October 27, 2009
Overlooking Architecture (And Upgrades) At The Montgomery (#502)
According to our plugged-in inside source, The Montgomery (74 New Montgomery) #502 offers great light and is surprisingly quiet ("thick walls and double-pane windows really keep the noise out").
Also noted, "the owners put a lot of money into it - subzero fridge (not a builder option) and custom cabinetry in living room, master bedroom and 2nd bedroom" so it’s not an apples to apples to comparison.
That being said, purchased for a recorded $1,242,500 in June 2008, asking $945,000 today (24% under its un-upgraded value in 2008). It's been on the market for 188 days with an original list price of $1,050,000.
Regardless, we're digging the old school city vistas and architecture.
∙ Listing: 74 New Montgomery #502 (2/2) 1,010 sqft - $945,000 [MLS]
∙ 74 New Montgomery: Soon To Be Sold Out Assuming Contracts Close [SocketSite]
First Published: October 27, 2009 12:30 PM
Comments from "Plugged In" Readers
$720 for HOA? Aside from paying the typical maintenance of the building (great roof deck, by the way), what else do you get from paying the high HOA?
Posted by: Wharton at October 27, 2009 1:00 PM
so called "double paned" windows, more properly called insulating glass...are not that good at sound control...Laminated glass, often 2-3 layers thick has a much higher stc rating; better for controlling sound.
Posted by: noearch at October 27, 2009 1:17 PM
HOAs there include the typical stuff - water, garbage, gas (for the kitchen burners as well as everyone's hot water), building insurance, 24/7 lobby attendant (which is a big chunk of the amount), and of course common area maintenance incl roof deck.
If you add up all the utils and insurance included and substitute a security system for the lobby attendant you'd be surprised how comparable it is to how much someone with a sfr pays every month.
The only utils the owners pay is elec, phone/internet, and cable (DirecTV there).
Btw, this unit is one of the few that has a deeded parking space in the building. If I'm not mistaken there are only 17 spaces for 107 units. Everyone else gets 3 yrs leased space at the Paramount garage and on their own after 3 yrs.
Posted by: SF Monty Rez at October 27, 2009 1:30 PM
Laminated glass, often 2-3 layers thick has a much higher stc rating; better for controlling sound.
Welcome to a coincidence dip! It is related to the development of a shear wave in the material, and depends on angle of incidence. It's especially relevant for upper-story windows, where the wavefronts arrive at shallow angles.
I love it when people actually pay attention to acoustical quality in these kinds of spaces; just don't take those STC ratings at face value...
Posted by: acoustician at October 27, 2009 1:45 PM
Wouldn't it be more polite to say "What a coincidence!"
Posted by: dipster at October 27, 2009 2:14 PM
$720 HOA seems like a relative bargain for a 2/2 given that the studio's pay $600 if IIRC.
Posted by: condoshopper at October 27, 2009 2:22 PM
The "No amenity but a doorman" SoMa buildings are running $600 psft, +/-. $935 seems a bit of a stretch.
Regardless, if it sells at asking, the current owner will have paid somewhere around $25,000 per month to live in a 1000 square foot, 2 bedroom condo.
Hope they enjoyed it!
As for windows, my significant other lives in SoMa. At 5:30am, the garbage trucks show up and you can hear them perfectly through the double paned windows. "Surprisingly quiet" tends to be true during the day: at night, not so much.
Posted by: tipster at October 27, 2009 2:30 PM
Not to be an ass, but how is a doorman (or 24/7 lobby attendant) an amenity? What do they do?
I'd rather not pay $700/mo for someone to play on the interwebs in between opening resident's doors.
Posted by: lolcat_94123 at October 27, 2009 2:49 PM
Tipster - don't know where in SoMa your sig other lives but I live on the 7th floor of this building and it's by far the quietest place I've ever lived in or stayed in the city (have lived at 310 Townsend, in Pac Heights, and Golden Gate Heights, and stayed in probably 25 different hotels). Not sure how you could compare the noise in a unit in the general area vs a specific unit somewhere else.
Posted by: SF Monty Rez at October 27, 2009 3:05 PM
Although the bedrooms might be fairly small, the space seems to be well utilized. This 1010 sq. ft. unit has space for two couches (or one l-shaped one] a table for six in the living area and a decent amount of counter space in the kitchen. Amazing that this has greater utility than the curved 2/2 units at the Infinity, which are over 1300 sq. ft. That said, north of $900 psf might still be a tough ask, unless someone really covets that deeded parking spot. It certainly beats parking at the Paramount.
"Hope they enjoyed it!"
