As we wrote in February with respect to three studios on the market at 195 7th Street:
It’s nothing fancy nor luxurious. And at 311 square feet, 195 7th Street #308 is anything but large. But it is a South of Market condo that’s just hit the market as a short-sale listed for $150,000. And it’s not a BMR.
Purchased for $51,000 in 1995 it sold for $79,000 in 1998 (appreciation of 14 percent per year). And five years later it sold for $180,000 in 2003 (appreciation of 18 percent per year). Apparently “short-term” holds and frequently flipped properties do show price appreciation. Well, at least when the market is actually appreciating.
Three other studios listed for sale in the 34-unit building currently range in price from $189,500 for #208 (time to strike that “Best Priced Studio Condo in SOMA” tout) to $238,000 for #404 which is larger by twenty-one square feet.
The sale of 195 7th Street #208 closed escrow on Thursday with a reported contract price of $146,000, 23 percent below the price at which it was listed as the “Best Priced Studio Condo in SOMA.” At the same time, the short sale of 195 7th Street #308 remains in contract while #404 remains active and available.
∙ “Best Priced Studio Condo In SoMa” Undercut From Above [SocketSite]
With this starting to take place on the low end, the City’s BMR system is just screwed.
My nephew owns one on Goldmine Hill. Cute place, nice light, parking, some view, etc.. He bought it for $181K in 2005 with 25% down. There is no way he can sell it with the restrictions placed on it. The City lists his resale price as $216K – but nobody is going to pay that when they can get a market rate condo without the income restrictions for $250K in Diamond Hts Village down the street. Seriously, nobody is buying these things at any price.
His loan adjust in 4 years…
I really don’t like how they have asset test to qualify for BMR, so as to punish someone who’s lived frugally and saved, even if they are low income.
Not that I support the BMR program, but they are presumable doing this to deter people from quitting their job for a few years to scoop up a BMR while they have low or no income.
How much can you rent these out for? If you can get $1,300/mo (keep in mind no parking) then it’s not a bad ratio.
“presumable doing this to deter people from quitting their job for a few years to scoop up a BMR while they have low or no income”
that would be pretty drastic to do that, especially since if your job disqualifies you it means you have a pretty good job. if the govt is that worried about someone doing it, they should be more concerned that people, once in a BMR, can quickly move up the income ladder and have large windfalls while still keeping the BMR.
although it would be pretty whacked if a billionaire with low income scooped up a unit.
Wasn’t that low assets requirement to prevent the proverbial trustafarians from buying BMR units?
The studio rentals typically go for $900-1000, depending on the size and floor
Longtime Lurker . . . your nephew probably pays much less for his monthly cost of living than a market rate buyer of a similar condo and even less than a renter. Furthermore, he may not be able to sell it for $216K, but he can sell it for less if he wants. But he probably doesn’t want to because he wants to make money. He is in better shape than market rate buyers in 2005. Market rate buyers of similar units would probably have been foreclosed on by now because their rate would have reset in 2010 (because most people were in option loans in 2005) and they would be way underwater on their mortgage while your nephew is probably above water (just not as much as he would like). This is because he probably bought his condo for 1/2 the price that a market rate buyer would have.
Re the means testing . . . how is this any different than any other program that provides a benefit for people that have a certain amount of money? It makes sense to look at their wealth as well as their income. Do people have a better way of means testing?
It’s also very interesting to me to see the libertarian minded people immediately assume BMR buyers have nefarious purposes and are trying to take advantage of the system rather than simply trying to find a home they can afford to live in. I mean c’mon, we’re not talking about greedy people here like lots of market rate buyers that wanted to get rich quick for nothing . . . these people have agreed to limit the upside on their home purchase.
It really bugs me to see people’s prejudices effect their analysis. Unfortunately, our country has become saturated in neoliberal propaganda.
