As we wrote about the Überprime 2306 Broadway in April:
Tax records suggested an August 2000 purchase price of roughly $7,000,000 for 2306 Broadway while a plugged-in reader puts it at $6,600,500. Listed as expected for $6,495,000 twenty days ago, but recently reduced to $5,995,000.
Once again, updated since its last sale [think new kitchen and master bath] and the sellers are simply moving next door.
As another plugged-in reader steals a bit of our thunder, the sale of 2306 Broadway closed escrow today with a reported contract price of $5,235,000, 20.7% under its year 2000 value sans updated kitchen and bath.
∙ Coming Soon And An Überprime Data Point To Be: 2306 Broadway [SocketSite]
∙ An Überprime Data Point Update: A Little Something Extra Off The Top [SocketSite]
∙ The Side Story (Quite Literally) For 2306 Broadway: 2310 Next Door [SocketSite]
flujanonn “expert” irony at its best:
“So, a 6.6M 2000 purchase according to SFRob. A 6.95 list is yet to come. Who thinks that there’s zero chance it could go over asking, even in this market, considering the block and the area’s lack of inventory? The house right next door was bought for 9M, and another 3M thrown is being thrown at it we gather. Yet we have folks talking about 1999 price rollbacks and the like. The only irony here is the true meaning of irony. If you give these guys any credence (I don’t) then this outcome is likely to illustrate the precise opposite of what was expected by the Socketsite vocalbears TM.” – Posted by: anonn at March 26, 2009 12:30 PM
Apparently this property’s owners bought the house next door for 9M. Go ahead and think what you like tho. If it’s “Space 1999 redux” who am I to stop ya?
speaking of the “experts”, where is paco with his “while the price of bleacher seats might fall the price of luxury boxes will hold steady” analogies for san francisco? this luxury box took a tumble.
“If it’s “Space 1999 redux” who am I to stop ya?”
What a great show.
“speaking of the “experts””, the noticeable absence of real estate cheerleaders the last couple of weeks could be a sign that we have hit the bottom, though I doubt it. It actually is a sign that the wheels have fallen off the real estate industrial complex booster express which is welcome relief for the reality based real estate community.
Clearly a lot of high end properties are not worth what they are listed for. If the owners want to hold onto them for at least five years before prices rebound, then that’s their right.
But the prices of properties that actually sell will continue to go lower for the next couple of years.
I don’t know how well the realtor representing the seller managed the seller’s expectations upfront, but it seems that they were realistic in reducing the price and selling it now, rather than selling at an even lower price in the future.
I don’t say this as a real estate “expert” (I’m not). I say it as an outside observer. With common sense. Sometimes.
Ouchee ouchee ouchee. Dust off the DeLorean and load up the flux capacitor, we are going back to the 90s in uber-prime land!
I’m not really sure what to say about this one. I personally think the buyer got a great deal. I’m sure the seller doesn’t care too much about the loss. He now gets to live in a place double the size with double the (unparalleled) views. Still, he could have sold in 06 or 07 in a heartbeat and moved elsewhere during the construction. But what are you gonna do?
Anyway, this is still bad news for a lot of neighbors. A house a few doors down was gutted and is still being redone for the market (or so I’ve heard). Likewise, this place, I believe, was in good condition and probably only needs some minor cosmetic work. So what does that mean for real fixers in Pac Heights that need millions in repairs? I’ve also noticed that a lot of construction work seems to have stopped on a bunch of places. The next 6 months should be really interesting!
Great guess, Eddy. You said $5.080 and it closed for 5.235, less than 5% away.
Sleepiguy and I thought it would close above 6. Shame on us. Way off.
Whoever bought that place on Fillmore for 5+ is probably kicking themselves right now, and conifer should be running scared…
I recently wrote that anyone who bought near the peak (e.g., 2007) and wants to “wait out” the downturn had better be prepared for the possibility that they might not be able to turn a profit until 2020 or later, even in “prime SF.”
Some were shocked by the suggestion that a prime SF property could turn a loss even when held 13 years or longer. Yet the owner of this property lost almost 30% when holding for 9 years, and that doesn’t even take into account carrying costs. Does anyone here really believe that this property would break even (i.e., increase in value by 50% from its current price) if the seller had just waited until 2013??
