April 27, 2010
A 7 Percent Slide From 2005 To 2009...But Up 8 Percent Since?
Purchased for $860,000 in May 2005, the renovated single-family home at 1409 20th Street returned to the market as a "pocket listing" asking $949,000 in early 2009 before being listed for $899,000 in February 2009. As we wrote at the time:
A sale at asking would represent average annual appreciation of 1.5% over the past three and three-quarter years for 1409 20th Street. And if you’re planning on playing the "I told you so card" with respect to its eventual sales price, go on record now or forever hold your peace (bulls and bears alike).
Following three price reductions and a "LAST CALL! Final $ Reduction" listing plea, the sale of the Potrero Hill home closed escrow in June 2009 with a reported contract price of $799,000 (representing average annual depreciation of 1.8% from 2005 to 2009).
And while we missed its return to the market two weeks ago, a few plugged-in readers did not. Now asking $865,000 (8 percent over its 2009 price). Once again, if you’re planning on playing the "I told you so card" with respect to its eventual sales price, go on record now or forever hold your peace.
∙ Listing: 1409 20th Street (2/1) - $865,000 [MLS]
∙ A Potential Single-Family Apple Atop Potrero Hill: 1409 20th Street [SocketSite]
∙ Its Last Call Is Heard: Apples To Apples For 1409 20th On Potrero Hill [SocketSite]
First Published: April 27, 2010 2:15 PM
Comments from "Plugged In" Readers
The biggest "winners" in fast turnovers are always the Realtors. 3X50K in 5 years!!!
I say it sells at 800K give or take 10K.
Posted by: lol at April 27, 2010 3:09 PM
Posted by: Snark17 at April 27, 2010 3:16 PM
Posted by: SFRE at April 27, 2010 3:23 PM
Posted by: R at April 27, 2010 3:35 PM
This house is selling as houses in a housing bubble should sell. $860K in 2005 is $958K adjusted for inflation to 2010 (usinflationcalculator.com, standard quirks about CPI apply), so a sale at asking is already a 10% real loss. If it sells for the prior sale price, it'll be around a 17% real loss.
There are quite a few wide angle shots here to make the place look bigger. The living room is attached to the main bedroom? If that's staging, the furniture is poorly arranged in the living room, and if they're keeping the pocket doors open for more light, you should look at what the bedroom looks like with the doors closed. The kitchen is unimpressive. There's no picture of the bathroom, so I assume it is too. I'm not a big fan of the trim in the dining room, although the rest of the details look pretty good. I also don't understand the random hallway with the closet with a desk, and that seems like wasted square footage in this house. And while Bay-view might be nice, industrial Bay-view isn't as nice. I feel like they'd be lucky to escape at the prior price.
Posted by: Anon E. Mouse at April 27, 2010 3:57 PM
Posted by: Jeremy at April 27, 2010 4:07 PM
Posted by: hubbub at April 27, 2010 4:17 PM
Posted by: dtrump at April 27, 2010 4:26 PM
I guess from the collective posts on here, and on the CS thread, that indeed pricing has increased from the 2009 bottom.
Posted by: SFRE at April 27, 2010 5:06 PM
@AnonEM: I disagree with your rote inflation calculator methodology. You don't even consider the cost the person would have to pay in rent, and using the inflation calculator, doesn't make sense. You need to use the return on an average market basket of Assets, not some theoretical index comprised of x86 computers and other consumables.
Posted by: SFRE at April 27, 2010 5:12 PM
Posted by: IckyNabe at April 27, 2010 5:20 PM
Thanks for your input, but I respectfully disagree. I see no reason to compare primary residences to actual investments because a primary residence is a consumable, not an investment. If you have a better inflation index, please share.
Similar to what happens in many housing busts, flat nominal pricing means real losses.
Posted by: Anon E. Mouse at April 27, 2010 5:22 PM
$765k but with easy FHA money could be wrong. In a normal non govt subsidized market, $725k
Posted by: calhousingbear at April 27, 2010 5:32 PM
It's ok to disagree. I don't have a better calculator, I just disagreed with the methodology. To male your calculation more relevant, you need to subtract out for rental costs of a similar property from 2005-10.
Again, I thunk you need to compare it to non-consumables, maybe a T-bill rate or something (then subtract out rental costs)
Posted by: SFRE at April 27, 2010 5:36 PM
I'm not sure why you want to subtract out rental costs, and I'm also not sure why you'd want to include only rental costs in the calculation (for example, why not include transaction costs and mortgage costs?).
It seems like you're trying to make a modified buy vs. rent calculation, but you're not including interest, taxes, etc. paid. There are numerous buy vs. rent calculators one can use, and I've found missionite's to be one of the most complete and inclusive.
In contrast, I'm trying to help examine housing values over time. Plenty of people say "my parents bought their house in 1980 for $200K, and now it's worth $800K," but we have no idea what that means unless it's compared to inflation, household income, rents, or some other index.
