Didn't Get It.

Not a huge surprise, we were lowballing and we knew it.

I'll provide all the details once escrow has closed (I don't want to mess with someone else's house purchase mid deal). This house should be a fascinating object lesson.

Putting a bid on a house today...

It's a long shot as we are lowballing, but wish me luck anyways. I'll provide the deets once the whole story is complete...

Chasing The Bottom Line At The Potrero

This blog ignores condos, but we're making an exception just once:

On May 1st of this year The Potrero launched a sales incentive "No Mortgage Payments for 1 year". They said the offer "must end June 15th", and that they only had 25 units left.

On June 9th they extended the offer to July 15th, and announced they are "nearly 90% sold out" and that there's "no better time to buy a home at The Potrero".

On July 14th, they announced "for the month of July only, we are offering a special collections of homes at special prices.* The Broker comission rate on all remaing homes is now 4%". Oh and now they are officially "90% sold" instead of "nearly 90% sold".

The Potrero is 165 units, which means that over the course of 10 weeks they managed to move an additional eight units. So they are moving around 3 units a month (down from around 4 a month at the end of December), during peak season (spring/summer) and with their biggest incentive yet on the table. Keep in mind that their stated goal was to move 12 units a month, and for a while they were selling 18. I'm assuming what's left are the leftovers nobody wanted and is going to be even harder to sell. At this rate it's going to take some serious work to get this all closed up and finished by the end of 2008.

Now here's the rub: in business, it's not the first dollar you make that determines your profit, it's the last. That's where all the bottom line is, and that's what the developer is currently chasing. If you got a 10% markup, and you don't sell your last 10% of inventory, you didn't make any money!

As it is they were clearly hoping to be finished by February of this year, and now it's mid-July and they are still working that last 10%. While I don't think they are in danger of losing money, it's clear their profit margins are probably shrinking from what they were hoping for or expecting.

Submedian rent vs. buy calculator updated

The most comprehensive calculator for San Francisco real estate just moved to Beta 2.5 folks. Added support for interest only loans among other goodies.
Enjoy!
http://spreadsheets.google.com/pub?key=pM4Gw0s2zSeAnOTnop5I7Lg

This is a big deal...

So why is no one talking about this?

http://thefrontsteps.com/2008/06/11/stats-numbers-single-family-homes-may-2007-versus-may-2008/

Median prices down in every single district (with the exception of D8, which doesn't count since they only had 2 sales in the whole district), YOY, in the fabled "spring bounce" month of May.

One would think there would be 20 comments on this at least, and all the local blogs would be discussing this with great interest, yet there isn't a peep from anybody but me. Wussup with that?

Submedian Searches: Sunset in Spring

For my next little "feature" I'm going to narrow my focus on a particular neighborhood to tell me something about the market for submedian single family homes (i.e. anything under $750k) with at least 2 bedrooms and see how things are holding up.

This week's featured neighborhood is the Sunset.

As of 9pm on May 5th, I got 29 results on one of my favorite sites Redfin.com. After eliminating the handful of condos and TIC's (I'm all about the SFH's here...) I have 22 SFH's. Some interesting data points arise when I take a closer look:

First of all I'm interested in how many homes are selling for more then they were purchased for. I'm frankly not surprised that out of the 13 homes that list the previous sale price 6, or 46% are listed for less then what they were previously purchased for. But what does this tell us about prices in general? Well, when we dig in a little deeper they tell us some interesting things:

Of the 6 homes that are listed for more then their previous purchase price, five of them were last sold in the 90's. That's a rather stark statistic: if you want to sell your house for more then you paid for it, you better have bought your home a decade ago.

Among homes showing a prior sale price, anybody selling a Sunset home purchased within the past five years is showing negative appreciation. And in some cases, it is drastic: 1491 43rd Ave is now listed at $720,000. It's high water mark was it's purchase for $875,000 in April 2005. That's a whopping $155,000 depreciation over three years. That's $4189/month not including taxes, maintenance, insurance, closing costs, commissions, etc.
Just to give you a point of reference here, you can find on craigslist today 2 and 3 bedroom houses and flats in that part of sunset for $2,000 - $2,500, today in 2008.

Intriguingly, the people who bought in the 90's seem to be suffering from another problem: greed. They have across the board higher listing prices then the newer homeowners, and are paying the price for their desire to hang on to those higher prices by having much higher DOM's: 54 is the DOM average for the people who have owned their homes more then five years, compared with 26 for the folks who are newer homeowners.