Tipster - is that snide comment really necessary? Definitely some bad decisions here but is there really any need to pile on someone who could have been a good faith purchasor and not a 'specuvestor'? The latter, I agree, are fair game. Perhaps its simply your character to behave like school on a Sunday - no class!
Posted by: huh? at October 27, 2009 3:19 PM
A doorman accepts packages. So you can send stuff directly home and it's waiting for you when you get home. In addition, you can leave them items to be picked up. Some work 9 to 5. In any event, they don't really do very much. At least my significant other's doorman doesn't seem to do much else, doesn't even open doors.
Others work later hours and act as a sort of a minimal security guard in the nighttime hours.
As for quiet, I think it depends on which unit you have and where the garbage cans are stored in the building, as well as surrounding buildings. We hear the pickups for the surrounding buildings at 5:30am on the 5th floor.
If the garbage cans are within earshot, you are going to hear them, if not, you won't. Double pane glass helps some, but not enough to really sleep through.
Posted by: tipster at October 27, 2009 3:29 PM
Wouldn't it be more polite to say "What a coincidence!"
dipster: I wish I had thought of that! You would think that all good acousticians would know all the good acoustical puns, especially for target-rich phenomena like the "coincidence dip"...
Posted by: acoustician at October 27, 2009 3:58 PM
Huh, stop being so negative. I really did hope they enjoyed it. $25,000 per month is a lot of money and I hope they got some enjoyment out of it.
I'll try to repeat it often enough so that you finally believe it.
Posted by: tipster at October 27, 2009 4:02 PM
^ No. You really didn't mean it. At all.
As for the garbage collection, a simple phone call to Golden Gate Disposal works wonders. There was a time when emptying SOMA's bins made perfect sense at 3, 4, 5 a.m. But now that they're well aware of the residential incursions, they are quite accommodating when you ask.
Posted by: amused at October 27, 2009 4:08 PM
"I'll try to repeat it often enough so that you finally believe it."
I think all readers with above 70 IQ got it the first 100 times you have essentially said the same thing. The fact that you keep repeating it, every day, over and over, suggests you may be over-compensating for some other shortcoming.
Posted by: huh? at October 27, 2009 4:18 PM
So many times I've seen comments to the effect of, "I bought my place to live in and don't care whether it loses value."
So what's wrong with tipster commending that attitude? You guys need to lighten up. It's only money!
Posted by: Legacy Dude at October 27, 2009 4:29 PM
i don't think tipster's comments are snide or that he takes pleasure in knowing that someone lost money. he's just pointing out how ridiculous prices used to be, which was apparently clear to him all along but which is now clear to everyone in retrospect. real estate was used as get rich quick vehicles during these years, and the soma condo's were even moreso probably, so it's pretty fair game. sure there were some unwitting hardworking folks who got fleeced, but it's not likely they bought this type of property and these blog comments are not directed toward specific people but the whole frenzy in general.
Posted by: condoshopper at October 27, 2009 4:31 PM
No one is arguing accuracy. It's about whitewashing. You can't keep taking victory laps and then try to pass it off as genuine concern.
I mean, come on. Seriously.
Posted by: amused at October 27, 2009 4:42 PM
Yawn, tipster's rants are getting old. I agree, prices have dropped, dropped huge throughout the Bay Area. I think it's good, but why hammer people who lost out? Keep it to yourself, Karma comes around.
About this unit, I love it. Possibly the best location south of market including SOMA, Mission Bay, Rincon Hill etc. Compare it other buildings in the area, and this place kills them. 199 NM, One Hawthorne, Blu, 829 Folsom doesn't come close. Montgomery is such a neat street with Financial District on one corner and an art school on the other end. It's the closest you'll get to New York in the city. MOMA is right behind this building, Palace Hotel next door and so is the Yerba Buena. If you have a kid, best park in the city.
HOA is high but compare it to Blu. You get the killer roof deck compared to a small courtyard with no furniture. This unit also has a deeded parking!
Posted by: Anthony Randolph at October 27, 2009 5:32 PM
> I think all readers with above 70 IQ got it the first 100 times
> you have essentially said the same thing. The fact that you
> keep repeating it, every day, over and over, suggests you may
> be over-compensating for some other shortcoming.
