As we outlined back in October:

Purchased for $1.650 million in July of 2016, the 1,366-square-foot, two-bedroom unit #7E in the Lumina tower at 201 Folsom Street, an interior facing unit with “peaceful garden views,” returned to the market priced at $1.899 million in 2019 but was withdrawn from the MLS without a sale having closed.

Listed anew for $1.690 million this past May, reduced to $1.525 million in July and then offered for rent at $7,000 per month, the list price for 201 Folsom Street #7E is now down to $1.400 million while the asking rent was dropped to $6,500 per month without a lease having been signed.

At the same time, the estimated carrying cost of the unit would now run around $10,400 per month “at asking,” including a 30-year jumbo mortgage at the prevailing benchmark rate with 20 percent down, property taxes, insurance and HOA dues of $1,287 per month, but not accounting for the opportunity cost of that $280,000 down payment. The carrying cost with a 5-year ARM would be closer to $9,500 a month, assuming a conforming rate could be secured.

The resale of 201 Folsom Street #7E has now closed escrow with a contract price of $1.35 million, which was “within 4 percent of asking” according to all industry stats and aggregate reports but down 18.2 percent on an apples-to-apples basis from the third quarter of 2016, with a leveraged carrying cost of around $9,800 per month, assuming 20 percent down at prevailing rates but not accounting for the opportunity cost of said $270,000 down payment.

41 thoughts on “Reductions, Rent and a Harsh Reality Part Two”
  1. Perhaps the seller switched listing agents during this close-to-three year debacle, or maybe they were just an unusually under motivated seller, but to a layman, this looks like the listing agent wasn’t providing very good advice on minimizing the loss. They probably should have opted for a Luxury Live Auction instead of slowly chasing the market down.

    1. I doubt it was bad advice from the listing agent as they usually have a realistic picture of the current market conditions and are motivated to make a sale. Instead my guess is that the seller was stubborn and unwilling to accept the loss. Or worse. The seller’s mortgage balance might have been greater than the sales revenue.

  2. The tower condos were sold largely on the premise of HSR turning the TTC into a Grand Central Station of sorts and a never-ending increase in high paying tech jobs in SOMA and the greater downtown SF area. Whether that premise was ever actually likely to occur it certainly won’t happen now. SOMA could see a 40% office vacancy rate by 2024 and HSR – it’s pretty much a pipedream. This unit was purchased in the midst of several years of irrational exuberance that preceded the pandemic and that too many buyers (a large chunk of them investors) bought into.

    1. Fix the homelessness, tent cities, and open-air drug markets on the streets and SF will be back to its former beauty and desirability.

      1. yep, 100%.

        You’re asking for basic safe and cleanliness expectations and the woke city/people aren’t interested in that.

        1. If the people at The City suddenly become unwoke, will the homeless people disappear shortly after that? Will that clean up and remove the tent cities? Will the patrons of the open-air drug markets decide to get clean/sober up and stop using based on the newfound interests of the city/people?

        2. Using words like “woke” (with no context and understanding into what that word actually means) is just empty virtue signaling by people who don’t care about fixing real problems.

          I support London Breed’s proposal to take the mentally incapacitated off the streets. If Britney shaving her head and attacking a car door with an umbrella is enough to be forced under conservatorship, surely it is enough for those that are defecating on the streets and attacking innocent citizen passersby, sometimes fatally.

          1. People “defecate on the streets” because they have no other options. Every living thing poops.

            It’s time to stop equating “something you don’t like to see” with mental illness, when the primary need is for proper housing and sanitation.

          2. No matter how destitute, one is never compelled by circumstance to crap in the middle of a sidewalk.

            Any forum for retail workers will have several stories from employees who were tasked with cleaning up bathrooms covered in excrement. I really think the same pathology is at work on our streets, with only a few serial violators.

