October 31, 2007
Those Aren’t “Reductions," They’re “Flex Purchase Incentives”
Two months ago the sales office at 170 Off Third was “excited to offer a 5.625% interest rate on all remaining two-bedroom residences!” Today they are offering “a $15,000 Flex Purchase Incentive on all two- and two-plus residences sold through year end” which can be used on “a wide array of interior upgrade options, HOA credits or closing costs.”
Remember buyers/neighbors, they’re “Flex Purchase Incentives” (and not “Reductions”).
First Published: October 31, 2007 9:30 AM
Comments from "Plugged In" Readers
Yet another sign of the strong San Francisco market which shows no sign of weakness and continues to enjoy bidding wars and healthy appreciation no matter how badly non-san francisco neighborhoods like the excelsior and outer sunset are faring.
Posted by: missionite at October 31, 2007 9:43 AM
Or recognition that the product in this building needs help moving, regardless of the art.
Posted by: Observer at October 31, 2007 9:47 AM
Yet another typical comment from a reader showing no signs of relenting about providing such brilliant insight.
Posted by: nate at October 31, 2007 10:22 AM
Aren't they both right?
Missionite is right, the market has softened and bidding wars seems to be a thing of the past (although they clearly can still happen for well priced, well located properties.)
Observer is also right, the owners recognize that steps need to be taken to move the product, why? because of market weakness that no longer supports the previous asking price.
The only difference I see is that Missionite attributes the weakness across the SF market and Observer seems to feel it is likely more localized to 'bad neighborhoods' or the 'inferior quality' of the property.
Regardless, both posts are suggesting that the reason for the "Flex Purchase Incentives" is due to lack of demand based on a softening housing market.
Posted by: badlydrawnbear at October 31, 2007 10:40 AM
I bought a unit here when they were about 60% sold and they wouldn't negotiate AT ALL. I think they were down to about 3/4 sold before they offered the rate buydown.
Not bad if you ask me.
Posted by: me at October 31, 2007 10:43 AM
i think the supply is finally starting to increase across the board but the one thing we'll never have enough of is single family homes in nicer neighborhoods that are turn key, hence the bidding wars. that will never change here in the city. other stuff is getting stale as folks seem to be gun shy on bidding even though they might be able to get a better deal than 2006 prices.
Posted by: james at October 31, 2007 10:46 AM
who wouldn't spend 1milllion to live next to McDonalds? your place would always smell like french fries - and is there anything better in the world than their fries?
Posted by: fries at October 31, 2007 10:52 AM
Are all of these units even finished?
Posted by: fluj at October 31, 2007 10:53 AM
So how do you feel about the art that was put up on your building?
Posted by: SC at October 31, 2007 11:06 AM
Yet another typical comment from a graveyard whistler who, in addition to being unable (or unwilling) to recognize market trends, also lacks facility with the english language. Bravo!
And isn't "needs help moving" the same as "isn't selling at the current price"? Is there some difference between the two that I'm not seeing? And isn't this a fairly recent trend? Didn't it use to be that if you didn't get in early on SOMA condos the price would go up, not down? I seem to recall that was the case, but I'm sure there's an explanation for everything.
The point here is that we are told over and over again by fluj and other bulls that the market is healthy and strong, and while I don't doubt that is their perception, there is a clear market trend developing that suggests we may have reached, and passed a tipping point. With no future gains to look forward to, and an uncertain future, fence sitters such as I don't really have much motivation to move off the fence for the time being, do we?
Posted by: missionite at October 31, 2007 11:15 AM
The developer is offering incentives because they only have a few units left and trying to complete the selling process.
The last few units in a development take the longest to sell because they are either undesireable to the public (based on location within the project or maybe the floorplan or unit type is less desireable)
Its the same in retail....the sale rack in clothing stores are the leftovers from last seasons stuff or the sizes & colors no one generally wants.
Incentives are factored into budgets when developing properties and a developer is much more likely to offer an incentive then lower the purchase price. The Palms is doing the same thing on there last remaining units.
I don't think this is evidence of a down or up market its just the way new developments work.
Posted by: JJ at October 31, 2007 11:48 AM
"whistling past the graveyard" and "there is a clear market trend developing that suggests we may have reached, and passed a tipping point."
We can always count on ole missionite for some evenhanded language!
The first part is a small flame and the second statement is without basis in fact. Crystal clear, eh? You can see it, eh? In this town? Baloney. Come on man. You aint fooling anybody.