If I posted every day for the rest of my life about people who lost money in Real Estate it would not even come close to the times I was called an “idiot for renting” , “ a fool throwing my money away on rent”, “someone that was going to be priced out forever”, etc. etc. in the years since I sold my last home in Burlingame and became a renter in the city. I’m guessing that the reason huh? does not want to read Tipster’s calculations of real estate losses is that he may have been one of the people pushing others to make (what we all know now) were horrible “investments”…
Posted by: FormerAptBroker at October 27, 2009 5:40 PM
i find the calculations useful and comforting to know that i am in the right place with my finances. If this place goes for 950K_, the next bagholder will prob be paying a similar amount for "renting" from the bank
Posted by: spencer at October 27, 2009 5:45 PM
No one who put in the upgrades these folks put in is a speculator ... I don't know the owners personally but heard that either the husband or wife got transferred to so calif.
Posted by: SF Monty Rez at October 27, 2009 5:47 PM
I think 25k/mo (if it sells here) is a low estimate of the cost - probably more like $30k. That's ok, though, people haven't been reading. The "owner" put in a subzero frig and custom cabinetry. Probably even a few nail holes in the walls and they probably even repainted. Can't do that as a renter!! You bitter renters are all just jealous...
Posted by: anon2 at October 27, 2009 5:54 PM
FAB, I don't think huh? has any problem reading that someone spent $25,000.00 per month to live in a two bedroom condo as much as he or she doesn't want potential buyers: 1) reading that someone spent $25,000.00 per month to live in a two bedroom condo; and 2) thinking that they too could end up spending $25,000.00 per month for a two bedroom condo if they buy now.
Let's just say that huh?'s "concern" is about as genuine as mine and leave it at that.
Posted by: tipster at October 27, 2009 8:01 PM
I have looked at this unit facing New Montgomery when the development first opened and it was indeed a lovely place. The price paid was pretty much the FULL asking price. They probably got some HOA money out of the deal plus the $6500 Sub-Zero. Only the premium 2/2 gets a parking spot. The unit is actually quite small. The large windows give the unit the spacious feel but in reality, it doesn't have a lot of room. Great for a getaway but not so if you have a lot of furnishings. The price clearly is still too high. I would guess the seller has to lower the asking to $795,000 to realistically generate interest and probably gets offer in the $750,000 range. The Infinity curve 2/2 is much larger at 1300+ sf and units with downtown or decent water view can be had for not much over $600/sf. I personally like the curve 2/2 better - a matter of taste. Same can be said for One Rincon Hill and BLU. The seller who bought at the absolute peak price is essentially trapped. After paying commission, he/she may net under $700K. The same for Infinity owners who bought 2/2 for 1.3 million only to see similar new units sold at $750K a couple of years later. I suppose identical nauseating feeling if you had bought 2000 shares of Google on margin at 650 and watch them dip below 400 in March. At least you got to sleep in your lovely condo and there was no margin call...
I love the building and its proximity to financial district, Union Square and BART. Fire-engine siren may be the worst sound issue and the alleys around the building are not as safe as I would like.
Posted by: Outsider at October 27, 2009 8:14 PM
"I’m guessing that the reason huh? does not want to read Tipster’s calculations of real estate losses is that he may have been one of the people pushing others to make (what we all know now) were horrible “investments”…"
I'm not a realtor and don't derive any of my annual income from real estate transactions. I also have no issue with people hammering on the messengers who essentially told you "buy now or be priced out forever". This owner might well be the victim of such rhetoric, so poking fun at his/her plight reflects bad taste all round.
Posted by: huh? at October 28, 2009 9:42 AM
Tipster can talk about noise issues in a unit of a building he's never even set foot in, or delight in pointing out money burning for the 3000th time if he wants to. The editor gave Tipster a green light for all manner r.e. panning -- whether straightforward, convoluted, erroneous, or of the aluminum foil protective headgear variety -- long ago.
Posted by: anonn at October 28, 2009 10:12 AM
FAB - Then you need to seriously consider hanging out with a different group of people. Let's do some math: "If I posted every day for the rest of my life about people who lost money in Real Estate it would not even come close to the times I was called an “idiot for renting” , “ a fool throwing my money away on rent”, “someone that was going to be priced out forever”, etc. etc."
Okay, if you are 60 and with an average life expectancy you would be looking at around another 20 years. 365 x 20 = 7,300.
If I had friends that called me an idiot 7,300 times in a few years, I would get new friends. If these were not friends but other people that were calling me an idiot 7,300 times in a few years I'd get a restraining order of these stalkers.
Now if you do not have an average life expectancy then my condolences but you then should not use "the rest of your life" as a measuring system in a public forum without disclosing that you are about to die so people can properly evaluate the bs associated with your hyperbole.
Posted by: Rillion at October 28, 2009 10:28 AM
Sure, tipster's calculation about the obscene amounts that these owners flushed down the toilet, whether rolling the dice or buying into the absurd hype, repeats a point that has been made before. But the sheer enormity of the now-realized risk is still an important counter-point to the prevailing line in the RE industry.
