As we wrote about 1310 Minnesota Street #206 when listed for $609,000 in April 2007:

It was on the market for a month before being reduced $30,000. And yet according to the listing, it’s now priced at “30K under Market Value!!” We’re still scratching our heads. And wondering when the market stopped determining “Market Value.”

The property ended up selling for $599,000 a month later before being taken back by the bank this past May. And today, the one-bedroom condo returned to the market asking $399,500 but requiring a “cash buyer” this time around.
∙ Listing: 1310 Minnesota Street #206 (1/2) 877 sqft – $399,500 [MLS]
Not Quite “Instant Equity” (But Close) [SocketSite]

18 thoughts on “A New New Market Value For 1310 Minnesota #206”
  1. Great location for Peninsula/South Bay commuters who want to live in SF (easy access to 280 and Caltrain), but not a whole lot going on in that immediate area.
    I looked at some units in that building, and think $399K is a fair price. But good luck getting cash.
    It’s my understanding that the HOA is in litigation with the builder (along with the lofts on Indiana St right behind it), which might explain the requirement for a cash buyer.

  2. Maybe with “cash buyer only,” you can see the 40-50% discounts some people on SS supposedly claimed we would see. But hey, we’re already at 33% for this condo.

  3. @$455/sf/$275 HOA…You can bike or walk to work if you work at Mission Bay ok….weather ok…15 year time horizon ok…young young professional…ok

  4. squeezed between the freeway and ugly warehouses ok… would be worried if my wife had to walk the streets after dark ok… will not live there for 15 years in hope the neighborhood come alive if it ever does ok… can find better at the same price and more central ok…

  5. having kids, not okay.
    That’s the thing. This is a starter place with not even a guest room. And yet it’s $400K, and the principal + interest payment alone sounds reasonable because interest rates are 4.52%. Tack on all the other costs of owning plus make interest rates 8% (which is not unheard of historically), and this price is ridiculous.
    Maybe our hypothetical young professional is waiting 15 years to have kids these days, but is the young professional staying in that same job in Mission Bay for 15 years these days? In the meantime, you have the problems that lol pointed to.
    Realtors love throwing around things like “starter home” or “move-up.” And buyers buy into these terms without thinking about the implications. I don’t blame realtors for doing their craft here because it’s just sales talk and not actively misleading, and this is a buyer perception problem. Buyers just aren’t considering the real costs and are just happy they “own” something.
    There are plenty of good reasons to buy this place if you meet the right profile (e.g. retire, never plan to have kids, etc.), but without boomtime appreciation, buying this place as a starter home is silly. Just save your money and buy something more practical.

  6. ” if you meet the right profile (e.g. retire”
    You don’t buy a place to retire that requires you to run up and down stairs. You might end up in a place with stairs if you bought it many years before, but you don’t buy a place like this for retirement. You can’t count on your knees to hold up!

  7. “You don’t buy a place to retire that requires you to run up and down stairs.”
    Sure, tipster, but you of all people probably get my overall point. More people in SF should use missionite’s calendar. Buying makes much more sense than renting, if you can save a down payment, in most other cities, but the calculation in SF often works the other way.

  8. This is a “starter” home only if you want to start your own personal downward financial spiral. We’ve seen this in slow motion: knife catchers step in where they falsely perceive a bargain. They jump in, the market continues its downward trend, and they jump out or worse.
    This is a $400K tiny one bedroom in a crappy location. There is no way that this pencils out better than rent right now, much less when interest rates go up or as pressure to reduce government subsidies of the RE market become unbearable and government sponsored mortgages start to dry up.
    I can’t imagine why anyone would mistake this for a good deal.

  9. I happen to work a couple blocks away from this place, and it is DESOLATE! Especially on the weekends… There are a couple decent places to eat, and a liquor store, but that’s about it. Once you get to the Dogpatch, it’s a little better, but many of the places close on the weekends, as they cater to the lunch crowd.
    I also looked at one of these places last year, and they are OK, but definitely nothing special, and that’s if you like the “loft style” developments that were popular back in the dot-com days (I personally am not a fan).
    My office is moving soon, and I can’t tell you how happy I am to be leaving the area.

  10. Yeah, you go to this area for business during daytime and nothing else, otherwise it’s dead. They managed to market the zone as “industrial hip” with terms like “Manhattan-style lofts”, except that when you get out of a Manhattan loft you’re in Manhattan not the freeway No Man’s Land.

  11. will not live there for 15 years in hope the neighborhood come alive if it ever does ok…
    New residential construction is prohibited in this neighborhood, and new retail/office is restricted, which pretty much means that the immediate area is as lively as it’ll ever be. Still, some people like to live in a quiet neighborhood, which this certainly is. Lots of street parking as well.
    This is a $400K tiny one bedroom in a crappy location.
    877 sqft is not tiny for a 1BR. I’d say it’s above average in SF. $400K will typically buy you something significantly smaller in a better neighborhood.

