November 24, 2008
Symphony Towers Update: Slashing Success And Words On The Street
Contracts were written on 18 of the 20 reduced units in the Turk Street tower of Symphony Towers the weekend before last.
The unofficial word on the street is that a construction loan might have motivated the “slashing” (sound familiar?). While an official word is that there are currently “no plans” for another slashing of prices on the 25-30 units that remain in the Van Ness tower.
As always, we’ll keep you plugged-in (and ahead of everyone else).
∙ Price Cuts Of Up To 30% At Symphony Towers (750 Van Ness) [SocketSite]
∙ RandomRumors: Calling On That Guy And The Guy He Heard It From [SocketSite]
∙ Symphony Towers Update: Buying Love (But Dropping Prices Too) [SocketSite]
First Published: November 24, 2008 10:30 AM
Comments from "Plugged In" Readers
Now they have a realistic clearing price for the units.
the market works, if you let it.
Priced too high: sit.
Priced correctly: sells.
let's see if the various developers learn from this.
Posted by: ex SF-er at November 24, 2008 10:38 AM
I toured a TIC on Stanyan street yesterday in which "2 bed / 1.5ba" units (which were actually 1 bed + den) were $599k, and "1/1" units (which were actually ~400 sq. ft. studios) were $349k, so I don't think the pricing message has quite reached everyone just yet.
Posted by: Jimmy (Bitter Renter) at November 24, 2008 11:27 AM
I've heard in numerous locations the mantra, "It'll sell if it's priced right." I'm confounded by this statement. If I list my 2005 Honda Accord for $40,000, no one will call me. If I list my 2005 Honda Accord for $5, my phone will ring off the hook. Of course lowering prices increases the number of people who are interested in buying your house. That's like saying San Francisco is in California. That statement gives virtually no information about the health of the market.
Posted by: D at November 24, 2008 12:35 PM
if a property closes, that means someone was willing to buy at the price someone was willing to sell. it is a great indicator of the current market--actually, it's the only useful indicator.
Posted by: yao at November 24, 2008 1:57 PM
I agree that sales prices are good indicators.
My frustration is that many times I've heard people say, "The market's not that bad. Houses will sell if you price them right." That means nothing. Of course houses will sell if you set the price low enough. Anything will. Land in the middle of the Mojave will sell if you set the price low enough. Tracts of land that are under the Bay will sell if you set the price low enough.
Posted by: D at November 24, 2008 2:19 PM
Property market corrections involve lowered volumes and sticky pricing. Simply lowering the price won't move a bunch of units with limited desirability if buyers are off as a group, and the stickiness means prices will come down only slowly anyway. It is all very frustrating which is why people need to remember to be wary of property speculation and avoid owning two homes at once unless your butt is really that big.
Posted by: Mole Man at November 24, 2008 2:27 PM
If I list my 2005 Honda Accord for $5, my phone will ring off the hook.
Exactly. and then since people are clamoring for your Honda Accord they will bid the price up accordingly. you wouldn't need to sell at $5, you could choose the highest bidder. This works on Ebay and Craigslist millions of times a day.
The same for houses. You can offer the house at $300k. and if there's enough demand for that house then there will be a bidding war and the final contract sale price will be higher than $300k. If there's not enough demand it will just sit there.
Tracts of land that are under the Bay will sell if you set the price low enough.
True again. but they won't sell for more than they are worth.
That's like saying San Francisco is in California. That statement gives virtually no information about the health of the market.
incorrect, for the reasons I listed above.
this project could have offered these prices and nobody buy... then we'd know the clearing price is STILL lower.
or they could have offered them and all snapped up immediately through bidding wars. then we'd know the clearing price is higher.
we'll know more once we find how much they closed for.
but it is inaccurate to say we're learning "nothing" from this process. quite the contrary.
and you know what: sometimes there is NO selling price for something. (like farmland right next to chernobyl, or for a mortgage backed security on Option ARMs on Inland empire real estate as example). we call those "worthless".