Posted by: Anon E. Mouse at April 27, 2010 5:54 PM
While I agree your primary residence is not strictly an investment, I also don't believe it is really a consumable either, and therefore, CPI does not make the most sense to me to use such comparisons.
"Consumables are products that consumers buy recurrently, i.e., items which "get used up" or discarded." I would tend to agree with SFRE that a different rate should be used. I personally use a composite of 1 year treasury rates to compute my own value of a dollar today versus yesterday. This is also an interesting viewpoint. http://www.measuringworth.com/uscompare/
Posted by: Skirunman at April 27, 2010 6:49 PM
(Median income x3) + (SF mystique + weather + fixed land + synthetic credit default swaps + realtor commissions + 20% ROI + google + google resume preparation cost - rational economic action)= $210,000
Posted by: ScoobyDon't at April 27, 2010 6:57 PM
Skirunman, that calculator is interesting. It doesn't include 2010 data yet, so this is based on 2009. $860K from 2005 is worth, in 2009:
$945K using the Consumer Price Index
$944K using the GDP deflator
$955K using the unskilled wage
$940K using the Production Worker Compensation
$934K using the nominal GDP per capita
$970K using the relative share of GDP
The main point here is that buying for $860K and then selling for $860K five years later doesn't mean you're even because of the time value of money (and because of transaction costs). We can quibble about what exactly that value is, and CPI is but one possible index.
Treasuries are an interesting suggestion. Treasuries are risk-free, whereas housing is most certainly not, but it gives us a baseline.
Btw, maybe "consumable" isn't the right word. I'm trying to get across the point that buying housing is consumption, just like renting is. Maybe that's not completely accurate, since housing is depreciable and land is not, but the two are often related, especially in SF where you can't necessarily build from scratch.
Posted by: Anon E. Mouse at April 27, 2010 7:10 PM
my bet.. 850K
Posted by: boblong71 at April 27, 2010 10:08 PM
why are they selling after only a year?? are we back in 'flip that house' mode?
if they get above what they paid $800k they are lucky and the buyer is a fool. housing prices will be falling for years. look at japan.
Posted by: bs at April 28, 2010 9:49 AM
@AEM: I still think you need to compare against asset classes, not against inflation metrics. Here are some asset metrics you can use:
2. CD rates
3. S&P 500 (general stock market indices)
4. Bank savings rate
I think it should likely be an average of those 4 items. If you assumed that they put 20% down (~$160k), then would have likely spread it across a couple of those things (or even worse spent part of it on actual consumables, such as a car, etc.).
Think about how you allocate your disposable income (including 401k) after you get your paycheck, then put it in those proportions. When you do, you are not above $900k
Posted by: SFRE at April 28, 2010 9:56 AM
"Think about how you allocate your disposable income (including 401k) after you get your paycheck, then put it in those proportions. When you do, you are not above $900k"
But we're not talking about what you do with your spare cash that's designated for savings. We're talking about what you do with your money that's designated for housing.
Posted by: Anon E. Mouse at April 28, 2010 10:01 AM
Not many single fam homes in this area. 850K
Posted by: jon57 at April 28, 2010 12:58 PM
I live nearby. Terrific neighborhood. Sunny, with wide open streets, and you can see for miles. You are out of the way, yet close to everything. You know your neighbors. I know for a fact this is not a flip and also not a distress sale.
Posted by: lark at April 28, 2010 2:53 PM
Just to note: the lot is shorter than standard. 25x75 vs 25x100.
Posted by: hja at April 28, 2010 6:08 PM
Posted by: spencer at April 29, 2010 2:01 PM
The list price for 1409 20th Street has been reduced by $16,000 (2%), now asking $849,000.
Posted by: SocketSite at May 11, 2010 7:34 AM
The list price for 1409 20th Street has just been reduced by another $39,000 (5%), now asking $810,000. Once again, purchased for $860,000 in May 2005 and resold in June 2009 for $799,000.
Posted by: SocketSite at June 10, 2010 10:33 AM
If they get the new asking, that will just be 12% over the $725k 2001 purchase price. About 12% below the 2001 price in real (inflation-adjusted) dollars. I guess that's better than buying tech stocks in 2001 . . .
As a 2000 buyer, I'm bummed, but as a 2010 would-be buyer, I'm elated.
Posted by: A.T. at June 10, 2010 12:26 PM
I maintain my original guesstimate to 790-to-810K
Posted by: lol at June 10, 2010 12:51 PM
The place is tiny! I say $780k and they buyer won't be happy after living there 2 weeks.
Posted by: Mr T at June 10, 2010 12:55 PM
It's not tiny, it's "charming." And just two blocks from the freeway to boot.
Posted by: A.T. at June 10, 2010 1:33 PM
These sellers probably believed the realtor hypesters that apples to apples SF is way up from "the bottom" last spring. Hopefully, it's a company relo and they'll pick up the commission.
Posted by: El Bombero at June 10, 2010 2:40 PM
Posted by: SocketSite at July 26, 2010 3:12 PM