As we wrote last month:
Purchased for $1.75 million in October of 2014, the “modern and sleek” unit #5 in The Silver Building, a full-floor loft conversion with exposed beams, eleven foot ceilings, high-end finishes and air conditioning at 10 Mint Plaza, a Mid-Market location a few blocks from Twitter, returned to the market listed for $1.75 million this past July.
After three months on the market, the asking price for the 1,559-square-foot, two-bedroom unit has been reduced to $1.65 million, a sale at which would now be recorded “at asking” according to all industry stats and reports. And having been relisted anew three weeks ago, a sale today would be counted as having occurred within “21 days of being on the market” according to all industry stats and aggregate reports as well.
Unit #1 in the building, which was purchased for $1.5 million in 2014, resold for a $1.425 million last year, down 5 percent on an apples-to-apples basis, as we reported at the time.
This past Friday the list price for 10 Mint Plaza #5 was reduced another $75K (4.5 percent) to $1.575 million, a sale at which would be considered to be “at asking” according to all industry stats but would represent net depreciation of 10 percent for the modern and sleek unit since the fourth quarter of 2014.
This area is awful. That’s why nobody wants to buy this.
It was awful in 2014 and at least one person wanted to buy it. And they wanted to buy it because their other options were worse, and everything they looked at was sold in an hour, so if they didn’t take this, they might have fared even worse.
But now things are different. Inventory is piling up, taxes went up 28% due to non deductibility, the deductible cap on the mortgage dropped from $1.1M to $750K, interest rates are higher, rents have stalled, investors are gone, and everyone is about to bail out on their second home when they have to write a bigger check to the Federal Government for their taxes on April 15th because their property tax is no longer deductible.
And that’s NOTHING compared to the 5/1 arm they took out in 2014 that will reset 35% higher in 2019. From $4375 per month to $5833, just for interest. Now add non deductible property taxes of 1750, and $1000 HOA, and they are looking at $7000 per month after taxes for a place that used to be cheaper to buy and is now cheaper to rent.
And it turned out only to be cheaper to buy when you didn’t factor in the $200,000+ loss they were going to take that will now cost them an extra $4,000 per month they lived there.
So yes, the area is poor, but that’s not the real reason for the major loss here. The area is poor and, more importantly, no one is forced to buy there, and there are going to be a lot more sellers than buyers. Theirs isn’t the only 5/1 ARM about to reset into the stratosphere, leaving them no choice but to sell at any price. It’s going to start happening all over the city.
I hadn’t thought about the effect of resetting 5/1 ARMs, combining with the new tax code on purchasing power.
The Market, especially condos, is going to get ugly. Now if Prop 13 gets tweeked next year and second homes are no longer covered, the condo market will get really ugly.
You know what’s crazy, even as late as last year we were seeing some 10/1 ARMS from the last bubble blow up on this side of the Bay.
Oof. Awesome post.
This specific area in 2014 had a fair amount of optimism, that it would specifically be an area to see strong appreciation. It probably seemingly had a lot going for it. That did not happen here. The homeless situation and 6th st street crime have worsened, for one thing. London Breed seems to be making a bit of progress so far but it’s early days. Anyway, you could pit this result against many 2014 purchases all across the city and the differences would be stark. I’m not discounting all the real things other folks are saying here. But Mint Plaza …. I’d liken that bet to someone buying a newer loft along the 3rd st corridor in Bayview. Probably more like a 10 year bet than a 5 year bet. Easier to say now of course.
Must be the homeless specifically. This sort of price drop would never happen in Saint Francis Wood.
Well, no, because it has indeed happened in St Francis Wood. You will get to true understanding through facetiousness though. I just know it. Keep trying.
Why pay 1.575 for this when one can get a 2/2 at 1501 Filbert for 1.498? The promise of this area near mid-Market and Twiter has not panned out. The neighborhood remains sketchy at night and during the day. It’s hard to see a transformation of the neighborhood – as was hoped for – coming anytime soon. Especially as major nearby projects are stalled. 5M which would have been huge may never get built. Maybe in a decade or two the area might see a transformation, but that is not a given. At this point the seller will likely have to further drop the price in order to get someone to take this off their hands.
I agree. There may have been optimism in 2014, but this neighborhood has gotten worse and there’s no sign of improvement.
It’s funny. I had an older neighbor and we’d talk about downtown and the boom several years ago. I pointed out how the plan was to transform mid-Market into a vibrant upscale area. He laughed and said they have been saying that since the 70s when he moved here. It has not happened and it will not – so he said. He has retired and moved away since then, but he may have been right.
Why would you get a 5/1 ARM during historically low interest rates? Was there a blip up in 2014 so they expected a lower reset?
At the start of 2014, a 5/1 ARM was 2.9% and a 30 year fixed was 4.5%. $3500 vs $5400. That’s why. If they had to pay $5400, that price would have been impossible. It’s why that price is impossible now.
This is going to be bigger than 2008, because it’s no longer the fed protecting the bankers. The whole point was to get these people to fork over their 20% down so that they would be the bag holders when the fed finally raised interest rates. They’re going to lose every dime. It was engineered in from the beginning. That down-payment was paid to the bankers to let them get out from underneath a low doc loan. It’s now no longer necessary to prop up prices. Down they go.
People have been talking about the impending crash for so many years. Are you sure it’s finally happening?
It’s not going to happen. Let’s be honest about it. In fact, both my mid-market places went up a good 10-15% next year, according to zillow and comps. They SHOULD have went down if the “doom and gloom” people were right. (they did dip a bit in 2015/6) But the inventory is mostly sold, and the mortgage rate isn’t that big a deal because the actual cost of these condos isn’t that much. People are not putting down 10%, mortgage lenders expect a lot more.
I actually think SF is under valued considering it’s going to one of the most revolutionary and important cities in the next 50 years to not just America, but the world. Look at the value of NYC London, lower salaries and higher prices.
A $250k down payment (assuming 25% down for a million dollar condo) between two high paid tech people isn’t a big deal. (most of my mid-level tech friends easily make this. They can save that in just a few years living together. The base entry level salary for an engineer is $130k)
Do you really think property is going to be cheaper in 5 years? 10 years? Think about that long and hard for a second before waiting for that crash.
“Do you really think property is going to be cheaper in 5 years?”
It’s close to 2019 and there is 2014 pricing right now.
we just got out of a period that has never happened in us history. interest rates were effectively zero and unemployment in sf was around 2%. that is not the norm and will likely never happen again. oh and btw, the run up in housing prices is highly correlated with said period.
According to Zillow, the current Zestimate for 10 Mint Plaza #5 is $1.67 million, up 28 percent since October of 2014 and up 19 percent over the past year alone!
Meanwhile, the unit remains on the market listed for $1.575 million having failed to sell when listed at $1.65 million and a sale at which would represent actual depreciation of 10 percent since the fourth quarter of 2014.
That shower pan looks like a slip and fall horror story.
are there people who actually prefer this kind of unfinished warehouse as a lifestyle choice, or is it something you “settle” for because a nicely finished space would be more expensive? to me it seems ridiculous to pay top dollar to live in what would otherwise be considered half-finished construction, but i wouldn’t be surprised if some see it as a feature-not-a-bug.
HOA dues are $1,523/month for this 1Bd+/2Ba. Seems really high?
add another ~1500 a month in taxes when this sells and you are now throwing away money at over 3k a month
You would need appreciation of 3k a month from here on out just to break even on this place not including inflation adjustments
Are you subtracting whatever the buyer would pay in rent, plus the potential tax benefit?
UPDATE: Mid-Market Loft Now Listed for 14 Percent below its 2014 Price