Billed as having the “Most desired junior 1 bedroom floorplan in building,” Gramercy Towers (1177 California) #1022 is on the market and asking $499,000. It was purchased for $462,000 three years ago. And all things considered, that wouldn’t be bad appreciation.
Two weeks ago, however, the sale of the Gramercy Towers #1402 (yes, the “Most sought after Junior 1 bedroom floor plan with views of the Golden Gate Bridge” but without a balcony we believe) closed escrow with a reported contract price of $407,000. The 511 square foot unit was also remodeled and had been asking $429,000.
You know it’s small when there isn’t a single picture of the unit in the listing.
junior 1BR = studio?
This has got to be the UGLIEST Building I have ever seen on socketsite….
That doesn’t mean that it is the UGLIEST Building in the city… or maybe it is…. ?
over 700 hoa for essentially a studio. the hoa, tax, condo insurance alone will be the same as renting a studio in a nicer section of nob hill over on sacramento, clay, washington.
R: no, there’s a picture. it just so happens that 350 of the square feet are taken up by a swimming pool. sweet! doesn’t look like there’s a kitchen, though.
Indeed, ugly.
Looks like a similar unit (~656 sq. ft.) is asking $2,000 in rent. Includes parking, utilities, and cable.
http://sfbay.craigslist.org/sfc/apa/1463451294.html
Clearly seems cheaper to rent, even at the lower $407,000 sale price.
In fact, using the Irving Housing Blog’s calculator ( http://www.idealhomebrokers.com/calculator/ ), assuming a $407,000 sales price, assuming a 5% interest rate, and taking into consideration the tax savings from the interest deduction, the cost per month is still over $2,500. And one would also still have to pay for your own utilities and cable.
With unemployment probably elevated for years to come the rental market it seem unlikely the rental market for Jr. one bedroom condos is likely to get stronger.
Even assuming a sale price of $300,000, it’s still cheaper to rent than own (I get a monthly cost of ownership of $2,006 at that sale price–still over the current asking rent).
If rent is actually closer to $1800/month (which I think is probable) for these types of places, the sale price would have to come down to $250,000 (which brings cost of ownership to $1,794) to bring us to rent/buy parity.
At the current asking price, $499,000, the monthly cost of ownership is $2,852. That’s quite a premium over the $2,000 asking rent (with cable and utilities included).
@SFHawkguy: Nice analysis. Of course, a realtor would say “you’re just throwing money away” or “you’ll have no equity” and “this is the absolute bottom of the market! Prices can only go up.”
what is the difference between a “Jr 1 BR” and a studio?
it is despicable that they couldn’t even manage to put a picture up of the most desired Jr 1 BR floorplan in the building.
“what is the difference between a “Jr 1 BR” and a studio?”
From Think Properties (based in NY)…
Studio Apartment:
A studio apartment is a self-contained, small apartment, which combines living room, bedroom and kitchenette into a single unit, barring a bathroom. Bathrooms are generally in a separate room, though instances of strange bathroom setups within a single room have been reported. Studio apartments generally range from about 200 to 500 gross square feet. These apartments generally fetch the lowest rents on an apartment scale. However, they are generally the most expensive per square foot. A studio’s premium comes from the privacy that is enjoyed by the renter. If you are not too keen on having your own place and want to save, we recommend a roommate situation, where you will get more space for the same amount of money you had planned for a studio.
Alcove Studio:
An alcove studio is a studio apartment with an alcove, usually for dining or extra sleeping place. Alcoves may or may not be bigger than regular studios and can range from 350 to 600 gross square feet. Alcove studios are often referred to as “L-Shaped Studios.”
Junior One Bedroom Apartment:
The Junior One Bedroom apartment is an often misconstrued apartment among new renters. Essentially, the “junior one” is an alcove studio. The only difference is that the “alcove” area has a window. If one were to have a wall up in that windowed alcove, it would be a separate bedroom, though it may not necessarily be a legal sized bedroom. The size of this type of apartment usually ranges from 350 to 700 gross square feet.
Thanks Rocco. If a realtor were to make those comments it wouldn’t be very convincing.
I think the bull case goes like this: As long as the government is subsidizing housing there is a limit to how bad one’s real estate bets will turn out. The premium for owning may be worth it because of the potential for out-sized gains from appreciation.