Here are a couple of the many recent, local lines being bandied about:
"And it really does sound like NOW is the time for San Francisco home buyers to get off that proverbial fence and go and buy something." "First-time buyers are owning homes years before they thought they ever would. Buyers who were hoping to afford that dream house one day are now finding it more affordable than they ever imagined. Sellers who have owned their own home for a while are still able to sell at a profit and are able to scoop up a bargain when they buy a replacement. Even sellers forced to sell at a loss are able to offset that loss with a potential gain on the buy side."
What drivel! The risk that a 2009 buyer of this place at the current reduced price would see a substantial loss, even one bigger than the huge loss suffered by those who bought just 16 months ago, is very high. Putting raw, straight numbers on the situation may seem cold, but it is necessary to counter the B.S. that continues to pour from those who really do profit from the misfortune of people like the 2008 buyer.
Posted by: Trip at October 28, 2009 10:40 AM
Do you feel a similar compunction to set matters straight when it comes to your own frequent misstatements? I've not seen it.
Posted by: anonn at October 28, 2009 10:57 AM
I meant "lack of compunction"
Posted by: anonn at October 28, 2009 11:00 AM
Human perception is an interesting thing. Why was it OK to scoff at bitter renters when prices were rising, but it's not OK to scoff at bitter homedebtors when prices fall?
Posted by: Legacy Dude at October 28, 2009 11:47 AM
"The editor gave Tipster a green light for all manner r.e. panning -- whether straightforward, convoluted, erroneous, or of the aluminum foil protective headgear variety -- long ago."
Nope, not true. I get posts deleted like you do. For proof, here are some links to my deleted posts:
See. They're all not there.
As for noise, my purpose was to pass along knowledge that I've gained. I never stated one thing or the other about this unit. But it's helpful to pass on things people should investigate and ways they might go about doing that. My experience is that the most help you'll get from many Realtors is "These double pane windows are surprisingly quiet", when, as noted above, double panes only help noise a little bit (they are designed for thermal insulation, not noise). You kind of have to investigate on your own.
Posted by: tipster at October 28, 2009 11:55 AM
Hopefully there are a lot of people who read your question thinking, "Neither one is OK." I only really started posting here in spring 2007. But I'm sure there were plenty of people reprimanding arrogant buyers three and four years ago. For me what's not cool is going out on limb after limb after limb and trying to play it off as if you're a conscienscious crusader. What a joke. You're a hater. Own it.
Posted by: anonn at October 28, 2009 11:56 AM
Of course people should investigate on their own. That's why they all do, and noise is a prevalent concern. No. You were never in the unit in question. You don't know the brand windows, you know nothing about the construction quality, and you don't even know whether "suprisingly quiet" came from a realtor. Yet you were compelled to say something negative. You'll go out on any limb whether imagined or perceived in order to hate on SF r.e. Own it.
Posted by: anonn at October 28, 2009 12:06 PM
"Of course people should investigate on their own."
anonn -- I don't know about the history of tipster's statements around here, but I hardly think it's unfair to describe potential problems with a place that people may not have considered.
Most people have no idea what to look for when they're "[investigating] on their own." Tipster's (and others') comments about the glass here do provide context for people, even when they're speculative.
I thought one of the most valuable comments someone made was regarding some old house (was it the Bourn Mansion?) that had lots of fireplaces where someone suggested that these types of houses often don't have heat vents on the 2nd floor. I wouldn't have known to even look for that problem specifically had someone not mentioned it, even if it was speculative.
This type of information doesn't hurt the value of the house because the house either has the condition or doesn't have the condition already, so I don't see why you should be so up in arms about it. These sorts of general transparency are a good thing (which, as a side note, is why I would advocate MLS being more open than it is).
Posted by: corntrollio at October 28, 2009 12:15 PM
You know what? Fair enough. Fair enough, even though noise in condos is something that's very much investigated by buyers each and every time in my own experience. Noise + light -- most buyers will return to properties at different times of day to examine these factors. And well they should. I'm not up in arms. I'm merely pointing out how Tipster strains his own credibility by always needing to say something negative, regardless of context. He regards the entire process as a scam in every single way.
Posted by: anonn at October 28, 2009 12:22 PM
Not to get involved in a tangential argument, but I live much high up in the building with double pane windows next to The Montgomery. The garbage truck noise is worse than the fire trucks here. Fire truck siren only lasts a few seconds, the garbage truck bangs and clangs go on and on.
