CFAH

3570 Washington
As we wrote this past September:

As a plugged-in and ever on the luxury ball sleepiguy notes, 3570 Washington is back on the market after a five month (yes, month) hold. Purchased for a reported $5,225,000 in April, asking $5,600,000 today (roughly 7% more than was paid).

As we added in January:

While MLS based reports and sales history reflect a “confidential” sale price of $5,600,000 for 3570 Washington in April 2009, it was a plugged-in reader that first reported the property had actually sold for $5,225,000 (which public records confirm).

And just five months after said purchase, the Presidio Heights property returned to the market asking a real $5,600,000. Yesterday the list price was reduced to $5,250,000.

And as we note today, the re-sale of the rather prime 3570 Washington closed escrow on 3/12/10 with a reported contract price of $4,800,000 (an 8 percent drop since April 2009).
If You Missed It When It Sold Five Months Ago… [SocketSite]
Perhaps Seven Percent More Five Months Later Was A Bit Aggressive [SocketSite]

Comments from Plugged-In Readers

  1. Posted by john

    interesting.
    does anyone know what 2849 Pacific closed escrow at? I have seen $12 million on this site, but it seems really high compared to properties like this one and properties like 2505 Divisadero at $7.6 million and the market environment, in general.
    It is hard to imagine a property like 2849 Pacific is 2.5x more valuable than this property.
    [Editor’s Note: Sorry “john,” but your question about 2849 Pacific has been asked and answered a number of times and confirmed by sources we trust.
    The 2800 block of Pacific isn’t Presidio Heights, and a down to the studs modern renovation is a scarce resource in San Francisco for which premiums are paid. We’re sticking with a $12 million sale price for 2849 Pacific (which was $2 million under asking) but would be happy to recant if you can provide any proof to the contrary.
    Now back to 3570 Washington…]

  2. Posted by tipster

    The politically acceptable decline appears to put SF at a 6-7% drop per year. They will manage rates and programs to that level.
    When HAFA gets going this summer, there will be a further hit.
    Posted by: tipster at March 1, 2010 11:10 AM

  3. Posted by sfquestion

    May I ask if anyone knows who is buying $4-$6 mm properties? Is it old money? Hedge Fund money? Tech money? Who an afford that kind of home? I’m surprised all these $2-$4 mm homes are still selling at or around asking price. I’m even more surprised people are still buying $5+ mm homes.

  4. Posted by Scooter

    sfquestion, any of the above, or others. People make lots of money in many different ways.
    A friend’s brother bought a house (not featured on SocketSite) in Pacific Heights about a year ago for $5.5M, then sunk another $1.5M into it on the refurb. He grew up a normal middle class kid, was an investment banker in his 20s, and now has worked for a major retail brand for the past 10 years or so.

  5. Posted by Sambo

    “May I ask if anyone knows who is buying $4-$6 mm properties?”
    For us over the past six months, it has been, in order:
    – Hedge fund employee
    – Venture capital partner (formerly social networking entrepeneur)
    – Private equity partner
    – Person who works for local non-profit for foster children (family money)
    – C-level person at a large regional bank
    – Surgeon
    – Young couple in grad school ( family money)

  6. Posted by Joshua

    @John
    2849 Pacific was a different caliber property. Larger than 8,000 sq ft, elaborate remodel and extensive modernization. $12MM.
    Regarding the question about buyers, there are certainly folks at and above the $5MM price range. The downturn has not affected those with diversified investments as much as those living on leverage.
    And people working in higher paying jobs, have relatively better prospects in the job market: “For example, as a study by the Center for Labor Market Studies at Northeastern University reported in February, at the end of 2009, the average unemployment rate for the upper fifth of the income distribution was 2%; for the middle fifth, it was 6%; and for the bottom fifth, it was 19%.”

  7. Posted by Shza

    Assume the surgeon was using family money as well — that salary isn’t close to this class.

  8. Posted by anonn

    When HAFA gets going this summer, there will be a further hit.
    Posted by: tipster at March 1, 2010 11:10 AM

    Why would you recycle something when you modified your own stance on it in the interim? Last week you said it was aimed at CoCo type locations, and that that would maybe spread. Or something. Now you’re recycling your initial stance that HAFA is another nail in the coffin. This despite the fact that California is already non recourse. I don’t get it, other than you simply like to say whatever is coming down the ‘pike next spells trouble. HAFA, in a thread about 3570 Washington? Odd. Also, 6 to 7% shifts annually? Doubt it.

  9. Posted by john

    Joshua, are you aware of any site, other than this one, where the 2849 Pacific closing price is recorded for $12 million?
    $1,500 per square foot at 2849 is a huge premium in this market environment and would suggest the real estate market has truly turned in San Francisco and is extremely bullish.