“It’s also very interesting to me to see the libertarian minded people immediately assume BMR buyers have nefarious purposes and are trying to take advantage of the system rather than simply trying to find a home they can afford to live in. ”
If you allow people to take advantage of the system then you’ll get more people taking advantage of the system.
Just a single data point on the other coast, but the fact that the person who once headed the tax writing ways and means committee had four rent controlled apartments, one of which he used as an office, does little to engender faith in the people’s reasonableness.
http://www.nytimes.com/2008/07/11/nyregion/11rangel.html
That’s not even a data point in the context. Rent controlled apartments in NYC. BMR here. Apples and compact discs.
“That’s not even a data point in the context. Rent controlled apartments in NYC. BMR here. Apples and compact discs.”
Perhaps if you take a more general view it will look like iPods and compact discs.
Most people would agree that the public policy goal of housing assistance programs like both BMR and rent control would not encompass one person converting three apartments into a penthouse and using another as an office. Yet this did not prevent a highly visible politician from doing just that.
If the asset restrictions were removed I’m sure we’d see similar cases here. While quitting your job is quite drastic, for some people there are a number of other ways of structuring your compensation to have up and down years.
“That’s not even a data point in the context. Rent controlled apartments in NYC. BMR here. Apples and compact discs.”
Perhaps if you take a more general view it will look like iPods and compact discs.
Most people would agree that the public policy goal of housing assistance programs like both BMR and rent control would not encompass one person converting three apartments into a penthouse and using another as an office. Yet this did not prevent a highly visible politician from doing just that.
If the asset restrictions were removed I’m sure we’d see similar cases here. While quitting your job is quite drastic, for some people there are a number of other ways of structuring your compensation to have up and down years.
“If asset restrictions were removed” is but one component of these dissimilar situations. One cannot discuss highly localized policies like these in the same breath, period. You’ve somehow adopted the opinion that your random unfocused thoughts are interesting. Well, good for you. Bad for the site.
I disagree, random unfocused thoughts can sometimes be interesting and provoke further discussion. So a net good for the site.
“If the asset restrictions were removed I’m sure we’d see similar cases here.”
We do see things like this with respect to rent control sometimes, e.g. the rich pensioner in a rent-controlled Russian Hill apartment who has lived there forever.
That’s not quite relevant to the BMR discussion, however. BMR units aren’t really good policy. They create a small favored class who lives in them and make all other housing housing more expensive for everyone else, rich or poor.
tc_sf,
Sure, rules are broken. It doesn’t mean that everyone breaks the rules. It doesn’t mean the rules should be thrown out. It doesn’t mean that sometimes we have to at least partially rely on the honor system.
Should we get rid of the federal income tax because Tim Geithner broke the rules and was not honest? Does this mean that all rich pricks are liars and thieves? Does this mean any white man in a pin stripe suit is a crook?
It’s funny that libertarians are big on rules . . . when it comes to the little guy (or politicians from the other tribe). We’ve been brainwashed into thinking of citizens as heartless rational utility maximizers, or parasites sucking at the teat of the “productive class” (the top 10% or so). It’s a very negative view of the great majority of citizens. So it’s no wonder that libertarians share with their neoliberal friends a desire to enforce means testing for housing assistance, or for Medicaid or Medicare, for instance. Or they want to prosecute mortgage fraud . . . against the little guy.
But when it comes to hugely powerful corporations I guess we simply have to trust them to do the right thing because the free market will evidently keep them honest. Forget government programs to help the middle class. Everyone knows the middle class will lie, cheat, or steal. And they don’t deserve anything.
“BMR units aren’t really good policy. They create a small favored class who lives in them and make all other housing housing more expensive for everyone else, rich or poor.”
This is true, sfrenegade. The program should be expanded to everyone. Or almost everyone.* Limiting the free market so that residential dwellings have an upper price limit, based on the area’s income, or based on the buyer’s income, seems like good policy. It will drastically lower the price of housing which will be a net good for the economy and our country. We need housing, not investments, derivatives, or securities.
