48 Linda
The apples-to-apples sale of 48 Linda closed escrow yesterday with a reported contract price of $2,149,000 ($717 per square foot), purchased for $2,205,000 in July 2008, call it an effective 2.5 percent decline in value for the nearly 3,000 square foot Mission Dolores single-family home over the past two years.
48 Linda: Apples To Apples Anoter Bit(e) Of 2008 Inventory Returns [SocketSite]

Comments from Plugged-In Readers

  1. Posted by curmudgeon

    not much of a decline, considering. I’d say that shows the strength of the inner mission, which has stayed incredibly hot throughout the recession. (not referring only to real estate sales, but rentals, restaurants, businesses..general zeitgeist). It seems like the Mission is where everyone wants to be. I would have guessed it would have been sub-$2 mill.

  2. Posted by ex SF-er

    I agree, this seller got out pretty good.
    only lost 2.5% plus maybe 5-6% in realtor fees.
    Although this was a bad investment, it was not bad in the way of consumption.
    I’m sure it hurts throwing away about $150,000 on owning (about $6500/month in addition to monthly holding costs), but this would have not been as painful had the recent seller held the property longer. For instance, if they held the place for 10 years instead of two it would only have been throwing away $1250/month
    as long as we start looking at housing for what it is (consumption, and maybe a multi-decade version of a forced savings plan) as opposed to what it is not (great investment) then we can all make better decisions. this will bring back sanity to the RE market.

  3. Posted by sfrenegade

    “as long as we start looking at housing for what it is (consumption, and maybe a multi-decade version of a forced savings plan) as opposed to what it is not (great investment) then we can all make better decisions.”
    I agree with your general statement ex SF-er, but someone on SS once pointed out to me that housing isn’t completely consumption if you’re buying land + a building. Land isn’t depreciable, while buildings are. So more accurately, houses themselves are consumption, and purchasing real estate (land + house) as a primary residence is generally forced savings. Primary residences are not good investments and shouldn’t even be seen as investments, whereas prudent rental property investment can be a good way to make modest investment returns. The influence and the experience of the Baby Boomer generation has really distorted people’s views of what proper return on housing should be.

  4. Posted by Q

    The architecture seems confused and, yet, I kind of like it.

  5. Posted by anonymous.landlord

    @ ex-SFer …. 6500 dollars a month, plus? Linda house otherwise rents for more than that 2008 – 2010. It probably cost around 9,000 interest-only to service the mortgage. So that’s more like 2500 a month buyer vs renter outlay plus other costs such as property tax. (Hard to say but I think this house rents for more like $7500. iT’s a pretty good house and people love the area.)

  6. Posted by noearch

    My primary residence in Noe V has been an excellent investment, and a great place to call home, over the past 26 years.

  7. Posted by tipster

    The lower price here made no sense to me. There is virtually no inventory in this area for SFRs. The price should be higher.
    To determine why the anomaly, I looked at the actual costs for the seller, who, by all accounts, ended up with a very favorable outcome in this market.
    He paid about $9000 per month in interest, of which half ($1.1M cap) was deductible at around 28%, or $7740 per month. Property taxes and insurance were another $2000 after tax.
    Assuming $16K in transfer taxes, $50,000 loss, $110,000 (at least) in selling costs, another $6,000 per month was lost.
    So it cost them $15,740 per month to live here at a near breakeven sales price. And that was with a very favorable outcome.
    You can see that the price should have been about a third lower to make the rent vs buy even close.
    So you can see how prices will continue to sink, even in favorable market conditions

  8. Posted by ex SF-er

    @ ex-SFer …. 6500 dollars a month, plus?
    yes, this is why I wrote $6500 PLUS MONTHLY HOLDING COSTS.
    the $150k only counts the Realtor fees and the money the seller needed to bring to the table.
    obviously there were holding costs as well. Interest, Taxes, Insurance, upkeep (maybe), etc.
    someone on SS once pointed out to me that housing isn’t completely consumption if you’re buying land + a building
    I know. this is why I wrote consumption PLUS a multi-decade version of a forced forced savings plan.
    I agree with you that buying investment property is a different animal.
    However, hard to argue that many people bought sensible investment properties the last few years when so many of them RELY on appreciation.

