December 19, 2008

Perhaps It’s The Market That’s More Unbelievable To Some...

214 Arguello: Living

Purchased for $1,600,000 a year ago when they were asking $1,675,000, 214 Arguello Boulevard returned to the market nine months later (September 2008) asking $1,595,000. The list price was lowered to $1,495,000 six weeks later. And for the past three they've been asking $1,395,000.

A sale at the current asking for this four bedroom, two and one-half bath, completely renovated and District 7 (albeit on a busy block, as it was before) condo would represent depreciation of 12.8% over the past year.

From the listing: "This price is [absolutely] unbelievable…" Only if you're not plugged-in.

∙ Listing: 214 Arguello Boulevard (4/2.5) - $1,395,000 [MLS]

First Published: December 19, 2008 7:15 PM

Comments from "Plugged In" Readers

I like it.

I was going to vacuum the couch this weekend. Perhaps if I find $1.395M in spare change between the cushions I'll buy it!

Posted by: diemos at December 19, 2008 7:28 PM

Propertyshark shows that these guys put down $240K (15% of purchase price) in cold hard cash.

Net proceeds if it sells at $1,395,000 will be approximately $1,300,000 after paying the agent and the transfer taxes. That represents a capital loss of at least $300K, or a return on invested capital of negative 125%.

That calculation does not of course include the approximately $18K of property taxes, any of the mortgage cost, or any maintenance expenses incurred.

These guys would have been much better off putting their downpayment in the stock market and renting an equivalent place. For the cost of a $1,340,000 mortgage and $18K taxes, they would have lived in a nicer place.

And, of course, the numbers could get worse if the market deteriorates further (a certainty IMO). Sad story for the individuals involved, but no surprise; it's a necessary part of the bubble unwinding, and therefore a very good thing for the economic prospects of SF going forward.

Posted by: LMRiM at December 19, 2008 7:54 PM

IMHO this one should not have sold for $1.6 last year. At the time it was worth $1.5 on the high end because nearby 2000 SqFt condos were selling for just SHY of $1.4 million on average. So even if they felt it to be superior to it's comps, $1.5 million should have been their maximum offer.

Unfortunately there are far too many agents and buyers who think they are getting a deal just because they bought the property for less than the Listed price - which was $1.675, so a $1.6 purchase price made everyone feel good... especially the Sellers and Listing agents!

So this year we get an over priced listing that "proves" the market is falling far more than it really is.

IMO based on last year's "real" value, and the now 10% drop in the area, expect a sales price of $1.3 to $1.35... that will look like a "deal" but if it's purchased at that price, it's the true value in today's market... not a leading indicator of more price drops... and not a "deal".

Posted by: sfrob at December 20, 2008 12:30 AM

What would a flat like this rent for? The place looks like it is in excellent condition, but I have friends about a block away paying around 3k a month for a 2bd with parking. Even with these price reductions, wouldn't they be better off to continue to rent although I believe they could afford to purchase a unit like this?

Posted by: Morgan at December 20, 2008 12:39 AM

IMHO this one should not have sold for $1.6 last year.

See? Nothing to really worry about here. They just overpaid. It happens.

It's funny that anytime an apples-to-apples comparison comes along showing that seller made some money since 2005, no realtors come on and say that the seller simply underpaid back then. Not that we've seen an example of anyone making some money over that period in a while.....

I actually think that the overwhelming majority of actual purchasers who bought in SF after Jan 1, 2004 cannot get out without losing money now, especially after paying the used house salesman.

SF prices are probably down now on average about 20% from peak (factoring in an average of all neighborhoods and property types, not just the relatively small part of the city that the realtors like to think of as the "real" SF). Look for 40%+ drops for SF as a whole IMHO, with some neighborhoods down 60-70% from peak before this is all over. I'm betting the entire city is going to unwind to 1999 pricing on average, and some areas back to 1997 or so.

Posted by: LMRiM at December 20, 2008 6:33 AM

The lesson to be learned here is to never take the good times for granted. Don't put yourself into a situation where if the economy does something unexpected, that you lose twice.

Right. Put your money in a mattress. Never take out any debt, not even a car loan because you might step in a manhole and break your legs and ruin your professional dancing career...

Posted by: "Dave" at December 20, 2008 8:02 AM

Perhaps we could try to strike a healthy balance between being a miser and taking on debts one has no hope of ever paying back?

How about living below one's means so that there's savings and a cushion to absorb any interruptions in one's cash flow?