Air’s thinner at the top they say. I guess I’d need some extra O2 if I lost all this cash. These losses are nothing to frown upon. 2M+ including redos and holding costs and grossly overpaying over renting.
Of course these properties are one of a kind. Many things can come into play. Maybe be the seller didn’t think twice when he bought 9 years ago (maybe he didn’t need to) and grossly overpaid. Maybe there’s urgency in this sale and knowing the trickle volume at these levels, urgency is never a good thing on both sides.
In any case, a very interesting datapoint.
On the plus side, think of all the money they could have wasted by renting!
Yeah, I really missed this one, among others… I grossly overestimated what people are willing to pay for a superior location and views.
Not running scared, tipster. The value of this house is the view, and the Broadway address, but location just off Fillmore could be better. Given that the buyer got a good deal, at this price he paid for the view, and now has a thoroughly modern house that could otherwise be anywhere in the world on a very narrow lot. If this did not have a view — a truly superb view — what would it have been worth in the same neighborhood? Probably under $4m.
I do admit that prices might fall. But I am confident that we are going to have a 100 donut party on December 31, 2010, because no single family house will sell north of Clay, south of Green, west of Fillmore, east of Lyon, for $1.3 million.
I’m not surprised by this sale, nor will I be surprised in the future when many many properties sell for 2000 prices (in real terms) and perhaps in nominal terms as well. 2000 was BUBBLE pricing. I see no reason why SF of 2009 and beyond can’t fall to the nosebleed BUBBLE-level pricing of 2000. (I’ve said this many times)
—
Conifer:
IMO you’re stretching trying to knock this property. It is uber-prime. Are there a miniscule handful of better properties? yep. but those cost way more than $5M as well IMO.
none of the things you listed about this property changed since 2000 when it was bought for more than it was in 2009. it didn’t change lot size or addresses, it’s view didn’t change, nor did its location relative to Fillmore.
and now has a thoroughly modern house that could otherwise be anywhere in the world on a very narrow lot
ROFL. that’s the case with 99% of the homes of SF that tend to be quite sub par except for their SF address.
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I grossly overestimated what people are willing to pay for a superior location and views
@sleepiguy: extend this thought process to SF and the entire Bay Area. A national downturn severely affects the Bay Area, regardless of how special it is. “real SF” will always sell for a premium over SF which will always hold a premium over the outer Bay Area which will always hold a premium to fly over land. However, as fly-over land and outer Bay Area falls, it puts pressure on SF too and later “real” SF. FWIW: I will bet you that I underestimate how far my personal house will fall due to this downturn as well, due to my inherent belief in the “specialness” of my own personal property. it happens a lot in RE since it is so emotionally laden.
much of the RE sold in America was only possible due to a credit bubble that is now contracting. Americans never had the wealth needed for 2005 prices. They just had the availability of debt, which is now less available.
unfortunately, we’re only in the lull of the foreclosure nightmare, the proverbial eye of the storm. Anybody who’s seen the mortgage reset charts that I’ve posted here ad nauseum knows that we are in the lull of the resets between when subprime reset and when the Option Arms and Alt A’s reset. Get ready for the next wave. This next wave also comes with credit card, student loan, and commercial real estate resets. Ack. Of course, everybody is willingly blind to this as part of the “green shoots” meme. Fools all.
This is why the govt is frantically trying to reblow a bubble as we speak. Too bad the banks aren’t complying and instead are lining their pockets with record bonuses again. Yay for Goldman Sachs the Welfare-Goddess! (GS puts a welfare queen to shame) It is absolutely disgusting what has happened throughout this crisis, the biggest theft in the history of Earth. And barely a peep from the masses. If you’re not outraged, you should be. the worst part is that now we won’t have the money when we need it.
20% under its 2000 price, and imo we are not even half way through the unwind of the SF real estate bubble. Fantastic!
Another fluj classic. Love it. Keep’em coming fluj.
