On July 1st 2005 a “Stylish Light & Bright Elegant View Home” in Glen Park sold for $910,000. Three years and a $40,000 kitchen later, 24 Addison closed escrow (after 80 days) with a reported contract price of $975,000. As a plugged-in tipster notes:
So a gross increase of $25,000 in three years. Throw in 7% transaction fees and any concessions needed to get this beast closed. Who says you can’t loose money in (fairly) prime SF real estate?
The kicker? Our tipster is the one who happily sold the place in 2005 (and who also adds, “the fireplace screen with a hole in it that a renter left me was highlighted in all the [listing] photos”).
Now granted, this sale still represents effective annual appreciation of just under 1% over the past three years for this single-family Glen Park home, but any guesses as to what’s happened to the neighborhood “median sales price” over that same period of time?
That gain outperformed the S&P 500 for that three year period, so what is your point?
[Editor’s Note: Actually it didn’t. And in fact, it wasn’t even close. From 7/1/2005 to 6/19/2008 (when this sale closed) the S&P 500 gained 12.7%.]
But it did not outperform my savings account at Wells Fargo.
The point, obviously, is that contrary to conventional wisdom as often “proven” by pointing to rising median sales prices, SF real estate has not been a good investment for the last three years, and a pretty bad one for the last year.
The 32 SFRs sold in GP from 1.1.8 to today have sold for $725 a foot. The 33 SFRs sold from 1/1/5/to 7-16-5 dold for $665 a foot. And if one were to look solely at the north slope of GP, one would see something like the high 6s shooting up to the low 8s per foot.
Then again, people who say stuff like this, “So a gross increase of $25,000 in three years. Throw in 7% transaction fees and any concessions needed to get this beast closed. Who says you can’t loose money in (fairly) prime SF real estate?”
Are full of — ahem — shall we say, their own agenda?
Why didn’t you dig up one of the dozens of claims posted on here about how “Glen Park is tanking right now” ?? That any number of know-nots uttered in the last eight months?
“fairly prime”???
you must be kidding.
anyway its amazing to me that anyone would pay nearly a million bucks for an ugly house with low low ceilings and cheapy windows/doors in this neighborhood.
and even more amazing that this place could trade for this price now given all the doom and gloom in the market. to me this proves the opposite of what the above poster wrote.
“That gain outperformed the S&P 500 for that three year period, so what is your point?”
Far be it from me to be an apologist for equity returns. I think everyone who has read my posting here knows I am moderately bearish equity returns, and very bearish on the prospects for the real economy in the US. But this statement that this little house “outperformed” stocks over this period is wrong, VERY wrong, and is a sign of the depth of financial illiteracy, even among plugged in people who are interested in real estate and want to make a point on a blog.
This modest house in this so-so neighborhood was bought on July 1, 2005, and sold on June 19, 2008.
July 1, 2005 – SPX index 1194.44 (closing level)
June 19, 2008 – SPX index 1342.83
Gross return for the S&P: 12.42%. About 15% if one includes the paltry dividends paid over this period.
Gross return for the house: ($975K – $910K)/$910K = 7.14%. 12.42% is bigger than 7.14%. 15% (including dividends, so is a better estimate of gross return) is bigger still. Not even close.
Of course, the actual financial return numbers were worse for the homebuyer. 6% back end transaction costs (5% for agent, 1% for transfer taxes, both low estimates; additionally, no front end transaction costs considered) yields a net selling price of $901K versus a cost of $960K (original purchase price + $50K remodeling estimate) means that the estimated return was NEGATIVE 6.09%. The actual return was almost certainly much worse, as there would have been other expenses for sure. In any event, the return of the house was way less than the S&P.
Financially, this was a foolish purchase, and it was punished accordingly. The original seller has reason to be happy IMO. Of course, the “psychic” benefit of owning in Glen Park might have made up for it, as regards the latest seller. Who knows?
Just as an aside, obviously the S&P has fallen a LOT since June 19, 2008. In fact, all the way to 1214.91, as of close yesterday. Still, a POSITIVE return of 1.71%, and about 5% including dividends.
Yeah, this house is ugly. And it has a wack floorplan. Oh, and I think it’s on a busy street.
Plus, I’m sure there’s a bunch of other stuff wrong with it too.
Wait, Satchel is back? That’s phenomenal! Guess I’ll start reading SocketSite comments again. The Fluj&Paco vs. passionateBears discussions were getting pretty stale.
