We saw value (not to mention potential), and apparently we weren’t alone. 321 Prospect closed escrow today (8/13/08) with a reported contract price of $1,100,000 ($636 a square foot and $221,000 over asking).
Let’s not forget those invitations to the housewarming. And our apologies for any observer effect on that final price…
∙ Bernal, Bright And Even A Few Built-Ins For Under $500 A Square Foot [SocketSite]
1.5 baths, no parking, not interested
but it does seem like a nice place – too bad the problems are killers
if it had one more bath and at least a one car garage probably would have been priced around a million no?
well that is what I said on the first post
now I get to eat my words.
maybe SF real estate really is undervalued.
http://www.nytimes.com/2008/08/09/business/economy/09bargain.html
I don’t know, but I just don’t understand how in the world this property is worth 1.1 mill, in any market, let alone a falling one.
Agreed, enonymous. I guess I got it wrong on the last thread, too. Still, I think the buyer will regret this in a few years.
I’ll predict it’s back on the market within 18 months and sells for less than $1.1M.
foolio – you may be right, but my guess is you will be wrong (do two wrongs make a right?)
here’s why
1.) I will bet there will be upgrades (maybe even a garage?). So the next price point won’t be an apple to apple comparison.
2.) I actually thought the list price was too high. So unless it drops below that price, I really won’t be able to claim that i was right all along.
I’ve begun to wonder if my entire hyopthesis is wrong. Is the contrarian view the correct one for both equities and real estate?
I always thought equities were best purchased by an investor when blood is running in the streets (the contrarian buyer). I always thought real estate was different. It is such a slow moving market, it would be unwise to buy at a low point becuase momentum in real estate prices is longer lasting, and thus it is easier to buy near a bottom and sell near a top. Maybe I just have no idea.
This purchase price has me confused. I understand why people like the house, but not for so much money. And not in this climate.
Smart seller and agents here. Priced it for under what the market will bear (at this immediate point in time), confident that it would generate an overbid.
We don’t know what the next highest bid was, and neither did the ultimate purchaser because the real estate “auction” process is deliberately opaque.
What we do know is that this purchaser valued this property higher than any other person in the potential universe of buyers for this type of property. Whether it was a smart purchase or a poor one will only be known in hindsight. In any event, the “winner’s curse” will need to be overcome.
I’m curious. What does the MLS say is the average $psf for this subdistrict over the last 12 months?
I thought that Times article was interesting too. Included in its discussion of various measures to quantify housing values, see this gem: Mayer of Columbia Business School believes San Francisco and Boston values are corrected to the right level and NYC is slightly undervalued.
Just blowing smoke? You be the judge.
and oh by the way – for those who claim this site is biased (I consider it neutral to bearish, but not biased) – stories like this don’t show up on biased sites.
Fox News doesn’t tell you about Hillary Clinton’s good deeds for the state of New York and the New Yorker doesn’t write stories about the Bush Administration’s willingness to provide foreign aid to fight poverty and disease in Africa. Those two media outlets are biased (and I suspect at least one is willing to admit it).
I live around the corner and saw that “for sale” go up and come down not but a day later. Crazy that it went for over-asking without parking, but I like it anyway…good for our hood!
Mayer of Columbia Business School believes San Francisco and Boston values are corrected to the right level and NYC is slightly undervalued.
yeah – that’s the part I was referring to. Of course, the model is one of those if-then types (if mortgage rates were following historical spread norms relative to 10 year Treasury then housing prices would be stable) and then he goes on to indicate that the final outcome is that prices might fall anyway. so much for believing in your model!
I’ve been waiting for this sale price to come through to figure out whether or not to just throw in the towel on SF real estate. For me, it’s official: there are too many crazy (and/or crazy rich) people to compete with here.
I went to this open house and did really like it… for the LP. It still had plenty of shortcomings, and the needed upgrades will be pricey.
@ enonynous: if you thought the list price was too high for this place, you must not have seen places like 1604 Treat and 280 Ellsworth that I think each went for $850k.
Enonymous,
Actually the model is more complex than you describe:
Mr. Mayer’s model, while unusual for its emphasis on mortgage rates, also uses rents, property tax rates, personal income tax rates, government interest rates, expected inflation and other factors.