          3. Fishchum: that is what the self-cleaning public toilets are for. Unfortunately, a significant portion of San Francisco’s homeless are also addicted to drugs, and they sometimes use public toilets for shooting up or as a private place to otherwise get high. This is why I think the “housing first” approach to dealing with homelessness is a bad idea. We need to have treatment and sobriety first.

          1. “To label me is to negate me”. Are all of your unfavored people are all the same, and think exactly alike? Or, is this just politically-correct prejudice?

        3. I, for one, am genuinely interested in hearing how any unwoke political leader proposes to “fix the homelessness, tent cities, and open-air drug markets”. Serious public policy proposals only.

          Getting drug addicts off the street is expensive. Psychologists, psychiatrists, social workers necessary to address people living in our tent cities on the street have hard jobs so candidates are not plentiful, and they also don’t like commuting, so we have to compensate them for the high cost of living in The City.

          If it’s true that S.F. implemented a tax on overpaid executives to support our public health systems and and some companies moved their offices out of San Francisco in order to avoid having their executives pay it, where is the money supposed to come from to address “the quality of life problems”?

          1. From the federal budget. This is a national problem, but red states would rather just ship their burdens here. While taking our federal tax dollars to bail them out year after year.

          2. OK I’ll bite. This hypothetical leadership would pursue the following:
            1. Sustained zero tolerance law enforcement around dealing hard drugs. The laws are in the books, we all know what Fentanyl and cartel meth do to ppl. There is no legal or moral hazard here
            2. Cover Boise with shelter capacity. It doesn’t need all that much as much of the encampment dwellers are not expectded to be overly interested in seeking shelter to begin with. That’s my read on this – status quo FWIW
            3. With Boise out of the way, arrest and sweep. Hold your breath, addicts are not going to prison but into rehab and appropriate programming. This doesn’t even have to be in the city. Most are from elsewhere anyhow and they’d be out of the environment. Needless to say that would be the hardest part, it takes a substantial ramp in sites, staffing etc.

        4. @thattechguy I’d love to hear more about these “unwoke” utopias that are free from some of the challenges “woke” San Francisco faces.

          1. dont know about woke vs unwoke as i dont know what either means, but the vast majority of cities in US and EU dont have the same level of drug problem that we do. They dealt with this in Portugal for forced treatment for users, zero tolerance for street using and heavy enforcement of dealers. its unfathomable that we allow huge hordes of people to deal death (fentanyl) without abatement. they all should be charged for attempted murder

          2. @ Fishchum – great recent article in The Atlantic about this (or maybe it was Vox) – people say SF and LA have homeless issues because of the climate, not politics and handouts – so why don’t Houston and Dallas and Atlanta have large homeless populations? And why *do* freezing cities such as Boston and NYC? Turns out there’s a much stronger correlation between a city’s (and state’s) policies and homelessness than many on the left care to admit. (And yes there have always been some homeless sometimes, everywhere. But the current level and impact in SF – particularly in SoMa and adjacent areas – is a magnitude more than that historical background level.)

          3. than many on the left care to admit

            You don’t hear many on the right crowing about putting their homeless on buses heading to blue cities, but they do. Odd, you’d think they’d want people to know…

          4. It was – or really “is” (the January issue) – the ‘Atlantic’. That Walthers, who tacks right – tho not hard right – can coo lovingly over an article in (what he accurately describes as) a left publication, shows the homeless problem has become the perfect Rorsach for uniting left (politicians) and right (developers). The only ones not signing on are the actual homeowners, who are profoundly unfond of both tent cities, and the mythical solution to them (density)

          5. Notcom, thanks for posting the link. I think it’s telling that Sierrajeff couldn’t tell whether it was posted at Vox or The Atlantic.

            What Dan Walters won’t tell you is that the author of the piece, Jerusalem Demsas, specialized in this kind of click bait while she was an advocacy journalist at Vox, and a lot of the argument in the longer, more recent piece is just her plagiarizing the work she did for her former employer.

