As we wrote this past September:
The sales office for 368 Elm Street on the edge of Hayes Valley first opened its doors in November of 2006. At the time, 368 Elm Street #406 was priced by the developer at $589,000. And it sold.
Back on the market last month for $615,000, the list price has been reduced twice since. And yes, most recently by only $2,000 (obviously to catch all those buyers with a cutoff of $598,000…).
Now asking $597,000, a sale at which would represent annual appreciation of roughly 0.74% over the past two years.
Apparently annual appreciation of 0.74% was a bit too aggressive. Now asking $375,000.
∙ Listing: 368 Elm #406 (1/1) – $375,000 [via Pacific Union]
∙ A Hayes Valleyish New Construction Apple On The Tree: 368 Elm #406 [SocketSite]
∙ 368 Elm Street Condos: First Release Pricing And Scoop [SocketSite]
∙ 368 Elm Street Condos: Complete Pricing (And An Update) [SocketSite]
huh? did I miss something? Is it bank owned or something?
375 is the new 615.
“Seldom available at this price.”
Not for loooong.
I am sure there will be many other 1/1 condos soon joining 368 Elm at this price.
Not anywhere near Hayes Valley. It’s in the scar of what used to be the terminus of the Central Freeway. Properly this neighborhood is Civic Center but really it’s an area that’s between neighborhoods. Not properly in any of the Western Addition, Cathedral Hill, Hayes Valley, or Civic Center.
Most definitely chasing the market down.
This unit was priced at $485,000 as of Jan 1, 2009 (via cached Google search)
Look at the old thread – Spencer gave a fair value price on this place of $350k in September. It’s January and we’ve almost reached that point. Granted it’s bank owned but those count as comps too.
Granted it’s bank owned but those count as comps too.
Not sure I totally agree for SF-city yet.
REO’s and short sales make up 50%+ of the transactions of much of the Bay Area, so they are true comps in those areas.
but they are less common thus far in the city itself. Many of the short sales/REO’s have something “wrong” with them (such as the ripped out kitchen in the prior thread)
so although this clearly impacts surrouding valuations, not sure I’d hold it up as a pure “comp” until we know more about the unit.
anybody know anything?
Wow. Just wow…Wonder when this will spread to the “real SF”?
“Wonder when this will spread to the “real SF”?”
Never. “Real” SF is immune by definition.
“Real SF”? The block I live on is Real SF, the block you live on is not.
I thought there was map with borders drawn. I saw it somewhere, at the post office.
@ex SF-er
‘pure comp’ is the new ‘real SF’.
Comps are designed to help an appraiser determine the fair market value of the property for sale. Thus, by definition, if another property directly affects the value of yours, it’s a comp.
REO sales don’t count. These are distressed sales, not arms length.
By the time this is over in a few years, real estate will have proven to be the greatest destroyer of wealth of our generation.
Wow. Just wow. How lucky I was that I didn’t buy. You can talk about pride of ownership all you want, but I have to think it pales in comparison to the shame of ownership that is now in full swing.
ahh too much agreeing here… so i’ll chime in… this is a Short Sale… one strategy used by agents is to price well below comps to guarantee immediate and multiple offers because many banks refuse to consider a short sale without an offer in hand. and once short, it does not matter to the Seller how short so long as the bank agrees. if they priced it at current market value it might take 30 to 90 days to get an offer…. so this is a pricing strategy… and since you all correctly point out that “asking prices” are meaningless, let’s wait for the sales price before deciding this is the new market price.
regarding the building, I heard that one of the original buyers turned around and sold her place immediately after taking the bus to work. location, location, location should be something that any buyer chants to themselves when considering any purchase, and clearly no one gave it any thought when buying in this building.
in the height of the market, people spent D7 money on D-gusting locations and places… $585k on a 685 SqFt place across from a gas station, a parking lot, on Franklin, near crime ridden public housing in a building with cheapo finishes? Not smart… and I mention it all because when you bears get your 20% or 40% price corrections, the bigger numbers will be on crap buildings and locations like this one.
why don’t we change it from “real sf” to “nice sf” or “desirable sf”. The tenderloin is real sf too… too real actually… but it’s not desirable sf… so let’s get SS commenters to get on the same page with what “real” really means and we’ll eliminate one of the dumber back and forth’s
tenderloin is not the “real sf” obviously you haven’t been on socketsite for very long. The “real SF” is Noe Valley, Pac Hts, Nob Hill, the Marina and South Beach.
It used to only exclude anything south of 280, but the “real SF” has been shrinking lately.
We went from 7×7 to 3×3. I am predicting a 2×2 any day now.
steve – I had always thought a non arms-length deal meant that the buyer and seller had some former closer relationship. Family, employer-employee, and the like.