That’s a strength in my mind, though I’m not an economist.
Other factors that could still drive down prices locally include consumer sentiment. And think about that from a contrarian point of view.
The NY Times article was interesting. But you have to keep the Mayer analysis in context. The whole point of the article was that economists have an extremely difficult time finding the “right” or “true” value of housing. Mayer’s was just one of many models out there trying to do so. And even when discussing the SF and Boston indications under his model, the article stated: “Still, Mr. Mayer says prices in these cities will probably continue to fall because of deteriorating mortgage markets and economic fundamentals.”
That said, I also am surprised anyone would bid this place over the asking price. But is $1.1M and $636/sf for a house like this an indication of a strong market, weak market, or something else? I know nothing at all about this part of town. 1.5 baths and no garage, but otherwise very nice and decent-sized.
where do you find the sales price of homes? from my understanding, this home just closed escrow yesterday and the chronicle has not yet published the sales price. is there a way i can get this info too?
Wow, it was a nice place, but I didn’t think it was $1.1M nice. Even the seller’s agent told me he didn’t think it would go for over $950K due to the 1 bathroom and no garage.
And about that garage… it’s solid rock where you’d expect to put the garage. That ought to be cheap…
trip,
I already pointed out in an earlier thread that the article is about context. Since my interest is more in the directionality of the trend any particular property does not consitute proof either way.
Analysis based on fundamentals does not really apply to real estate for some strange reason.
In April of 2000 the tech-market crashed and many people lost thier jobs in the dot-com bust that followed, even the 401ks that were rich in tech stocks took a beating (mine for example)
Logic would have indicated that prices of homes would fall or at least not rise. This was before 9-11 and before the interest rate reductions. Yet prices continued to rise. I was holding out for some reductions given the fact that many people were leaving SF and the local economy was hurting. Rents fell some too. Unfortunately for me, I waited and prices shot through the roof. Then interest rates fell and there was another boost to pricing.
Maybe there are just alot of people with more money than is apparent. It’s possible that many of the people just chilling in jeans actually have a ton of cash and pay what they need to pay in order to get what they want. It’s really beyond me and from what I can tell, beyond most people regardless of intelligence.
Here is what I wrote on the thread when this house was first featured:
“A 3/2 with 1 car garage sold recently nearby on Coleridge for over $1.3 million. This house will sell for well over asking.”
Many homes in this area have sold for more than this house’s $636/SF.
If it had a garage it would have gone for more like $1.3M.
To enonymous, “and oh by the way – for those who claim this site is biased”
There is bias and there is bias. This is a property editorially chose to revisit. We could point to a lot of other editorial choices right now but let’s not. The world is not black and white nor is this site.
This is what I said in the original thread:
“Go to Mapjack and take a look at how the neighbors added garages.
The change is very minor. Essentially, the lower section of the stairs is made a little bit steeper. That’s enough to make room for the garage.
This is an exterior change which nobody will object to.”
I had no comments on the pricing(I am not interested). However, I believe within 6 months, a garage will be added.
No one bats an eye when a house on 30th and Church is for sale for $1.3 million, but some are suprised when a house 4 blocks away in Bernal sells for that price, though the Bernal house is quieter with better views.
So, what does the MLS say was the average or median (I’m not sure what the database spits out) $ psf for this subdistrict for the last 12 or 18 months? Could we get a figure for with and without garage (fluj?)?
Dan,
I believe there was a lot of discussion about 254 Church Street not being worth that much. I don’t see why people perceive it’s worth a premium to live in this part of Noe, though a few seemed to understand.
The 30th street property has a 2 car garage and a 100′ lot, Prospect has a postage stamp yard, you’ll spend a fortune to add a 1 car garage (as someone already alluded to, the house is built upslope on rock). There’s something to be said about climbing 3 stories of stairs just to get to your front door (especially if you have kids) and having to go downstairs from your room just to take a shower!
Yes, Bernal homes often have only 70 foot deep lots.
For the $200,000 to bring this house up to $1.3 million, one could add a garage and a bathroom.
The humbled listing agent here on Prospect.
I hope it is appropriate to post my thoughts on the comments, given that I have never posted here before. A client of mine who sent me the link encouraged me to do so.