Posted by: Fish at October 28, 2009 1:28 PM
Thanks for, um, linking to my blog, Trip. But how about putting it in CONTEXT?! You missed the most important part of the post:
A study by investment company T. Rowe Price points out that investing when prices are low can result in amazing gains. For instance, between 1970 and 1990, the annualized rate of return for the S&P 500 was 11.5 percent.
Can you deny that prices have dropped and are actually steady and or on the rise in certain areas of SF????? Can you deny that interest rates are at historic lows now????? Can you argue against the fact that a SAFE 30 year FIXED mortgage will keep your housing payment low as inflation goes up and uP and UP???????
Sorry for the people that bought last year and have to sell now, but they f*cked up. I've NEVER allowed a buyer with short term ownership goals to buy. It's PLAIN STUPID. And YES, I've used those exact words with clients.
Quit lumping us ALL into the category of Pollyanna's with a sinister plot to screw people out of their money. I don't strive to become the richest realtor - not because I'm not good at what I do, but because I actually look at each person's situation and tell them whether buying a home is right for them.
So - thanks for plugging my blog (no such thing as bad PR), but try quoting properly the next time.
Here's something you can actually quote me on:
Real Estate is NOT a short term investment. It is a strong and solid investment over the LONG TERM. Those with safe and steady income, a proper down payment and a goal of owning their property for a LONG time WILL see a return on their investment better than leaving their money in the bank, or worse yet, renting.
Next time, I'd prefer you leave me out of the conversation if you're going to take the context out of my message. But hey, thanks for the extra traffic to my site.
Posted by: LubaSF at October 28, 2009 1:58 PM
Fish - what building do you live in? The Paramount? The Montgomery's garbage cans (and those for Starbucks and Jamba Juioe) are set up near the corner of Jessie and Annie so I suppose someone living in that part of the building gets some garbage truck noise. I live in the middle of the building on the alley side and hear very little outside noise ever.
Posted by: SF Monty Rez at October 28, 2009 2:01 PM
Legacy Dude - I would and will be just as critical of those that would mock renters.
That's why I told FAB he needs to dump whoever it was that was calling him an idiot thousands of times. If they were family (which are harder to dump then friends) then he has my sympathy for have such poor relations.
Posted by: Rillion at October 28, 2009 2:27 PM
LubaSF, I wasn't trying to pick on you personally. The vast majority of local RE blogs and websites say the same thing. I just linked to your blog because it's one of the handful I check every week or so (other than SS). But I will briefly address your questions.
Can you deny that prices have dropped and are actually steady and or on the rise in certain areas of SF?????
Yes, I can deny that. Initially, I take note of your "certain areas" qualification. Which areas did you have in mind? From every market indicator I've seen, from medians to "apples," prices continue to fall everywhere in SF. The market segment that is doing the least bad right now appears to be the extreme low end, likely due to the small tax credit and easy FHA lending. If you disagree, what do you base your position on?
Can you deny that interest rates are at historic lows now?????
Yes, that is not a true statement unless one disingenuously ignores inflation/deflation. Real interest rates (generally the spread between US treasury yields and actual in/deflation -- here, the spread between mortgage rates and in/deflation) are currently the highest since the 1980s.
Can you argue against the fact that a SAFE 30 year FIXED mortgage will keep your housing payment low as inflation goes up and uP and UP???????
Yes. See discussion above re real interest rates and prices. Also, by limiting your discussion to the "payment" you ignore the fact that housing prices continue to fall, and thus real money is at risk even if the mortgage payment itself is low. This is the line that car dealers always use to lock buyers into expensive, long-term payment plans (only $199 a month). Moreover, where do you think inflation is going to come from any time soon? I don't see it for at least several years. We're in a deflationary period now. And most people do not stay in a place for 30 years, as you are well aware. And renting is still far less expensive than owning in SF, apples-to-apples. The owner of this place will suffer a devastating financial hit (I hope they can absorb it OK) and would have been way better off renting or even staying in the Ritz for the last year and a half.
My point above was that cheerleading by those whose primary interest is to get people to buy something, anything tends to be misleading or contain a lot of half-truths, and tipster's cold, hard facts are a nice counter-point to that.
Posted by: Trip at October 28, 2009 3:59 PM
"It is a strong and solid investment over the LONG TERM. Those with safe and steady income, a proper down payment and a goal of owning their property for a LONG time WILL see a return on their investment better than leaving their money in the bank, or worse yet, renting."
It's not even clear that that's true in all areas. Using the word "investment" is highly questionable because it's not clear that housing in all areas is an "investment," when in some cases homeownership just serves as forced savings.