Yes, it is Glen Park and the median price there is way up. I am a big fan of the neighborhood and still see upside there.
This particular home is situated on a street dominated by a large, subsidized (Section 8) apartment project. It’s a well-done home, but that particular stretch of Addison always takes a little longer to sell and prices reflect the location.
If the same home was on Laidley, it would be at $1.3M. This is why it’s dangerous to deduce a trend from one example.
If this is such a bad house and location then why did it sell for $910,000 in 2005?
I’m confused. I just clicked on the 24 Addison link and the site it took me to shows that this is for sale and they’re asking 1,029,000.
addison is way up the hill, closer to diamond heights. neighborhood rumor has it that the projects up there — glen view or something like that — were the source for some gun activity in the “village” a year or so ago. i’m not sure this home is a good indicator of glen park as a whole.
It’s not. First it’s unabashed cherrypicking by people unfamiliar with the area. Then it’s willfully cherrypicking between net profit and appreciation terms. As usual.
Where are all the Glen Park is tanking peeps @ ??????
I can’t believe Satchel is back! Love your comments as they are always backed up by reasonable assumptions/facts. Please don’t go away again!
I see only 9 homes listed in Glen Park on the MLS. I think 2-3 are short sales. I don’t believe the other listings have sold in the last 3-4 years but haven’t checked. Not many apples.
I do see a few prices in the $600K range and a fixer for $599K. Anecdotally, back when I was actively looking in this neighborhood, it was tough to find anything for under $700K. In any case, not really enough data to come to a firm conclusion.
What does “tanking” even mean, though? I don’t think prices here are seeing a Stocktonesque implosion, but I also wouldn’t say they’ve gone up in the last year or so. Moderately down to flat, at best, depending on the property. And nearby areas (Sunnyside and Excelsior) aren’t doing well at all.
A semi-close apple that recently caught my eye is 149 Kensington. On market for $1,279,000. Last sale was in May of ’05 for $1,275,000. So no appreciation in 3 years, and it’s in a better neighborhood (at least in my opinion) than Glen Park.
i’m just saying, be careful as to what falls under the “glen park” tree, even on the mls. up the hill or south of bosworth is a whole different story.
@Dude:
I heard they picked up 149 Kensington and moved it to a crummier, less safe area. And converted it to a Marina-style home.
Don’t bother telling these people anything, lefty. They don’t listen. They just mock and say the same shit every single day.
Wow, looks like we got grumpy fluj today. What’s wrong, kid? Market not quite as “hot” as you claim it is?
I live in Glen Park and I must say that the selling price is actually encouraging given the house itself is fairly bland and located right next to Section 8 housing. Honestly, I only see GP continuing to increase in value. It’s a major transit hub for the Bay Area with BART, J Church, Multiple Muni Buse lines, easy 101/280 access…The village is taking on a Noe-like feel to it with Glen Canyon Market, Gialina, Chenery Park, Le Petit Laurent, Sangha, Destination Baking Company, Perch, ModernPast etc. I’m also hearing the city is thinking about sprucing up San Jose Avenue and making it more pedestrian friendly. My only quibble is that GP is in the middle of the fog belt so buyers who must have lots of sun will probably look elsewhere.
“Market not quite as “hot” as you claim it is?”
sigh.
I’m pretty sure it is you who keeps saying “hot” and precisely NO ONE ELSE.
Well, you and maybe a couple other posters, who dwell not on the fence, but miles beneath “on the fence” in a subterranean cavern, beneath the ye ole stone bridge of enlightened discourse. Waiting to club passerby.
Satchel,
Welcome back! Please, Please, Please stay! Your wisdom was sorely missed.
Satchel,
I agree that this was a relatively poor investment, but what if you factored taxes into the equation and assumed that the buyer/seller was an agent? Assuming your stockmarket investment was not in some sort of retirement vehicle (e.g. 401k) you would have to pay capital gains tax; capital gains would most likely not have to be paid on the house. And if you are a realtor, couldn’t you avoid most of the transaction costs? Just questions, thanks.
I hope the editor does not mind one more “welcome back” for Satchel. I find your comments interesting, thoughtful and educational as well.
@fluj:
I’m curious why you think being “on the fence” somehows adds credibility to a person’s post.