  10. Posted by Joshua

    @ John
    Are you aware of any site that records a different closing price?
    Here’s Zillow for what it’s worth: http://www.zillow.com/homedetails/2849-Pacific-Ave-San-Francisco-CA-94115/15081171_zpid/
    Gotta go to the city for official numbers…

  11. Posted by Mole Man

    It is precisely because 2849 Pacific is such an outlier that the details of sale say so little, if anything, even about the high end of the San Francisco market.

  12. Posted by 45yo hipster

    Shza- I would assume the surgeon is middle aged and is partner in a private clinic. My understanding is that docs who are partners in private clinics, especially those who deal with wealthier clients not using blue cross, etc, get a share of the clinics profits, which can be significant.
    Also, if they own their own lab, I think the profit margins are very high for running your own tests (skipping any middle man) and billing the clients directly.
    Are there any docs in the house to substantiate/ add further comment?

  13. Posted by john

    Mole Man,
    are you suggesting 2849 was not an “as is” sale, but that there were other details involved in the transaction that are not readily transparent?
    However, if it were $12 million, presumably the property tax roll would reflect this.

  14. Posted by Shza

    I suppose there may be a tiny fraction of surgeons who actually make $1.5M+/year. Definitely not at all typical though. (I would guess average is more like $300k/year, if that.)
    Ex-SFer, care to share?

  15. Posted by eddy

    @John, a single sale does not make a market. That home was incredibly unique and nothing like it has really hit the market in quite some time. 2505 that sold for much less on a psf would require a serious 3-4M restoration bordering on a gut remodel to get it to anywhere near the quality of the home 2849 was listed. And it would command a premium if it were (sale price + $4m + premium) if it were in that condition.
    Take 3855 Washington that closed at $8.1M. Btw, the new owners are repainting the exterior and it looks nice. No one here including myself thought this had a chance at that price. New construction just brings out the premium in buyers who do not want a project.
    I posted in another thread recently that we’ve seen very real comps that are 20%+ discounted from recent prior sales. And we’ve seen some recent comps that are at or near peak pricing. 2849P, 3855Wash and the recent Green St remodel is another. All this means is that there are clearly buyers that are willing to spend premium dollars on premium properties. It also suggest that there are still plenty of buyers with the funds to purchase valuable homes/property at reasonable discounts.
    The comments like, “in contract at what price” and other odd statements that don’t have sense, only make everyone here question your intentions. What is your intention?

  16. Posted by sleepiguy

    My quick take on current D7 trends:
    Unremodeled homes sold within the last 5 years not only sell for significantly less, but are being actively marketed by realtors as being priced below a previous sale.
    Gut remodels are still selling at close to peak prices. Cost of construction is still high, planning is still a nightmare, and money for developers is still tight, so there’s not a lot of high-end remodels on the market right now.
    Quality homes under 5 million are still moving fast. Really fast. In stark contrast to last spring, when the high-end market seemed totally frozen.
    The 2342 Broadway home sale is going to be the benchmark of the spring. I’m REALLY curious at it’s final price because a lot of potential sellers who were feeling a bit desperate last fall are going to start being a lot bolder with their asking prices.
    One element still missing though, are the lateral movers I’ve mentioned in previous threads- i.e., established families who move from mansion to mansion in the same neighborhood. Those transactions accounted for some of the highest sales in the 06-07 period. Now those people are staying tight because they don’t need/want to own multiple homes in the same district and a huge sale price to an investment banker or tech zillionaire isn’t guaranteed should they decide to unload a place at some point in the future.

  17. Posted by sleepiguy

    I posted without having read eddy’s thread, so obviously I agree with his statement. The Washington sale was huge – much bigger than I would’ve guessed.
    I think “John” is basically a troll at this point.

  18. Posted by john

    [Removed by Editor]
    my “intention” = the truth – isn’t that was socketsite is all about?
    [Editor’s Note: It most definitely is. And once again, based on our sources and the property in question, we buy a $12 million sale price for 2849 Pacific. That being said, we’ll run a full feature if you can deliver any evidence to the contrary (email tips@socketsite.com), but a continuous cross post chorus of nothing more than “I don’t believe it” doesn’t add any value.]

  19. Posted by waiting2nest

    “I suppose there may be a tiny fraction of surgeons who actually make $1.5M+/year. Definitely not at all typical though. (I would guess average is more like $300k/year, if that.)”
    I’ve worked at medical device companies most of my professional career (ultrasound, nuclear medicine, radiotherapy, cardiology, ophthalmology, neuro surgery). Most doctors do not make the kind of money that would enable them to purchase a home like this one. Most surgeons make around $250-300K. A very small percentage of doctors make $1MM+.