Posted by: corntrollio at October 28, 2009 5:18 PM
Hey Trip, We tend to get a bap reputation in the industry, and I just happened to to write a tongue in cheek blog post about the fact that the market IS getting better. I don't have time to run a neighborhood by neighborhood breakdown for you, but in San Francisco, since January, prices HAVE been rising. For single family homes, these are the median prices since January of 2009.
While there has been a little up/down action, median prices since January have crept up quite a bit. I've also personally given my clients estimates of what I think places are worth based on comps, and we end up losing them because my estimates are too conservative. I'm not ready for my clients to jump in over their heads, but I am ready for people on the fence about buying to start a dialogue with a realtor - hopefully one that will tell them to stay put in their comfortably priced rent controlled apartment if that makes the most financial sense.
As for interest rates - I'm talking strictly about the rate of a mortgage - rates were in the double digits, in some cases 15% and more. Here's a site that has the info to back that statement up.
In terms of inflation, you're right. TODAY, we're in a deflationary period. But that's not going to last forever. Historical charts (http://www.usinflationcalculator.com/inflation/current-inflation-rates/) show this as a fluke and inflation will be back - I'll bet my bottom dollar on it. And since I advise my clients to buy for a 10 year holding period, I can bet the cost of living and housing WILL increase over the next ten years.
My point is that statistics can be twisted to prove anyone's point. Data is objective, but it's use is subjective - but it doesn't change that historically, real estate is a good investment in the long term - and by long term, I mean a minimum of 7 years with 10 or more being ideal.
As for the person who lost on this particular condo, I feel horrible for them. But, had I been their agent, I would have sat down and looked at their long term picture and likely would have highly advised against them buying at the time.
Anyhow - sorry for any frustration on my end - we (realtors) are just constantly accused of being the equivalent of used car salesmen in our business and I just get a little sensitive when every time we say something, we're accused of saying it simply because it's in OUR best interest. Not all of us work that way.
Posted by: LubaSF at October 28, 2009 8:26 PM
"Fish - what building do you live in? The Paramount? The Montgomery's garbage cans (and those for Starbucks and Jamba Juioe) are set up near the corner of Jessie and Annie"
Monty, yep. I'm on the Annie side of Paramount looking at Bay Bridge.
Posted by: Fish at October 28, 2009 10:35 PM
Historical charts show this as a fluke and inflation will be back
Tell that to the Japanese. Here is a charming first person account of what 20 years of deflation look like. Not exactly the worst thing in the world, but you certainly wouldn't want to be trapped by a mortgage if rents don't go up over that period of time ...
Posted by: EBGuy at October 29, 2009 12:27 AM
"Historical charts show this as a fluke and inflation will be back"
Past performance is not a guarantee of future results.
Predicting the future by looking at the past and drawing a straight line through it will give you the right answer 99.9% of the time but guarantees that you will miss the inflection points.
Posted by: diemos at October 29, 2009 1:52 AM
Diemos and EBGuy - both points are very valid. I do just want to point out that the reality is that we are always working with imperfect information.
We never know what tomorrow will bring, so all we can do is do our homework, prepare for the worst, hope for the best and make a decision that fits our current needs and lifestyle.
Posted by: LubaSF at October 29, 2009 1:58 AM
LubaSF, I agree that we never know with 100% certainty what tomorrow will bring, and that's why I initially pointed out the problems with statements such as "since I advise my clients to buy for a 10 year holding period, I can bet the cost of living and housing WILL increase over the next ten years."
I've said before here that there are many, many good reasons to buy a home in SF (I own one myself), even at today's still-inflated prices and the current declining market. But buying a home as an investment is certainly not among them. Even with a 10-year horizon the risks of losing substantial amounts of money on a home bought in this market are significant. And inflation is unlikely to "save" a bad deal. For example, the difference in yield between 10-year TIPS (inflation-protected) and 10-year notes is less than 2%, suggesting the market expects inflation to remain low over the 10-year life of the securities.
Realtors sell homes and try to get people to buy them. They are not, and are not qualified to be, investment advisors, and my biggest beef is when they act as such or make promises of future gains while declining to accept the responsibilities (or liability) that go along with playing that role. Are you prepared to make your clients whole if the investment value of their new home does not pan out 10 years from now?
Posted by: Trip at October 29, 2009 9:03 AM
Somebody should explain to Luba that medians are not the same thing as values. Just reinforced the realtor stereotype she wants to avoid.
Posted by: Anna at October 29, 2009 2:37 PM
Somebody should explain to Luba that medians are not the same thing as values. Just reinforced the realtor stereotype she wants to avoid.
Hardly. She quoted median flatly. How about you make the same point to a bear the next time they use median the exact same way Luba did?