            At that publication, she learned what side of the bread the butter is on, and cranked out this kinda thing pretty much non stop. Outsiders can’t comment on this kinda thing without coming off like they have a tinfoil hat on, but it’s worth noting that two of the three bloggers who started Vox in 2014, Ezra Klein and Matt Yglesias, no longer work there.

            They definitely seem to have a “house line” that all that is preventing more housing from being built is that cities in the united states don’t practice enough political repression of homeowners and existing city voters in favor of developers which is obviously appealing to the chain yankers in ss comment threads.

          6. My pleasure, Brahma, and it was useful for me too, since it caused me to actually read the article which – Walthers claims notwithstanding – I found to be neither lengthy nor “meticulously sourced”. It seems to be mostly a thought piece with a bunch of generalizations.
            Not that the arguments presented are entirely without merit, but when you lump in ‘architectural preservationists’ with $100/hr wage rates as all being the reasons why housing is expensive > why someone is in a carboard box in your local park, I begin with the notion you’ve started with the conclusion (you wanted) and worked backwards to cast your favorite suspects in the roles….the 44/100%th matters a whole lot less than the 99.

      2. It’s bigger than that. The downtown jobs center is emptying out. Those workers (the well-paid techies) kept demand/prices up. Without a return of a solid jobs base prices will continue to drift down. There is little reason to live downtown if you don’t work in the City. Speaking of which Proptech Bungalow announced today it is relocating its HQ and 30 jobs from SF to Miami. The big moves out of the City make headlines but there is a continual weekly bleed of jobs from smaller companies that will add up to significant numbers over time.

        1. Silicon Valley and San Francisco are still the top Venture Capital Capitols in the country/ world. 2nd place isn’t even close. That’s not going to change because the real money is immune to any effects that are causing “white collar working class” to migrate elsewhere.

          Fix the quality of life problems and those workers will return.

          1. Wake me up when that happens. Homeless Inc and the complicit politicians will likely not turn off the funding spigot in my lifetime. They both benefit from “serving” the addicts and homeless. Expect an influx of needy illegal border-crossers next into sanctuary city San Francisco. The SF tax base is fleeing. CVB activity drastically down. Companies are not moving in. See Dave’s comment, above.

          2. “There is little reason to live downtown if you don’t work in the City.” I’m not sure if you’re referring to SF in general or FiDi specifically, but I can assure you that many people love living in urban areas.

            Some people might not appreciate the convenience of parks, museums, restaurants, or being able to walk, and that’s ok. But many people also don’t appreciate the lower costs of lower power bills, lower gas and transportation costs, cooler climate (subjective), or even a higher risk of a DUI when you’re always having to drive.

        2. In earlier times, the homeless were often there, but were easy to ignore when outnumbered by the workers/residents/tourists who simply are no longer filling up public spaces. For 25 years or so, we have had a Christmas Day tradition of brunch downtown, usually Cafe de la Presse, followed by a movie. It could be depressing because the only people you saw on the street were the wandering homeless. that is what a typical day downtown looks like now.

    2. While high office vacancy is likely to persist for several years at least, I would not agree that HSR service into the TTC is a “pipedream.” With Caltrain electrification almost done and the state having spent $20B(?) to date on the backbone of the system in the central valley, I highly doubt that the system will not get completed at some point. Maybe it will take another 15-20 years from now, but mark my words it will get completed slowly but surely. But I agree that no one buying real estate should naively bank on benefiting from it anytime soon or pay more at this point in time for that benefit unless they have a very long investment horizon.

    1. If it’s true that the seller is from mainland China and has no mortgage, it’s probably the case that they are just shielding their corruption-derived wealth from the eyes of Chairman Xi and this is no great loss for them, given what would have happened had they maintained the same level of exposure to the local real estate market in China during the period in question. There was no need for them to live in a tent.

      I am not a cryptocurrency proponent, but if you want to go into counterfactuals…if they had purchased $270,000 in Bitcoin in July of 2016 and held it even through the recent crypto winter and sold this week, they’d still have come away with about $6.99 million in U.S. Dollars.