  20. Posted by anon

    “A very small percentage of doctors make $1MM+.”
    Yes, an incredibly small percentage of doctors are able to even get to the $400K-500K range. You have to be in a pretty rare specialty and have pretty high qualifications for the kind of income we’re talking about for this place.
    It’s sort of like lawyers. Certainly some of the big law firm partners probably make above $500K, but that’s not by any means characteristic of even a large number of successful lawyers.
    The typical fairly successful lawyer and the typical fairly successful doctor top out well below what’s necessary to buy this place.

  21. Posted by eddy

    @w2n, SF real estate is all about the small percentages. The few plastic surgeons and large practice owners are out there and they can make well in excess of $2M per year. Why do people gasp at $3-4M prices with buyers who net more than $1M per year? No one gasps when a couple making $120k buy a home valued at 450k? I’m not saying it’s a fair comparison and there are lots of arguments, but the economics and leverage are roughly the same.
    The question is how many people stretched the limits of leverage on neg-am, no-doc or other sketchy products here in Prime SF and how much did that inflate bubble prices. Even if it did happen here, and I’m sure there are cases of it, the general supply is so limited that the high prices probably flushed out more sellers (as evidenced by the abnormally high # of sales during the peak relative to the non-peak years). In any event, I’m increasingly coming to the conclusion that SF has enough wealth and economic support to keep prices near current levels for some time with some marginal downward pressure caused by inventory. Of course, interest rates increases will have a direct impact on housing prices.

  22. Posted by kurt7

    Does anyone know the status of 2799 Pacific (foreclosure 6/09)?

  23. Posted by Joshua

    @ eddy
    Most of your points are right-on. However, I suspect higher interest rates will have little direct impact on high-end D7 homes. Hedgies, entrepreneur zillionaires, etc. don’t much need to finance their homes. A number of long-term loans on high-end homes today are intended to lock-in historically low rates.
    A bigger risk is that rising interest rates often cause equity market valuation contractions. If the S&P 500 loses 30%, then we’ll surely see prices slip at the high-end.
    If you want to predict the price trend, just add a lag to S&P 500 performance.

  24. Posted by MikeW

    Senior associates at large law firms make 280k base plus bonus, which sucked this year. All but the most junior partners at big most firms make above 500k.

  25. Posted by Anon E. Mouse

    “All but the most junior partners at big most firms make above 500k.”
    Who told you that, MikeW? At lots of big firms outside the top 20-30, junior equity partners (i.e. those without very many partnership points) don’t make much more than what senior associates make. And as K-1 partners, they have to start paying the full (non-subsidized) amounts for health insurance, parking, etc. and often have to start making equity contributions (usually spread out over some number of years).
    And at many of those firms, a junior partner has to be a non-equity partner first. That means you have a W-2 but can call yourself a partner, and you get a raise but not a huge one.
    You have to be a pretty hefty equity partner to make above $500K in the first place, and this is a relatively elite group. Don’t believe all the hype about Profit per Partner based on published numbers — those numbers are fake. Many firms have armies of service partners who make a lot less than those quoted numbers.

  26. Posted by Shza

    And at many of those firms, a junior partner has to be a non-equity partner first. That means you have a W-2 but can call yourself a partner, and you get a raise but not a huge one.
    Non-equity “partners” are not partners in any legal sense of the word (this has actually been held in multiple employment law cases).
    If you restrict MikeW’s statement to actual (i.e., equity) partners at AmLaw 100 firms, I think he’s correct. He did make a point of excluding “the most junior partners” from the statement.
    At my firm, to the best of my knowledge, draws for the most junior partners are in fact above $500k (though not by much). But we also don’t have the kind of spread that a more “shark tank” type firm has.
    At top firms, it’s absolutely untrue that “you have to be a pretty hefty equity partner to make above $500k.” “Pretty hefty” partners (a relative term, granted) tend to make more in the neighborhood of $2M+ at the two firms I’ve worked at. (And “pretty hefty” partners at more profitable firms with bigger spread — John Quinn, say — can take home $10M.)

  27. Posted by Anon E. Mouse

    “At my firm, to the best of my knowledge, draws for the most junior partners are in fact above $500k (though not by much).”
    You’re assuming that non-lawyers appreciate the difference between a non-equity partner and an equity partner. They don’t — everyone thinks partnership is the golden ticket. Add that to the fact that when many people (outside the top 20-30 firms) without much business “make partner,” they are non-equity and may be non-equity for several years.
    Note that when I say “junior partner,” I am specifically referring to a partner with a low number of equity points, and it has nothing to do with age. And note that I specifically excluded the Top 20-30 firms from what I said above — the Vault Top 20-30, not AmLaw.
    The junior partner draws were certainly not above $500K at my old AmLaw 100 firm. There was a lot of complaining by junior partners when law firm salaries went up because senior associate salaries were bumping up against junior partner salaries. Your mileage may vary.
    And I’ve certainly spoken to my share of junior partners at other firms, who had similar complaints when law firm salaries went up. Like I said, don’t always believe the hype, especially when you include the stuff you actually have to pay for as a partner vs. as an associate.
    Has the Sidley case finished yet? I assumed that was going to be the definitive case on non-equity partners. But yes, the quirk you mentioned re: non-equity partners is why I said “you…can call yourself a partner.”

