay off…

  56. Posted by eddy

    It’s hard to argue that they overpaid. Real estate in terms of value is very subjective and they paid exactly the right amount required to secure this property in 2007. Were they top of market, above market, sure. But clearly it was worth $2.2 to the buyer.
    I’m in disbelief that we have a 2007 buyer / 2009 seller who “had to have” and “had to sell” this home so much that they sustained such a massive loss. I’m not ruling out shenanigans on this place. For all we know the 2007 ‘buyer’ got 200k cash back at closing; and 2009 buyer might have found a creative way to gift 200k to the seller. It’s just very rare to see anyone take this kind of hit. There is a story here that we don’t know as far as I’m concerned.

  57. Posted by Joe

    anonn, of course everyone “overpaid” who bought in San Francisco in 2004-2008. If you disregard those purchases, then I agree with you that the result will indicate little market decline at all, probably just about 5 to 10% for most of SF.

  58. Posted by LMRiM

    I’m glad we cleared that up. The 25 Mercedes guy simply overpaid. Hey, it happens.
    Now, perhaps we can move on to some of the other District 4 “apples” that have been mentioned in this thread or previously on SS:
    845 Monterey – sold recently for 20% under its 2007 price
    10 Fernwood – sold recently (after foreclosure) for 25% under its 2004 price
    414 Foerster – sold in 2008 (after foreclosure) for 32% under its 2007 price
    200 Kenwood Way – recently closed at 21% below its 2006 sales price, and it was renovated subsequent to 2006
    630 Joost – for sale (200 DOM) at a wishing price 14% below its 2005 sale price
    138 San Felipe – for sale (82 DOM) at a wishing price 13% below its 2007 sale price
    2209 9th Ave – for sale (61 DOM, but it’s been for sale before) at a wishing price 16.6% below its 2005 sale price, and it was renovated after the last sale
    86 Idora – for sale (74 DOM) at a wishing price 22% less than its 2007 sale price
    On second thought, now that I look quickly at those listings and closed sales, it’s pretty clear that all the buyers simply “overpaid”. Prices are really only down 5-10% in most parts of SF. Too bad for all those suckers who overpaid – their realtors must not have been very good.

  59. Posted by LMRiM

    eddy – I’m pretty sure this 25 Mercedes sale was on the level back in 2007. As I said, this was considered “underpriced” at the open house. Sure, it was one of the most expensive sales in Ingleside Terrace, but it’s one of the nicest houses. The buyer worked for a large tech company on the peninsula (transport is very easy from that location b/c Junipero Serra – two blocks from this house – leads directly into 280 south).

  60. Posted by anonn

    “anonn, of course everyone “overpaid” who bought in San Francisco in 2004-2008. If you disregard those purchases, then I agree with you that the result will indicate little market decline at all, probably just about 5 to 10% for most of SF”
    The buyers of this property went pretty far past what “everyone” did 2004-2008, and without precedent too. If you want to reduce it to “everyone overpaid” feel free. But you can’t caricaturize me with “disregard those purchases.” There are probably 200 examples of me delving into 2005 or 2006 purchases and talking about them archived on this website.

  61. Posted by Legacy Dude

    As I mentioned above, I expect to see more of these isolated anecdotes going forward.
    Daily riddle:
    Q: What do you call a grouping of unrelated anecdotes demonstrating a similar pattern?
    A: The market.

  62. Posted by anonn

    Oh man, come on, LMRiM. “hey it happens” “their realtor must not have been very good,” “simply overpaid” etc. etc. Yawn. Then Foerster, Idora, Joost — as if the variance within D4 isn’t enormous. Or as if we haven’t discussed positive results within the same areas and timeframe. If you wish to go that route, why did you not acknowledge the data point I mentioned in Ashton Way? It’s in the same neighborhood as Mercedes. And it’s seemingly an apple + new appliances that sold for ~9K less within a year and a half.