This is one area where the unfettered free market doesn’t work. Like with health care.
*Unlike you, I don’t mind higher incomes being able to purchase property for whatever price they want. And we could certainly transfer the BMR policy terms to the government backed agency mortgages so that it would apply to a lot more Americans.
How do you propose we do that and pay for it, SFHawkguy? The money has to come from somewhere. We can lower the cost of housing by eliminating BMR units, reducing planning’s interventions, allowing lot mergers, allowing more dense building, eliminating prop 13, allowing different land use, etc. all in a more cost-effective way than BMR units. Agency loans have been problematic, in case you haven’t noticed.
What do you mean pay for it? I only proposed using the agency backed mortgage structure because that is already an existing regulatory system.
How about the government simply decrees it so? Anyone making a certain amount of money can only purchase a home for X dollars, based on the buyer’s income and/or tied to the income for that area. Say you are in the top 25% of families, and make $100,000 a year (I’m just guessing the numbers for purposes of illustration), then you can only purchase a home for up to $350,000 and when you go to sell it you are limited in the price you can sell based on inflation or the percentage increase to median income for the area code, or something similar.
It would take a lot of speculation out of housing. There would be fewer extreme winners and extreme losers and everyone would pay less for housing.
So, your idea is basically to institute North Korean housing here? We could have long waiting lists of people wanting to move in.
Also, what would be the point of homeownership in your scenario? What would it accomplish? There would be no real incentive to improve your own housing, for one thing. Why are people better off owning instead of renting in your scenario?
You can take a lot of the speculation out of housing by underwriting good loans. Why is your way better?
And sfrenegade,
Your premise is flawed. It’s the neoliberal premise. The premise is: if we get rid of all regulation (zoning, planning, BMR units, rent control, government backed mortgages), prices will go down for everyone. I don’t buy this premise. And in some cases, even if it’s true, it’s not worth it.
It’s hard for me to believe that we actually have libertarians/neoliberals seriously proposing the removal of zoning laws in a major U.S. City! As if the market should decide where leather is tanned or chemicals are made or how a city should be planned.
However, I’m in agreement that a lot of our government intervention props up the price of housing and doesn’t work. I agree we should not back mortgages unless conservative underwriting is used. We shouldn’t have given tax breaks to people to buy houses. We shouldn’t give people the mortgage interest deduction. We shouldn’t have let the government and the Fed buy all those crappy mortgages off of the banks at face value. I agree that our government is so corrupt that it usually intervenes at the behest of its true masters, the financial elite, so most government intervention re housing simply makes it more expensive.
But the BMR program is one example of good policy that helps the middle and lower classes. Even if it does raise the price of housing for others, and I doubt there is a substantial effect from the SF BMR program on prices for other people, it is worth it. In fact, it can lower prices on some units, because it gives people a lower priced alternative. Look at Longtime Lurker’s example. The market rate seller at $250K has to compete with someone that bought at $180K and can sell for that price and still come out pretty well.
You can call it whatever you want, but certain cities other than SF have a better balance in terms of zoning, planning, etc. that doesn’t artificially inflate the cost of housing so much as here. Think of it as a spectrum rather than something black and white. I’m not sure that’s “neoliberal,” whatever that means.
I’m just not seeing the benefit of having a city full of BMR housing as you are suggesting. What benefit does that provide? Why is that good for SF’s economy? How does that produce a proper mix of jobs?
“Why are people better off owning instead of renting in your scenario?
You can take a lot of the speculation out of housing by underwriting good loans. Why is your way better?”
Why should people be better off owning than renting? Your policy simply creates a different set of winners. Your prescribed policy helps those that have greater financial means and that’s the status quo. Our government is propping up the housing market to help a certain small group of winners.