Posted by: diemos at December 20, 2008 8:53 AM

It may have been a higher than average price, but that place is in much better than average condition. $800 psf was not unreasonable for a place in such good condition at the end of last year.

Posted by: tipster at December 20, 2008 8:54 AM

you mean selling into this market after buying a coupla years ago is a bad idea? thank goodness ss is providing this public service!

Posted by: paco at December 20, 2008 9:02 AM

"thank goodness ss is providing this public service!"

SocketSite's public service was in warning people about the bubble years ago. A pity these people weren't paying attention.

Posted by: diemos at December 20, 2008 9:16 AM

This home has no yard to speak of, which is a major factor for "families", and is very close to the home to the rear of it.

For resale, new buyers need to think of three things: location (e.g., not on a busy street and not staring straight into your neighbors house)and true amenities (for $1MM plus, it would nice to have a real yard, parking, AND not be looking straight into your neighbors house).

Posted by: [t2] at December 20, 2008 11:21 AM

I think the place is fantastic. It has parking and two decks, way more useable than a yard (brrr!) with out the maintenance and expense.

Go back and look at the online brochure from last year linked in the post (just under the photo with last year's asking price) - that place is fantastic, and it was (and is) in move in condition - better for a family than a remodel. The street is modestly busy, but that's about the only real problem.

It was among the nicest homes last year for under $2M. It's in a great family location. If I didn't think it would be 1.1M next year, I'd go look myself.

Posted by: tipster at December 20, 2008 12:35 PM

SocketSite's public service was in warning people about the bubble years ago. A pity these people weren't paying attention.

Years ago? Like years before this fall's change, which is still looking like a soft landing, finally happened?

Well, those folks are two years into appreciation. Now they're looking at a depreciation period. If they can ride that out, they'll be looking at another appreciation period. After that ....

Posted by: fluj at December 20, 2008 1:10 PM

"If they can ride that out, they'll be looking at another appreciation period."

Tell that to the Japanese. How long did they have to "ride out" their depreciation period? 15 years?

Posted by: tipster at December 20, 2008 2:34 PM

You tell them. I don't feel like getting another Rosetta Stone program.

Say, "Hey Japanese. Tipster here. Guess what ..."

Posted by: fluj at December 20, 2008 2:51 PM

Renting at 3K is far less then buying this place...

Posted by: Michael L at December 20, 2008 4:49 PM

Fluj, I assume you are under 40 years old? Us older folks (48 years myself) have seen this all before. I sold my second home in Santa Monica in 1990 which at that time had the same bubble energy of late 2006 here. I had 6 offers within 48 hours, almost all over listing price, which was 25% more than any other similar home sold for in my neighborhood that year. Back then L.A. was going through a bubble that reminds me very much of what we see here. The buyer had to hold on until 2000!!! to be able to finally sell it for what he originally purchased the home for, not more. This was a nice area, north of Montana, with many media stars living nearby and listed architectural gems by noted architects such as Neutra, Wallace Neff, Gordon Kaufman, etc., including at that time the bizarre residence of Frank Gehry. This was the "real Santa Monica". 10 years is a LONG time to have to wait to get your money back imho.

I took my money, and moved up to San Francisco, which at that time was much less expensive than the westside of L.A. and I rented, and then purchased a much nicer and larger home in the Marina. I think we are going to see a lot of people stuck for at least 10 years, even in the "real SF".

The second thing I would remind those under 40 is how insane these prices really are to those of us who purchased the "old" way (20% or more down, fixed rate, with payments not to exceed more than 1/4 of total yearly income) what is now many years ago. San Francisco only has about 45,000 more residents than when I moved here, depending on which census you use, which is hardly justification for the current extreme housing prices.

Posted by: over40 at December 20, 2008 5:09 PM

over40,

Yes. I am under 40 but not by so much any longer. I concede that you may be right. I do business on a regular basis with many people who were buying and selling real estate in San Francisco befrore, uring and after the last downturn up here. And of course, the economy looks like it will need some time before it straightens out. I also think that San Francisco has undergone an enormous shift in terms of workforce and population in the last 10 years. I cannot call it.

What wearies me is those who think they can call it. That's all. They cannot.

Posted by: fluj at December 20, 2008 5:43 PM

Courage fluj, only 2 and 1/2 more years until I hang up my crystal ball and ride off into the sunset.

Case-Schiller below 110 and everything in the city 50% off peak prices by 2011.