We in fact did price it low on purpose hoping to generate interest mainly because of the no garage.
We had 8 offers 3 of which were very competitive. The winning offer was not just about price but was because they did their inspection prior to making an offer and therefore had no inspection condition.
The buyers love the house (as did my Sellers who were there for 7 years). The house offered a lot of amenities that are hard to find, i.e., fantastic bernal block, over 1700 square feet, incredible views, great neighbors, and 3 good sized bedrooms on one level (hard to find!) (Kaya, the full bathroom was upstairs, so you dont have to go down to take a shower).
Yes, agreed, the private,easily accesible yard was small and there are in fact a lot of stairs to climb. The Buyers have a small child and are selling a house in Noe in the same price range. I agree with some of the comments that if we had had the garage we would have sold closer to $1.3M. (Bid for installing a garage was $130K). Not sure if the buyers plan on doing it or not.
[Editor’s Note: Not only appropriate but welcomed as well.]
Here are some stats from Dist 9A (Bernal Heights) for single-family homes:
2008 YTD: 76 sales, $795K median price, $638 mean psf
2007 Full Year: 153 sales, $850K median, $663 mean psf
For the 76 YTD sales, 17 showed no square footage data – but none had * selling prices! 65 of the properties showed at least one parking (garage) spot while 11 showed no parking (or garage). The mean psf for the 65 with parking was $641 – for the 11 without it was $604. However, our subject house (321 Prospect) showed as having 1 parking spot – it was noted as a $200 leased garage spot on the listing.
This was an easy one. I predicted here that this would sell quickly for over-asking, but I would not have guessed over by $221k.
FSBO, what does the * by SP mean?
Thanks for the response Richard, I guess I mis-remembered the layout after seeing so many different properties over the past several weekends. I still say the place needs an elevator if people ever want their parents to visit…. or maybe not.
Oh, and yes, placing the listing indicating 1 parking spot was naughty.
The west slope of Bernal, north of Cortland (where this house is), is more expensive than Bernal as a whole.
At least half the houses in Bernal are south of Cortland or on the eastern flank near 101. These two areas are cheaper than northwest Bernal.
8 offers, 3 very competitive. Wow.
Excellent data, as usual, FSBO.
“The west slope of Bernal, north of Cortland (where this house is), is more expensive than Bernal as a whole.” (fom Dan)
So, putting together the info from FSBO, which shows a pretty substantial decline (-6.7%) in median price 2008YTD vs. 2007FY, and a somehwat smaller decline (-3.8%) in median $psf, with the above info from Dan, it looks like:
1. This house on Prospect sold for a little LESS than the median in this “west slope of Bernal, north of Cortland”, which means it was VERY underpriced at the initial listing price; however, as we saw on the thread on Caselli, the inacuracy of square footage data means that the “true” median selling price psf is lower than the $638 shown in the MLS.
2. The whole neighborhood of Bernal (District 9A) seems to have gone down a little since 2007, although the data is likely very dirty and 2008 is incomplete, so we should be cautious about drawing any conclusion with a lot of confidence.
Like I said above, the listing agents here were very smart. In a flat to declining market, it is best to aim a little low IMO in order to generate the overbid.
“Analysis based on fundamentals does not really apply to real estate for some strange reason.”
it does apply, just over a longer term than most people are willing to look
kaya – an * in the selling price field indicates that the actual selling price has not been disclosed. In this case, the listing price (with *) is shown as the selling price – and the listing price is now used in the aggregate sales statistics (such as median selling price, mean price per sf, etc).
Is claiming a garage spot on the listing when it is actually leased (at another location) “naughty”? Perhaps – but the leased nature was disclosed. But, if you were doing an initial search for properties with a garage, you would have gotten an hit for this property – even though you probably wanting the garage to be located on the property. (Which is likely why the seller did this.)
In thinking more about the leased garage at 321 Prospect, they disclosed that it was leased at $200 per month – but where it it located and how long does the lease run? Why not also lease a bathroom or bedroom and maybe an extra few hundred square feet from your neighbor? It could make your listing really stand out!
[Editor’s Note: We like the way you think, and on this point we couldn’t agree more (see A Parking Space (And MLS) Pet Peeve).]
