We missed the listing for 79 Woodland prior to its heading into contract, but seeing as how its sale still hasn’t closed we’ll feature this apple to be anyway.
Purchased for $1,300,000 in June 2005, the Parnassus Heights single-family home returned to the market three weeks ago asking $1,329,000 and is currently in escrow with contingencies having been waived.
A plugged-in tipster adds, “we are renting a bigger house on the same block for just under [$4,000 per month].”
∙ Listing: 79 Woodland Avenue (3/2) – $1,329,000 (In Contract) [MLS]
$1.3M in 2005 = $1.44M in 2010 adjusted for inflation, so figure an 8% real drop if it sells at asking.
The previous owner did a lot better, buying for $890K in 2002, putting in a modest amount of work in the kitchen and a bathroom ($20K claimed on the permit), and selling for $1.3M.
I’ll admit I’d generally expect to see a nominal decline after 2005, but today’s price seems about right, without having seen the place. Has Cole Valley gotten more desirable?
SO CUTE!
Goodbye 2005 peak, it was nice knowing you!
@ Anon E. Mouse: Interesting quick analysis, but I would disagree. In order to look at the true inflation adjusted price, I would look at the ‘housing only’ inflation rate. Even using your figures, this is no where near the 30%+ drops most predicted (including myself).
I agree that the previous owner did a lot better.
SFRE,
What are you talking about with your reference to ‘housing only’ inflation rate? Something quantifiable? If you only measure purchasing power of one asset, you are not measuring inflation at all!
If inflation was calculated solely with house prices, we would have already become the Weimar Republic in 2005.
Actually, according to the Case Shiller CPI, haven’t we been going through deflation?
Here’s an interesting article on including housing prices in the CPI:
http://globaleconomicanalysis.blogspot.com/2009/07/whats-real-cpi.html
@J: True, and I understand that. I would have liked to seen what the housing only inflation rate (again understanding it is not the typical way of looking at things) to see what the figures look like. But I understand the flaw in my logic, I was just curious.
Woodland is a great street, very quiet and perfect for kids.
I don’t know where Anon E Mouse is getting his statistics – arguably, we have had a huge bout of deflation, and the price here represents a significant gain.
I’m not saying that it make sense, but I’m just pointing out that a huge amount of capital was effectively removed from circulation after the crashes in 2007-2008. With the tightening of credit, still more capital is being witheld from circulation.
I’d like to know the rationale used to calculate the difference between 2005 dollars and 2010 dollars.
Embarcadero,
I assume Anon E. Mouse is using the official CPI which has showed a small amount of inflation since 2005 (which includes a small amount of deflation in 2008-09, basically).
But, if one looks at my link above, the changes to CPI in the Clinton era may have understated inflation in the early and mid 2000s and overstated it recently.
SFHawkguy,
Yeah, I just plugged the numbers in and CPI gives something close to what AE Mouse is saying.
I just don’t believe those numbers are very good – it seems like the deflationary impact of the massive capital losses we’ve collectively sustained just aren’t reflected in these numbers. The link you provide gives some good reasons to doubt those numbers, but there are lots of other reasons too.
But then calculating inflation was always more of an art than a science. I recall this from living in South America during times of hyperinflation – when we stated our balance (at the company where I worked), it was always a theoretical balance, and we usually provided a few different scenarios (and this was just projecting 30 days out!).
Yeah he uses the CPI calculator and he likes to flatly apply its results. Meanwhile, as even some of the biggest bears on here have pointed out, a lot of stuff is much cheaper nowadays than it was in 2005. From cars to gas to groceries.
How large is this place? Redfin says 850 square feet? That can’t be possible with 3 beds/baths right?
“a lot of stuff is much cheaper nowadays than it was in 2005. From cars to gas to groceries.”
Actually, gas was 29% cheaper than it is now at the end of Feb 2005, which is one of the biggest mitigating factors to plummeting housing costs, when calculating inflation/deflation.
http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/pswrgvwnus.xls
Looking forward . . .
If the prospective buyer pays asking price (is he really this big of a sucker?) it will be costing him almost $6,500 a month according to my calculations (with a ~ 6% jumbo loan rate).
If rent is under $4,000 a month for an equivalent place this sucker will be paying over 60% what a renter is paying and therefore will be relying on another huge bubble to come along and lift asset prices into the stratosphere.
Basically, at a premium of $2,500 a month, if this prospective buyer were to sell in 5 years he would need to sell at around $1,575,000 to come out flat even. And that doesn’t even include inflation (which arguably could go either way)!
That figure includes a $150,000 premium to own this place over 5 years. One would have to recoup that plus gain enough to cover the 5 or 6% realtors’ fees.