In fact, we are quite squarely “on the fence,” looking at open houses in various parts of the Bay Area on a very regular basis. We’ve written very competitive offers in the past and expect to do so in the near future. We also have the financial wherewithal to move quickly with substantial down (even with new requirements and the current economic crisis), should we find the right home at the right price. I think there are parts of the area where that is becoming more and more possible, although I think SF still has some ways to go before the rent/own equation comes into line.
You know, in case that adds to my credibility or something.
I actually think that does add to you credibility for what it’s worth
Yes, count me in among those who greatly admire Satchel’s writing and wisdom. I wish you had a blog Satchel, so I could go there. I know thefrontstepsDOTcom would love to have you…
Now, to answer Jake’s question (at least in part):
Here’s the whole scenario laid out, with taxes factored in:
http://spreadsheets.google.com/pub?key=pM4Gw0s2zSeC2llqZvpiYLg
Now addressing a couple points you bring up:
1. You can’t fairly factor in capital gains on the sale of stocks, to the sale of a house, because you only pay capital gains if you choose to sell the stocks, and most investors are not going to sell all of their stocks all at once. Rather they are going to move them around periodically, taking losses on some, gains on others, and leaving some untouched unless needed in an emergency. This muddies up the picture quite a bit when trying to do an apples to apples comparison between investing in a home and investing in stocks.
2. Assuming you are referring to the seller, being an agent would save you perhaps 2% on the front end in comissions, and 3% on the back end. It’s a valid point, which is why agents often invest in real estate. That’s certainly some useful wiggle room in a large transaction, but the truth is you don’t need an agent to buy a house, nor do you need to be one. Most of the neccesary forms are downloadable, and it’s possible to buy a home DIY, although not neccesarily reccomendable. Also some people forgo agents by using an attorney, and then there are internet services like redfin, etc. which can dramatically reduce these costs as well.
Also, not to disagree with Satchel, for whom I have nothing but undying respect, but looking at a home strictly as an investment and measuring the gains and/or losses accordingly doesn’t tell the whole story. Because you do get to actually live in the home, which is not something you can do with your stocks. And since everybody has to live somewhere, in order to get a true sense of what the gains or losses on the property were, you have to compare it to what your housing costs would be otherwise. That’s why I created the spreadsheet above for this kind of analysis.
My own take is that this wasn’t the worst investment I’ve ever seen. Depending on the cost of the alternatives, it’s even possible this house broke even with renting a similar place. And in the meantime the owner enjoyed the pleasures of owning. There are some significant horror stories out there, but this doesn’t strike me as one of them. I think it’s close enough to call it a tie.
@Foolio & Fluj
Word. Me too. Just wrote an offer yesterday as a matter of fact. Is my credibility enhanced any?
@ Editor
I’m not sure how you are looking at it, but I view a $65k gain on a $910k purchase price, as a 7.15% increase over three years which works out to 2.33% per year, not “just under 1%”.
[Editor’s Note: Think $40,000 and a new kitchen.]
Missionite,
Good luck. Credibility is certainly enhanced by active interest.
Foolio would have us believe that he is attempting to time the market outside of San Francisco, thus far to no avail. I guess I can understand his profound bitterness and disdain for the San Francisco market then. OK. The needling is for the birds, tho, and hardly not ad hominem. Who does it rile up precisely? It doesn’t have to be addressed to anybody by name to be ad hominem. naah. It’s about as ad hominem as MMA.
I know this street. Above comments are correct in that it’s right next to public housing. Walk up this street (or just use google street view/mapjack) and you’ll see what it’s like up there.
I think this example points out something very obvious about real estate booms and busts. When things are booming, people get priced out of their choice neighborhoods and into more marginal areas. But nobody worries to much about buying on the edge of where they want to be because values are rising across the board. (e.g. A young couple is more willing to buy in a sketchy mission block with the hope that the wave of gentrification will wash over them too.)
In a cooling market, the marginal stuff is the first to get whacked. Even though this buyer didn’t do horribly, they were never going to participate in the same gentrification phenomenon that’s taking place closer to Canyon Market. They bought next to public housing. I repeat, they bought next to public housing… This “apple” will be lucky to sell for this price again in three more years, IMHO.
I’ve lived in multiple parts of SF, and actually Glen Park was one of my favorites. And the “hey, look I found a comp that shows declining values” posts are also getting a little old IMHO.