Posted by: diemos at December 20, 2008 5:49 PM

This home has a gas station on the corner... and just saying "arguello" is enough to have quite a few people not even show up - and lots of decks - looking at walls on the bottom floor. So to me this appears to be a strinkingly obvious over-pay in '07. They bought it during the holidays, putting an offer in "late" for a San Francisco listing (30-ish days), and a couple of the comps were pretty darn nice too, yet sold for $200,000 less. So I'm not apologizing for all real estate and the entire market - i'm offering an opinion on one home. You'll agree with me that many people over paid in '05, so how is it a stretch that someone made a dumb offer in '07?

Lastly, yes, these people would have been much smarter renting if only they had known they would be divorcing in a year. And duh, they should have known since 50% of marriages end in divorce. It's a much smarter finanical decision to never get married, which is why the marriage bubble is about to burst led by the government interventionists who got prop 8 passed. Lets all never enter into permanent relationships, it just cost too much. After all, it's all about the fundamentals.

Posted by: sfrob at December 20, 2008 5:55 PM

sfrob is right.

of course there are probably lots of rich guys who move their families around for the sake of a good deal on a rental.
makes economic sense if that's what you care about...

Posted by: paco at December 20, 2008 7:07 PM

"What wearies me is those who think they can call it. That's all. They cannot."

I agree with your comment Fluj, and I have bought homes not to make money, but to enjoy a permenant place to live.

However, not meaning to pick on the real estate profession, I do have one rule that I have always kept in my back pocket. A senior VP at Wells Fargo who was my neighbor for many years told me that you know the real estate market is over-priced when the realtor showing you the two or three million dollar home drives a nicer car than you do. He said that the time to buy is when the realtors are driving 7 year old Volvos and selling "homes" instead of "investments".

Now I think he was joking a little, but there is some truth to what he said.

Posted by: over40 at December 20, 2008 7:36 PM

sfrob,

It's fun to see the Realtors and owners trying to show that the house hasn't lost $200K, instead trying to prove it was that the previous owner who overpaid by 200K.

My favorite part was your complaining that the street name would be too hard for people to find.

That's really reaching, but funny!

I also have sensed a distinct shift in the Realtors in the last week. They once were sure the real sf hadn't and wouldn't decline. Now, as prices and volumes are collapsing everywhere, jobs are disappearing and consumer spending is drying up, they "cannot call it". Hilarious!

I think "cannot call it" is the same as the stock market analysts who rate a stock as "hold", which means get out while you still can!

Posted by: tipster at December 21, 2008 10:15 AM

"What wearies me is those who think they can call it. That's all. They cannot."

You mean "experts" such as :

http://realestaterecord.blogspot.com/2007/10/leslie-appleton-young.html

???

Posted by: HeardItAllBefore at December 21, 2008 10:15 AM

""What wearies me is those who think they can call it. That's all. They cannot."

You mean "experts" such as :

http://realestaterecord.blogspot.com/2007/10/leslie-appleton-young.html

???"

Does Leslie Appleton Young post on Socketsite?

?????????

Posted by: fluj at December 21, 2008 12:15 PM

"I also have sensed a distinct shift in the Realtors in the last week. They once were sure the real sf hadn't and wouldn't decline. Now, as prices and volumes are collapsing everywhere, jobs are disappearing and consumer spending is drying up, they "cannot call it". Hilarious!"

THEY? They are not me. You're talking to me, pal. Or at least about me. Don't go trying to paint me like I'm Lawrence Yun. That's one of your lamest moves on here. Of the like 10 things you say over and over again, that's perhaps the lamest. I said over and over again that a shift is likely to occur, and that it was unfair of you and others like you (although nobody is quite like you per se, Tipster, don't go changin') spoke as if the change had already happened. You know that too.

Posted by: fluj at December 21, 2008 12:21 PM

"Of the like 10 things you say over and over again, that's perhaps the lamest. I said over and over again..."

This is too funny.

The fact remains, however that in a declining market, the faster you talk the sellers down to reality, the sooner your income recovers. Coco county realtors are having a boom time. There is no doubt in any sellers mind that the market there is dropping.

The people posting about how the sellers overpaid and therefore the market isn't dropping isn't helping your cause any. And the buyers have mostly dried up: we know the market is falling.

The interesting thing is that the subject of this post is a Darwin Tejada listing. He's pretty good, rarely misses the price (and rarely by much when he's wrong), and he originally priced it way high too. I think this market has taken even him by surprise.