How is a REO sale not arms length ? The buyer and sellers are strangers.
that building is so horribly awful I can’t even stand to look at the picture. The ground floor looks like a prison crossed with a warehouse splashed with bright miami colors. Welcome home! If there’s one thing that perpetuates the bad qualities of a transitional neighborhood is architecture that treats it like a transitional neighborhood.
Wow, almost as hideous as the Hayes.
These small cuts show me that their listing agent really knows what he’s doing.
Milkshake:
my understanding is that “comps” is a more fluid idea than people like to discuss.
In many time periods, REO’s are not considered comps because they are often “distressed” even though they are arms-length.
however, that is NOT the case if REO’s are a substantial % of the recent sales.
that said, a “comp” is whatever the lender specifies is a comp.
I’m not sure that REO’s count as comps for most lenders TODAY in the city itself, since REO’s don’t make up much of the market in the city itself yet. But they probably do count for the Bay Area where 50%+ of the sales are foreclosures/short sales.
municipalities often don’t consider REO’s to be a comp (for tax purposes), even when REO’s are a huge % of the transaction volume.
(a “comp” is more than just the same general location and the same number of bedrooms and bathrooms… it might also include of the house had fire damage as example, or if it is condemned, etc…. foreclosures are more likely to be distressed than non-foreclosures)
Apologies for being a n00b, but you guys mention “arms length” deals all the time. What does that mean?
Arms length = unrelated buyer and seller.
Not dad selling to son at a sweetheart price.
This has come up in the context of appraisers. Appraisers are supposed to look for arms-length deals and ignore the non arm’s length transactions if they can figure them out.
Appraisers are also supposed to ignore the outlier transactions: some one
instantly desperate for cash – e.g. a relative was just kidnapped and they need an all cash transaction that will close tomorrow.
However, during the boom, appraisers had one job and that was to hit the number. Therefore, the list of transactions considered outliers grew and grew until they could ignore any transaction they wanted:
“Are you selling your house on a Sunday? Good, because last Tuesday this identical house sold for 1/2 the price, so I will ignore that transaction and use one from 2 years ago that also sold on a Sunday to give your house the higher appraisal that you need to get the bank to lend to your buyer who is clearly overpaying.”
I am exaggerating, but you get the idea.
And I have yet to see a high price ignored by an appraiser for any reason. They only ignore the prices considered to be too low.
FWIW, the Case/Shiller methodology (PDF alert) includes REO sales in the index.
The most typical types of non-arms-length transactions are property transfers between family
members and repossessions of properties by mortgage lenders at the beginning of foreclosure proceedings. Subsequent sales by mortgage lenders of foreclosed properties are included in repeat sale pairs, because they are arms-length transactions.
The Case/Shiller explanation of arms-length makes sense. The sale back to the bank should not count as a comp as the bank and borrower have a preexisting business arrangement.
However the subsequent REO sale should *not* be considered arms-length. There is no reason to think that there is any funny business in that 2nd transaction. The only difference between a homeowner to buyer sale compared to a bank to buyer sale is that the bank is likely to behave in a very rational manner while the homeowner may not.
So many posts on this site have comments regarding whether or not foreclosures/short sales are comps.
While I agree they have some relevance to valuations, they are FAR from perfect comps.
Let me give you a REAL-LIFE personal example. I’ve purchased a number of distressed homes in the Pheonix area over the last 3 months. In each case, we purchased a home at foreclosure and resold it WITHIN two months for 20 percent more.
IMHO, my resale of the property represents the REAL market value of the property and perhaps that’s even on the low side given that we are flipping quickly.
Consequently, whether many of you like to believe it or not…many (but not all) foreclosures/short sales/bank-owns are sold at discount.
Will have to go down more for me to even look at this location…Can you say Ghetto?
“….however, that is NOT the case if REO’s are a substantial % of the recent sales.” I disagree with this statement. REO’s are not comps regardless of their percentage in recent sales. The banks’ motivations are to minimize their holding costs, get the assets off the books asap, and get just enough from the sale to cover the loan. The banks are not motivated to get the highest price for the property, but just enough to recover the loan amount.
Since the banks’ motivations are not exactly the same those of as a normal seller in the open market, the REO sales are not comps regardless of the percentage in recent transactions.
steve – I think you’re saying that comps include an “irrational optimism” premium since they exclude transactions made based on an objective look at valuation, like bank sales.
REO sales are not “objective look at valuation” for the reasons I stated above. If your premise is that REOs are “objective valuation,” then there is support for your argument that normal market transactions carry an “irrational premium,” but your premise is incorrect.
steve – If REO pricing is not objective, calculated, or dispassionate then what is it ? Are you saying that banks set prices on a whim ? Or that banks get emotionally involved in the pricing decision ?
I thought just the opposite. My feeling is that banks try to set prices to move the property at the highest price possible without incurring the negative effects of carrying costs (or a downward trend in prices). Banks employ people who are experts at optimizing financial return.