What's The Diff? Spring 2008

So I'm perusing one of my favorite real estate blogs TFS (no, I don't get paid to plug it, I really do like it) and I stumble across this whopper in the comments:

"I feel sorry for people who were tricked into renting for the past 5 years while SF prices continue to go up."

That kind of broad, categorical, arrogant, and self satisfied comment deserves a reply that can match it ounce for ounce with pure snark. In other words, this was custom made for a blogger like me.

As always, I spent less then 20 minutes on the research here. That's cause Redfin rules and makes a wiseass post like this totally easy. I've just included one example property from a variety of neighborhoods, but if I wanted to get all nerdy about it, I could probably go bezerk and do a gigantic mega post on all the properties that have experienced depreciation since their last sale within the past five years (there are TONS of them), but I don't have that kind of time. Oh how I long for some kind of Redfin/MLS/Trulia/HotPads/PropertyShark API that would let me crunch the numbers without having to do this by hand... (yes I am a full on geek), but I think all the sites who make a living collecting this kind of RE information probably aren't particularly interested in giving data access to people who might want to poke holes in the overly optimistic SF market. If I'm wrong though, and you are one of those sites, please feel free to contact me! :)

And to all the unlucky folks who are owners/former owners of these properties, my heart goes out to you, sincerely. The real estate situation in SF has been pretty stupid for a while, and you got caught up in it. That sucks, and being made a public example out of is probably adding insult to injury, but real estate is a public business and that's the breaks.

So without further ado, here is the Spring 2008 version of our popular recurring feature: "What's The Diff?"

Mission Massacre
1485 Valencia
list: $579k
last sale 2004: $679k
diff: -$100k

* This property is a single building that apparently converted to two TIC's. As such, the listing price ($579k) is for one TIC, while the entire building was sold in 2004 for $679k. Apologies to all concerned for the error. This is what 20 minutes of research on Redfin buys you I guess.

Sunset Savaging
2100 27th ave
list: $674k
sale price 2006: $805k
diff: -$131k

Miraloma Park Mugging
24 Coventry St
list: $699k
sale price 2007: $754k
diff: -$55k

Bernal Depths
826 Peralta
list: $649k
sale price 2005: $655k
diff: -$6k

OH NOES!!1! in Noe Valley
169 Grandview
list: $699k
sale price 2005: $699k
diff: -$51k

Not So Excellent Adventures in Excelsior
940 Cayuga Ave
list: $580k
sale price 2005: $720k
diff: -$140k

That's it for now. Heading down to Crossroads Cafe to drink some coffee, hang with my friends, and let the kids play outside for a while.

I'm back...

Since Alex at the wonderful TheFrontSteps.com has gone back to his main blog, and while TheFrontSteps.org (a concept I think is brilliant) awaits the changes neccesary to become a more useful site from a blogging perspective, I have decided to restart the engines here.

To bring everyone up to speed: I'm a potential buyer with a family in tow. I'm currently preapproved for a loan that would allow me to purchase a median priced home in San Francisco (~$800k), which I guess puts me in the top 12% of income for the city. The problem for me is I can't really afford either the downpayment (I'm aiming for 10%) or the monthly nut on a median priced home, so I'm focused on homes that are priced less then the median price, hence the name of the blog: submedian.

I would ideally like to find a reasonably priced 3br 2ba SFH with a yard, so if any realtors have any pocket listings out there they want to run by me, I'm all ears.

This isn't my main gig, so postings, if they happen, will likely be on Sunday mornings. Like today. And right on schedule I have a post coming up momentarily...

The Front Steps breaks new ground

TheFrontSteps.com has started a new website at thefrontsteps.org (and count me as someone who thinks this new website should take over thefrontsteps.com pronto!). It's a social network for SF real estate. Alex (owner of thefrontsteps.com) clearly used some premade build-your-own social network software, but you know what? It kicks ass! No one has done this before, and I have no idea why.
SF is ripe for a social network devoted to SF real estate, and I think this is going to be a winning idea. I'm so fond of it, that I am moving my blog postings over there for the forseeable future. So if you are looking for musings from me on the submedian market, head over to thefrontsteps.org and join the party. Make your own page, start your own blog. With everybody playing in the same sandbox the open exchange of ideas is about to get a lot more fun.
I'll keep this blog here for a while, just in case the plug gets pulled for some reason, but new postings will be at thefrontsteps.org. See you there!