Posted by: anonn at October 29, 2009 3:10 PM
"Past performance is not a guarantee of future results."
No but this graph does not bode well for those that think we will have 20 years of Japanese style deflation...
Posted by: Rillion at October 29, 2009 3:19 PM
The previous owner of 2151 Green "disappeared" $3million+ from WaMu at the foreclosure auction and the current owner could "disappear" a similar amount from Barclays depending on how the lot auction (2157 Green) goes (the loan amount was for $5million). This is who the Fed is trying to fight. Add to that, the vacancy rate is atrocious in our building which was purchased about two years ago (the CRE avalanche). I think Mole Man said it best: $1trillion into a $10trillion hole only goes so far.
For a contrary opinion, here's a good chart showing how Fed and Japanese Central Bank responses differed. I was always comfortable with the Fed's ability to get money off the street by winding down 'temporary' lending facilities (like TAF) rather quickly. Well they have been winding down TAF, but it's not been an orderly exit, though, as they've picked up the slack with purchases of GSA debt and MBSes (that's the trillion spoken about before).
For now, and the foreseeable future, I ride with the deflationistas. Ask me again in 2013 if Mortgage Forgiveness Debt Relief Act hasn't been renewed.
Posted by: EBGuy at October 29, 2009 4:25 PM
Okay, got it, printing money is not inflationary and we don't have to worry about the banks ever lending out any of that all that printed money they are being handed by the FED. Good to know the Ex-SF'er is totally wrong for believing in that whole kapoom nonsense.
Posted by: Rillion at October 29, 2009 5:00 PM
oh and EBguy I guess our main difference is I consider the years past 2012 to be the foreseeable future. We are not in for a 20 year deflationary environment, 5 years, sure maybe, but not 10.
Posted by: Rillion at October 29, 2009 5:04 PM
We're probably not in disagreement (10 years of deflation would be a stretch, but not exactly a picnic for current buyers). At this point, though, I don't think the poom is inevitable; the banks lent out a lot of money (which is created out of thin air thanks to the miracle of fractional reserve banking) that they're never gonna see again (well, the loans they kept on their books, anyway). We'll see if Ben can keep up.
Posted by: EBGuy at October 29, 2009 6:10 PM
"printing money is not inflationary and we don't have to worry about the banks ever lending out any of that all that printed money they are being handed by the FED"
Rillion -- you're right that printing money is inflationary, but so is EBGuy on money disappearing. The issue that people often forget is that inflation is a function of money supply AND credit. Right now we are seeing a huge destruction of credit, so while the printing money is inflationary, in many cases it is simply taking the place of credit. As such, even while the Fed is increasing money supply, we can still have deflation as long as credit is still disappearing.
If I were LMRiM, I would suggest that short sales and foreclosures (as currently occurring) cause money to go to "money heaven" because they represent a decrease in credit typically.
Posted by: corntrollio at October 29, 2009 6:16 PM
Trip - I see your point. And this forum isn't the best place to get to know me or my advice to clients, because each one gets different advice. I've pointed clients away from real estate when they wanted to use it as "an investment." I had 2 young kids in their early twenties that wanted to buy a condo in 2007. I advised them against it, they were smart enough to listen and now, they're thrilled they didn't lose their shirts on the place they wanted to buy. I make general statements in a forum - for instance, you emphasize "I can bet the cost of living and housing WILL increase over the next ten years" whereas I emphasize "I can BET the cost of living and housing will increase over the next ten years" and add "but there are NO GUARANTEES" and ask "will you still be happy with your purchase if you don't financially gain from it?" Their answer will dictate where we go next.
And you're right, my business it NOT to provide investment advice, but I'm asked several times a day "how's the market", "where's it headed", "is now a good time to buy" - and my answer is almost always "it depends." The problem is, I have to have an answer, which I qualify by explaining that it is just MY OPINION and that if the nation's top economists can't agree where the market is headed, my opinion shouldn't be the basis of a decision on whether or not to spend a minimum half million dollars.
As for whether I am prepared to make clients whole if the investment value of their new home does not pan out 10 years from now? No. I'm not. But I'm not promising the value of their homes will go up. I'm answering their questions about the market as best as I can and I'm pointing them in directions to do more research when needed. My job today is to help them find a home, to negotiate the best deal for them and to get through the escrow process as soon as possible. Period. I'll provide opinions along the way, but they are just that - opinions.
And Anna - you're right, median price is not value. But we're talking in generalities, and this isn't an economics class. Thanks for pointing it out though - just in case some other readers were confused.
And Annon - thanks for stepping in - very much appreciated.