Some people are apparently counting on inflation–at least house price inflation.
Unless this place doubled its square footage or something recently.
Was gas less expensive then? OK. I’ll take your word for it. I had only glanced at crude oil and I know that doesn’t necessarily translate. (Was it ’06 when gas got super expensive?) Many things were more expensive back then tho. If this was a competitive sale then chances are the seller put down substantially more than 20 percent, and the timing of it looks like it was competitive. So don’t be so quick to slap a 2500 dollar monthly premium on it.
Inflation is a slippery fish. Consumer index inflation has been a little over 3% for most of the periods being talked about, but wages and rental units have seen closer to 5% inflation.
“From cars to gas to groceries.”
Cars are cheaper now? I doubt it. Same $40K+ car I bought in 2005 similarly optioned now is a good $5-7K more for the latest model. That would seem to go beyond inflation. Hell, you can buy $40K Ford Tauruses now (SHO of course). But you’re just cherrypicking anyway, so it doesn’t really matter — CPI likely correlates to people’s household income better than gas prices considering how volatile gas prices are.
As I’ve mentioned numerous times:
http://www.usinflationcalculator.com/
It uses CPI, so is subject to all the quirks of CPI. Maybe I should just add a footer…
You can see on the overhead view that redfin provides that the floor plate is about 850 square feet. Standard lot width in SF is 25 feet, and this one is a bit wider, maybe 28. The overhead view shows a basically square original building, with an addition. So 28 x 28, plus a small entry way on the first floor hits about 850.
There looks to be about a 150 square foot addition off the back, and it’s two stories, for a total of 300. They could have gotten around 400 square feet behind the garage from the original building envelope if they cut it to one car parking. So this likely has 700 additional square feet, give or take, in addition to the 850 listed.
1350,000/1550 = $870 psft, which is a bit high, but 3/2 SFRs under 1.4 are doing very well.
Contrast that to 2005/2006, when any bank would give a two income family more than this place would have sold for, so homes like this were not in very high demand relative to today.
So this seller should do quite well: he has an asset that is more in line with today’s economy than it was when it was purchased 5 years ago. So they should at least not have to bring any cash to the closing, even to pay their realtor. I doubt they’ll make the entire premium they paid to renting.
Even if the prospective buyer put 35% down the cost of ownership is still around $6,000 per month. That is still probably well over a $2,000 premium to own vs. rent.
If I’m going to make a speculative bet on housing I would rather be in FHA land where I only have to put 3.5% of my own money down. If things turn out badly (as the CS futures still predict, no?) at least one could exercise his option to walk away. Here, if the prospective buyer puts more than $300,000 down as an initial bet . . .. wow. That’s courage. Or they are being cavalier with their money and can afford to lose it. In any case its not conservative financing of one’s shelter. It’s taking a huge gamble. That’s what one does when one pays a 50% premium to own. I just think there will be fewer “winners” this time around. Enough people remember the winners from the early aughts and think they can repeat the experiment.
Especially people of my generation–people in their 30s. We’ve only known boom times in real estate, except for the ‘recent downturn’ and our parents and society have told us its the secret to long-term wealth. And then the only personal experience we have is seeing (or experiencing) the boom times of the early 2000s. Those that “missed out” on the bubble may have gotten the wrong message . . . I certainly see lots of people once again leveraging themselves silly and paying ridiculous premiums.
Count me out. And don’t blame me when this comes tumbling down.
Basically, at a premium of $2,500 a month
SFHawk – what about tax deduction for owning? And i’m not ready to buy the “bigger” argument as one to mean these are equivalent. Does the renter’s place have a large yard? How does he/she know it’s bigger – have they been in 79 woodland? What is the condition of the renter’s place. Most rentals are in vastly inferior shape to most homes for sale. Indeed there may not be any premium, or a small one to live in a superior place.
Basically, at a premium of $2,500 a month
SFHawk – what about tax deduction for owning? And i’m not ready to buy the “bigger” argument as one to mean these are equivalent. Does the renter’s place have a large yard? How does he/she know it’s bigger – have they been in 79 woodland? What is the condition of the renter’s place. Most rentals are in vastly inferior shape to most homes for sale. Indeed there may not be any premium, or a small one to live in a superior place.
hangemhi,
Of course I took the tax savings into account. I assumed 25% savings in this example. There are many variables to consider but I think a monthly cost of ownership around $6,000 is pretty fair. I use the calculator at irvinehousingblog.com. If you have a different calculation I would love to see it.
