To recap:

In October of 2005 246 2nd Street #1003 sold for a reported $950,000. In April of 2008 the unit was bought back by the bank for $835,783. And [on December 18, 2008] it hit the market asking $689,900.

Previously purchased and owned by the same party that had owned and lost #502. And as plugged-in people know, but industry stats wouldn’t reflect, both condos were purchased with a significant amount of cash back at closing. Let’s hope nobody relied on that sale back in 2005 as a “comp.”

First purchased for $734,500 in the year 2000 when the building was built.

Last month the sale of 246 2nd Street #1003 closed escrow with a reported (and recorded) contract price of $670,500. That’s 29% under its “comp” price in 2005 and 9% under its original price in the year 2000.
And yes, the kitchen was intact.
UPDATE: A plugged-in reader adds:

My wife and I are the buyers. We purchased the unit as our primary (and only) residence, not as investors. We knew some of the history of the unit when we made our offer. For all you curious Socketeers the seller (Bank) also paid $10,000 in our closing cost, so actual sale value $660,500. Wish us luck!

Congratulations, well played and thank you for plugging in. Now about that housewarming…
Another Non-Comp Comp On The Market At 246 2nd Street (#1003) [SocketSite]
Can Bank Owned Comps Kill (Values)? 246 2nd Street #502 Returns [SocketSite]

33 thoughts on “Another Non-Comp Comp Closes At 246 2nd Street (#1003)”
  1. That’s a nice unit, nice location, and a very good price. Hard to believe but when the building was first sold there was a lottery to get a unit.

  2. No surprise at all about the “1999” price.
    It won’t be a surprise either when in 2016-18, units at ORH and Infinity are trading below their initial offer prices.

  3. My wife and I are the buyers. We purchased the unit as our primary (and only) residence, not as investors. We knew some of the history of the unit when we made our offer. For all you curious Socketeers the seller (Bank) also paid $10,000 in our closing cost, so actual sale value $660,500. Wish us luck!
    [Editor’s Note: Congratulations, well played and thank you for plugging in. Now about that housewarming…]

  4. Ward, congratulations! (small tip, don’t tell your neighbors you paid 30% less than they did!)
    As to the 410 sellers (and their realtors) currently trying to unload condos in District 9, take note. Either drop the price — a lot — or just stop paying the mortgage and walk away when the bank gets around to you. Those are the realistic options available.

  5. Congrats on the purchase, Ward!
    IMO you might have a bit further down to go, but your purchase is significantly closer to fundamental value than the previous purchasers’ purchases!
    As a primary residence, and if you can see yourself living here more than 5 years (ideally more than 10), I bet that at these low interest rates this will turn out to have been a sensible purchase. I would stop looking at “comps” for a while, though, and just enjoy the place.
    If you feel like sharing more, I’d be curious what you estimate your effective after tax carrying costs to be on the place are going to be, and approximately what percentage down the banksters required (if you really feel like sharing ;)).
    Anyway, best of luck and congrats again.

  6. hey Ward,
    any inside scoop on the ins and outs of living in this building?
    i went to open house for the two units on the 7th floor currently listed, then on my way out, i saw a note posted in the lobby saying that someone had tampered with the smoke detectors / fire sprinklers on that floor.

  7. Congrats, Ward, it is indeed a great unit (saw it at one of the open houses). I think on the previous thread I predicted a sales price of $650K, so I was 1.5% off. Not too shabby.
    Also on the previous thread, another-anon commented that the developer retained a lot of units here to rent out. I’ve heard anecdotally (disclaimer: complete rumor) that they’re now looking to sell some of them. 702 and 704 in the building are listed, as condoshopper notes, with PropertyShark showing both owned by “Slats Investors.” These may be the developer’s units, but I’m just guessing here. However, Slats also owns several units at 199 New Montgomery down the street, which is the younger sibling of this building and has a lot of current listings itself.
    In any case, more inventory is definitely coming. BLU is struggling to sell units across the street, and in a year or so, One Hawthorne will dump 160 more luxury condos onto the same block (unless they go rental).
    [Editor’s Note: Selling The Rest Of Their Sold Out Inventory At 199 New Montgomery.]

  8. Congratulations Ward! Always nice to see more owners — make sure that when you vote in local elections, vote NO on attempts to increase property taxes in this economy and don’t vote for any more Chris Daly clones.