Next year it could look like this seller got ‘lucky’ because the next big wave of mortgage resets/recasts is coming very fast and is likely to whack the crap out of the bay area ‘option arm’ and ‘alt-a’ crowd.
http://mortgage.freedomblogging.com/2009/05/20/loan-reset-threat-looms-through-2012/10791/
The only thing that could stop the wave would be a strong economic recovery and a dramatic rise in incomes, which even the most bullish market observes don’t see happening anytime soon.
I know nothing about the $5M+ market, but isn’t it off to mention the credit bubble and Alt-A in conjunction with sales at this level? Shouldn’t, instead, we focus on the VC bubble, the merchant banking bubble, the M&A bubble, and, going back to 99-00 the IPO bubble?
Obviously, the sale of a great SF property at this level is not good news for the real estate bulls, but was 06-07 really the peak in $5M land? On the peninsula, where much SF wealth is created, there are ultra-expensive Atherton, Woodside and Los Altos Hills homes that haven’t seen their 2000 price since, well, 2000.
for the record, I beleive that prices will continue to fall and that price tiers and neighborhoods are connected, but I am struggling to see the relevance of this sale for, say, Noe.
I am struggling to see the relevance of this sale for, say, Noe.
There is a relevance. A family with 10-20M net worth might consider both depending on its priorities. If they’re looking for vibrant, walkable, family-friendly but still want luxury, they might go for a McMansion-ized 4000sf 2.5M+ vic in Noe. If they want more exclusive feel, they will go for the 5M++ “real” mansions of PH. If they’re looking for something in the middle, this area would be a good pick: 2 blocks away from the start of the very lively upper Fillmore with shops, cafes and restaurants. You’re in PH, but you’ve still got life around you.
The sale price here seems like a split between a $5M offer and a $5.5 ask. I think this sale price accurately represents what is going on in PH right now. I honestly don’t think it’s relevant to compare this place at a 2000 $7M sale price; as that price was way out of line and on the high end properties you are going to get the occasional outliers? But I guess it’s too late for that argument as this is now an apple data point.
FWIW, I don’t think the owner here is too concerned about the loss. They had a garage sale a few weeks ago and everyone seemed pretty chipper.
On the whole, it’s not a good comp for most of the homes on the market priced between $3-10+ anywhere in the city. If you use this is as a comp and assign a 300-450 range value on view, and this home is clearly at the upped end of the range — you might infer that 900-1000psf is about the maximum you are going to get for a non-view SFH in excess of 3000 square feet.
I still think there are buyers out there in the $3-5m range that could be hooked for a lesser property for more than this comp would suggest, but finding them and convincing them just got a bit harder.
If you have a buyer in this range it’s a signal that sellers are clearly entertaining low ball offers. Very surprising and uncharacteristic of recent time.
I know nothing about the $5M+ market, but isn’t it off to mention the credit bubble and Alt-A in conjunction with sales at this level? Shouldn’t, instead, we focus on the VC bubble, the merchant banking bubble, the M&A bubble, and, going back to 99-00 the IPO bubble?
The VC and private equity bubbles etc were all PART OF the worldwide credit bubble. the credit bubble seeped into almost everything, and now it must be wrung out somehow. PE and VC are withering due to credit restriction. that clearly affects the $5M price point. The credit bubble lifted all boats, not just the middle and aspiring classes. The destruction of that credit bubble will likewise affect all boats.
it’s all inter-related.
===
this affects Noe because if Pac Heights falls in price far enough then people will take their money and buy there instead of Noe. Many would bypass a $3-4M Noe home for a $4-5M PH home. I know I would.
I should probably clarify my last post and what I mean by “interconnected”
Many of the banks and “shadow banking system” entities that make funding/leverage available for VC deals, PE deals, hedge fund leverage and all the “high finance” stuff also funded alt a, subprime, option arm, Commercial RE, student loans, etc.
As their balance sheet takes the hit from residential mortgage securities and the other coming “common man” securities (student debt, commercial RE, etc) it impedes their ability to lend to the VC/PE/Hedge world. this reduces profits of the high finance world. which leads to less money available for salaries and bonuses for the high finance types, which affects the ability to purchase the $5M homes.
Many would bypass a $3-4M Noe
Noe homes in that range have barely existed. Think one sold ever and one on the market right now. So no, you’re really talking about twice as much for PH versus Noe by and large. I don’t particularly see your point there. It’s actually a different buyer group all together.