Also, you’re right that the assumption of $4,000 rent is not established fact. However, based on my view of Craigslist rentals and a discussion in a previous socketsite threat I think $4,000 is, if anything, on the high end. Of course one would have to do a little digging to make sure the comps are true comps, as you say. But it’s harder to hide rental comps in this neighborhood than it is with the “luxury” condos. What I’ve seen is consistent with the fact of falling rents and an economy in near depression. Rents have been falling in this neighborhood. Maybe anonn has some comments on this.
anonn wrote:
> Was gas less expensive then? OK. I’ll take your word for it.
Gas, cars and just about everything in the grocery store were less expensive in 2005 (the gas price spike was in the summer of 2008)…
> So don’t be so quick to slap a 2500 dollar monthly premium on it.
Buying the home for that price in 2005 was a bad decision even if the premium was only $1,000/month.
P.S. Who are the “biggest bears on here that pointed out, a lot of stuff is much cheaper nowadays than it was in 2005”?
P.P.S. I know that a flat screen TV and a 1 TB Hard Drive is a lot cheaper now than 2005, but “From cars to gas to groceries” I can’t think of anything, can you point us to a gas station, car dealer or grocery store that is selling stuff for less than 2005?
I’m not surprised that this house went quickly since it’s on a really beautiful block and it has great curb appeal. There’s also a shortage of nice homes on the market but it is basically a small two bedroom house with a couple of small and pretty dark rooms down. 1.3 million plus for that.
Reasonable people may disagree about whether CPI should include housing, as discussed by Anon E. Mouse, but when calculating the inflation-adjusted price of a house, the right index to use is “CPI less shelter”, not CPI.
Not that it makes much difference in this case. For the period from June-2005 to Feb-2010, CPI less shelter is up 11.9% whereas the full CPI is up 11.4%.
Of the other items people claimed had fallen in price, the story is mixed. Cars (“New and used motor vehicles”) are down 1.1% but Gas (“Motor Fuel”) is up 26.2% and Groceries (“Food and Beverages”) are up 14.8%.
All data from the Bureau of Labor Statistics: http://data.bls.gov/cgi-bin/dsrv
The rent vs buy equation still favors renting in SF. Can’t wait to see the day when that will change.
“I assumed 25% savings in this example.”
That completely ignores that savings you get from CA, which is easily 9% in this income range. From many years of doing my own taxes and looking at others, a fair estimate, which comes in a bit on the low side for tax savings is 33% (25 fed + 8 state) but then add back about $750 to $1000 in taxes for not getting the standard deduction. Generally without the mortgage interest and real estate deductions a lot of people have hard time coming up with additional expenses to overcome the threashold of the standard deduction (unless they have really high income or a lot of other deductions but then they might be coming up against the AMT).
Rillion, anyone who can afford a $1.3M dollar home (like, actually afford (making $400k/year plus); not just get a huge loan they can super-stretch to service) is going to be hit with the AMT and get no state property tax exemption.
There are lots of people getting FHA loans with 400K and up as a down payment right now. I think about 570K down would work here. 730K @ 4.75% or what have you is cheaper than 4K a month by a considerable margin.
“There are lots of people getting FHA loans with 400K and up as a down payment right now.”
You’re saying there’s some meaningful number of people who have 400K+ down on an FHA loan? Can you back that up?
“730K @ 4.75% or what have you is cheaper than 4K a month by a considerable margin.”
You’re ignoring the opportunity cost on that $570k. Granted, equities markets are volatile now but I still don’t think SF real estate is the most promising asset class out there in the next 5-10 years.
I also find it hard to believe that there are a meaningful number of people with $570k cash and an income low enough to qualify for FHA. (I understand there may be some folks who timed the bubble and sold a home they couldn’t afford for a huge margin profit but “lots of them”?)
Yes, I am working with clients who have up to 400K to put down and the kids are qualified for up to the superconforming FHA limit, approved by any number of lenders. They’ve lost out on several offers recently because others had even more money to put down. I’ve seen it on the selling side and the buying side numerous times since last June. Is it an “opportunity cost” when it’s family money designated for housing? Similarly, is it an opportunity cost when the individuals furnishing the money have a balanced portfolio elswewhere earning money?
“730K @ 4.75% or what have you is cheaper than 4K a month by a considerable margin.”
For F$%^’s Sake! Please stop pulling numbers from you know where.
730K @ 4.75% = $3808.03
…5% less than $4k
$400k down payment earning 1% interest in a money market account = $334/month.
Property taxes = $1,300/month…
Even if they got 35% of interest and property taxes as a tax write off(not happening), there is no wide margin of savings.
My fault anonn, I somehow forgot about the city’s many trustfunders. I can see how you’d have a fair amount of those. Still seems like a less than ideal use of daddy’s money but if that’s what he wants to spend it on, who am I to say.