As for me, I've always qualified everything I've said on here. I am not an out and out bull. I'm just not. Everybody on here knows that I've said SOMA condos are the place to get deals right now. That I have a client who is trying to buy just that, and that stuff isn't as expensive as it was. (I put that down to the sheer fact that so freakin many have been built!)
Posted by: fluj at October 31, 2007 12:32 PM
I think the point missionite is making is that today's market is noticably different than the market of '02 to '06.
People used to wait in line to snap up any and every new development that came out. That's no longer happening.
Demand was so high that developers didn't need incentives. Those days seem to be over.
Prices were rising in even the less attractive, outer areas of the city. Now they're coming down.
Don't these changes qualify as a shift in the market?
Posted by: Dude at October 31, 2007 12:44 PM
"The developer is offering incentives because they only have a few units left and trying to complete the selling process"
Maybe, but there is a pretty visible pattern of developments in SOMA having to offer incentives to move product. It's hardly limited to those developments that are at the end of their selling cycle.
I think I'm going to wait for bigger "Flex Purchase Incentives".
Posted by: Amen Corner at October 31, 2007 12:56 PM
I acknowledge most of your points, yes. Except that today's market is actually pretty similar to the fall-early winter'02 market. That was a three or four month period of uncertainty. With the aid of hindsight, we can call it a blip.
Outer areas have come down. Some of them. Not Balboa Terrace, Merced Manor, or any of those "nice" southwest areas. Miraloma Park is still expensive. Also, on a house by house basis, there are anomalies. A big view home on Bridgeview hill west of 3rd might still command a historically high price in Bayview right now. But for the most part, sure. Silver Terrace and Bayvwiew and Lakeview have taken a hit. You seem to think that Parkside has as well. Not big houses in Parkside. Only little ones that need work.
I'd like to point out that you used the word "shift," and missionite said "tipping point." Not the same thing. How can it be a tipping point when median prices are up in many areas? It can't. We understand the reason for high median values. But "tipping point" is not applicable.
Real quick. So far there have been 174 SFR sales in October. It'll probably be like 180 by day's (month's) end. It was 155 in September.
Posted by: fluj at October 31, 2007 1:09 PM
So how do you feel about the art that was put up on your building?"
I think it makes the building stand out amongst the other soma cracker boxes.
Posted by: Me at October 31, 2007 1:29 PM
yeah...now it's an animal (and ghost, and mythical creature) cracker box.
Posted by: anon at October 31, 2007 2:45 PM
If all printers were determined not to print anything till they were sure it would offend nobody, there would be very little printed.
- Benjamin Franklin
Posted by: Me at October 31, 2007 3:15 PM
Fluj. Ah Fluj.
OK quick lesson in median, since you don't seem to understand how it works...
Let's say there are four houses in a market. Two sell for $600k, two sell for $1,000,000. What's the median price? $800k of course.
Now the next year, all four houses go for sale again. One of the $600k houses sells for $400k. Ouch. The other one doesn't sell at all and winds up in foreclosure. Double ouch. One of the million dollar houses sells for $900k, and the other sells for $950k.
What's the median price? Despite every single house going down in value, and despite 25% of the market not even selling at all, the median price just went *up* to $900k.
In a nutshell, that's what is happening right now: lousy neighborhoods aren't selling at all, and nicer neighborhoods are still healthy, but appreciation isn't what it was even a year ago, and is continuing to decline.
In the myopic little world you and many of the bulls live in here, there is still plenty of competition for choice million dollar+ properties. That's great, and I don't doubt it for a second. Repeat: I am not disputing that.
But the overall market trend is down, and anybody with a broader view of the market then say cow hollow give or take fifty feet is keenly aware of it. I just met with a B of A mortgage broker today, and she was commenting how nobody wants to buy right now, they just want to refinance. I'm willing to bet she sees more deals in a day then you do all year. I lapped up the info and walked out the door more determined then ever to not buy this year, no matter how badly I want to.
I think simply waiting six months to a year is going to be one of the better investments I've made in a long time. As Amen suggested, I think there are even more attractive "flex purchase initiatives" coming down the pike.
Posted by: missionite at October 31, 2007 3:16 PM
"Let's say there are four houses in a market. Two sell for $600k, two sell for $1,000,000. What's the median price? $800k of course."
This is completely wrong. The median price is the point at which half the properties sell for more and half for less. In Missionite's example, the median would have to be represented as a range of 601K-999K, and is completely useless.