  9. Posted by sfrenegade

    I don’t think we disagree here, ex SF-er.
    But people often forget how much they’ve really spent on their house, when you include renovation, maintenance, taxes, insurance, etc. Over the very long-run, owning should be cheaper than renting because rent prices should reflect the cost of ownership plus reasonable profit. But for the typical holds of many people, they would have been better off renting.
    That’s why I never understood the concept of a “starter home.” The concept, likely invented by realtors in order to sell 1 and 2BR SFRs, depends on undue appreciation in the very short-term in order to overcome transaction costs. That’s a good way to lose money.

  10. Posted by A.T.

    Well, starter homes made sense until the topsy-turvy ’00s when the rent/own calculus got turned upside down. Until then, you could buy a 1BR or 2BR starter home and save money compared to renting even taking into account transaction costs. But you’re right that at current prices the concept makes no sense in SF (which is one indicator that prices still have a ways to fall).

  11. Posted by sfrenegade

    Perhaps, but I was also thinking that the transaction costs of holding a home for only 3-5 years tend to be fairly high. People depended on abnormal boomtime appreciation for the move-up, but I wonder if people would be better off saving a larger down payment for the move-up home, instead of buying a starter home, in non-boomtime. I’m wondering if the lack of transaction costs would put them in the move-up home sooner than buying a starter home would. I guess missionite’s calculator would shed light on this.

  12. Posted by noearch

    Ok, sure you’re entitles to any opinion you want to throw out here, but here’s some friendly advice:
    1. Stop typecasting everyone the same. Stop calling people “typical”. that’s demeaning.
    2. Stop being so high and mighty about real estate. It’s not rocket science, and many of us have done quite well, thank you, over the years with our real estate transactions and investments, without churning out endless numbers and statistics and projections.
    3. Try being more open minded and stop calling people ignorant. It’s not nice.
    Have a great day.

  13. Posted by curmudgeon

    ^Noearch, please remember to take your meds this EACH morning.
    I just re-read the string, and all I see is a balanced discussion between sfrenegade, AT and Ex-SFer about the idea of a “starter home” in today’s market. And then you inexplicably attack sfrenegade. I don’t get it.
    Have a great day.

  14. Posted by noearch

    I’m already having a great day. You might want to re-read some of his insane rants…arrogance and lack of real estate knowledge has no real place here.

  15. Posted by seller

    I am the seller of Linda Street. Thanks for your comments. Please remember that there is usually a story behind things as you are doing your calculations and speaking about unwise investments, etc. We bought this home not thinking about it as a great investment…we thought it was a great house in a fantastic neighborhood and looked forward to many years in the home. However, the daily commute to and from the Peninsula with a 2-year old has finally exhausted us. So quite reluctantly, we decided to move back down closer to our jobs, although we very much wanted to make the city work for us. Financially, probably not the wisest and we accept that, but we will also cherish our two years in the Mission, hand down the best neighborhood in SF. fyi, our purchase price included financing of closing costs so the actual sales price was $2.17. In the end, I think we did pretty darn well. Thanks.

  16. Posted by anonymous

    They aren’t insane rants. Remember this is all in the abstract to posters like him. He’s talking hypothetical econ the way things ought to be, and not necessarily San Francisco, right @ your tangible experiences. You’re talking past one another. But yes, the guy could definitely be more polite. He could also cite his own examples since he’s asking everyone else to do the same.

  17. Posted by A.T.

    Seller, congrats! I said on the earlier thread I love this neighborhood. I agree you got a great result, and I also think you were smart — from a financial standpoint — to make the call to sell now rather than waiting another year or two, to cut the losses. Well done, all things considered.

  18. Posted by tipster

    price included financing of closing costs so the actual sales price was $2.17
    This is of course, what I have been saying for the last few months. The sales price will reflect 2.17, not 2.149, distorting the sales prices for nearly everything being sold.
    And, I should point out, that the Realtors absolutely hammered me for exposing yet another lie: that current prices are being distorted by the common inclusion of closing costs in the sales price. And this was almost certainly NOT an FHA loan and most certainly not a low income buyer to whom the Realtors screamed this practice was limited.
    And you’ll also note the seller congratulating himself on the fact that the sales price was actually higher, by the exact amount they were required to pay, as if that made any difference to them at all. But psychologically, it does. And so they were happy to do it. This in contrast to the “why would the seller do this?” arguments the Realtors made when I exposed their little lie.
    Now it wasn’t much here, only 1%, but in lower priced transactions it can run 3% or more.
    Congrats to the seller: you won’t regret the loss: having time with your kids will be worth every penny, and the house you just bought was lower too, unless you were even smarter and are renting while you ride out the real estate market’s next leg down.