  9. Congrats Ward, and good luck with remodeling. I’ll wait for an outdated Parc unit on a high floor facing Folsom for around $600k.

  10. Thanks for all the best wishes.
    LMRiM, I fully intend to stay away from comps for a good long time and just enjoy my new home. We transferred here about 2 years ago from an area with much lower RE values (99% of the rest of the planet) so did not have a big down payment. We basically went FHA mortgage for the largest conforming ($625,500) and put the rest down, about 7%.
    condoshopper, we really haven’t been in the building long enough to give you an insiders report. Initial impression is that it’s very quiet and common areas are kept very clean and well maintained. I saw the note about the tape on the sprinklers too – who knows? The views on the higher floors are much better because you can see over the Marriot. There is a recently filed law suit against the developer/builder due to some leaks around windows. Tom Monyhan(sp?) developed both 246 2nd and 199 New Montgomery. Don’t know if the current listing has any relation to the suit.

  11. “Hard to believe but when the building was first sold there was a lottery to get a unit…”
    Really? I had deposit on a 2BD/2BTH unit in this building at the time of construction and was able to more or less choose any unit I wanted. (I subsequently pulled out because of the pending construction (Courtyard Marriott) across the street that would block views of the 9th floor unit I selected.)
    BTW, the location of 246 second is excellent but can’t you pick up a “brand new” 2/2 @ SF BLU for under 650K?

  12. any inside scoop on the ins and outs of living in this building?
    I lived there for some years and really liked it. Location is great, and the people living there are friendly (esp. when compared to a couple of other places I’ve lived in in the area). The main drawbacks are the lack of amenities and the fact the Monahan still has a large presence (and yes, Slats IS Monahan’s investment company).

  13. Bit of an aside, but did the issue with the front door ever get addressed? When I was visiting there a couple of years back, the front door was automatic opening (for ADA issues, no doubt), and closed VERRRY slowly. And there was no doorman. It presented a real security concern because folks didn’t always wait until the door closed and locked. Because of that they had a funky code system in the elevator to prevent folks from getting beyond the lobby. The whole thing seemed very stupid.

  14. We basically went FHA mortgage for the largest conforming ($625,500) and put the rest down, about 7%.
    Great deal, that FHA loan plus tax incentives–apparently first-time homebuyers can (could?) buy in 2009 and apply the $8000 deduction to their 2008 taxes.

  15. ward and anonsf: thanks for sharing the personal experience of living there.
    isn’t there a $75,000 income limit for the 8K deduction?

  16. Very smart move to go FHA financing, Ward. As I’ve been saying over an over again for more than a year on here, please people do not get large downpayments caught up in these prices.
    No one can know the future perfectly of course, but maximization of the ratio between potential reward and potential risk is key. The smaller the downpayment, the better.
    Also smart to wrap the closing costs (more than 1% of the purchase price) into the loan. (Note to everyone out there, as I’ve been saying from anecdotal experience related to me by family members in the industry, this is becoming standard practice.)
    The only downside, Ward, was having to put up 7% of your own money – but the deal might not have been available if you had waited until the FHA limit gets fully back up to $729K (is the higher conforming limit available yet?), so no one could fault you for judging that a sensible risk.
    The government in conjunction with the banksters have turned housing into just another trading vehicle. Get with the program, use every advantage you can press any way you can, or don’t play the game.
    Again, I think that a purchase now at a pre-2000 sort of price, will ultimately work out to be a sound one over a 10-year horizon (and perhaps even over a 5-year horizon). I doubt you’ll make much by way of nominal appreciation (and the asset will depreciate in real terms over 10 years, guaranteed), but at some point you will certainly benefit from having low fixed rate debt against inflating rents.* It’s possible that in many places (maybe even for 246 2nd?) we’re already there.
    * Inflating rents won’t translate, however, into a new bull market in nominal prices I bet, b/c higher equilibrium interest rates will be a drag on price. People always seem to forget that nominal prices of residential real estate assets exploded over a 25 year period of trend falling interest rates and price disinflation when they project out a new nominal price increase in a period that is likely to be characterized by rising interest rates and price inflation pressures.

  17. Easy to say from your lofty perch, LMRiM. But don’t forget that 99% of the rest of us are W2 types being forced to cover any losses on that “trading vehicle.” We’re the unwilling insurance wrap on the American dream.
    So in that context, I sure hope Ward doesn’t turn into one of your “Great American Heroes” if prices fall another 10-20%, and he and Mrs. Ward decide it’d be easier to transfer right back to that area with “much lower RE values.”