A better example would be to use five numbers, 2 properties at 600K, one at 800K, one at 900K and one at 1M. Then, the median is 800K. Now if all of the properties go back on the market and the two 600K properties fail to sell, the 800 and 900K sell for 10% less, and 1M sells for 10% more, the median has increased to 810K (1.3%), despite what would be considered a bad overall year over year showing, with only the 1M property increasing in value, 40% of the properties failing to sell at all, and the others losing substantial value.
I don't know if this is hapenning in S.F., but at least if Missionite wants to throttle someone, he/she should do it correctly.
Posted by: anono at October 31, 2007 4:15 PM
While it is an interesting argument that a developer has only a few units left and wants to minimize the remaining selling expenses (model unit, sales team, advertising, etc.), that hasn't really been my experience in the past. In the past what I've seen is that the last couple of units available from a developer are actually aggressively priced and sit on the market longer before they sell - and usually they sell at full price. The explanation behind this from what I've heard is that by the last couple of units, the developer has paid off their construction loans and pretty much owns the last few units outright without significant carrying costs. Not only that, but these units represent pure profit for the developer, so they are looking at these units sales closely and are not real eager to give away the farm on the last few units. We may be talking about more units here so that the developer still has the construction loan to pay off, but the incentive to sell units fast and lower your carrying costs is more intense with a lot of inventory at the beginning of the sellout, and less so with a few units at the end of the sellout. However, in this case, I think a $15K discount in light of the overall prices for these units is more of an advertising/marketing gimmick rather than a significant price reduction.
Posted by: Miles at October 31, 2007 4:20 PM
I've never seen this property, but just took the virtual tour online. The pool scene here may one day rival the Beacon...
Posted by: Dude at October 31, 2007 4:34 PM
Missionite you are misinformed about a lot of things. As I said, we understand what's goin on with medians. Do you? But I'm not standing on medians alone.
"Lousy neighborhoods not selling at all" -- untrue. It's house by house in "lousy" neighborhoods.
" But the overall market trend is down .. broader view then Cow Hollow and say 50 feet" -- Nonsense. Do you read what I write? Do you? I'm the realtor guy on here who, um, doesn't talk about areas ?
Glen Park is down? Potrero Hill down? Bernal down? Get out of here man. Nonsense.
"Myopic little world" -- insult
"BOFA Mortgage broker .... sees more deals in a day than you do all year" -- insult.
Posted by: fluj at October 31, 2007 4:35 PM
that was areas 7
Quit attacking me personally for having an opinion, OK? At least I have a perspective. Or can you not write in a somewhat pleasant manner? It is more difficult than being acerbic.
A client of mine wrote on a Miraloma Park listing yesterday. There were three offers. Is that not an area one would expect to take a hit?
Posted by: fluj at October 31, 2007 4:39 PM
I live the mission now and would not have considered the area around 170 Off Third just a couple of years ago, but I'm starting to really like it. There are some great lofts in some of the alleys off of Townsend as well. As for 170 Off Third, it seemed like an affordable alternative to a lot of the really high priced SOMA apartments.
Posted by: anono at October 31, 2007 5:11 PM
Fluj and anono -
"As I said, we understand what's goin on with medians. Do you?"
Unbelievable. I do, but apparently you still don't, and even worse you found somebody to convince yourself you are right.
Dictionary definition of median is the middle number in a sequence (half are above, half are below). http://dictionary.reference.com/browse/median
In an even numbered sequence the middle two numbers are averaged. In an odd numbered sequence the middle number is used. Real estate doesn't have a different definition of "median" to my knowledge, but at this point nothing would surprise me.
At any rate, plugging the numbers I gave into Excel and running "=median(a1:a4)" in the fifth row gives the results I posted.
Now I'm not a professional, but I'm pretty sure the real estate industry uses Excel to figure median prices out.
So, tell me again I don't know what I'm talking about? Oh and btw, thanks for proving my point.
As for you comments:
"untrue. It's house by house in "lousy" neighborhoods."
You know what I meant. Did you seriously think I meant no houses were selling, period? I meant volume is down, a lot, in lousy areas.
"Nonsense. Do you read what I write? Do you? I'm the realtor guy on here who, um, doesn't talk about areas ?"
WTF? Go read the post you wrote, just before that. Here let me help you:
"Outer areas have come down. Some of them. Not Balboa Terrace, Merced Manor, or any of those "nice" southwest areas. Miraloma Park is still expensive."
