Sunday, April 27, 2008

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.

16 comments:

Anonymous said...

I know where I live, District 7 (Marina, Cow Hollow, Pac Heights), prices are up about 30-35% since Jan 1, 2005 according to about 4 neigbhors that recently sold. It's not the same in other parts of the city, or Vallejo/Antioch/boonies though. I think prices are also up about 5-10% since 1-2 years ago. Thanks for the above examples, but those places aren't that desirable. Maye it's a different world in the north end of the city, but people are doing quite well and are bidding prices up very well.

missionite said...

Congratulations, you missed the point of both the post, and the blog. Leave the Marina once in a while.

Brian said...

If we can help get you some data at PropertyShark.com, just let us know. We provide custom foreclosure listings to SFNewsletter and probably could get you some regular sales data as well. Email as needed.

Missionite said...

Thanks Brian, I'll definitely take you up on that. In fact, I have a burning question right now which I will email you as soon as things slow down a little in the office...

Anonymous said...

I think there is a misunderstanding. Maybe someone else can help and sort this out?

1485 Valencia is a TIC, I will assume that it has two units. Sold Mar 12, 2004 $675,000 both units together - otherwise it would be a condo. Tax record reflects this.

For sale now is the following:
Property Type: Top Floor, Tenancy In Common; Price: $579,000

If we assume a 50/50 split, then the property as a whole has appreciated considerably. I think even if the top floor is 2/3 of the whole value, they're way above water.

Jochen

Missionite said...

I would agree that appears to be the case, (which is not reflected on the Redfin listing, hence my error), so my post with regards to that property is erroneous. I am correcting it immediately, and if you represent and/or own the property, or have some connection with the owners, then please accept my sincere apologies.

Anonymous said...

No connection, no offense - just curious where this market is headed, from my amateur perspective.

I think people are even more irrationally invested in their houses then they are in their cars. That's probably in part because this property is also their home, and in part because the stakes are so high. My perspective is to always remember that you buy a house, but you make a home. That's not to say that I am not emotionally attached to where I live, but it isn't a limb or such. Beware of real estate professionals (and there are really good ones, worth their commission) that want to help you buy a home. Do you buy friends and family? That's spin and soak, as in they're giving it the emotional spin, and you're getting soaked.

Missionite said...

Spin and soak? LOL I've never heard that one. I am not emotionally attached to this decision in the extreme. If you see the spreadsheet I made (it's on the right on the main page), I've examined this entire decision process from an analytical standpoint about as much as one amateur can.
I worry I might be over analyzing it actually. I'm not 100% committed to buying either. I would like to see the market shake out a little more before plunking down our life savings. It seems to me that the risk ratios are all out of whack at the moment, with marginal chances for a small amount of gain, and significant chances of total loss. On the other hand, I want the kids to have a yard, and some of the other fruits of home ownership. So I'm really torn, and well that's why I have the blog so I can agonize over all of these decisions very publicly. :)

anna said...

I'm in the same place. Really want to own for similar reasons you mention, can't really afford it for similar reasons you mention. Thanks for this blog (really glad you're back, and am going to link to your latest "Dif" post. Hard to find you on tfs.org),so happy to find you on your own URL

Anonymous said...

Dear Missionite,

I know the smartest people who overanalyzed the market, and are now in their mid 30's, 40's still renting. They have NOTHING to show for their rent after 10-15 years. It is always paying off someone else's debt and making them rich in the meantime. Now that the market is soft, those who didn't buy in a crazy up market STILL WON'T buy. Creating a life, and providing for your family is a choice. Some people are not meant to be wealthy. At 40 years old, you have perhaps 20 more years left to work i.e. your money making opportunities are half over. I feel sorry for Adam at SS who is 40 this year, and renting his condo in Pac Heights, which continues to appreciate, at $3,000 in after tax money a month.

You can point out the 1 bedrooms, or crappy neighborhoods which show no apreciation or declines. But, why don't you look at the places you actually want to live. Then you'll realize the real state of the market.

Anonymous said...

The rental stock is generally ALWAYS inferior to the for sale stock. Imagine living being 33 and living in the same cruddy place you did when you were 27. Work to live, not live to work.

Missionite said...

OK, let's break this down.

First of all, I'm not 40. Not yet at least. I think you are thinking of another, much more well known blogger.

I would have bought up a storm in the 90's if I had the opportunity but I had a semi-successful career in the arts. No family money to speak of, so no big loans from Mom and Dad, just whatever money I scraped together. So a home wasn't in the cards for me back then. I'm not mad about it, not blaming anybody, that's just how it was.

Started my own biz about five years ago, and that has been successful and growing every year. So the future looks good, but I'm cautious and conservative when it comes to big investments, and this is the biggest.