Either way, I don’t think Addison is good indicator for prices in GP. Here’s a property (284 Sussex) that I was able to find on Zillow that shows a 25% or $170K increase during the same time frame on a house in a more indicative part of Glen Park (not up on the hill next to section 8). How do you interpret what this says about appreciation there…. or many other parts of San Francisco for that matter? I stick by my prior assertion that prices in most of the city have and will continue to be pretty flatish (+/-10%). There are always going to be outliers… which your example really isn’t by the way.
Anyways, here’s the Zillow link for the counter comp: http://www.zillow.com/Charts.htm?chartDuration=5years&zpid=15200506
I have to agree with Lance. The whole theme of “apples to apples” on this site is kind of interesting when you consider that just about every transaction in this city is an “apple”. Almost all of our inventory is a resale. So which ones get selected for editorial and what do they prove? I guess you could deduce that “investing” in real estate actually does have risk, even in San Francisco. But is this news anymore to anyone?
It’s actually quite difficult to find a real “apple” because so many resales have been remodeled or otherwise altered since the previous sale. Makes sense as that is a good way to make a profit in SF real estate. But that is why it is difficult to find hard, incontrovertible evidence about market direction — a place selling for $1.5 million may be quite different from what it was when it sold for $1 million three years ago. I have no idea if SS highlights a representative sample of those places that are as close to a true “apple” as one can find in SF, but I don’t know of any other site that at least attempts to use meaningful comparisons to frame the debate.
Several months ago, Satchel posed a challenge that was something like to find any home in SF bought in the last three years and resold within the last 6 months at a higher price that had not been remodeled (i.e. was a true apples to apples comparison). I don’t recall that anyone ever met the challenge.
Trip,
“Several months ago, Satchel posed a challenge that was something like to find any home in SF bought in the last three years and resold within the last 6 months at a higher price that had not been remodeled (i.e. was a true apples to apples comparison). I don’t recall that anyone ever met the challenge.”
You’re right. No one did. Only paco chimed in with a good story about how he used his expertise and experience to make some good money by doing a TIC conversion. Kudos to him, but in all fairness that’s like me saying stocks have been great this year because I’ve made some good money so far! Nevertheless, I’m sure that examples do exist (how could it be otherwise?).
Meanwhile on a true apples to apples basis, the list of properties in District 4 that are languishing below last sales price is growing. For example, 10 Fernwood (fluj gave some incorrect info on this one unfortunately – it was remodeled with sq ftge added BEFORE last sale at $1.75M – NOT the $850 a foot in 2004 that fluj noted, but more like $580 psf (maybe fluj is dyslexic?? Just kidding, easy now…), now a short sale at $1.55M and it’ll go into foreclosure IMO… BTW, 3 houses away from that Fernwood property is 60 Ravenwood, featured in SS, also a short sale heading into foreclosure IMO – the house right next door to 60 Ravenwood – 60 Ravenwood – just sold for $1.35MM after a long time and down from an initial listing price of $1.6M+; this is a prime area of D4 – not the best, but easily top 10%, with AMAZING views for these properties.
835 Foerster – another one that fluj gave bad info on, and sort of near to the Glen Park properties that we are discussing here – again, square footage added BEFORE the last remodel, and yet even after new kitchen, etc and updating, is now $100K below 2006 sales price…. The yahoo that is eating the loss on this (well, at least a credit rating loss….) tried to rent it at $5500, then $4500, then $3500…
Here’s the thread for the fluj “disinformation” (again, easy now, just some good fun after a long layover – BTW, fluj you once said I’d have a point about Merced Manor if 3035 25th ave failed to sell at $1.429 – seen the price lately and the “true” DOM? BTW owner put in about $50K of upgrades, including 5kW solar system, new furnace, hardwood floors in lower level, landscaping in the back, new water heater, etc.). See https://socketsite.com/archives/2008/03/apples_to_apples_3342_divisadero_two_bedroom_condo_in_t.html (see fluj’d 10:10 am post). Oh back to that thread where the D4 properties were mentioned:
https://socketsite.com/archives/2008/07/foreclosure_activity_in_san_francisco_as_mapped_by_trul_1.html
(see fluj’s post @ 12:12 pm)
845 Monterey – true “apple” now languishing at $959K after having sold last year at $998K, etc., etc.
There are lots of others of course.