  19. Posted by seller

    What I meant was that our actual purchase price in 2008 was $2.17, rather than $2.205 (which included closing costs). thanks.

  20. Posted by R

    Tipster, I think you’re a little confused.
    The seller stated that when he purchased he received closing costs. Not when he sold.
    i.e. His purchase price in 2008 was recorded as 2,205,000. But he received some back and so only paid 2,170,000.

  21. Posted by R

    Woops, beat by the seller…

  22. Posted by sfrenegade

    “stop calling people ignorant”
    I don’t really understand the personal attacks here. Best I can tell, disagreement is not being impolite. In contrast, noearch has referred to my apparent “insane rants.” Who’s the rude one?
    I’m not quite sure where I’m being high and mighty. I look at a lot of statistics for sure, and I interpret those statistics. Apparently noearch and anonymous don’t. I don’t judge you for that.
    And anonymous/fluj, just because I look at stats doesn’t mean I only speak in theory. Thanks for adding no substance to the discussion and instead providing only personal attacks.
    seller – thanks for your response. That commute does indeed get tiring. And the anecdote certainly flies in the face of some people here who think that people who live in the city with kids are not likely to buy on the Peninsula.

  23. Posted by hangemhi

    tipster – you found one house where one of two transactions included closing costs and have extrapolated out that all home sales have this and that realtors have a secret “lie” that no one knows about – yet everyone is doing.
    Thanks to you, now everyone is doing it AND now everyone knows they are doing it.

  24. Posted by hangemhi

    “some people here who think that people who live in the city with kids are not likely to buy on the Peninsula”
    sfrenegade – is anyone on here really saying that? SS comments can be like the telephone game – and this one keeps getting repeated lately and keeps getting morphed into “some people” supposedly saying really stupid things. With tipster soon sellers will be financing buyer’s entire down payments. Meanwhile, I’ve heard the “City people won’t look elsewhere” argument on here and have never heard it put quite like how you have it now. That people with kids won’t consider the peninsula. That’s absurd and I doubt it’s ever been said on SS.

  25. Posted by sfrenegade

    Come on hangemhi, this even happened recently:
    Gil – These are two very distinct markets. I doubt most people who are looking for a house in Burlingame are going to consider Glen Park or vice versa. If you’re a prospective buyer going to open houses in Glen Park you’re most likely going also to also see comparable homes in Bernal Heights, Noe Valley etc. Conversely, prospective Burlingame home owners are probably looking at homes in Millbrae or San Mateo. I doubt there’s much crossover between the city and places outside it. You average buyer more or less knows whether they want to be in San Francisco or not. Oh yeah and I have several fellow Glen Park friends and neighbors who have chosen to live in the city while working in the Peninsula so it does happen!
    Posted by: Willow at June 7, 2010 3:09 PM
    (sorry, didn’t mean to pick on you Willow, just the first example I remembered)

  26. Posted by hangemhi

    sfren – that comment makes my point – not yours.

  27. Posted by hangemhi

    What willow is saying is that few buyers look at both places simultaneously. They either want to be in the City or they don’t.
    To be clear, the seller here may “want” to be in the City – but fits in the “don’t” category NOW that he’s given up on the City due to the long commute. Do you think he’s now considering other SF neighborhoods? No – he’s only looking down south now.
    Sure a minority of people will consider the City and not-the-city at the same time – but it’s usually one or the other. Meanwhile your comment morphed Willow’s point into “people with kids are unlikely to move to the pennisula”.

  28. Posted by sfrenegade

    “I doubt there’s much crossover between the city and places outside it” makes your point? How so? I’m suggesting that people do cross-shop between SF and, say, Burlingame, but people on SS occasionally do say that there is very little cross-shopping because city people want to be city people.
    I’ve even seen people who doubted whether there were substitution effects within the city. fluj has even suggested that some of his buyers will only consider certain blocks of SF even within choice neighborhoods and wouldn’t cross-shop other blocks, much less other choice neighborhoods. Also, check out my conversation with sparky-b here:

  29. Posted by sfrenegade

    hangemhi, don’t think I reloaded before sending my 5:20PM post. I see what you’re saying in context, and that’s probably a fair criticism. Consider me pwned. You’re saying that Willow is talking about a present substitution effect for people who want to buy in the city as opposed to a future substitution effect which is what happened with “seller.” I’m still not sure that I agree with Willow’s comment, especially given the recent Redfin report of anecdotal evidence that there is a present substitution effect.

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