Regarding availability of debt and jumbo loans — my wife and I just got a firm pre-approval letter from BofA for a $700k loan with 10% down (to back up an offer on a short sale property). Its not as bad as some people on this board seem to think.
Our credit scores are both less than 800 and we don’t even make $250k a year combined.
Clearly, banks are still offering “jumbo” loans with less than 20% down. Our rate would be 6% including PMI (if the offer was accepted today).
I think ex-sf-er’s point is broadly valid even if there are fewer homes in the high end in Noe. Without belaboring the basic economics of supply/demand and price/value, people would generally prefer more for their money. If one location becomes relatively less expensive than other areas of similar style should react accordingly. Sure, there is the guy that needs close acess to the valley and values Noe’s proximity to the highways more than a view, but by and large I’d say most Noe buyers are very similar to PH in terms of ‘wants’.
1) do many $20M+ net worth folks look to buy in noe? I would have thought it was home to the $1-5M crowd.
2) what do folks think peak price would have been for this house? and when was peak? again, there are places in woodside, los altos hills and atherton where the price topped out in 2000-2001. palo alto (the noe of the south) doubled almost across the board 2000-2008, but, the markets were and are very different.
I don’t know. You cannot really argue with “PH still costs twice as much as Noe.” Nor is it really debatable that for the most part the 2M to 2.8M buyer is in a different financial place than the 5M+ buyer. They might be looking for the same things, true. That doesn’t mean they can afford the same things in the same areas. An attached narrow lot house with big views whose owners didn’t really care to tough out a long sale period haul gets 5.2M in Pac Heights now. OK, but that’s very removed, price wise, from the Noe market. In case you haven’t noticed, numerous Noe houses have been selling for the upper echelon Noe price range — the same range they’ve been selling at for years — all spring and summer. I’d argue that that’s because there are a lot of tech workers who can afford 2.2 to 2.8M. 5M+ tho? Another story. If ex-SFers point were to stand, the house in this thread would have sold for more like 3.5M or something. It wasn’t remotely close to that.
Yeah, if you look at things superficially it does seem like some places in Noe and elsewhere are “selling for the upper echelon” price range. But if you look at the apples to apples examples, that is shown not to really be the case. For example, a 2000 sf simple house selling for 1.1 million may seem on its face to be sort of at peak pricing “range,” unless one sees that it sold for $300,000 more 18 months ago. If we didn’t have the 2000 reference sale on this place, $5.2 million would seem like “the upper echelon price range” too. That’s why you need to look at the apples and not just pricing in a vacuum or in relation to subjective “comps.”
lol@anyone even attempting to compare PH and Noe Valley.
re: market being interconnected, that also means that Person A won’t buy Person B’s overpriced house, which he/she needs to sell to buy Person C’s overpriced larger house, which he/she needs to sell to buy Person D’s overpriced larger house, etc. The whole idea that this was a “subprime” issue was just really good marketing.
lol@ anyone even attempting to compare PH and Noe Valley.
I agree.
I always got the impression on here that people thought Noe was not all that, a bit overrated, no where near prime SF etc.
But suddenly, an apple in Pac Heights is seen as bad news for Noe!
“palo alto (the noe of the south) doubled almost across the board 2000-2008”
Really?
A quick look brought up this one: tear down shack replaced by mansion and sold for $4.5M at the beginning of 2001.
They’ve been trying to sell it for awhile, the last price change was to $3.8M last week.
http://www.redfin.com/CA/Palo-Alto/2061-Webster-St-94301/home/707781
It looks like they are back at 1998-1999 pricing just like SF. So if by “doubled across the board” you meant “dropped by at least 15%”, I’d agree with you.
“It looks like they are back at 1998-1999 pricing just like SF.”
This is one property. I don’t think it means SF as a whole is back to 1998-1999 pricing. An apple just sold at 1% below its 2007 price – but no one is claiming SF is still at 2007 pricing.
This is one property. I don’t think it means SF as a whole is back to 1998-1999 pricing
Neither does he.
The dispute about Pacific Heights and Noe Valley is not a little specious. The northern part of the city has a certain loyal following, usually rich or wannabe rich. They won’t go anywhere else, no matter what. I have a good friend like that.
