Purchased for $2.71 million in May of 2016, the 1,890-square-foot, three-bedroom condo at 3341 Jackson Street, with a private entrance and “house-like” floorplan on “one of the most elegant blocks of Presidio Heights,” returned to the market priced $2.95 million this past March.
The full-floor unit in a classic two-unit, Edwardian building features a “luminous formal living room, anchored by a wood burning fireplace,” a “richly paneled formal dining room” with a box beam ceiling and built-ins, and a “light-filled, eat-in kitchen,” along with a private walk-out deck off of one of the bedrooms, two newly remodeled bathrooms, and deeded parking for two cars (and storage) in the garage.
And having been reduced to $2.749 million in May and then to $2.595 million in June, the re-sale of 3341 Jackson Street has now closed escrow with a contract price of $2.375 million, down 12.4 percent ($335K) on an apples-to-apples, versus “median price,” basis from the second quarter of 2016.
I guess you’re paying for the location on this.
So they paid an above market rent (via a mortgage, property taxes and insurance) for 4 years, and then paid $500,000+ for the privilege. They also paid 10% of their income to state taxes for 4 years, probably at least another $100,000.
If their combined income was $250,000 per year ($125K each) for 4 years, they lost 60% of it by living in California. If each of the couple had jobs in Texas, Florida or Nevada paying $40K each, when lower rent and federal taxes are added to their account, they would have come out ahead.
Love how you put these in $terms, that’s a horrible trransaction!
I don’t see how a household making $250,000 per year affords a $500,000+ down payment in SF. I must be doing something wrong, because it feels impossible for 2 people making that amount to save $500,000 in cash while paying $35,000 every year in rent.
ummm help from the Bank of Mom and Dad, maybe.
That’s because it doesn’t happen. A bank will not issue a mortgage for 2.25M to an applicant with 250k in income. Typical-debt to-income ratio maxes out at 4x annual income. This would be inclusive of any student debt, auto loans, etc.
In order to qualify for a mortgage as outlined above, the applicant’s annual income would need to be 500k+.
Coming up with the downpayment is a whole other story.
people making $250K /yr are not buying $2.5M homes with $500K down unless they have a lot of family money or had a windfall from stock options. Making $250K/ year you should be able to afford a $750K condo with $150K down. $250K salary without prior money is salary for starter level condos
I don’t see that happening in the Bay Area. I work with loan officers. Not uncommon for a couple pulling in 400kish to take out a 2 million loan. I do think that’s stretching it, but it happens more often than not. That wouldn’t happen in most other parts of the country.
When our income was 200K/year, the bank only authorized us to buy a house of $1mil. So I’m presuming the owners of this house probably have an income of 500K. So if they lost 150K per year on housing, they’re probably still ahead of a 80K/year income in another state.
Or maybe they traded up with a similarly inflated starter house. Or they got a bunch of money from their parents. In the end, you’re playing with higher stakes in CA rather than the other states, and that’s their choice.
Your math is roughly right, but your assumptions don’t make much sense.
You need a 25% down payment minimum, so assume a loan amount of approximately $2.0 million for simplicity. You will need a debt to income ratio of roughly 36%. Assuming no student loans or any other debt, that means a minimum combined income has to be around $400,000.
In reality, these folks are likely making around $600-800k in annual income (before equity) to feel like they can afford this place, based just on my circle of high earning, borderline millennials.
Good luck netting anything close to that kind of income in tech outside of the big cities.
but everyone in tech knows you no longer need to be anywhere in particular to net big… Not that you really did before. You can live anywhere you want as long as you have a computer or are capable of getting onto an airplane for irl meetings when necessary. People live in the city bc they’re in business or they want to live there. Also, you can def net over a milli outside of a megapolis. If you’ve got the product or the talent, the buyers are there.
Except everyone in tech also knows that employers are going to drop the compensation adjustment hammer soon. Heck, the employers have announced it publicly. There is no need to pay someone San Francisco salary if they move to Kansas City when they could hire someone local to KC for half as much.
It’s not a hammer. It’s at least half of the reason jobs are moving out. The fact that employers can pay less in direct compensation and support costs for employees elsewhere is the employer side motivation for relocating jobs. The employee side motivation is that even with a salary cut some employees can get greater QoL/net savings elsewhere. If you’re happy in 1,900 sqft you don’t need to spend $2.4M in most of the country.
The reader “Cave Dweller” pointed out last week that people were essentially leveraging their tech salaries to extract money from a rising housing market. And it isn’t just that this was the easiest and cheapest way to get a payout. Crucially, money someone made from rising home equity wasn’t a cost to their employer.