  28. Posted by Shza

    Ok, we’re pretty OT here, but…
    You’re assuming that non-lawyers appreciate the difference between a non-equity partner and an equity partner. They don’t
    The sequence was: MikeW (who seems to be a lawyer based on his knowledge of the market pay scale) said that “all but the most junior partners make at least $500k.” You responded by saying that, among other things, non-equity partners don’t make that much. My response to that relayed my assumption that MikeW was not including fake non-equity “partners” in his statement about partner draws. I’m not sure it’s relevant what a non-lawyer believes or doesn’t.
    And note that I specifically excluded the Top 20-30 firms from what I said above — the Vault Top 20-30, not AmLaw.
    This is nitpicking but why would you use Vault, which is a “prestige” scale rather than AmLaw, which is actually based on firm economics (including (equity) partner profits)? My firm is well within Vault’s top 20 firms but there are a ton of supposedly “less prestigious” firms where the partners make considerably more money (consider Quinn, again, for instance).
    Not sure about the Sidley case. But there have been at least two other analogous cases, I believe. I’m not sure how there’s even a Rule 11 basis for those suits just given fundamental partnership law. My wife’s firm has a non-equity tier and it’s always seemed ludicrous to me — and really a backend way of extending the actual partner track to 12-15 years (as well as juicing diversity numbers, overcharging clients, and all of the other typical complaints about “two-tiered” firms).
    /OT lawyer discussion off

  29. Posted by sfquestion

    Thanks for all of your replies. One other question, how much does one need to earn per year to afford a $3.5 mm house? Anyone know some rules of thumb? Or, a mortgage calculator that is reliable. Thanks.

  30. Posted by eddy

    @sfq, you’d need about 350k down (10%) and about 20k per month, or 240k per year in bank payments/taxes. You’d need a min of 500k salary just to live afford those payments. The reality is that most buyers if these homes have instant cash equity of 50% or more and have a fraction of the cost under a loan. Most keep it at $1M to take the mortgage deduction. For others, the cost of capital on a loan doesn’t make sense so they just borrow against themselves.

  31. Posted by Shza

    eddy, I thought the days of 10% down loans were over (though I agree that folks buying these homes wouldn’t be taking them regardless)?

  32. Posted by Anon E. Mouse

    “This is nitpicking but why would you use Vault, which is a “prestige” scale rather than AmLaw, which is actually based on firm economics (including (equity) partner profits)? My firm is well within Vault’s top 20 firms but there are a ton of supposedly “less prestigious” firms where the partners make considerably more money (consider Quinn, again, for instance).”
    Vault serves as a decent proxy for profits. The AmLaw 100 uses firm *revenue* for its listing, but it also publishes profits per partner. You could use the top 20-30 in PPP if you wanted to as well to determine the firms that tend to pay more. But using the PPP number as any sort of absolute is silly, and any law firm CFO (or equivalent) should tell you that, or he/she is lying.
    And it’s entirely important what non-lawyers think. Lots of SocketSite commenters say that all (big) law firm partners make above $500K. It’s simply not true, and many of those “partners” may either be non-equity. And some of them are likely service partners (the latter of which at many firms could have some guaranteed salary + some draw based on points), who don’t make as much as the partners who really rake in the business.
    Law firm non-equity and equity partner salaries are highly highly dependent on the individual firms, and even the published statistics lie.

  33. Posted by anon

    “One other question, how much does one need to earn per year to afford a $3.5 mm house?”
    For a traditional prime bank loan, you are required to have 20% down, and a maximum 28% of gross income going to PITI. By that measure, you’d have to put $700K down and need to make more than $720K/year, assuming a 30 year fixed, $2.8M loan at 6% (principle + interest payments of $16,787, so add taxes and insurance). Some banks may require more or less down than that, and they may have special requirements in this price range.

  34. Posted by Embarcadero

    Vault = “real SF” for the purposes of calculating imagined valuations. It’s the fantasy index!

  35. Posted by logicgirl

    @Joshua – FYI
    I noticed this Zillow qualification when I read your Zillow link from above:
    Transaction Not Included in Zestimate
    This transaction was not used in computing the Zestimate for this house. When our computer models detect data patterns that suggest particular transactions are not closely correlated to actual value, we exclude them. These patterns can include unusual document or transaction types, sales between possibly related parties, and unusually high or low transaction prices.

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