Then there are people who are willing to go to other neighborhoods. Some will go to St Francis Wood or Forest Hill or nearby. And some others will go to Noe Valley.
But they expect to pay less, since they are getting less.
This may not always remain true. There are neighborhoods in Manhattan that now cost as much as the upper East Side, which was for generations the only and best place to live. The Marais (3e and 4e) in Paris is now as expensive at the 6e and 7e arrondissements. The Marais is marginally more expensive than the 8e and the 16e.
But for now Pac/Pres/Russian/Nob retains it cachet.
repornaddict, are you refering to the Green TIC property? If so, that’s because 2007 was the peak and we are now far removed from that. Also since it was ellised 5 years ago, you can now have rental income. This is new information since the March thread, apparently.
So you see, it’s not really an apple; still a TIC and still over $4m, still 3 units and still only $50K less than 2007, but not an apple and consequently not a pertinant data point. Besides a fool overpaid.
conifer’s point is interesting. one of the things that has suprised me in my year-long peninsula housing search is how neighborhood and even street specific buyers are. I assumed that if los altos drops 20% than means palo alto should too. maybe in time, but not in a year or so. in fact, one of the ways people seem to make (or lose) money in real estate is through luck of the draw. some communities get hot – others not.
for example, mountain view and cupertino used to trade at a large discount to los altos. now, barely at all. or, 25 years ago, houses in the hills (los altos hills, palo alto hills, woodside) were all the rage. today folks like to say they can walk, so ares close to “downtown” areas are all the rage. this explains why central menlo has rocketed past sharon heights, and 94301 past 94304.
I forget who first championed this theory, but to understand Noe you only need to track GOOG. Alt-A etc doesn’t have nearly the explanatory power of that one chart.
anonn:
I agree with you that the buyers of a Noe home aren’t generally in the same league as the PH homes. if you recall, I didn’t bring up Noe, others did.
I disagree that Noe and Pac Heights aren’t related however.
many cheaper and middle neighborhoods are doing poorly. If this property is representative (surely arguable), Pac Heights MAY also be struggling a little bit.
and yet Noe will be unaffected by this?
I’m not saying nor have I ever said that this property will fall to $3.5M. However, the fact that it DID fall to it’s current sell price means that it resets the “uber prime” pricing lower.
“uber prime” pricing will always hold a premium to Noe Valley, unless you consider Noe to be Uber Prime (I don’t).
Therefore a lowering of Uber Prime pricing lowers what people will be willing to pay in Noe (since Uber Prime always holds a premium to Noe). the lowering of the surrounding neighborhoods to Noe also lowers what people will be willing to pay in Noe. (noe has a premium to them)
In general, although “it’s all micro” and “location location location” are valuable truths, they do not exist in a vacuum. surrounding RE affects micro markets, as does macroeconomics.
Regardless, I don’t feel strongly about Noe vs Pac Heights anyway, it wasn’t really my main argument. Noe has a lot more to worry about than Pac Heights pricing IMO.
It is absolutely disgusting what has happened throughout this crisis, the biggest theft in the history of Earth
C’mon man, don’t you think this is just a little bit hyperbole? Bigger than the theft of North America from the Native Americans? Bigger than the millions of slaves stolen from their homelands in Africa? Bigger than the Holocaust?
To pick a more recent example, bigger than the Japanese American Internment in WWII?
Whenever the oligarchy has a systemic threat to its existence, it just changes the rules. This has been true throughout history, I don’t see why anything would change now.
Your argument doesn’t hold water about pricing premiums ex SF-er. Let’s imagine that there are three neighborhoods, A, B and C and A is priced at a premium to B which is priced at a premium to C.
By your logic, during a period of increasing prices, A will always outperform B which will always outperform C. And during a downturn, A will always outperform B, which will outperform C. Eventually, the gap in prices will grow and grow.
Does this make sense to you? It doesn’t to me.
Specific neighborhoods get better or worse over time and tend to either underperform or outperform the general market. I might be biased, but I suspect that Noe is outperforming the market right now, and has done so for a decade or so. I have been widely derided for predicting that it will continue to do so, but so far I have been right and my critics wrong.