  63. Posted by LMRiM

    If you wish to go that route, why did you not acknowledge the data point I mentioned in Ashton Way? It’s in the same neighborhood as Mercedes. And it’s seemingly an apple + new appliances that sold for ~9K less within a year and a half.
    The neighborhood of 245 Ashton is very different in feel and demographics than that of 25 Mercedes, even if both are technically in Ingleside Terrace. (245 Ashton is on the border street right by the old St. Emydius church and former school.) There is a world of difference between those locations.
    I would have expected values to have fallen around 245 Ashton more than the minimal fall shown since the 2007 sale by that property. I can’t tell exactly what happened there (maybe next time I’m out there I’ll drive by), but clearly a lot of work was done. A permit search turns up the following permit from 11/07 (approved 2/28/2008):
    Report Date: 4/14/2009 11:46:15 AM
    Application Number: 200711087640
    Form Number: 3
    Address(es):
    6932 / 003 / 0 245 ASHTON AV
    Description: TO RAISE BLDG 4′-0″ AND CONVERT (E) CRAWL SPACE TO LIVING SPACE ON 1ST FLOOR. REMODEL 2ND FLOOR KITCHEN/BATH AND ADD FULL BATH.
    Cost: $248,000.00
    Occupancy Code: R-3
    Building Use: 27 – 1 FAMILY DWELLING
    I can’t tell if they actually did all that work (permit was not closed), but I’m sure that at least some of it was!
    Probably not an “apple”, and the 2007 buyer certainly blew up a good deal of capital on the 2009 sale. As I’ve always said, remodelling can work very well given the general cluelessness of buyers and willingness to “overpay” (it happens) even now. Whatever work was done on 245 Ashton imo is masking a decline in values in the neighborhood (again, though, it’s one data point so I wouldn’t want to extrapolate too much from it).
    Redfin is showing that $/psf has trended down in that zip code from about $550 in 10/07 to about $430 now, about a 22% decline.
    http://www.redfin.com/CA/San-Francisco/245-Ashton-Ave-94112/home/1085353
    A 22% decline seems about right out there for this stage of the bubble unwind, and I’d expect that the micro neighborhood right around Ashton will ultimately fall about 50% (worse just to the east of Ashton, better to the west).

  64. Posted by anonn

    The neighborhood of 245 Ashton is very different in feel and demographics than that of 25 Mercedes, even if both are technically in Ingleside Terrace.
    As are the myriad other D4 properties you posted earlier from a number of very different neighborhoods.
    Probably not an “apple”
    I said it looked like an apple plus a kitchen refurbish, and the listing information speaks to same. I don’t think they got around to doing that work. Because if they did, why would they not advertise or depict it? But I could be wrong.
    This looks like an ’05 – ’09 apple — 80 21st Ave. Not D4 tho. And it appears as if they did take a loss even though it sold for 120K more.

  65. Posted by Geo

    LMRiM/anonn: Thank you both for the volleys of anecdotal data back and forth. I learn more about discrete SF RE everday.
    I truly do appreciate it.
    take care.

  66. Posted by 94114

    Geo,
    You’re a real mensch! (That’s a compliment).

  67. Posted by Trip

    I suppose we could dig up any number of these, but here is a new reduction that caught my eye in Pac Heights:
    http://www.redfin.com/CA/San-Francisco/2922-Sacramento-St-94115/home/1739534
    Now reduced below the 2004 (and 2001) selling price. As I’ve said, SF saw one big RE bubble in the late ’90s in addition to the 2003-2007 bubble that was nationwide, and we are deflating them both. Pac Heights and Marina places seem to be particularly troublesome to sell right now (or it may just be that so many of them are at a difficult — i.e. high — price).

  68. Posted by briefremarks

    I saw the house and spoke with the listing agent (Paul) when this house come on the market at $1.895m. He was quite clear that the list price was “introductory” and expected the property to sell in the $2.0+ range. I had an offer ready to go at just below what the current seller bought the place for. I came to my senses thankfully.

  69. Posted by LMRiM

    Wise decision, briefremarks. 25 Mercedes was deliberately underpriced, as were many properties in nice parts of District 4 during 2004-2007.
    Whether they expected $2.1 or $2.2 or $2.3 is really immaterial. The behavioral finance characteristics of this sort of strategy are straightforward: potential buyers will use a artificially low listing price as an “anchor” in order to gauge their overbid, but what ultimately drives the final price is the marginal purchaser’s desire to “win” the auction.
    The auction process is wholly opaque because only the listing agent has a reasonable read on the “true” demand curve out there, and both buyers’ agents and listing agents’ economic interests are in consonance, namely to squeeze potential buyers’ bids as high as possible. Therefore, in hot markets, the seller who employs this strategy can rely on the dynamics of the “winner’s curse” to ensure that the maximum $$ are extracted from a market that is deliberately shielded from relevant information (the pool of potential buyers “knows” that the proprty is underpriced and that therefore they will have to enter an auction, but have no specific knowledge of the other potential purchasers’ bids).
    @Trip – I think the 2922 Sacramento seller should consider himself lucky if he can get out here with only a $100K decline to the 2004 purchase price, which would be in keeping with the C-S upper tier index for the SF MSA. Prop shark shows that the place was purchased with a $1.5M loan and therefore $1.4M at risk in the “first loss” position. (I can’t see if there were any subsequent cash out refi’s, which would have been a smart strategy whenever dealing with a bubble asset.) $30K+ per year in taxes, permits show that the place was reroofed after the 2004 purchase, and now at least a $100K capital loss and maybe $150K in selling/transaction costs to get out from under this – that sounds about what should have been expected on an ex ante basis given the overvaluation of the property (relative to prevailing rents) and the obvious bubble nature of the market. It’s too bad for him that he didn’t sell in 2006 or 2007 – I bet losses would have wholly been avoided.