Posted by: tipster at December 21, 2008 12:35 PM

My cause? My cause is paying the bills, enjoying my life, trying to be a good person in society. It isn't trying to convince anybody to open his or her pocketbook. You aren't even supposed to know what my name is, where I work, or anything. I told this website I was a realtor because at the time it sorely lacked a voice from someone in the market. So every single time you and others like you argue at me or talk about me as if I'm towing the NAR line is yay I get to say it again, the BBS buzzword we all know and love, "Straw Man" City.

Did people overpay when there was a feeding frenzy? Sure. They occasionally did. But in this thread I personally didn't even say anything about that. It would be impossible for me to even communicate at all if I were what you attribute. If I'm not only my Internet persona, but additionally Lawrence Yun, Leslie Appleton Young, that idiot blogger who bought 17 houses all over the Western United States, heck, Ronald McDonald, Lucille Ball, and Captain Caveman? Knock it off. I'm a person. Stop with the "I can't believe realtors are still trying to get us to do this, that or the other thing" nonsense. I've never once came at you like that, Tipster, and you f**k**g know it.

Posted by: fluj at December 21, 2008 5:02 PM

Never said you did, fluj. Go back and reread the post: I was referring to sfrob and [t2]. I said "The people posting" not you. My mistake for mixing them into a post addressed at you - I can see how you might have interpreted it that way.

I assume people posting those things are usually owners, not realtors, and I was pretty complementary to Darwin Tejada, so I don't think you or he are the NAR or all realtors are evil or manipulative.

Nevertheless, the sooner that sellers get the message, the sooner the market gets back to normal and everyone in the industry starts to make money again. Just like the head of McGuire noted a few weeks ago.

Realtors have your work cut out for you. I can't imagine the conversations Darwin Tejada is having with these sellers. They are going to lose many hundreds of thousands of dollars, perhaps their entire life's savings, to live in a place for a year. That can't be fun, and I have no idea how that ever gets easy. Darwin's a pretty aggressive guy, remarkably frank, and is exceptionally knowledgeable, and so I suspect that helps.

Posted by: tipster at December 21, 2008 6:42 PM

of course there are probably lots of rich guys who move their families around for the sake of a good deal on a rental.
makes economic sense if that's what you care about...

paco, I know you are just trying to tweak LMRiM, but it really is that *@%#$ing attitude that got us into this mess. The housing bubble required millions of patsies... err... ordinary homebuyers along with the marginal scammers to get us to totally out of whack price-to-rent ratios. I know more than my share of folks who bought 2/1 stucco *&^%$#boxes and are now "priced in forever", trying to raise their families in less than ideal conditions. All because a well meaning loved one told them to get in on the "property ladder" and they felt they were somehow doing their family a disservice by being renters. These are educated, white collar professionals (not necessarily the six figure types that hang around here) who took on fixed loans and got their downpayments blown to smithereens when the bubble popped. Hopefully they'll have better advice for their children and grandchildren.

Posted by: EBGuy at December 21, 2008 10:18 PM

This thread is way off topic. We've degenerated into choosing which side we're on (fluj vs. LMRiM) and then taking pot shots at the other team. What's that? This is every thread on socketsite? Oh, nevermind then.

In that case, I'll tell you the story of how just tonight I had two different family members on my wife's side say: "Hey, you know how I told you it was a great time to buy a home a few months ago? Well, it's an even better time now!".

I guess they don't realize I wrote off their opinions months ago.....

Posted by: Valentino at December 22, 2008 12:18 AM

i don't see this as side picking. Paco ad Fluj have about as much credibity baghdad bob. Everyone else is trying figure out how much the market is going down and when we expect big drops and the market to eventually stabilize. They are still talking about pockets and refuting facts and avoiding looking at macrotrends.

And insulting people who have so far been on the money by saying we started claiming the market would drop a yr before it actually did. most of us could see their true colors 9 months ago, that every statement they make is based on self interest and not market curiousity. they had some shred of credibility then as some still believed the "microclimate" argument. it time to give up the shill boys. you were wrong and you still are. just admit it and move on. it will feel better.

Posted by: spencer at December 22, 2008 9:02 AM

"shill" ??

Nobody on here has been as consistently wrong as you, Spencer.

Posted by: fluj at December 22, 2008 10:28 AM

Valentino was on the money. Even if the bears on SS were early in their prediction(which I don't agree with), they are far better than "best time to buy" peeps.

Posted by: SFwatcher at December 22, 2008 10:52 AM

Back onto the subject of the listing...