You even once yourself said that you believed that gentrification matters. This neighborhood has definitely gentrified.
There is a definite demand for safe, walkable neighborhoods right now and it is not something that the market has found itself capable of providing, so these neighborhoods are all priced at a premium.
Again, really unique ground breaking analysis. Yes, prices are down. So is the stock market.
Not sure why the same old posters keep piling on with the same old tired analysis. I’m sorry that the fact they live in a rent controlled apartments and kept their $20k life savings in money market funds during the meltdown and that makes them feel smarter to those who tried to put down roots and become part of the community.
Mostly I’m sorry I keep reading thier comments and try to figure out why they are so smug and angry all at the same time.
They are smug because they saw it coming and stayed out of the way.
They are angry because, as taxpayers, they are going to end up paying for it anyway.
sorry diemos, wrong on so many levels.
those who saw it coming are silent and happy and don’t even know socketsite exists, those who are angry have other issues. those who are both… wish they saw it coming, didn’t and have more issues than anyone needs to know, except thier therapist(s).
really… the sky is falling, dancing on the graves of those who lost money is really sad. Not as sad as thinking you saw this coming. That is just delusional.
@ Jimmy C – Its not about celebrating others losses – its about gathering data points and trying to learn from them.
This is one of few sites I’ve seen that has commenters who try to do some fact based analysis, logical reasoning of whats going on in RE market relative to economy, other investment alternatives, and public policy. I, for one, find this as one more useful bit of input as thinking about how to balance my portfolio into various assets over the near / medium / long-term.
So – vote with your feet. Noone forcing you to read – but some of us appreciate the analysis that slips in between the pedantic flameing.
And realize you were just being petty – but suspect your assessment that renters here are just broke and bitter is probably way off. Doth protest too much?
FWIW, I don’t think the owner here is too concerned about the loss. They had a garage sale a few weeks ago and everyone seemed pretty chipper.
Did anyone else think this was funny? After blowing up ~$1.5-2M + the cost of renovations on a 9 year hold, you try to sell some junk at a garage sale? I mean, why not just donate it all to some scam nonprofit – or at least to the local “dumpster divers”?
I found it funny too LMRiM but I guess in some ways, following that kind of behaviour is exactly why they have money – in a Monsieur Grandet kind of way….!
It wasn’t junk. They were trying to unload a couple Monets and Picassos.
😉
Jimmy C,
Renter, very far from broke, saw it coming, very happy about my choices, and not silent about it. Any questions?
About roots: are these roots when the goal is to move up every 2-4 years, using profits for the next downpayment? This was a quasi-flipper-based market, not a 1950s’ style build-your-house-and-give-it-to-your-kids market.
Furthermore, roots are supposed to circulate up nutrients to the surface, whereas housing at these levels suck everything from the surface to feed those “roots”. Renters are the ones with money to fund an actual life, whereas bubble-toppers are just working for the bank.
Thank you San FronziScheme.
(Renter, not broke, and if rearing three children in the city and being involved in schools, neighborhood organizations and community advisory boards isn’t “putting down roots” but perpetuating a casino economy is, than I am happy to remain shiftless.)
Oh, and yeah, anyone with more than two inches of forehead could see it coming – they just didn’t know when.
I found the garage sale nothing out of the ordinary. Pacific Heights is a neighborhood too, you know.
I found this comment “I mean, why not just donate it all to some scam nonprofit,” typical.
Sorry to have doubted all the wise sages. But really, anyone can say they saw it coming, but who shorted Citibank when it was $50? Not the geniuses here, they were content to sit back in their rent controlled apartments and talk about it.
Just because you decided not to buy between 2005 to 2008, doesn’t mean you saw it coming, it just means that you didn’t make a change… nothing more.
Regardless of how prophetic you feel you are, the “this person lost their shirt”, “good thing they didn’t throw their money away on rent” and “we haven’t hit bottom” comments are really getting old.
I’ve seen more insight in letters to the editor of People, as least those people know they’re crazy.
I shorted Citi as well as Bear and Lehman and GGP. I saw it coming, and did quite well. On the other hand, I didn’t have the guts to short the agencies or AIG. Oh well.
