The latest campaign from the sales office at Symphony Towers: “Buy your own studio home with only $13,000 down payment.*” From the asterisk: “Down payment is based on a $369,000 purchase price, FHA approved financing, and seller paid closing cost.”
Symphony Towers Moves To Sell Twenty-Six Leased Leftover Units [SocketSite]

11 thoughts on “Have We Seen This Movie (Or Symphony) Before?”
  1. And they will get $10,000 of that back from the state of California. So they will only have $3,000 in poker chips on the table.

  2. SFHawkguy wrote:

    And they will get $10,000 of that back from the state of California. So they will only have $3,000 in poker chips on the table.

    I don’t think so. Unless the language changed at the last minute, the $10,000 tax credit only applies to a “newly constructed, previously unoccupied home”. So unless the leftover units at the Symphony went unleased and were just sitting there, empty, buyers wouldn’t qualify for the tax credit.
    [Editor’s Note: “The new law allocates $100 million in credits for buyers of new homes (a previous requirement) and $100 million in credits for first-time buyers of existing homes (a new twist)…”]

  3. Does anyone know how much more one would have to pay for only putting 3.5% down? And what is the next level? 10%? Is the insurance about 1% for only putting 3.5% down?
    So the effective interest rate would be ~6%?
    I get a monthly cost of ownership of $2,200 at the price they quote (assuming $400 HOA and 3.5% down at 6%).
    I’m sure there are studios to rent in the area for much less.

  4. True, but it’s phased in. A little under $10K at stake the first year, a little over $6K the second year, and $3K the third year. I still don’t understand why the state tax credit makes financial sense.
    It makes a little bit of sense to encourage people to buy *new* houses because that may actually reduce inventory and encourage builders to build more and produce more for our economy (similar to a tax credit in the 70s).
    But it makes absolutely no sense to pay people to buy existing houses because that produces absolutely nothing for our economy. All it does is *reduce* value because of transaction costs.

  5. even when i got caught up in the bubble-mania a couple of years ago these prices felt high; now that the frenzy has subsided and they are still trying to get the same price, it looks totally absurd.

  6. condoshopper,
    The price certainly feels higher because the likelihood of big appreciation has diminished. It’s a sucker’s bet to gamble that one can make money on a place like this from appreciation. If someone bought this place for $369,00, in five years time, just to break even, one would have to sell this studio for over $425,000 (to recoup the $6,600 yearly premium to own [X5] plus the 6% realtor fee).
    That’s an insane valuation and I think people are going to figure out the upside potential is not worth the risk on these places. There should be a premium to rent and not have to take the chance of the price going down!

  7. hi SFHawk, insane valuation is right, especially when the cost of ownership includes high HOA fees with zero amenities (not that i want to pay for an under-utilized swimming pool or a concierge). plus i took a tour of the studio and they are really tiny. maybe for 200k.

  8. Fair value is 120K to compete with rentals, imho.
    HOAs are ~440. Net rent after taxes/maintenance/HOA will be less than $500. With 3.5% down, you still have 500/month in interests.
    Knife catchers welcome. The deflation Gods will appreciate your contribution.

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