I drew a polygonal map of the traditionally better Bernal areas, north of cortland on the south side east to Bache, up the hill to the top, west along the top, dipping down and encircling the area around this listing, down to like a block above Mission, South to Precita, and over to grab Franconia and Ripley on the North. I thereby grabbed all the best areas of Bernal. YoY I saw 28 sales this year at 692 a foot versus 36 sales for the same time period last year at 667 a foot.
I don’t have time to pare that down from zero square foot reporting and in fact the MLS crashed. (It keeps crashing whenever I use the more fun features.) But this year is not down for the best of Bernal and even casual observors around here are anecdotally talking about just that. Most people in my neck of the woods marvelled at the two unit fixer that went $1.2M right on Folsom between C.C. and Precita.
321 Prospect sold for $636 per sf – right at the 2008 mean for the subdistrict. Still, a $221K overbid seems huge – a 25% increase over the list price of $879K. So far this year, there have been 1,319 sales of single-family homes in San Francisco. 56% of these sales were at or below the list price – 44% went for over list price. But only 10 sales went for greater than 25% over list price (and at least 5 of those were probably REO’s) – so this sale represents one of the largest overbids of the year.
Fluj’s data that the best of Bernal is up a little, and FSBO’s data that all of Bernal is down a little, is consistent with what we’ve seen on Socketsite. The total fixers and homes in less desirable parts of the hill have struggled, while the better homes, such as this one and the one at the top of Gates (which also sold for way over asking– $1.35 million for a small house) continue to do very well.
That being said, I agree with Satchel that with the small numbers, the small number of homes sold, and the variation in the homes, it is hard to conclude the direction of the Bernal market from the median price per sf.
FSBO, if 321 Prospect sold for the mean price per sq ft for the subdistrict, then perhaps we should say that the house was underpriced by 20% rather than remarking on how much over asking price it went for. (Oh, please don’t flame about the mean/median thing. I’m just citing FSBO here.) As Satchel said, I think underpricing was a great strategy for this home. But did it need to be underpriced by $200k? Who knows!
The phrase “it went for $XXX over asking” is meaningless when underpricing is an often-used strategy for generating interest. At some point, buyers learn to ignore the asking price and make a bid that reflects what the house is worth to them. It’s usually the clueless out-of-town buyers who bid at the low asking price. I wonder whether the owners would have even sold the house if only one bid came in, at asking price.
(Full disclosure: I have used the underpricing strategy myself. But the price I used was the lowest price I would have accepted. I think it’s a bit underhanded to price lower than you would actually accept.)
Point taken, but mean price per foot isn’t applicable IMO when the property has no garage. Of course it will fare less well than a similar home with a garage.
RenterAgain – I agree with your points – particularly that the sellers should be obligated to accept any bid that meets the list price. I do understand the underpricing strategy – not to open a debate on it, but I’ve always considered it just another distasteful aspect of our local real estate market. Maybe $636 psf was the right price for this house. The other recent sales of garage-less houses went for $604 psf.
spencer, are you suggesting that current pricing is correct because it works out in the long term?
no, am suggesting that prices come bak to normal over long term.
I hope you are right.
Spencer has been consistently wrong about every prediction he has made over the last year or so.
The underpricing strategy on this house seems to be more about misreading the market than a gross attempt at manipulation. And this is a difficult market to make sense out of. No question that the bubble run-up in prices was excessive and a general asset deflation due to severity of the credit crunch.
This sale though seems emblematic of another trend in SF, increasing gentrification driven by increasing income disparities. As long as that center holds in So.San Francisco and points further South, expect stable to appreciating prices in SFR’s. Just from the paint choices, I’d guess the appeal here is to knowledge workers or the monied creative class.
I just don’t buy the 50% drop across the board in SF predicted by diemos. Some declines, yes.
I agree prices go back to some kind of “normalcy” after a while. It all depends on what you call “normal”.
Cities change, local economies change. Think Detroit 1920s (boomtown) vs. today. Think SF 1995 vs. today.
A rule of thumb is what people who live here can afford. Take the median income, multiply by 4-6 and you’ve got your target median price.
BUT, SF is a city of renters (64% of all) who are mostly rent-controlled.
What really matters then is the demographics/economics of the people who want to buy. I’d bet they’re way over median income. That changes the parameters on prices big time.