Are my eyes deceiving me, or is that you talking about areas? Areas that are nice, and are doing well? That was my point with the cow hollow jibe. Dig?
""Myopic little world" -- insult"
Only if you have very thin skin. Again my point is that while you talk about the market being healthy and so on, you seriously downplay what's happening in "outer" neighborhoods like the excelsior. Understandably, you focus on the areas where you are selling houses, and I don't blame you. But has been pointed out over and over, the price is set by the margins.
"BOFA Mortgage broker .... sees more deals in a day than you do all year" -- insult.
A) Not if it is true.
B) Note I used the word "probably", leaving room for you to see more deals then a person whose job it is is to look at deals all day, every day. So yeah, if you can beat a BofA mortgage broker, then I take it all back. Can you?
Fluj, I like you. I like your posts. I think you are honest. I think your post about your property showed guts, and was refreshingly truthful, and I hope you stick around, really I do.
I just think you are wrong, that's all.
Posted by: missionite at October 31, 2007 5:53 PM
Honestly, you guys, you are trying to do the impossible. You're trying to get a realtor to admit something that, if admitted, is bad for business. It isn't going to happen. Prices could drop to 50 cents on the dollar, and people like that will tell you it's a good time to buy. Speak your peace and move on, but don't expect someone like that to ever admit things are bad. Not going to happen.
Now, when I was growing up, just because it stopped raining didn't mean the rivers wouldn't continue to rise. Slowly, the tributaries would start falling and then the flow of the major rivers they fed into would start to fall and before you knew it, even the bigger rivers fell. And as the drought wears on, the major rivers, which show it last, start to dry up.
We're 75 days from the mid August mortgage meltdown. The last of the people who rate locked for 90 days STILL have loans, even sub prime loans.
And when they buy some place in Fairfield, the homeowner with equity can still move to a move up house in Walnut Creek, and that guy can move to SF. The stuff takes time. The mortgages are the rain and the last of the bulk of the rain will stop this weekend (can't close in time to use the last of the 90 day-locked loans), but some of the rivers will continue to rise for awhile.
But trying to get someone to admit something that if true, would be bad for his business is a waste of breath. A lot of people wouldn't admit something that was bad for their business - I don't care how overwhelming the evidence was, because there isn't anything in it for them and it's fun to take an untenable position.
Will rates dropping help? Man, there are an awful lot of people out of the mortgage business. If the rainfall drops to half of what it's been, so do the rivers. Not right away, but at some point. Whether the wind is blowing one way or the other isn't going to make much difference if the supply of water feeding the rivers gets cut by half.
Posted by: tipsterPosingAsChauncyGardner at October 31, 2007 7:17 PM
The one bedrooms here are affordable and prob the best floor plans for one bedrooms if you consider the 500-600 range class building. Facing the ballpark view with the water is great. Deeded parking and a funky decor. Some don't like it, but I think it was the deal for the area. Especially if you got in early and had a shot at a unit you picked. Much better than Berry and Palms location but at the same price with parking/pool/hottub. I know two bedroom buyers have different considerations so the competition is stiff. But the one bedroom facing the ballpark
was the cream of this crop.
Posted by: Hank at October 31, 2007 8:22 PM
"people like that will tell you it's a good time to buy." and then you say "People like that" again. Step off, pal.
you don't know me. "a good time to buy" please. I'd never be so corny. Now is a precarious time, plainly. In more ways than one. Does that mean everyone should not buy? No it does not.
Have I ever given any of you any sort of sales pitch, in any way?
What a lame thing to say.
There are a bunch of mean-spirited people on here. Seriously.
And, FYI, good realtors make money in falling markets. Yeah, you know, when folks are compelled to sell, and other folks who are ready to buy get great deals? The sellers still retain realtors.
"people like that" -- what a perfectly asinine thing to say.
Posted by: fluj at November 1, 2007 12:13 AM
Fluj, I don't think tipster meant that so much as a personal attack. He was kind of telling others to back off a bit.
Of course he implied you haven't a clue about what you're saying, but I think that was unintentional. LOL.
Anyway, I like your spirit, and it benefits the board to have someone on here who is actually in the business of helping people buy and sell houses, so really, the personal attacks SHOULD stop. We have plenty of posters telling us the sky is about to fall. If you want the entire board to become a series of threads like:
"sky? yeah, it's falling that's for sure."
"i agree! right on man!"