  18. That dynamic, Legacy Dude, of average Americans being forced to cover the ambitions and gambling debts of their overlords (the goobermint and the banksters) can only change at the ballot box. Unfortunately, judging from recent elections, I’d say it’s not going to change.
    It’s a war – to get philosophical a bit, not so different from the battle all living things have to wage against a hostile world. Too bad we are in a war against our own government and Fed, but that’s the way it is. Surveying the damage to average household finances (from what I can tell) wrought by the twin equity/housing bubbles over the past few decades, I’m reminded of that famous quote of regarding real soldiers in battle: all gave some, some gave all. And the real battles are yet to come….

  19. Well, given that all of the bailout schemes, loan limits, and other programs were all decided by a handful of people in DC/NYC, I don’t think anything really can change at the ballot box. Did you (or anyone) vote for Geithner or Bernanke? On FHA loan limits? I must have been really drunk the day they got elected, since I don’t even remember going to the polls.
    Back on topic, I really do wish the buyers here the best, and am not insinuating that they’ll walk away from the loan. I hope they enjoy living here for a long time, as it’s a great building and neighborhood.
    But FHA financing is subprime du jour. It’s like financial vandalism: a few people go on a lark and act on some of their latent desires. Then the rest of us have to spend years cleaning this shit up after they’ve moved on. So even though I agree with many of your musings from an idealogical perspective, LMRiM, it’s frustrating to hear you continually advocate such behavior. If everyone begins gaming the system, the system doesn’t react and improve itself – it collapses.

  20. @LMRiM
    I am a non-sophisticated soon to be (or considering it) purchaser. I noticed that you tend to mention you should never buy with cash (or with as little as possible). Could you elaborate more for me please?
    Wouldn’t a purchaser be facing bigger interest payments than potential rental payments? If I did have the type of cash on hand to place a large downpayment what should I do instead with the cash? I assume it would have to at least earn interest above the 5% rate on most loans.

  21. If everyone begins gaming the system, the system doesn’t react and improve itself – it collapses.
    Now that’s the beginning of wisdom. You asked, fairly, who voted for these clowns and these absurd policies (like creating a new subrpime fiasco with $700K+ “affordable” loans, lol)? There is no way anymore to change policy in Washington – it’s too far gone. Ask yourself why a collapse would be so bad, and at the root is always going to be a belief that the “government” must stop such a collapse. At all costs. Including your liberty and ability to effect change at the ballot box imo.
    It’s a rigged game. Look even casually into the bios of Obama, Geithner, Gorelick, Bernanke, the President of the NY Fed who also simultaneously sat on the Board of Government Sachs and was buying stock in GS as he presided over their payoff by the taxpaying sheeple through AIG’s bad gambling debts, etc., etc. Same thing with the last Administration. The population lost the battle when the September 07 TARP bailout passed. It’s done – the die is cast and it’s every man for himself. Good luck, folks.
    (Sorry for continuing the OT ;))

  22. It’s certainly true that the market is being juiced by all these intervention efforts — expansion of FHA, larger GSE limits, low rates. But IMHO the key takeaway from this recognition is not that one should also jump in and play the game with other-people’s-money but that eventually (my guess no longer than two years) this game will end too because the bulk of the mortgage mess will have washed out through most of the country (not California — too bad here) or it will simply become too unaffordable. Notice that the market segments not being goosed, over roughly $900k, continue to see steep declines in sales.
    When the juicing ends, the support it is currently providing will be gone and the decline will pick up pace again (or anew). Even with this support, prices continue to decline across the board — imagine what will happen when it is gone! In other words, don’t believe for a moment that shacks in Bernal selling for $700k are going to fetch anything near that once the spigot on this new round of funny money ends. I guess LMRiM is right that if you are going to play, don’t use your own money. But I would advise that the better move is simply not to play at all. Rent a very nice place and live well on the monthly savings (and losses avoided) instead.