Posted by: LubaSF at October 29, 2009 10:41 PM
LubaSF, for the record, I just cut-and-pasted from your earlier post stating that you bet the cost of living and housing WILL increase over the next ten years.
But thanks for clarifying your m.o. when asked by clients for market information and opinion. I think your approach is reasonable: "I'm not promising the value of their homes will go up. I'm answering their questions about the market as best as I can and I'm pointing them in directions to do more research when needed." From my experience, your approach is not the norm in the industry, particular in the last 10 years or so. From the NAR to local blogs the dominant RE pitch was and is that buying a house is not primarily about getting a place to live but is a can't-miss investment -- no caveats or warnings. And that misleading sales pitch has led an awful lot of people to serious financial distress. This part of the thread started when some criticized tipster for pointing out the huge sums that the 2008 buyers of this condo are poised to lose. Yes, I know, realtors are not solely responsible for the housing market bubble and subsequent conflagration that we are still in the midst of, but they were (and are) certainly a key player in fanning the flames. I wish those in this industry who act ethically would police those who don't.
Posted by: Trip at October 30, 2009 7:40 AM
I guess what it comes down to is you have a bit more faith that the whatever exit strategy the Fed is sitting on will be both implemented at the right time and work. I do not have faith that the Fed will be able to perfectly manage the system so that we do not end up with an inflationary spike and or skyrocketing interest rates sometime in the not so distant future (within a decade).
Posted by: Rillion at October 30, 2009 9:12 AM
"I guess what it comes down to is you have a bit more faith that the whatever exit strategy the Fed is sitting on will be both implemented at the right time and work."
I'm sure inflation will be back at some point soon. I'm merely talking about the present because many people look at Fed statistics and point out how we're going to have hyperinflation in the next few months because of their actions, and in the short-term, that's just not true. In the short-term, there's still plenty of credit destruction going on, and the Fed is just temporarily replacing it. In the longer term, who knows...
Posted by: corntrollio at October 30, 2009 9:52 AM
"And Anna - you're right, median price is not value. But we're talking in generalities, and this isn't an economics class. Thanks for pointing it out though - just in case some other readers were confused."
Sorry Luba, this is your comment that confused me:
"I don't have time to run a neighborhood by neighborhood breakdown for you, but in San Francisco, since January, prices HAVE been rising. For single family homes, these are the median prices since January of 2009."
If medians are not values what evidence is there that prices have been rising?
Posted by: Anna at October 30, 2009 4:54 PM
Trip - I'm embarrassed that I used that emphasis (in terms of "WILL") the way I did. I'm usually not that emphatic, but I was probably trying to make a point - and in a blog post, when dealing with readers with short attention spans, you write things fast, and often times don't take the time to read into them. It taught me a lesson to take a look at the message as it comes across and not just how it sounds in my head when I'm writing it.
And I'm glad we got into this dialogue, I'll try to police my own blog posts a little better from now on - not because I don't stand by what I write, but sometimes it's not about "what" but more about "how."
As far as policing other REALTORS, I wish there was a way for that to happen. The system is imperfect and many have huge egos and have deep pockets that they'll fill at any cost. I'm really lucky to know a lot of decent and honest ones that really are human beings and care about their clients. I'm also unlucky enough to have run into more than my fair share of a**holes. (In fact, many of my clients are runaways from past agents that treated them like tissue and threw them away once the commission check came.) It's the nature of the business. It would be even better if people could act like human beings and skip the need for policing altogether, but that's a philosophical discussion for another place and time.
Have a great weekend!
Posted by: LubaSF at October 30, 2009 4:58 PM
Anna - I didn't catch your comment before. In our industry, we use median price as an indicator of the condition of the market. If it goes up, it typically means that values are also rising. If it goes down, it typically means that values are falling. There can be other factors in play, for instance, a strange mix of high end properties that sell in one month would obviously increase the median price.... but it median price typically correlates to property value in most occasions. I hope that helps clarify my statement.
Posted by: LubaSF at November 1, 2009 8:11 PM
The listing for 74 New Montgomery #502 has been withdrawn from the MLS without a sale at $945,000. Once again, purchased for a recorded $1,242,500 in June 2008 but then upgraded.
Posted by: SocketSite at December 28, 2009 1:11 PM
It didn't sell at $945K, so we're looking at a loss of at least $300K + commissions and expenses and remodeling costs.
Walking away after stopping payments and living for free for as long as possible has got to be the best move here - hard to imagine that they put down more than $350K, but anything is possible I guess.
Whatever, at least in this instance the market appears to be working as it should. Happy New Year!
Posted by: Bombero at December 28, 2009 1:57 PM