We can see that this point by looking at the numbers on this condo.
Aassuming a $407,000 sale price, one only needs to come up with $14,245 for a down payment. Uncle Sam is kicking in 8 G’s, so that leaves our Humble Homebuyer with only $6,237 to come up with for a down payment. This is not much more than the $5,000 required to move in to the rental (although the rental deposit money is returned to the renter).
So, again, assuming a $407,000 purchase, the cost of ownership comes at a premium of $500 a month over the cost of renting ($2,000 to rent, $2,500 to own). So that is an extra $6,000 a year to own here.
Let’s also assume a holding period of 5 years. Our hypothetical Jr. one bedroom owner is now getting married and ready to move on (or whatever–can’t afford the payments and has to downsize and move out, etc). Over that 5 years one would have paid an extra $30,000 to live here. So that means the homeowner must sell for $443,237 to break even (adding down payment and ownership premium). And let’s not forget, of course, the fee to the realtors. So, we would need to to add 5% to get to the true break even point. I’m too lazy to do that last calculation exactly but I think it gets us to around $475,00.
Anything over ~$475,000 is pure gravy and would mean it would have been better to buy at $407,000 instead of renting.
The upside, the potential gravy as it were, as we remember from the good days, is crazy good. Who knows, even if the fundamentals suck, and this place is renting for $1,600 a month 5 years from now, prices may be inflated and this might sell for $600,000, which would give our hypo home buyer hero a huge windfall. That would be about a $120,000 in profit for buying at $407,000. These things appreciated at that rate earlier this decade–so many it’s not a crazy to think this is a possibility.
And then the downside is rather limited if one is willing to walk away and give the keys back to the bank. $30,000 extra in living expenses and $6,000 in a down payment. Yeah, it would suck to lose $36,000 over 5 years but it’s not totally crazy to take the bullish bet. Especially when the government is doing all it can to reflate the housing market and is encouraging people to take this bet.
It’s actually not a terrible gamble as long as one was willing to be a ruthless defaulter and cut one’s losses by defaulting if the deal turns sour. If the condo is worth less than $475,000 in five years and the Hypo Home Buyer needs to move on he or she is better off just defaulting. A short sale would of course simply add to the $36,000 cost of owning. If the only mortgage was a non-recourse loan though, it’s better to simply default, and the losses are limited to 36K. A person worried about their credit might rationally be willing to spend 10 or 20 K extra in a short sale.
But the fundamentals tell me that renting is safer and who knows, maybe it’s better to have $36,000 extra five years time than to take the speculative bet that this place will appreciate enough to make it profitable. In fact, I think that people that are in the market for Jr. one bedrooms are probably (in general) better off taking the sure thing $36,000 in savings.
It’s so sad that America turned the financing of our dwellings into a poker game in the Wild West.
Excellent analysis by SFHawkguy. I’m not sure if you have some sort of professional connection to the real estate industry, but if not and this is just an interest of yours, you may want to consider your own blog.
I’m actually a Realtor – I’m essentially the assistant to one of the City’s big agents who’s listings are profiled on this site every now and then. I’m also getting my MBA right now, with an emphasis in real estate finance.
I’m not writing this to display my qualifications (which are mediocore, I know), but to point out that not all Realtors take an entirely sales driven, detached view of the market. I would say that most do… but not all.
In regards to SFHawk’s post, I think that the government has made it clear that they will devalue the dollar in order to save housing. Obviously, the effort to save housing isn’t the only reason behind a plummeting currency, but it plays a heavy role. I’m not an economist, but from my view, looking at our national debt and still over leveraged population, is there really any other choice than to monetize the debt? And if that is the course, doesn’t it make sense to bet on real estate (or metals, oils, pork bellies, whatever…).
Chinese imports from Walmart will sure get a hell of lot more expensive, as will filling up the gas tank. But in this scenario, that I really don’t see as that far off, won’t real estate as well?
Whew!
The paralax correction on this photograph is giving me a headache.
“But in this scenario, that I really don’t see as that far off, won’t real estate as well?”
LMRiM would have hit this out of the park. Sambo, you are a bit brave to forecast inflation during one of the great deflations of all time.