J, a lot of people would consider 200 less monthly plus the tax writeoffs (which from what I’ve seen of the jobs and incomes are definitely happening) as good. If you want to pick apart the words I used, “wide margin,” well, you already did that. I’m pulling numbers from reality. You’re telling me that hypothetical people all have great jobs and don’t qualify. WHo’s pulling what from where, again?
Shza, the ideal use of family money is only visible in hindsight. Obviously exceeding 250K in money markets wasn’t all that sweet of an idea for a lot of people recently. What’s not debatable is that FHA has made down payment gifting much easier than it was before. So some people are approaching it that way, and thinking it’s a good deal. I see that you disagree.
“You’re telling me that hypothetical people all have great jobs and don’t qualify.”
I didn’t say they don’t qualify, as far as I’m concerned, history has shown it’s too easy to qualify.
5% is NOT a wide margin, especially when it is evaporated by opportunity cost and taxes, which even in the best scenario, is not mitigated by deductions in this market.
Taxes can be deductible. The opportunity cost of someone else’s gift is nil to the buyer. This is just one scenario. I’m not saying it happens constantly. But I’m saying it happens, and families are taking advantage of the way FHA treats assisted down payments these days. They only raise red flags when the gifter looks like a covert multiple landlord using puppet buyers.
Wow, what an erudite thread! 🙂
“Taxes can be deductible.”
I took the property tax deduction into consideration when I said: “Even if they got 35% of interest and property taxes as a tax write off(not happening), there is no wide margin of savings.”
“The opportunity cost of someone else’s gift is nil to the buyer”
I don’t think that is a safe conclusion. If your parents are willing to fork over $100k+ for a house, they may fund an education fund for your children instead…as ONE example.
I thought it was interesting that Downey flew off the market after months of no activity. The selling season hit a little late this year and it flew off the market.
“I thought it was interesting that Downey flew off the market after months of no activity.”
Seriously? So now when a place finally sells “after months of no activity” we can call that “flying off the market.” Come on, now. The one thing that is objectionably measurable is sales volume, and it is still very, very low in SF. High, and rising, DOM indicates continuing market softness (check out the bottom two charts, particularly the top half of the market; the $/sf chart is also revealing):
http://www.altosresearch.com/paragon/latest/paragon_market_update_zip_based_cmid_55_zipd_none.html
If your parents are willing to fork over $100k+ for a house, they may fund an education fund for your children instead…as ONE example
The “either or” mentality around here is not one that the people you are evaluating share. Opportunity cost versus more lucrative investment elsewhere … housing versus education … in my experience these are people with balanced portfolios and sound future planning with close knit families who don’t view things that way. You all also discount entirely the prospect that affordable mortgages and long term holds will yield good returns. Look at all the late ’90s to late 2000 sales ever parsed on here.
The Downery property got into contract pretty quickly when it returned to the market. Parsing people’s language on a blog as if you can read their minds and then using it as a jumpoff from which to make a bigger statement is for the birds. You say sales volume is low. I say a lot of 2M+ houses that had been sitting around finally got into contract. You say trend. I say trend. Who’s right?
“You say trend. I say trend. Who’s right?”
Well, I backed up my point with hard data from a respected source. You backed up your point with an anecdotal observation completely lacking in anything that is objectively verifiable. Anyone could counter your point by simply asserting anecdotally, “I’ve noticed a lot of $2M+ houses just sitting around and not getting into contract.” Got anything to counter the hard information to which I referred? You have access to the full MLS. If there is anything there, you can present it.
You backed up your query of Katy’s somewhat hyperbolic, but not false, assessment of one local property with research from a brokerage. I don’t see the congruency using a brokerage report to parse somebody’s language. “Flew off the shelves” made you mad. That’s how that read, period.
As for the 2M trend, I’ve talked about it three or four times already in terms of area 5. It was unusual to see a clump of now eight all grouped within three weeks. But citywide, 28 properties 2M or higher have gotten into contract or sold in the last month and a half.
Shza – Umm, I said that someone with a high enough income is going to get hit with the AMT if they have a lot of deductions, but for anyone (in CA at least) that is not subject to the AMT the tax savings from owning will be more along the lines of 33% less a small adjustment if the taxpayer otherwise could use the standard deduction. My comment was not specific to this property and no where in my statment did I mention a $1.3 million property. Sorry if that wasn’t clearer.
Actually that was just SFRs. Add another eight condos, three in contract, five sold, in the last month and a half or so. That’s 36 properties give or take one or two miscounting out of the tiny poorly alligned database. Those of us following the market are pleasantly surprised by this activity. It’s of a level not recently seen. Doubt that if you like.