And my proposal is very similar to your proposal of “underwriting of good loans.” My first, more limited, proposal would be to have the U.S. government adopt San Francisco’s BMR program rules as underwriting rules on the mortgages it backs. So, for instance, like with SF BMR, buyers would need a hefty down payment and could only purchase a home for a certain multiple of their income.
I’m taking it to the next logical extreme when I say the government should simply decree these underwriting standards for all homes and get out of the mortgage backing business.
What is the benefit to society to allow speculation in housing? People will improve their homes? Why won’t people improve their homes for while live there? And if all these crappy finishes we now see in the real estate market is the benefit we get from the huge housing bubble then capitalism is officially dead. How can granite and sub zero fridges be worth that much?
@SFHawkguy: it does seem from your comments that you expect the “other guy” to pay for your plan, which really just means those that are high producers in our society. Also, exactly who is this “government that decrees it so”? Sounds like Stalinist Russia to me, no thanks.
Government ran health care is a joke, with higher costs and lower service, and if you think our health care system has operated under a free market system in the last 35 years your are sorely mistaken.
Now you want to further pollute our already somewhat inefficient housing market with more government intervention? The best thing we could do is get completely out of subsidizing the market with government backed loans and government provided housing of all kinds. Like many ideas that come from proponents of big government it sounds good on paper, but does not work in actual execution and also tends to have unintended consequences that are the polar opposite of the original goal.
Viva la liberté!
Wow, your further explanations are even less coherent than the original, SFHawkguy. Again, what’s the benefit — succinctly? Why should our housing market be like North Korea’s? What is the benefit of making 100% of SF into BMR housing?
“I’m just not seeing the benefit of having a city full of BMR housing as you are suggesting. What benefit does that provide?”
The benefit is that most San Franciscans would be paying drastically less to live in their dwellings. That’s a huge benefit. A bubble in housing only helps a small number of winners. We are better off taking the speculation out of housing and thereby making it cheaper for everyone to have shelter.
Before I respond to your other comments, I can’t let this pass:
“Government ran health care is a joke, with higher costs and lower service . . . ” Do you have a cite? Reality is the exact opposite of your beliefs my friend. Single payer health care is far more efficient than the for-profit model. Health insurers provide no added value. They are simply parasitic middle men.
If the government represented the majority of people rather than the rich we would have efficient government programs like Medicare for all.
The “free market”, especially your lousy crony capitalist facsimile thereof, is not appropriate for sectors like housing or health care. It brings out the very worst of capitalist parasites to prey on the fundamental needs of humans.
SFHawkguy, you’re assuming a priori that massive housing bubbles is the natural state of housing, rather than being a consequence of poor lending practices. This focuses too much on the recent past. Instead, housing prices are usually quite stable, with the occasional small bubble.
Have you even thought about the consequences of SFHawkutopia? It would be a good thing that people wouldn’t have to pay as much to live here, because they probably wouldn’t make much money either.
To put it another way, SFHawkguy, you’re optimizing one thing and screwing up everything else. This is basically the same categorical error that libertarian philosophy makes when taken to its logical conclusion.
Why does everything always have to be all or nothing? Why can’t we reduce some of the things that make housing expensive in SF without doing drastic things with massive negative consequences?
“I agree that our government is so corrupt that it usually intervenes at the behest of its true masters, the financial elite,”
Given your belief here it’s hard to see how giving government absolute power to run the housing market would have a result that you’d desire.
@SFHawkguy: from what you have written you sound like a true socialist. We are so far ideologically apart as to likely have no value in debate in this forum, but please try to keep your hand out of my pocket, thanks. Good luck living a happy and prosperous life.