  23. @ condo buyer –
    I’d look at the ability to put down a very small downpayment as a “free” option offerred by the government through the nonrecourse status of purchase money loans. I haven’t tried to price it explicitly, but having traded options for a long time, I’ll say that that option is significantly underpriced, if the only “penalty” you are paying is the subsidized interest rate (again, courtesy of the USG, meaning your fellow tax payers) on that small portion of the loan that would have been displaced had more $$ been put down in the first loss position as a downpayment.
    If things go kablooey, you can just walk away from your loan and asset with no real repercussions. Well, some repercussions, but you’d suffer those anyway, and at least now you have your downpayment cash to help mitigate them 🙂 If you suffer a pang of conscience (which you shouldn’t – none of this is a question of morality imo), you could always sacrifice your downpayment dollars later paying the mortgage on a hopelessly underwater asset (remember, we are only talking in the “kablooey” scenario).
    The risks are very binary at this juncture: a continued wipeout of values that would literally trap you in the asset unless you made peace with the fact that the downpayment is gone, or a very inflationary world in which nominal values would be ok, but your downpayment cash that otherwise would have been locked up as dead in the asset can now be reinvested at much higher interest rates b/c you put down as little as possible.
    It’s pretty much a no-brainer imo. I’m definitely not advocating fraud – I’m just advocating risking as little as possible in a rigged game by using all the laws and strategies available to you. For the same general reason, I also advocate looking very carefully at any interest-only type options for loan funding (although of course this is greatly restricted now) and always recommended that to family and friends who were intent on getting involved in this folly during the bubble years.
    BTW, I generally agree with Trip’s characterization of what’s happening and what is likely to happen. Now, the natural question to ask is that, assuming that we are right, surely the policymakers understand this. Why are they therefore intentionally trying to sucker their servants (the people) into debt peonage? I know it isn’t really explcitly stated and discussed this way in the halls of power. It’s more like, “we have to slow this down, prevent panic, it’s all for the good of the people in the end.” Some more realistic policymakers probably rationalize it with the famous maxim, “If you want to make an omelette, you have to break a few eggs”. Regardless of the nomenclature or method, I’d prefer not to be one of those eggs.

  24. @condoshopper
    isn’t there a $75,000 income limit for the 8K deduction?
    Yes, for single filers. 150K for couples. And it’s not a cliff-higher incomes get a partial tax credit. BTW, I was wrong–it’s not a deduction, but a credit. So if your 2008 tax return would have been net zero refund or payment, and then you went and bought a first time primary residence in 2009, you get $8000 paid to you by we-the-people. I was shocked when a friend mentioned doing this to wipe out his 2008 tax liability–the gubmint&banksters really are desperate.

  25. Thanks for the advice and input LMRiM. Your comments definitely contribute to the appeal of this site.

  26. I thought that concessions (including the bank paying part of closing costs) were not allowed in FHA loans.

  27. If things go kablooey, you can just walk away from your loan and asset with no real repercussions.
    An apocalyptic economic meltdown is LMRiM (and all the other Austrian economic types) wet dream. For me, if you REALLY think things are going “kablooey” there’s no point in buying anything.

  28. “For me, if you REALLY think things are going “kablooey” there’s no point in buying anything. ”
    There are many flavors of “kablooey” that are possible. What the right thing to do turns out to be is dependent on which “kablooey” happens.

  29. Fannie Mae just posted a $23 billion loss in one quarter and needs another $19B govt handout. I don’t know the numbers, but I suspect that the GSE expansion has now sucked up enough of the banks’ bad mortgage liabilities, and the political will to extend handouts is waning, that they can and will start scaling the GSE lending back in the not-too-distant future. May already be happening with the tighter appraisal requirements recently implemented. The $729k limit expires at the end of 2009 — may be extended, but I doubt it. The 625k higher conforming limits also get revisited soon. These sorts of things are all that’s propping up the market in CA right now, and things are still tumbling. Look for the pace of the declines to accelerate.
    I don’t think we’ll have a kablooey, but I agree with anonsf that buying now is only for knife-catchers (or dead cat grabbers to use another metaphor).

  30. “Kablooey” for the average recent SF purchaser can be as innocuous as a 10-15% value decline, combined with a job loss or other life event that necessitates moving, which wipes out every dime they (presumably) struggled to save to put down on the house.
    Nice ad hominem regarding “wet dreams”, anonsf, but I take the market as it comes (lol), and I have to say I’m very satisfied with how this has been unfolding. It’s been a good trading environment for the past two years, and while I’m not the sort of trader who is ever going to hit it out of the park, it’s been a good and satisfying run of increasing my and my loved ones’ relative share of the pie. Especially as that pie is going to be increasingly difficult to grow as this disaster continues to unfold. I hope you’re prepared.

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