Oh price inflation is perfectly possible if we have a currency crisis. But rising costs of goods will leave less money available to pay the mortgage and will throw more people out of work.
The only scenario where inflation helps home prices is if TPTB can engineer a wage-price spiral. I would say that is unlikely.
Until then TPTB are having to let deadbeats live in their homes without paying the mortgage and have to provide cheap loans on stupid terms just to keep the market from imploding.
Sambo wrote:
> I’m actually a Realtor
Are you an actual Realtor ® (a member of the National Association of Realtors ® ) ?
> I’m not writing this to display my qualifications (which are mediocore,
> I know), but to point out that not all Realtors take an entirely sales driven,
> detached view of the market. I would say that most do… but not all.
I’ve pointed out before that there are “some” real estate agents are not sales driven, but after knowing many top real estate agents for a long time (I got my sales license back in ’82 as a college freshman) it is amazing how many of them are so good that they are “sales driven” but will make you think that they just care what is best for you and don’t care about the “sale”…
> In regards to SFHawk’s post, I think that the government has made it clear
> that they will devalue the dollar in order to save housing.
Ask your business school professors what they think the Chinese (and other buyers of US Government debt) would do if the government does (more) devaluing of the dollar to “save” housing. You can also ask them to evaluate “success” of the devaluing of the dollar over the past year in “saving” housing…
What a surprise! Someone in the real estate industry believing that the solution to all of our problems is for the price of real estate to rise. Happy days will be here again.
That would be a wonderful solution if the economy started and stopped with real estate. Unfortunately, it does not. There are business owners who will lay people off in roves if we have to pay suppliers, and employees in todays dollars, build a product and sell it for tomorrows devalued dollars. When we do that, prices ultimately fall because no one has a job. And who will be able to purchase when rates go to 20% and no one has a job? No one.
So the administration can push this however it wants, and for the short term, prices will stabilize as is occurring now, but in the long term, it’s impossible, and that’s what the Chinese are lecturing Obama about as we speak. If they pull their support, look out. The further decline of real estate is baked in.
But from your world, where real estate IS the economy, and there is no other components to it and no one reacts to anything negatively, happy days will be here again soon as prices zoom up to the moon!!!
Sambo, I realize that this is at best tangential to your argument, but still:
God I hope so, but I’m not holding my breath. This is the problem with economics, people learn it and then argue what should happen in theory. What you’re describing is what should happen in theory.
In practice, the renminbi/yuan (yes, I understand the semantics, pedants) is artificially pegged to the U.S. Dollar; the Chinese government isn’t buying your theory.
Whoa… lol.
Not sure how my post got turned into saying that appreciating real estate prices will solve all our problems, but that was not and is not my position. My post was a question, not a statement (and apparently not a very popular question).
With that being said, some good responses here – thanks everyone. In regards to how the Chinese will respond to a dollar that continues to depreciate, it’s a common discussion in b-school. Maybe my poor writing got in the way, but I’m well aware of the yuan pegged to the dollar – I think just about anyone with an elementary understanding of finance understands this relationship. I guess this is for Brahma, and maybe I’m misunderstanding your post, but if China continues to peg – the dollar can only depreciate so far considering they are the largest buyer. Should China shift to a basket of currencies, in turn causing the yuan to rise and dollar to plunge, then yes, you will see the end of $4 sweatpants at Walmart. FormerAptBroker, my professors are asked this question – a lot. The question is whether or not China’s domestic consumer purchasing power has become strong enough to handle a shift from the dollar. Thus far, even with our government printing them like baseball cards, this has not been the case. Until then, they need an employed populace, and a source of willing buyers (us) to keep them employed. Toxic codependency… You trade purchasing power for more stable employment.
So hopefully I’m making sense here. I really do appreciate your feedback, and would be interested to hear your thoughts.
Anecdotal data points, but certain imports have approximately doubled in price the past few years:
home firewall routers, used to be $25, now $60, and this is counter to the usual trend of established electronic devices falling in price
roquefort cheese, up about 80% over the last two years (yes, I like my cheeses bleu)
sesame oil–now about $10 per 16.9 oz bottle. Was under $5 3 years ago. (bought at Safeway; Trader Joe’s stopped carrying it)
Despite all the complaints, take it from someone who lived here a few years — its a great place to live. Right on the top of the hill, very good location (okay kinda inconvenient but this is city life). Its getting old, but its a cool place. But those tiny studio/jr 1’s I would not want to live in. The corner units and units with views are worth the premium.