The numbers on renting don't always equal making somebody else rich. Buy at the wrong time and you are making yoruself poor. I think a lot of people had good reason to be suspicious of this market, and still do. It is the biggest run up of real estate prices in all of history, so I think people can be forgiven for being suspicious, and likewise I think you might be giving yourself a little too much credit for your (presumed) wealth.

There are an increasing number of tragic stories out there of people who bought at the wrong time. You can lose everything if the ball bounces the wrong way.

Finally, with regards to your last point, I do look at places I want to live. I look at them often, and quite longingly. The problem is I can't afford them. Not even close.

Our Adjusted gross income is a little over twice the median income for a married couple in SF. So, roughly around $160k and growing. I don't know about you, but putting away a year's salary for a down payment is a pretty tall order even if you don't have two kids. If I borrow from my business I can get myself up to about $80k for a downpayment on an $800k house that, contrary to your assertion, is not a noticeable improvement on our rental stock, which is actually quite nice (think classic victorian with hardwood floors and open floor plan, oh and parking too), and quite inexpensive: $1800 month.

I want to own a house, but trading our $1800 a month rent for $6000 a month mortgage/tax/insurance etc. + losing interest income on $70k downpayment is a big step, and from my perspective, not a sure winner.
I would be PISSED if I bought and the market took a 10% hit right afterwards, eliminating my down payment equity, while still leaving me with the high payments.

In other words, it's nice that D7 keeps appreciatinig for you, but it has appreciated far out of my range. At some point the appreciation relative to incomes has to stop, or there won't be anyone left to buy. I don't want to be holding the bag when that happens. Just my .02.

PS There are other ways to create wealth besides home ownership.

Anonymous said...

Dear Missionite,

I wasn't referring to you as a 40 year old renter, but Adam at SS. He spends $3,000/month for rent, and had the opportunity to buy 10 years ago at 30 when he was a banker and didn't. Just being brutally honest, $160K combined income is not that wealth. You need to compare the median income of the recent homebuyers in SF vs. the median price, not the median income of all SF residents, since 70% rent. Also, 10% DP is not enough either. When 23-24 year old kids are making 80-120K one year out of undergrad in finance, you have a very tough environment to compete against when they turn 30!

The key to understanding real estate is simply fixed payments and inflation. 3 years after you buy, you will find your payments a JOKE compared to renting. I've bought several properties, and have always felt this way in up and down markets.

I venture to guess the median income of a SF median home buyer is probably closer to $300,000 vs. $150,000.

When I bought my first place, I made around $140,000 and put 20% down on the %600,000 place. I made the DP through savings and taking aggressive bets in the stock market. I had about $40,000 left over after the DP. Sure i was scared crazy, but it' s not like that money DISAPPEARS. It's just a transfer from your bank account to your house and that's it.

Let go of money and make it work for you. Do not be afraid. In fact, moving the money to my house made me work HARDER and not be complacent. You may make $160K combined now, but you sound like you are on your way to mak $250,000 in several years. Believe in yourself.

anna said...

Here you are, bring quoted

http://blog.redfin.com/sfbay/2008/04/sf_are_renters_less_educated_.html

Anonymous said...

Oh for crying out loud. A Real Estate troll. You can catch them by the code-phrase, jingos they toss out: "40 yr old renter", "bitter", "nothing to show for renting".

OK, mr. real estate troll. I'm an almost 40 year old renter. I've probably paid nearly $160,000 in after tax income on rent since I left college. And - oh dear - I only have nearly half a million in liquid investments to show for it!

And whats even cooler is that when I increase my investment portfolio further with my after tax income over the next three years I'll probably add another $150K in equity - in my portfolio that is.
And I'll still have enough left around for 4 week vacations to Hawaii every year and such - I need something to throw my money away on, after all.

Now while property prices fall in San Francisco, probably falling at least $150K if not more on these houses priced at 750K-- why...that sounds like an almost $300K net gain for me when I actually do buy.

Meanwhile, the over-leveraged homeowners surely *won't* be throwing their money away on insurance and maintenance and their net interest payments (after subtracting the income tax deduction).

BTW, I can't for the life of me figure out why a RE agent would ever use the code words anyways. Its in their best interest to make sales - whether prices are high or low.

i always assume when I see that sort of BS language that we have a flipper, speculator troll. Here's a hint flippers: leaving comments on a blog is not going to save you from financial ruin. Hope you have a backup plan.

Anonymous said...

Missionite

My best advice would be to buy a two-unit to give you rental income. It may be tough to qualify with the lending standards these days but it really seems like the way to stretch your money (and a good investment). I tried to do this before buying our house 3 years ago but my husband wasn't as interested. Comparing the monthly costs (and the tax write-offs), we would have had a lot more disposable if we had gone the two-unit route.