OT – Thanks to everyone who expressed good feelings that I’m back! fluj, where’s my welcome? (hehehehe) (BTW, fluj, you also gave some bad info about 414 foerster, the ugly little blue house that sold in foreclosure for 32% less than its 2006 price. $400 per foot? And that’s a good deal? Try more like $300 psf (whole downstairs added). And it’s still a bad deal, and a very foolish purchase. :))
Fluj this fluj that fluj the other thing.
Buzz off Satchel. You’re most unwelcome. hahahah. Just kidding.
But “You’re right. No one did. ” (show apples resold for more) — That’s blatantly false. Such properties have been featured on the front page of this website, and off the top of my head 576 30th is one.
I’m not going to get into it with you about $psqft. It isn’t your field. Oh, fluj is wrong because he didn’t count some illegal roooms down! Please.
Remember our entire converstation about Miraloma Park? It’s still selling for around 600 a foot average. Two in the past week, week and a half. You could not have been more wrong about that.
“It’s still selling for around 600 a foot average”
True. But doesn’t help the folks who paid 700+ a year or two ago. 24 Coventry is another ugly foreclosure in this area. Bought for $880K in January of 2006, or $870 psf. Reverted to the bank last October with a loan balance of $755K, currently listed for $629K. Not pretty.
Satchel is right – there are a lot of fix & flips languishing in this area.
fluj,
“Remember our entire converstation about Miraloma Park?”
Does this mean that you are conceding Merced Manor??
“Hey, if the only Merced Manor property on the market, 3035 25th Ave, listed at $1.429M, doesn’t sell for around that pricepoint (at only 2260 feet it is sort of pushing the $psqft envelope) you [Satchel] may have something to say about M.M. Otherwise you should really consider holding your peace on the subject. Oh, by the way, that one is apples to apples. It was purchased for $1.287M in June of ’05 and it doesn’t appear to have been remodeled since.
Posted by: fluj at March 19, 2008 10:10 AM”
https://socketsite.com/archives/2008/03/apples_to_apples_3342_divisadero_two_bedroom_condo_in_t.html
So, now it’s Miraloma Park that I’m all wrong about. Well, isn’t 835 Foerster Miraloma Park?
Isn’t it in pristine shape (remodelled, and then updated and new kitchen)?
And, you say $600 psf is common there? Well, isn’t 835 Foerster being offered at $500 psf (after having failed to sell at about $550 after a long time)? And, because 835 Foerster is a decent size (for the neighborhood) but not very large house (it’s ~1650 sq ft), shouldn’t the $psf selling price be *higher* than average or median?
Hmmmm….
It’s not mix, it’s beauty pageant effect that’s going on here. So far, financing options are not so tough that they have moved buyers in a certain price range into a lower price range. But it’s gradually happening. And there are fewer buyers at any given price range. So, what’s happening is that they buy the most (read, “prettiest” house) in light of the buyer constraint. The ugly houses – or simply those like 835 Foerster that happen to be on one of the busier streets in MP, just sit and sit. Maybe it’ll sell now, who knows. There are always fools willing to pay too much. But because there are fewer fools with resources (banks are wising up), there are fewer of them. And so, sales volumes fall, and the ugly houses are pulled off while the owners wait (hope) for a better market…..
Satch-el,
Stick to yer guns, OK? Finance, etc. 835 Foerster has an unusuable cliff of a backyard and that’s its — very large — problem to overcome.
Merced Manor has slowed way down. I concede that. A year and a half ago I wrote offer after offer for a client who ultimately gave up out there. That was my frame of reference. Apparently it has changed a bit. But the ones on the market aren’t quite as good, are expensive still, and fixers still seem to go fast.
Trip, while it may be true that it’s hard to find true “apples”, this place WAS remodeled. We don’t know anything about how much went into it other than a note from a “tipster” about a $40k kitchen. So how exactly does this qualify, given your definition?
“So how exactly does this qualify, given your definition?”
It doesn’t and I never said otherwise. That’s exactly my point. It is hard to find true apples to apples comparisons because of this. So SS did what they could by also disclosing what adjustments should be made to make it closer to an “apple.”
542 Laidley sold for $938k on 7/1/05 and for $950k on 6/27/08.
This is four years, not three, but 161 Randall sold for $1.15M on 4/30/2004 and for $1.5M recently. I saw it both times and I don’t remember any major changes. There might have been a small amount of remodeling, but if so, it wasn’t much.