Regarding health care, I don’t need a cite. I owned a small health care provider business with my wife in the area of orthopedic surgery rehab. We sold the business in 1994 because of the continuing intervention of the government in to marketplace and I have seen the continuing growth of inefficiencies since then. Go speak to some Doctors that have been practicing for 20 years or so if you want to get the real story. I agree that insurance companies as currently regulated and controlled by the government are inefficient and lack the required competition. We also unfortunately use “insurance” to pay for all our medical costs, which is not what it is really designed to do. Anyway, this is not a health care debate site, and we can agree to disagree on this subject.
sfrenegade wrote:
The worst opinion columnist in California had an example of this last month, when he described a North Beach developer’s attempt to force four elderly tenants out of units he owned on Greenwich Street in March.
Now, realize that he’s trying to make the elderly tenants seem sympathetic here:
Nevius never bothers to ask this guy Carlo Tarrone why he needs to live in a leased apartment if he already owned another place. I guess the answer is obvious to even the most casual observer.
I still don’t understand what causes people to think a lifetime tenancy for *anybody* makes good policy. Like retirees everywhere else, these people can move to cheaper housing because their cashflow isn’t as high in retirement.
None of these people are being thrown out on the sidewalk. They’ve enjoyed far-below-market rents for years, and should have saved money while doing so.
Skirunman,
You won’t have conversations with socialists? You do realize we live in a mixed economy, right? You do realize even our uber-capitalist society has adopted some “socialist” policies? Like Medicare and Social Security.
And guess what, vast majorities of Americans support single payer (government run) health care: http://www.healthcare-now.org/another-poll-shows-majority-support-for-single-payer/
Also, Doctors are increasingly supporting it. Maybe you’ve heard of Physicians for National Health Care Plan? Polls show that doctors favor the “public option” or a single payer system. For instance, “A majority of physicians (58%) also support expanding Medicare eligibility to those between the ages of 55 and 64.” http://www.rwjf.org/healthpolicy/quality/product.jsp?id=48408
Plus, you’re wrong on the math and the facts. See here for the multitude of evidence that proves that America’s for profit health care system is more inefficient and unfair than government run health care: http://www.pnhp.org/resources/pnhp-research-the-case-for-a-national-health-program
tc_sf,
You’ve noticed the conundrum I’m in. Our government is broken. It doesn’t mean that a government that truly represents the people isn’t possible. Or preferable. It just means the fascists are in control right now.
“SFHawkguy, you’re assuming a priori that massive housing bubbles is the natural state of housing, rather than being a consequence of poor lending practices. This focuses too much on the recent past. Instead, housing prices are usually quite stable, with the occasional small bubble.”
I assume that unregulated capitalism leads to massive bubbles. I assume that capitalism is like poker–ultimately there will be only one winner. I assume that capitalism turns a basic human need, like shelter, into a chip to be gambled with. I also assume that it is an incredibly inefficient way of distributing assets and arranging for shelter for people. We have millions homeless and thousands of houses sitting empty and some big winners and some big losers. The rest of the silent majority are taking hits they don’t realize they are taking yet–the tax everyone that bought a home the last 10 years or so paid so that a few winners on Wall St. could strike it rich.
If the government is so bad and evil why is the post WWII period, when government began regulating banks and the housing market, a period of stability, while other periods where the government took a hands off approach, like the 1920s or 90s-00s, were when huge bubbles occurred? The reason for that stability you point to was government regulation!
At one point, you and I figured out we are both getting to the same “fix” for housing–more stringent underwriting standards which will decrease leverage and probably lower prices. I’m simply saying that the government (supposedly speaking for the majority of the people) should be the one to enforce these underwriting standards. How else do you enforce standards? Are people still making the argument that industry self regulation is the way to go? (that was a rhetorical question)
But you are right about one aspect of the ‘the horses already left the barn’ argument: a huge part of the bubble was the deregulation of banks and derivatives and securities and it doesn’t appear that the poker players (aka bankers/ capitalists) have an intention of pulling off the same scam again. It’s not because the politicians realized it was a mistake to deregulate the last ten years or so; oh no, they aren’t really going to regulate, they will just move on to the next victims. They are moving on to the next feeding frenzy–for which the market is being deregulated right now, I’m sure.