I have been inside it. The unit is on the bottom floor, above the garage and the bldg. is on a Arguello busline. So lots of noise from buses outside, the main building entry and, because of old construction, the neighbors above. Although a very large space, it has a weird layout that is cold and wasn't altered in the remodel.

For the PHeights neighborhood, a bit high but taking into account all negative factors of the physical space itself, way too high.

Posted by: Presidio Heights neighbor at December 22, 2008 1:45 PM

Nice place. Given the location, I think it's probably worth around $900k in a "rational" market.

Posted by: Foolio at December 22, 2008 3:41 PM

@Fluj

Amen, brother. Keep up the good fight!!

Posted by: Fluj Is Right! at December 22, 2008 10:00 PM

You can now rent this place for $7500/month. Good luck.

http://sfbay.craigslist.org/sfc/apa/967870980.html

I can't believe how many places are going on the rental market while owners "wait until they get their price." I counted 8 single family homes that hit craigslist so far TODAY.

It feels to me like the rental market is beginning to implode.


Posted by: G-man at December 23, 2008 9:39 AM

Owners must have read this blog and saw the writing on the wall.

Posted by: satchelfan at December 23, 2008 12:55 PM

214 Arguello Boulevard is now "off the market" without a reported sale according to the MLS.

Posted by: SocketSite at December 29, 2008 9:30 AM

I guess it's a big psychological hurdle, going from the idea that your real estate is going to shower you with free money to the reality that you're going to have to write a big honking check to get rid of it. Leverage is a b!tch on the way down.

Posted by: diemos at December 29, 2008 9:39 AM

There may be more than psychology at work here.

When the owners listed it at $1.395M, they effectively wrote off the entirety of their $240K down payment, and even signalled a willingness to write a check of $40-75K just to pay the used house salesman and transfer taxes. So, it looks like psychologically they were over the big hurdle: the admission that one has been a fool with his financs, suckered in by a bubble.

There was some speculation that the owners were lawyers. There are ethical considerations for lawyers regarding walking away from debts and/or filing bankruptcy (depending on the circumstances; at least in theory the Bar can sanction lawyers for undertaking these actions lightly) and there are tremendous disclosure requirements - especially when applying to practice in other states, before certain courts, etc. Perhaps that is why the owners are still paying the $18K+ property taxes (looks like $9K was paid just this month) and why they were exploring trying to rent it out at the laughable rate of $7500/mo.

Looks like these guys are even more trapped than the typical recent buyer. They should stop paying the mortgage immediately and try to angle for a piece of the bailout money, but like I said if they are lawyers there may be some ethical considerations that make this sensible course tricky.

Posted by: LMRiM at December 29, 2008 10:24 AM

@LMRiM:

I actually sorta feel for these guys. Just guessing, but it looks like they succumbed to the hype at exactly the wrong time (late 07). And they probably thought they were getting a "deal," at $75k (plus who knows what in NRCCs) off the asking price.

Posted by: Foolio at December 29, 2008 10:28 AM

Looks like 214 Arguello is back on the market! I guess they couldn't find a sucker to rent it for $7500 (what a surprise). From the redfin listing:

"Back on Market! Price reduced $200K from original list price and ready to move quickly."

http://www.redfin.com/CA/San-Francisco/214-Arguello-Blvd-94118/home/587741

Posted by: LMRiM at December 30, 2008 7:32 AM

I'll stick with my view that I used to writer here last year, that SF City bottoms in late 2H 2010. SF was the last market to peak in the US. But it was too stubborn to fall and even now has still not fallen enough. There won't be any VC or start-up windfalls coming for quite some time.

-The Kid

Posted by: SurveyKid at January 2, 2009 6:04 PM

spencer,

just back in town and just now reading your gems:

" Paco ad Fluj have about as much credibity baghdad bob"

"most of us could see their true colors 9 months ago, that every statement they make is based on self interest and not market curiousity. they had some shred of credibility then as some still believed the "microclimate" argument. it time to give up the shill boys. you were wrong and you still are. just admit it and move on. it will feel better."

if you read my comments about you, spencer, you'll notice that i quote you and then i ridicule the inaccuracy of your statements.

i would LOVE to see you attempt to do the same. please, please
show me how i've been wrong. quote me. go ahead, i can take it...

Posted by: paco at January 4, 2009 4:07 PM

I saw this place when it was on the market the first time, and it's actually really nice on the inside. The biggest drawback is the location next to a gas station, but otherwise that's a great part of the city.

Posted by: Roxxie at December 23, 2009 9:21 AM

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