  70. Posted by anonn

    “Introductory” huh? Not “priced aggressively” ? Color me skeptical. Again, look at what the neighborhood had ever done at that point. However, also again, if he happened to know that there were 10 buyers in the mix all bets are off.

  71. Posted by barbco

    I listed 25 Mercedes in 07. My report to the seller showed $1,850,000 plus or minus $100k in January 07. Then a home 3 doors aways sold to a google guy on Cedro for almost $3,000,000 cash which was out of this world for ingelside terraces home. The sellers wanted to list higher because of this, but I felt Ingelside was not going to capture St. Francis Wood prices and suggested $1,895,000 (also the huge side yard lot was not included in the sale).
    The demand was stronger than I expected as spring 2007 ended up breaking records.

  72. Posted by Trip

    $1.4M down on the 2922 Sacramento place? Whew. Well, at least that place can sell as the owner presumably can afford to take the loss. He just needs to get the price right. The ones with 5% (or 0%) down, and thus underwater, are the sticky ones. They simply cannot sell at all, other than a short sale or foreclosure. We can debate how many places like that there are, but you know there is some number out there.

  73. Posted by Geo

    Speaking of Ashton, we went to the open house of 285 ashton
    http://www.redfin.com/CA/San-Francisco/285-Ashton-Ave-94112/home/1672314
    It has been sitting on the market 225 days now, still asking $1.595 – $463/ft²…Apparently acquired on spec for $665k in 2003, with a lot of work done.
    It is actually a nice home with a good feel inside. Some of the choices are a little off like the Tuscany bath off the master suite does not go well with the very nice retro tub..the kitchen cabinets seem a bit flimsy — I was also suprised they did not make the garage a bit larger with a connection to the house.
    But some very nice touches as well like skylights, built in speakers in the media room and the italian kitchen range I never heard of, but looks sharp.
    It is overall a nice space with decent bones to work with for a long time. Too bad it is on Ashton which is on the edge as LMRiM notes, and the place right next door is undergoing the same renov treatment and looks very tough at the moment.
    With a 20% discount to where mercedes traded given the location and architectural pedigree, which may be a bit much, gives a $1.3mm handle for 285 Ashton…

  74. Posted by LMRiM

    285 Ashton – that sounds like a nice place but anyone spending more than $1M on Ashton really has to have his head examined.
    No hills east of Ashton means that there is significant “spillover” from the neighborhood (3H – Ingleside) which is directly across the street. 285 Ashton also faces St. Emydius Chruch directly, and parking and traffic becomes an issue on occasion (although I sort of like the idea of being across the street from the church – and it’s a beautiful church).
    The area might improve slightly. The Catholic school that had been attached to St. Emydius has been closed for a while – at least since I moved to SF out near there in mid-2002. The old school building had been leased to SFUSD for a high school (I think “City Tech” but don’t hold me to that!). The locals talked about a huge increase in petty crime and even some gang activity associated with the high school.
    In any event, the high school is now gone, and the space has just been taken by a private “corporatist” preschool/elementary school, The Stratford School, which has a number of campuses in the Bay Area, particularly in the South Bay. 2008-09 is the first year in that location. Tuition is reasonable for private school, and the locals seem glad to be rid of the high school.
    Nevertheless, a few blocks across the “flats” east of Ashton is pretty rough in spots, and there is (or at least was a year or two ago) open drug dealing in and around Capitol and also along Plymouth.
    Like I said, anyone paying more than $1M to live on Ashton in this environment has to have his head examined. Buying something right on or inside the “racetrack” (the local name for Urbano, since it was originally a horse racing track) a little west of Ashton is a much better bet (north Urbano is much nicer than the south stretch), and the wishing price of 285 Ashton buys you a whole lot on Urbano.