For a while, home prices were showing double digit appreciation. Even at 10% appreciation the 2016 buyer of this place would have been looking at about $1.3M in gains now. $500k of which would have no tax and the rest taxed favorably as capital gains. Your employee would be motivated as if you gave them a $1.3M, but that money never had to come out of your pocket and hit your bottom line. And for startups, there wouldn’t even need to be a successful exit. People could clear large home equity gains even at failed startups.
But in a declining market 4 years of very high mortgage payments just gets you a $400k+ loss. It went from costing you nothing to motivate someone chasing a $1.3M prize to requiring you to take a $1.7M compensation expense to get the same level of motivation.
The real financial hammer dropping for many people is going to be the shift in the housing market.
You say “the employers have announced it publicly”, but of course that’s only a subset of employers. Many other employers aren’t adjusting compensation when people move out of S.F. because turnover costs real money, they want to keep their valuable employees and allowing and supporting remote work is a competitive advantage if your company isn’t one of the Frightful Five.
Also, you are correct that companies “…can hire someone local to KC for half as much”, but in the scenario we are actually talking about, a current employee who moves to escape high S.F. housing costs, who has the relevant background, understands the business and has significant domain knowledge, that someone isn’t interchangeable with a random person in KC so even if the company was to re-hire the position, the salary for the replacement wouldn’t be “half as much”.
my wife and I are at $550K income and a nice nest egg saved. We would not buy a $2.5M property. Just because you can doesnt mean you should. keeping up with the Jones’ is not a fun game long term
A lot of those with mid 6 figure salaries got stock windfalls along the way. They’re taking a mortgage not because they have to but to be liquid and invest elsewhere – which at least in 2016-2020 served very well – and guessing many of those types invest in tech
Not a straight line up but my guess is these buyers were more liquid than just high salary
Agreed. I don’t claim to have done a statistically valid survey of local high-income households, but from the anecdotes shared with me from people in exactly this situation I figure what is going on is that people who have a lot of money tied up in stocks, either in their employers options, RSUs, etc. decide they already overexposed to the stock market’s volatility, and buy “more home than they need” in order to diversify their holdings. They aren’t just keeping up with the Joneses.
This is a two-bedroom unit. What is labeled as a bedroom next to the entry is not legally a bedroom per the building code, at least based on what the plans indicate. Real estate agents constantly get away with fraudulently labeling rooms as bedrooms, when in fact they are not.
Do you know the BR next to the entry is <70 [square] feet? I see door and window….
A bedroom requires a window that opens to the public right of way or in SF to a rear yard that is a minimum of 25′ deep. A room with a window that opens to a lightwell that doesn’t lead to the street or rear yard can’t be a bedroom.
It was built in 1910…long before that building code requirement was implemented. I believe it’s grandfathered in as a bedroom.
That’s not true. Not every bedroom needs to face a public way or rear yard. And the minimum for a rear yard can be much less, depending on property. Rule of thumb is 25% of property depth, or 15′ minimum. But some small lots can get away with much less.
So are we in a correction yet? Some other SFH still closed over asking in October, I guess time will tell
Beautiful unit, nice layout and neighborhood. You would expect it to hold it’s value.
This interior looked a lot better when it had contrasting panels and trim in the 2016 listing.
With the impending construction nearby (CPMC California campus and UCSF Presidio Hill), more is for sale in Presidio Heights than I’ve ever previously seen. In speaking with neighbors, that is the reason many are leaving our neighbourhood. So I do wonder if buyers like these are aware of the many year large developments on the horizon…
Yeah, right, “impending construction” 12 blocks away is going to make someone move. Could it be the 40 minute bus ride, that makes these places more dangerous in a pandemic than the 2 minute elevator rides in SOMA, that’s causing the problems?
And as for whether buyers are staying away, given that the top floor, private stairwell, 1950 square foot 3/2 condo at 327 Locust (name link) just dropped their price to net about 4% over their 2007 buy after fees and taxes, I’d say this area might have a teensy problem getting buyers. Did you feel you missed out 13 years ago? Now’s your chance.
3341 Jackson is 3 short blocks from the UCSF project and 6 regular blocks from the CPMC one…where did 12 blocks away come from?
I know this building. The third bedroom is small, but has always been a bedroom. This is the smaller of the two units in the building. The upstairs 3343 is larger, because the living room goes across the whole front facade, as does the entry hall. In 2016, the buyer overpaid. Because of its excellent location, with superb homes on the block and famous neighbors, this building has more than once fetched more than it was “worth.”
The apples always have the same comments from a set of people. Bad block, poor layout, was staged poorly/mishandled, it’s only in Soma, the last buyer overpaid. Now we have new things to try to convince people that the market is not going down or this is your last chance to buy. There is going to be construction but not anywhere close to this unit. Multiple people have overpaid thus it’s not really a down apple. Yup.