  3. “woke”, “homeless”, “politics”…….all side show. This is a simple two-prong issue. (1) an unprecedented surge in interest rates, correspondingly dropping purchasing power and (2) a drop in demand for housing in this area due to (primarily) work from home and some job cuts in the workforce that would typically reside in this area.

  4. Here’s a non woke answer. For a starter ban tents.

    Since per the Idaho federal judge we must offer them shelter, divide them between the CA born and migrants. Provide high rise dorms in Bakersfield for the locals using CA taxes and Nevada for the migrants using federal dollars.

    Sweep the streets. No options. Since no drugs at these high rise shelters much less mental health costs. Food and shelter is all they get.

    Provide indemnity to the governments from all the mayhem which will occur in these dorms.

    After 3 years or so the paradigm of heading out west for tent living and general assistance payments to buy drugs will cease. Children will get serious about staying sober and getting a job.

    1. While I think the rest of your proposal is unrealistic because it would require the cooperation of The City of Bakersfield, which likely doesn’t want a large influx of drug dependent homeless people from San Francisco or high-rise dorms to house them, I agree in general with the sentiment that tent living and general maintenance of drug use is something to work toward eliminating in our homeless population.

      However, at least in the short-term, the legal tactic of banning tent living as a way around the Ninth Circuit’s holding in Martin v. City of Boise isn’t going to get far. ICYMI from a couple of weeks ago, Federal judge says San Francisco can’t clear homeless camps:

      Magistrate Judge Donna M. Ryu in U.S. District Court in Oakland granted an emergency order Friday night that bars the city from taking away tents and confiscating the belongings of encampment dwellers…The move came in a lawsuit filed on behalf of homeless plaintiffs that sought to stop San Francisco from dismantling homeless encampments until it has thousands of additional shelter beds…In a statement, Mayor London Breed decried the emergency order. Breed said many people encountered during the cleanups “are refusing services or are already housed” and some use the encampments for “drug dealing, human trafficking and other illegal activities.”

      San Francisco’s business class is going to have to band together, contribute some serious money to a pool and fund some serious legal challenges to these rulings from activist judges in order to have any way forward, because The Coalition on Homelessness’s lawyers are bringing their ‘A’ game to this fight, and presumably they are working pro bono.

  5. There ARE tried, tested, and documented ways to address homelessness problems, used successfully by other cities in the US and EU. San Francisco may be a challenging environment to implement them in, but that doesn’t make it impossible. Perhaps there is not yet the right level of discourse around the problem and the wrong political entrenchment prevents the needed investments from happening:

    1) Safe, reliable housing. A private place where someone can rest their head, keep their stuff and not be bothered. Navigation centers and shelters are not this, not even close to it. Lack of this destroys lives and mental health.
    2) Social work and mental health services. Many of the people on the street can’t help themselves due to mental illness and drug addiction. We have hundreds of orgs that attempt this but there are lots of challenges to doing it this way.
    3) Purpose. Lack of a job, volunteering, close family, outlet for creation, and difficult/impossible to get these things and having (1) and (2) alone doesn’t work unless you can help them get (3), they will just backslide.

    You have to stand these pillars up together and have a real plan and coordinate action, you can’t just have a bunch of “non-profits” doing a bunch of shit and expect it to work.

  6. I took the $1.65mm purchase price from July 2016 and put it in the BLS CPI inflation calculator.
    In today’s dollars the purchase price would be $2,041,421.

    So, in CPI purchasing power terms, the owners have taken a loss of nearly -34% on a simple price-to-price basis, ignoring the holding costs and capital opportunity costs.

    It’s too bad the tax code ignores the impacts of inflation on winners and losers for capital gains/losses.

  7. It’s too bad the tax code ignores the impacts of inflation on winners and losers for capital gains/losses.

    That’s by design. How the government manages to pull more real equity out of the (more productive) private sector.

    1. All prices ignore inflation by design, because using anything but nominal dollars for pricing creates a feedback loop.

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