In February The Montgomery (74 New Montgomery) announced an official round of reductions with “Two Bedrooms starting from $882,000.” At the same time buyers’ agents’ commissions were raised to 4.5%.
As plugged-in people know, buyers’ agents’ commission were raised to 5% in May. And yesterday 74 New Montgomery #316 (a two bedroom, two bath) was listed for $750,000.
∙ Listing: 74 New Montgomery #316 (2/2) 1,216 sqft – $750,000 [MLS]
∙ A Plugged-In Reader’s Perspective On The Montgomery And Its Cuts [SocketSite]
∙ The Montgomery Surpasses Itself (Now Offering 5% Commissions) [SocketSite]
Buy later and save!
The folks at 74 New Montgomery aren’t stupid people. They’ve raised commissions so that realtors will bring them sheep to shear. This is an excellent example of realtors being vital in a real estate transaction. Not to the buyer, of course, but to the seller with the bank breathing down his neck who needs to unload property. Who says you don’t need realtors.
Um, $750K for a 2/2 in a so-so part of town? AND, an HOA of $736/month? I think the SF condo market still has some correction to do.
diemos, your comments are spot on! I’m going to pass them on to friends that are currently in the market for SF property. Baaa baaa
Let’s not forget that there are very few ammenities for that $736 monthly HOA bill. At least you get a fitness center, pool, business center and common areas for your $700+ HOAs at the other condo towers.
Let’s not forget that $750k will not give you deeded parking. Add another $500 in a few years on top of that $700 HOA.
Let’s keep things in perspective, though. This is a very large 2-bedroom (over 1,200 square feet). So at $750K, it’s approaching $600 psf, which is around current market in Soma.
However, I agree that this building generally underwhelms. I understand they sunk a lot of money into the retrofit to turn an old structure into luxury condos (more expensive than razing and building de novo, which wasn’t possible here). But they priced it around where Millennium was coming out while having virtually no amenities. Millennium may be overpriced as well, but you can’t knock the building itself. Take a tour, and you can see what the money buys. At this place…not so much. Both still overpriced on an absolute basis, but this building overpriced on a relative basis as well.
This, in my humble opinion, was a case of “sell the sizzle and they buy the steak” which basically backfired. A cursory look at PropertyShark shows that many of the 2/2s here sold around $1 million, if not higher. Ouch.
If anyone out there is still trying to “figure out” the Soma condo market, let me save you some time and legwork: it’s tanking. TANKING!!
$750/mo HOA for nothing. It’s not like they have a high speed elevator hoist to the 99th floor. This short building only has 8 floors.
Love the location and the building. I’d also love to snap a couple of units except it’s still 2X overpriced for a break even rental value. Outrageous HOAs are the killer (and even with low HOAs the math wouldn’t work).
I am not in the renter charity business therefore I’ll pass, thank you.
Terrible deal
No view, no amenities, no parking
I think fair market value would be more around 600k
so why are the HOA’s disproportionately high here? there’s a studio listed at 330K, which normally would be tempting for me to look at, but taking in HOA+parking+property tax, it comes out to what i consider might be fair rent.
Buy later and save!
More like, Buy Later or be priced IN forever.
This is not too far from BLU 5E which set the new benchmark back in Jan. Comparable as well with no view, decent location, nice finish. $600/sf seems to be a viable price for SOMA condos these days. Almost getting there on P/E basis.
“$750/mo HOA for nothing. It’s not like they have a high speed elevator hoist to the 99th floor. This short building only has 8 floors.”
Renovated buildings are expensive to maintain. Combine that with fewer units and you get high HOAs.
So where does the HOA go? Aren’t these set up as not-for-profit entities? Is there just a lot of vacancies and it will go down over time?
Ah, Jason! HOA’s never go down. The money just keeps piling in and in the rare instance where there’s a bit of a surplus the board is sure to find a way to blow it, for example on crazy expensive art for the lobby or Sub-Zeros for the rec room or whatever. When they actually need cash beyond day-to-day expenses you can be sure they’ll hit everyone up for another assessment.