Posted by: ex SF-er at November 24, 2008 2:31 PM
It's more a matter of semantics - priced "right" really translates to priced "lower", at least in the SF real estate market. If a market is overvalued then the "right" price is lower, the price that buyers will emerge at. You don't see the reverse as much because if a place is priced "too low" (ie, the buyer is willing to pay more) as long as the buyer is savvy & rational and there is no competition from other buyers he will pay the lower price, reaping the difference in consumer surplus. I guess the proper example of that situation would be properties that have multiple bids and sell above the asking price - the "right" price was higher in those situations.
Posted by: Rent vs. Buy at November 24, 2008 2:33 PM
a simpler way of saying this:
At $535K to $577K nobody was willing to buy one of these 1/1's at Symphony Towers. so they are "worth" less than that.
At $399K to $459K people did buy them. so they are "worth" at least that.
thus, we have learned that a 1/1 at Symphony Towers is worth LESS Than $535k (since nobody bought one at that price) and MORE than $399k (because people did)
then to extrapolate: if you are selling a unit similar to Symphony Towers, don't bother pricing it at $535k or higher.
using your example:
if I learned NOTHING if you offered your 2005 Accord at $40k with no sales, I might as well offer mine for $100k.
Posted by: ex SF-er at November 24, 2008 2:37 PM
it's not a matter of semantics IMO.
a property's market value is what a buyer will/can pay for it.
thus, if you have a product just sitting there for some time with no sales, it has a market value lower than your sales price.
there are VERY FEW properties in the SF Bay Area that have been underpriced and had NO competition. when properties are underpriced they are bid on immediately.
if you have no competition for a property, then you are the only demand for that property. hence your sales price was the "accurate" market value again.
the problem: many people refuse to believe the current market price of their home, and believe their property is "special" for some reason and they will wait for that "one special buyer". if the buyer comes along then they will sell. if not, then they are overpriced and they can either drop the price or remove the property from the market.
on a side note:
the demand for a product is more than just if someone "wants" something. it is if they want and can afford it.
Many many people "want" a Bentley. only a few can afford one. thus, the demand for a Bently isn't how many people want one... instead it's how many people with the means to acquire a Bentley decide to do so at a given sales price.
Over the last few months, the demand curve for real estate in San Francisco has SHIFTED to the left... because their wealth is down significantly (due to stock losses, RE losses, bond losses, job losses, etc etc etc). In addition it is likely the demand curve shifted to the left as now people are starting to understand that real estate doesn't always go up...
Posted by: ex SF-er at November 24, 2008 2:46 PM
Let’s not overlook the importance of volume. Like when realtors boast that some property had 5 offers, and “Those other 4 buyers are still out there!”
True, but those other 4 buyers obviously weren’t willing to pay as much as the first party. So the buyer pool was just reduced by one buyer, and an identical property going to market today will not fetch as much because the other bids were lower than the recent sale. So you fill one bid at what’s dubbed as “market price,” but to truly clear the full market, the price would have to be lower. In other words, selling 18/50 condos is one market price. Selling 50/50 would be a lower price still.
Posted by: Dude at November 24, 2008 3:08 PM
Perhaps I'm misunderstanding what you are saying. My point is that "Houses will sell if they're priced right" is always true. It's true when the market is bullish. It's true when the market is bearish. It was true in 1933. It was true in 2006. It is true today.
It's a meaningless phrase that I hear people throwing around as if that meant our market was doing well.
Posted by: D at November 24, 2008 3:27 PM
oh I see what you're saying. I don't throw the phrase around the way the people you are hearing use it.
I use it to mean that things aren't selling because they're priced too high.
it seems obvious, but obvious arguments have been ignored so often that you need to repeat obvious things many times.
I mean, just about 1.5 years ago many people on this blog called me crazy because I even suggested that prices *could* fall in San Francisco. they also believed there was no such thing as a bubble, that if there was it would never affect San Francisco, that all RE is local and SF was "special and different" and so on...
so you gotta state the obvious, because most of the people seem for whatever reason to not understand the obvious.
Posted by: ex SF-er at November 24, 2008 4:21 PM
"Tracts of land that are under the Bay will sell if you set the price low enough."
The City did in fact sell tracts of land under the bay. It's now called SOMA.
Posted by: Mystery Realtor at November 25, 2008 9:52 AM