Note HOA in this place is a killer and walking up the hill everyday will keep you in shape.
Agents need to start doing their jobs and take some pictures of the inside! Unless they’re hinting that the inside SUCKS SO BAD YOU CAN”T EVEN TAKE A PHOTO, then get in there and take some!
Thanks for the insiders view jackychan . . . .
Only H would freeze over before I would pay that much in HOA and still have to feed coins to use a W/D.
“…and still have to feed coins to use a W/D.”
I’ll betcha the HOA could replace the coin operated machines with normal machines if they felt like it.
The aspect that isn’t easy to change however is the location of the laundry room. Free or pay, it is not very convenient to haul your laundry down to the basement.
As a single guy I actually preferred the laundry room concept. Go down, run as many loads as needed all at once. Fold. Done. In unit with one machine it’s an all day or multi-evening chore.
^^^ and an opportunity to meet the single females in the building and impress them with your ability and willingness to launder your own clothes.
Chicks dig guys with skills.
“As a single guy I actually preferred the laundry room concept. Go down, run as many loads as needed all at once. Fold. Done. In unit with one machine it’s an all day or multi-evening chore.”
To each his own, but I’m not leaving the house to do laundry. Way too inconvenient, tough on clothes, and how clean are they anyway when they come out of someone else’s dryer? My washing machine has a sanitizer cycle; won’t find that in a shared laundry room.
As for “multi-evening chore”, this is true and preferred. I’m not sitting there watching the clothes spin; I’m cooking and/or eating dinner, washing dishes, on the Internet, etc. I’ve lived a dozen different places in the past 26 years, rented some and paid mortgages on others. A firm criterion for choosing each was a W/D or connections for machines I bought.
Many would agree that a condo without W/D in today’s market is functionally obsolete.
The list price for 1177 California #1022 has been reduced $30,000 (6%) to $469,000. Once again, purchased for $462,000 three years ago.
Here’s a dishonorable mention: 1177 California #1424 (2/2 1635 sq.ft.) was refied in 2006 for $1.95 million by Chevy Chase Savings Bank. Don’t worry, though, it looks like the loan was securitized. Taken back by the bank (err… MBS) for $1.7 million on February 17. For reference, Unit #1414 is contingent at $1.08 million (2/2.5 1399 sq.ft.)
The list price for 1177 California #1022 has been reduced another $24,000 to $445,000. Once again, the Nob Hill condominium was purchased for $462,000 three years ago.
The listing for 1177 California #1022 has been withdrawn from the MLS after 330 days on the market without a sale. Last asking $445,000 having been purchased for $461,754 in 2006.
Unit #1022 drop to $249K
http://www.redfin.com/CA/San-Francisco/1177-California-St-94108/unit-1022/home/2018015
Put a bid on it and didn’t get it at $270k
+ 10K for HOA dues.
Seller want us to pay for all the HOA till bank approval (who know when) and all the back taxes (didn’t give us the amount of the taxes).
We didn’t buy because they won’t provide us info or send us the disclosure package.
The unit is in original condition – we can’t see because it is tenant. too much risks. didn’t go for it.
I actually live in this building-I have a proper one bedroom and pay 2650. per month in rent. I get no tax break. It’s a nice enough building and a great location. The building has full services and maintains things in a very nice way, I have golden gate views from my living room and nice city views from the bedroom. I initially thought that not having a washer and dryer in the unit would be a drawback but, it’s very easy with one on each floor. The building lacks architectural charm but, so do many in San Francisco. This is hardly the ugliest building in the city-Are you kidding? It’s the top of nob hill across from Grace Cathedral. You could easily spend 5K for a dumb one bedroom in any of the buildings on Sacramento street and they aren’t all that great either. Plus I have parking. I just have to say-location, location, location! Plus services! It’s a nice building and these units seem like a good value. The Hoa’s are high but, that’s the cost of maintaining a building in the level that they keep it-