Well Downey was cut in price by 300k or so…as was 930 clayton… These didn’t fly. anyway back to topic…..
this house here is on a good street. the yard is small, upsloping and shadowed prematurely in the afternoon, as are just about all lots on woodland and willard. It’s a small house on an ok lot on a good street that someone likely bought to add some size to. Look at the opportunity for vertical expansion. Build at $400 /ft sell for $700-800,and you’ve probabaly added some value.
Yeah, fly they didn’t. Prices slashed. Agreed. Look at the timing once they found their niche, tho. They went speedily, then. The thing was that neither Downey nor Clayton were flawless and they were priced like they were flawless, initially. (If Downey had a bigger lot it could have gone for 300K higher IMO.)
I see (redfin) 103 homes listed at $2M+. Avg DOM is 86 (presumably that is “MLS DOM” i.e. real number is higher). 1/4 of them have had at least one reduction. I only see 9 sales at that level in the last month. Did not check them all, but it looks like most were below asking.
This is undoubtedly the weakest market segment (really, anything over $1M). I’ve seen a lot of $2M+ places pulled with no sale over the last few months. I’m curious as to that total count (not public as far as I can tell). In other words, a lot of actual and pent up supply and very little pent up demand. The wobbly stock market and continuing economic fragility are going to keep this a buyers’ market for quite a long time.
OK, redfinxpert. I see 50 SFRs and 41 condos 2M+ in the MLS, many at the upper end of the spectrum. But compare that 91 with the 36 that have sold or gotten into contract since January. Nobody can argue that’s a moribund market. But I began by talknig about the 2 to 3M SFR, so back to that. There are 23 active and 19 sold or in contract since the first week of Jan., with an average DOM of 60 days. That’s pretty decent and nobody could possibly argue that it’s even close to the weakest market segment. The weakest market segment is condos 1.2M and higher.
“compare that 91 with the 36 that have sold or gotten into contract since January”
Not that impressive even at face value. But that’s misleading in any event. Of those 36 that sold “since January,” those went into contract over several months. Many listings went off-line during that period. And of those 36 that have “gotten into contract,” some won’t close at all and the rest will close over a several month period. Many more listings will come on-line during that timeframe. Your “snapshot” is false as you’re inflating the numerator. Compare “listings” to “solds” and the numbers aren’t so rosy.
“Several month period,” “won’t even close” — not things you know. (There are quite a few pendings in there.) More will come on line, true. More will also get into cotract and sel. The 2 to 3M SFR market is anything but moribund and I proved it.
91 listings:9 sales = 10 months inventory, and 103 listings:9 sales = 11+ months inventory. How does that compare to other segments?
How about you go through all of them and break down their pricing strategies and eliminate the ones that aren’t remotely legitimate, like every buyer who is in the marketplace would do? Then talk about supply. Thanks. I’m telling you that in advance because I’ve done this sort of thing and it’s indeed a thankless job. Some “anon” will just pipe up and act like they know what they’re saying and be dismissive for fun.
Well, as one comparison, per our illustrious editor, there are 1023 houses listed in the city of San Francisco as of 2/1 and 1116 as of 2/16.
In January, there were 311 sold, so looks like 3+ months inventory for the city as a whole.
http://www.dqnews.com/Articles/2010/News/California/Bay-Area/RRBay100218.aspx
The sale of 79 Woodland closed escrow yesterday: Into Our Apple Cart (And Back To 2005) 79 Woodland Goes.
One of the advantages of having old farts like me on this site is that we can give you a longer perspective. In the late 60’s, I spent many a day playing touch football on Woodland where my close friend bought a house a few doors up the block from “79” for around $75K. For the sake of this discussion, if he still owned the house today and it is worth what “79” is worth, was it a good investment? Factoring in the tax benefits of ownership, and subtracting all the maintenance, would he(if he were still alive), have done better buying a CD?
It’s unclear, john, because it depends on how much was spent on the remodel in addition to ordinary maintenance, property taxes, insurance, etc. If we assume 1969 was the purchase date, $75K adjusted for inflation is $443K in 2010 (if we assumed 1966, then it’d be $502K).
The permits for this place since 1988 only show about $25K of work, which doesn’t sound right to me.
Even if we take the $443K number and assume a sale for $1.335M like 79 Woodland — since 1969, that would be 2.7% annual appreciation above inflation, not including tax benefits and excluding maintenance, insurance, property tax, and remodels (if we take the $502K number since 1966, that’s 2.2% annual appreciation above inflation). That’s not terrible, but it’s by no means the real number when you include the true costs of ownership.