I would definitely be a buyer here at this price, if HOA is < $300
San Fronzi – you say that it is 2X overpriced. Does that mean you think it is worth $375K?
Where are you going to find an investment that does pencil with that logic?
Am I missing something?
EO,
There is no such investment in SF that would fit with this logic, apart maybe pocket deals on apartment buildings. The market is skewed by individuals who are paying way way too much for a home thinking buying ANYTHING is better than renting and then cross their fingers appreciation will make up for their ballooning expenses. There’s a lot of rationalization right now among some of my home-owning friends, I can tell you that. They overpaid and are now stuck and can’t move up. You don’t want that.
Just because you CAN pay 750K for a 2/2 doesn’t mean you SHOULD, but it looks like everyone’s a wannabe overachiever in SF and wants to up the guy next door. Johnesing makes the world go round, that’s salesmanship 101!
Look at the numbers. Even at 375K you’d better be sure of your numbers.
375K purchase w/20% down at 5.5% is ~1750 in mortgage + 400 in taxes + 736 HOA + other expenses minus tax breaks = ~3000 / month.
Will it rent at 3K? Who knows? Rents are coming down, by the way, with all the oversupply in failed flips. All I know is there was a better time to buy 12 years ago and the economy was in much better shape than today. These times will come back I think. I’ll just be patient, I have all the time in the world. I already made my killing in the past cycle.
Where are you going to find an investment that does pencil with that logic?
Well, it’s not SF – it’s NYC – but it hits all the themes I always do.
Who is going to pay some crazy rate of return to a developer? Why, the foolish taxpayer of course!
http://www.1010wins.com/Some-NYC-Homeless-Now-Live-in-B-klyn-Luxury-Condos/4533379
Note the numbers carefully in that article. These are condos that couldn’t sell at $250-350K, and so rather than let the developer simply lose the property and have the apartments simply fall to the level that the local population can afford (maybe it’s $150K? maybe $200K? who knows?), a “nonprofit” is going to put $2700/mo per apartment in the developer’s pocket to house “homeless” people (sure). Isn’t that the less than 100x monthly rent that Fronzi and I often mention as a reasonable metric.
So nice of the “nonprofit” to float the developer here until he can cash out at some point in the future.
Again, I know it’s not SF but I have to believe these sorts of scams will literally explode as the Obama administration increases spending on “the poor”.
It reminds me of a small lunch I attended in NYC environs back around Thanksgiving 2008. A few pretty heavy hitters in real estate investment were there (not Manhattan – investors in the northern suburbs) and all of them thought the Manhattan condo market was going to be “toast”, with two of them talking 50% drops (and one of them had some reasonably extensive Manhattan rental properties). They scratched their heads, and talked about “where can we make money” going forward. To a one, they all agreed, “affordable housing”. One quipped, “If Obama is going to be throwing money around, which we will [Obama had just won], it’s best that that money wind up in the proper pocket.” And we all laughed. True story.
I can’t imagine that that sort of stuff doesn’t happen here as well, but I just don’t know any of the players.
(PS – Today, Mayor Bloomberg is in damage control mode about the story, saying that the homeless shouldn’t get too comfortable there and it’s transitional, but I bet it blows over and the “nonprofit” puts the money in the “proper” pocket for a long time to come.)
Thanks San Fronzi –
I agree with the logic from an investment property standpoint but hardly think that should be the only consideration when determining the fair value of a property.
Also, big assumption on market rent for this unit. Lots of inventory in the area. 2 bedrooms in the area are on craiglist for under 3K to 10K.
The listing for 74 New Montgomery #316 has just gone straight from “In Escrow – Firm” (i.e., all contingencies have been waived) to “Withdrawn.” As such, no sale price will be reported on the MLS.