I just wish I had been smart enough to see it coming. If I had, I could have posted about 50 comments on SS throughout late 2007 and early 2008, outlining an impending credit crisis and the reasons for it, and at various times in those posts counseling people to be very light in equities and long US treasuries, advising people to be short financials and commercial REITs (especially GGP – what a beautiful plunge), arguing that people should be short all commodities in July 2008 (just about the exact top – except for gold), etc. That would have been a good set of posts to refer back to right about now.
Oh well, shoulda, coulda, woulda… and if I had my net worth would probably be $25K instead of $20K 🙁
Hey, no one was talking about you, LMRiM.
We know you have an enormous basement filled with golden statues that move about, and that you bathe in piles of money, cleaning indecent regions with presidents you don’t like. Or perhaps that was an episode of Scrooge McDuck.
What I want to know is — did you short the agencies, and are you shorting now?
That’s funny, Robert, about the agencies. I’ll see if I can pull it up – it was a very long time ago I posted on housingbubble.com that I was shorting the GSEs – FRE and FNM – it was probably September/October 07, and FNM was trading around $65-70 iirc. I actually had a short call/long put position – exactly as I had done with Countrywide two months prior. Countrywide worked out spectacularly, but the FNM spread was just a slight winner (you might recall that FNM got squeezed higher in Sep/October 07 following Heli-Ben’s antics in Aug/Sep 07). I probably could have managed it better but I had taken the entire family (grandparents and brother’s family) to Maui and flattened most of the positions before I left. (Renting allowed me plenty of spare cash.) I never really caught the swan dive of the agencies, but I was right there for GGP with you!
I think you know that I tend to do index option trading much more than individual stocks, so I guess I indirectly caught the financials meltdown in early- to mid-08. About shorting right now, I’ve taken my risk profile down a lot, removing most of the options overlay strategies – it’s been a very good year and I don’t want a repeat of Fall 08 when I gave back a substantial portion of 08’s gains. First rule of trading for yourself is not to get too greedy (it’s fine when you’re at a hedge fund, because someone else will pick up the pieces after you’ve been paid out and subsequently blow up) 🙂
I’ll see if I can find that old housingbubble post – it should be good for laughs. BTW, this is the “macro” Robert and not the other one, right?
Yes, the macro one, albeit in a colorful mood recently. I never followed housingbubble.com. This is my only housing blog, and the only blog I post in.
GGP was really a thing of beauty. Anyways, making money in the markets is hard to do, but I don’t get this business of not seeing it coming. Many people saw it coming, but none of them were mainstream. They still aren’t mainstream.
Give those post-keynesians a second look!
It is hard to make money in markets, Robert, largely for psychological reasons I think. At some of the best-known hedge funds, you’d be surprised at who is actually making the decisions, and the thought processes. It’s not always the “smartest”.
Some of the most successful of the funds found that trading success is sometimes correlated with what they thought of as the “jock” mentality. Successful high school and college athletes had to deal with coming up short all the time, and still were able to get up the next day and play again. Many of the smartest had never had the experience of multiple, repreated failures and simply didn’t have what it takes to keep fighting in markets. It’s a humbling experience finding out every day whether you succeeded or failed (daily p&l), and sometimes people with the best resumes didn’t have the psychological makeup.
I think that is the benefit of systems – no one really in markets seriously thinks that prices move or are predictable because of technicals – but many recognize the value of trying to systematize (even imperfectly) a process in which some of the natural, psycholgical biases can be overcome more easily and consistently.
BTW, I can’t find that old post – the search function on housingbubbleblog.com is very poor and manually searching is also just about impossible (it seems like perhaps all the threads haven’t been archived from back then?). Like you, I really only post on SS, and probably have less than 5-10 comments on other housing sites over the last two years. As I’ve mentioned a number of times on SS, the only reason I really started posting on SS in December 2007 is because I had some enormous put spreads on the S&P mostly for March 08 which required active hedging and monitoring. Prior to summer 07, I hadn’t been doing much trading since mid-2002 – basically just got long everything in mid-2002 and stepped back to raise kids and travel. It’s been a good run, but perhaps it’s getting time to step back again for a while and explore a new activity for the next few years.
The mate to this place on the right is now for sale asking 6.2…