  12. I have friends who work here. Good location for commuting south. Quiet, not scary, especially if one has a car to drive back late at night.

  13. This place is not at rent vs buy parity, but here’s a good example of how even close to rent vs buy parity can go wrong.
    1531 Beach street in D7 sold in 2004 for 1.280M. That translates into a monthly payment, plus property taxes, insurance and HOA to just under $5000 per month. It was a 2/2 with a sunroom so it would have rented for about $4000 per month. Not too bad.
    It looks like they modestly updated it over the 6 years they held it, about $50K or so. They just sold it for $1.1M (compared to 1.280 in 2004). A loss of $170K. Then they lose the $50K in updates, 8250 in transfer taxes, maybe $20K in closing costs and finance costs, and $55K in Realtor fees, and they may have paid $15K in the buyer’s closing costs, for a total loss of 328K.
    Over 71 months, that’s an additional $4.8K per month.
    So now they went from being at least reasonably close to rent vs buy to hopelessly above it. A place they could have rented for $4K, they have now paid $9.5K per month, more than double the rent vs buy.
    And they did everything right. They bought in a good location, well before the peak, enjoyed the benefit of a decent runup (none of which current buyers can expect) didn’t go overboard updating, and they still end up losing their shirts. Nearly 9.5K per month for 6 years for a Marina condo.
    Note that the bulls will tell you they “only” lost 15%, it’s proof the market is strong, etc. But it was financially a disaster for them. What happens if prices fall another 15% over 6 years. The new buyer will have about the same problems.
    http://www.redfin.com/CA/San-Francisco/1531-Beach-St-94123/unit-2/home/1339685
    Anyone considering this place in a sketchy hood should think twice.

  14. “Nearly 9.5K per month for 6 years for a Marina condo.”
    I marked in bold the problem in people’s assumptions as exemplified by tipster’s anecdote. Short holding times are typically death for making money in real estate if you don’t have boomtime appreciation. This is, again, why the starter home concept is broken and really only worked during the boom.
    I would bet that most people don’t realize how much money they are actually spending when they “move-up” and don’t understand transaction costs very well, instead focusing on “how much is my payment?” or “what’s my interest rate?” or the “tax benefits” of $1 for every $3-4 spent in interest.

  15. You’re exactly right about the huge impact of transaction costs. But I’ve heard many times that the average hold for a home is seven years (yes, it’s apocryphal; I have no source) — so this 6-year hold is not far off. This is just to add to sfrenegade’s point that in running the numbers one should not assume an unreasonably long hold period. Or, if you are going to do so, you should think long and hard about whether you really will want to, or will be able to, hold for a long period given the opportunities and difficulties that life throws at us.
    Of course, the most broken part of the system is the absurd 5% transaction cost on selling a home — that is slowly being chipped away but not nearly as quickly as it should be. Realtors should have gone the way of travel agents by now.

  16. “But I’ve heard many times that the average hold for a home is seven years (yes, it’s apocryphal; I have no source)”
    I’ve heard that too, but even that period can be too short to cover transaction costs. I’ve also read that 5-7 years is a common holding period, but that people tend to assume that they will live somewhere longer than that.
    Hell, people are used to thinking about 10 years as “long-term” in the stock market, but look at the S&P 500 for the last 10 years.
    Anyway, whether something is common is a different question from whether it’s financially prudent. I’ve had plenty of friends make bad financial decisions because they really wanted to “own,” really wanted the “tax benefits,” and didn’t understand the risk and costs.

  17. The numbers shown by tipster show yet again how “owning” usually translates into “owing”.
    With 20% downpayments, the bank has an almost risk-free environment. The buyer has the benefit of leverage on the way up, but that’s about it in the “plus” column.
    In the “minus” column, the buyer has:
    – Property taxes on an asset owned at 80% by the bank
    – Maintenance on an asset owned at 80% by the bank
    – Extreme leverage on the way down. A 10% loss ends up as a 75% loss of your investment (when including Realtor commission).
    Remember these 150K that took you so long to save? The 401(k) you probably raided or borrowed against at a great cost? That’s years of 12-hour toiling days vaporized. That was for a good cause (housing) but this cash vanished into someone else’s pockets (hint: someone wealthier than you already)
    As Tipster said, the rent-vs-own rationale doesn’t always guarantee a safe play. Especially with artificially low mortgage rates that “makes it look like” a good deal.
    A metric I like to use is income vs purchase price. Anything lower than 3 is pretty safe, if you are targeting your own segment. A 250K/Y family buying into a 1M home is already outside of my personal comfort zone. There’s not much safety in these deals, even if you have more cash than the usual 20%.

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