"yeah, for sure. woah to those who bought this month."
"I know it! Can't wait to buy on the cheap!"
then continue bashing Fluj and others with the sacks to disagree with you.
Posted by: timkell at November 1, 2007 7:33 AM
I second the appreciation for Fluj's input.
One point he just made that I wish more local realtors would grasp: "good realtors make money in falling markets." I have heard and continue to hear from a number of realtors I know both casually and better than that, just like many others on this board, the cliches repeated about SF's market -- only 49 square miles, prices never decline, Google money, etcetera, etcetera. They had a great, easy run for the last several years, and I think there is a sense/fear that even acknowledging that the market has turned -- or even flattened -- will spawn doom.
But on fluj's point, places continued to sell in the mid-90s and realtors made money even in the nadir of that slowdown. The same will happen here. But it takes a little more work now on the sell side -- and realtors who won't or can't get their clients to price places at realistic prices are doing neither their clients nor themselves any favors. We're now in the early stages of what is nearly universally recognized to be the biggest housing slowdown in many, many decades, and SF is not and will not be immune from that. Sellers/realtors who think we are won't do too well.
Posted by: Trip at November 1, 2007 8:56 AM
I already made it clear I enjoy Fluj's input, but I disagree that there has been any personal attack. It's not a personal attack to point out the reasons why you think someone is wrong in your opinion, and honestly I'm left with the impression that Fluj, bless his heart, is being a little thin skinned. Also it was only a couple days ago I recall reading some posts by him where he was doing some attacking of his own that struck me as quite a bit sharper then the relatively gentle jibes in this thread.
Hell I was just called out (erroneously) as being misinformed because a chorus of people didn't know how to find the median in a series of numbers. Neither Fluj, Anono or Craig (who was apparently moderated out) has apologized for that yet so I guess I'm running a little short on sympathy.
Posted by: missionite at November 1, 2007 9:19 AM
Don't think it matters who did what when. How about we just debate instead of adding attacks and insults on both sides?
"Yet another typical comment from a graveyard whistler who, in addition to being unable (or unwilling) to recognize market trends, also lacks facility with the english language," is probably not the most productive intro to a point, Missionite, despite it making me crack up when I read it.
Posted by: timkell at November 1, 2007 9:33 AM
Missionite, you're right. I guess we all know what medians are from Algebra II or pre-calc, I forget which. From here on out I'll resume taking this with a grain of salt again. Not sure why most of those comments bothered me. And yes, I have thrown a barb or three my damn self.
It's just "people like that" -- honestly man, them's fighting words in just about any context. And also the notion that I'm offering a sales pitch of any sort. (Nice sales pitch "Realtor Fluj, the anonymous realtor bull curmudgeon"!!) I'm not that big of a cheerleader. I've made the point more than once that people are overpaying for fixers in Noe Valley right now, for one thing. Never told anybody to buy. Never will. I already have a clientele base. Internet buyers-agent trollers like the type you see on craigslist advertising properties that are not their listings make me sick. I'm far less bullish than most realtors you'll encounter. Most of you guys know this.
Truthfully, I pick up some valuable insight into what people are thinking on this site. There are some very intelligent posters. And it seems like people put effort into backing up their points. Don't get me wrong, I'll continue to bristle at macroeconomics as applied to micromarkets, and the notion that SF is tanking outside of 94123!
Posted by: fluj at November 1, 2007 9:36 AM
Well Tim, that was a barb aimed at a barb, and I never said I don't give as good as I get.
Fluj, thank you for that. As I said earlier, I think you speak from your personal experience, and you speak honestly, and that has real value and currency with me, and I know I'm not the only one who has gained insight from your posts as well. So any disagreement we may have is above and beyond the base level of personal respect I have for you, which in some ways can be measured by the time I put into replying to your posts.
Posted by: missionite at November 1, 2007 10:07 AM
"But the one bedroom facing the ballpark
was the cream of this crop."
Hank, I'm guessing you bought a one bedroom facing the ballpark.
("Interesting group of pics today. I lived on Pacific next to the 20m condo building, I now live in 170 off third.")
Posted by: anon at November 1, 2007 11:03 AM
i got a chance to see the inside of this building yesterday with a friend. it's really nice. the 4th floor party room is beautiful with a huge kitchen. the pool area is very nice too. i hear they only have a few units left, not surprising. it kind of seemed like a great place to stash a mistress or two.
Posted by: james at December 29, 2007 6:12 PM