Holy Crap! It's getting rough out there!

DataQuick reports today that Bay Area sales ended 2007 at a more-than-20-year low, with last month being the slowest December since DataQuick started their stats in 1988!

Sales have decreased on a YOY basis for 35 consecutive months, and according to DataQuick the city of San Francisco saw a 24.4% drop in sales volume versus last year, and a 1.9% drop in the median sale price.

Intriguingly, there are still people out there who think RE is the path to wealth:

Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages or with multiple mortgages has dropped sharply. Down payment sizes and flipping rates are stable, non-owner occupied buying activity is edging up, DataQuick reported.

I'm calling this how I see it: clearly we still have some very foolish investors out there. There wil be some who will make money regardless, because even a broken watch is right two times a day, but many, if not most, of them will suffer a great deal for the mistake of buying at the start of a down cycle. We have a lot of room for downward momentum, and once it kicks in (I'm not even considering it an "if" at this point) a feedback loop will be established where buyers will grow increasingly reluctant to buy as prices drop further, which of course will only exert more downward pressure on pricing. As we are all seeing, real estate prices move slowly. So this can literally take years to play out, and in some cases, decades. You aren't going to see the bottom of the market until the volume starts going up significantly, and right now it's been 35 months (three years!!!) since we have seen any sign of that as compared to prior years. We have a large number of option resets headed our way, and a possible recession to deal with. There is a storm gathering here and a lot of people are going to get hurt. Be careful out there!!

Realtor Massacre - SFH sales volume down 27.9%

The buzz this morning via sanfranciscoschtuff.com is the new SFAR (San Francisco Association of Realtors) report which shows a stunning 27.9% drop in sales volume as compared to December of 2006.

This is catastrophic for realtors. As I pointed out in the comments in this post on The Front Steps, it is much better for realtors if prices decline then if sales volume declines. You can't collect a commission if the house isn't selling! In this case we have 61 less homes sold within a single month. If all these homes were all priced at the median price of $800k that's $48 million dollars of sales that dissapeared. Which of course translates to roughly 2.5 million dollars in realtor commissions that evaporated out of a total pool of roughly 8.6 million. That's a lot of missing money for a single month!

If realtors had sustained volume by being more successful at encouraging owners to drop their prices they would have fared much better. For example let's say prices had fallen citywide a jaw dropping and unheard of 10%, the realtors would be looking at a loss of only $860k for the month.

So if you are a realtor, and you want your properties to move, I would strongly urge your clients to start dropping prices.

What's The Diff?

We're going to start 2008 off with a bang here and start a new feature where we take a look at some of the pain in SF real estate. Looks like some folks have discovered that real estate doesn't always go up. Know some of the back stories? Share them with us!

Oops!
61 Ina Ct.
Last Sale: $730,000 (07/18/2007)
Asking: $650,000
What's the diff? $80k in about six months.

Even in Bernal Heights!
38A Elsie
Last Sale: $695,000 (08/25/2006)
Asking: $550,000
What's the diff? $145k in 17 months.

Another Bernal haircut...
277 Bradford St.
Last Sale: $775,000 (10/10/2006)
Asking: $675,000
What's the diff? $100k in 15 months.

Missing money in the Mission.
1800 Bryant #311
Last Sale: $739,000 (11/22/2005)
Asking: $625,000
What's the diff? $114k in 50 months.

Western Subtraction?
2529 Post
Last Sale: $756,000 (07/30/2007)
Asking: $669,900
What's the diff? $86k in six months.

Downside in Ingleside
230 Howth St.
Last Sale: $745,000 (08/31/2005)
Asking: $650,000
What's the diff? $95k in 52 months.

Keep in mind these are just the differences on buying and selling. Don't forget a true measure of loss would measure closing costs, sales commission, property taxes, carrying cost, etc. If you really want to measure the pain, use the infamous Submedian Spreadhseet and you'll see just how bad it really is.

BTW, Crocker Amazon, Excelsior, Bayview? Just too damn many to list. Seriously, there must be over a hundred properties in the city right now selling for less then what they paid for. Just a year ago that would be inconceivable.