  75. Posted by LMRiM

    Geo,
    It looks like the 285 Ashton listing dropped off. No chance at that price in that neighborhood anyway.
    This one is worth checking out imo – on probably the nicest street in Ingleside Terrace, 265 Moncada @ $1.2M ($526psf) is about a 1000% better bet than 285 Ashton:
    http://www.redfin.com/CA/San-Francisco/265-Moncada-Way-94127/home/1186110

  76. Posted by Geo

    LMRiM: Thanks for the heads up on Ashton, will look for that rental wish on CL…
    I did see Moncada pop up — at a decent $/ft² initial ask, but what an odd house, it is too bad 285 Ashton was not on Moncada…
    and then 325 Urbano hits at a $692/ft² asking which seems way out of whack for that place…crazy.

  77. Posted by 94114

    Geo: 265 Moncada is in escrow.

  78. Posted by Geo

    94114: thanks for the heads up, so did the other 3 on Urbano…including 325 Urbano, will be interesting to see what they close for.

  79. Posted by 94114

    Geo: I saw that this morning as well. Urbano is hot. Too bad I’m not selling something on Urbano.

  80. Posted by LMRiM

    That doesn’t surprise me about 265 Moncada being in escrow (see my post of April 24, 2009 3:14 PM above) quickly. It’s probably the nicest street in all of Ingleside Terrace, and that spot (265) is probably on the nicest stretch (just across from the little mini-park/median patch).
    325 Urbano going into escrow so quickly is a little surprising, but not too much. Some places right around there were going for well into the $800-900Ks even in 1999 (I know b/c a very good friend of mine from my law school days bought one then right near there), so a bit over $1M for a slightly less nice place today (judging from the pics) seems about right for this early stage of the unwind.
    BTW, Geo, if you have kids (which I am pretty sure you do), take them to the Halloween celebration on Urbano and surrounding streets. The activities are mostly centered on the nicest part of Urbano, the north and west sides of the “racetrack”*, starting around Victoria and going well past 325 Urbano. West Portal also does a fun celebration – centered around Wawona, Vicente, 14th and 15th aves. Stay away from St.Francis, which is filled with gawkers from other parts of SF.
    * I’m told that Urbano was originally a horse racing track in the very early 20th century, and if you look at an overhead google map of 325 Urbano (and scale out) you can see it easily!

  81. Posted by Geo

    Stay away from St.Francis, which is filled with gawkers from other parts of SF…
    No can do, as we are right smack in the middle…last year we had our first experience with Halloween here, and boy it was quite amazing, about 1,500 pieces of candy flew out the door. the boys had a great time.
    It is a hoot that Urbano was a race track and the developers kept the flow. Moncado is nice, but I do like Cedro…
    415 Urbano was listed at its ’05 price, 349 had a good bump in the ask from its ’07 price of 400k, and 325 was last sold in ’97…so there will be some interesting comps to look at when the dust settles in escrow..415 is the weakest looking.

  82. Posted by Geo

    What kills me on 325 urbano is at the ask, you get so much more house for 349 for cheaper. Do buyers really not look at the comps?? Again, assuming it closes near the ask.

  83. Posted by 94114

    I don’t think everyone is looking at price per square foot. They’re looking at what they can afford. A lot more people can afford 1,079,000 than 1,450,000.

  84. Posted by LMRiM

    Geo,
    Based on your description I think I might know the exact house you live in (I’m assuming you rent the place).
    Did you see this place come up for rent (at the laughable $16K/mo) that’s right on Santa Clara near San Anselmo:
    http://sfbay.craigslist.org/sfc/apa/1166457107.html
    I remember when that one sold (for more than $3M) – I’m surprised to see it up for rent. Not a chance at that price I’m afraid. For that much scratch, you can get a $6-10MM Tiburon spread with 3 bridge views, tennis court and swimming pool. LOL, you could probably rent two of them! (There are at least 4 that have been vacant and advertising in the $15K+ rental market up here for a year or more).

  85. Posted by Geo

    LM: I did not, as we limit our CL searches to $4000 to $7000, in keeping with our means. and laughable does not describe the asking rent there. that is simply insane and out of touch. I guess I will have to widen the search terms to get chuckles like that one though.
    Monterey is still asking too much in rent.
    94114: you are probably right, but it pains me.

  86. Posted by Geo

    86 Idora is now for rent 1t $4750/mo…

  87. Posted by Geo

    285 AShton hits back on the market for $1.499 $435/ft²… down 6% from the original wish of $1.595…

  88. Posted by 94114

    Does anyone remember 285 Ashton? It finally sells for 1.14 million.

Add a Comment

Your email address will not be published.

Recent Articles