April 27, 2010

A Winner’s Curse That Has Yet To Be Cured

819 Haight Street

As we wrote this past August:

A renovated Victorian at 819 Haight Street hit the market in 2005 asking $1,395,000, it sold for $1,635,000 ($240,000 over asking). No word on what role the buyer’s agent played in advising their client on how to "win" in a competitive situation ("pay more!").
As a plugged-in tipster notes, back on the market today and asking $1,595,000. One and one-half rather nice baths then, one and one-half rather nice baths now.

As we added in March:

The August listing was delisted in November without a sale, but 819 Haight Street was re-listed anew at $1,535,000 a couple of weeks ago. It’s still active, available, and with only 18 official industry days on the market. We continue to dig the kitchen.

And as a plugged-in reader noted today, the asking price for 819 Haight Street has been reduced to $1,470,000. Hopefully those who will dismiss the apples-to-apples outcome due to the "competitive" nature of its 2005 sale also dismissed its use as a comp in 2005 (along with every other sale that garnered multiple offers at the time).

∙ Listing: 819 Haight Street (3/1.5) - $1,470,000 [819haight.com] [MLS]
A Four Year Hold For A Renovated 819 Haight: A Winner's Return [SocketSite]
819 Haight Street’s Return Redux: Winner's Curse In Action? [SocketSite]

First Published: April 27, 2010 12:30 PM

Comments from "Plugged In" Readers

I went in this place a few weeks ago on my way home from hoops in Duboce Park. It was done quite nicely. The biggest problems at this price point are:

(a) there is not really a third bedroom. The third room upstairs is an upstairs living room, which is very nice, but not set up well for a bedroom.

(b) no second bath.

(c) the downstairs living room and dining room are basically wasted space with that big kitchen and the upstairs living room.

(d) right on Haight Street.

This would not work very well if you had kids -- maybe OK for one kid. This is a great place for a couple with no kids (I think this describes the current owners), but pricey for that demographic. This place was an expensive lesson in bubble economics for the 2005 buyers.

Posted by: A.T. at April 27, 2010 12:57 PM

I noticed this piece in the listing (Nina's on the ball and it trying to address a major concern -- short of the owner actually ponying up for a new bath): Potential 2nd bathrm upstairs, contractor's floorplan provided for review.
Here's my 21st century "green" bath solution (on the cheap?) -- located in the closet area of the rear bedroom. No sewer connection, that's so 20th century; composting toilet with 'receptacle' beneath the back porch (should have a straight drop). Shower backed up to the main bath tub for hot water access. Plumb shower and sink to a greywater system in the back yard.

Posted by: EBGuy at April 27, 2010 1:26 PM

@ebguy: I do hope you are joking. You have to be f**king kidding about that cheap bath.

Composting toilet straight drop to the back porch? No sewer connection?

Ever heard of the building code? health codes? god, if more people did something as stupid as that, we'd have the black plague here in no time.

Tell me you're not a licensed contractor.

Posted by: noearch at April 27, 2010 1:34 PM

That's a joke, son.

--Foghorn Leghorn

Posted by: anon at April 27, 2010 1:39 PM

still don't get the grey slate steps clashing with the "painted lady" paint job. covering terracotta steps that replaced original painted wood steps?

Posted by: bernalkid at April 27, 2010 1:43 PM

EBGuy's just kidding.

But it does remind me of my 6th grade church group's summer "program" in Kentucky (I grew up in Indiana). True story. We built a fine 2-hole outhouse for a large extended family that literally had just been lifting up the flooring on their back deck and using it for a toilet. Took 6 of us two weeks to dig the holes and construct the building about 50 feet from the house so they would no longer have to live in their own private sewer. They seemed grateful. We went back the next summer to work on the town school and noticed the family was once again just lifting up the flooring and "doing their business" in the hollow space under their deck. We asked them if something was wrong with the outhouse. They said there wasn't -- it was just too far away.

I stopped going to church after that.

By the way, this house is much, much nicer than the Kentucky family's.

Posted by: A.T. at April 27, 2010 1:49 PM

Can I apply the frequently used 25-30% drop from 2005 peak on this home ? That would make this a 1.15 -1.22M property. Also is the request by the listing agent for interested parties to review the "disclosure package" prior to making an offer a standard item on all listings in San Francisco?

Posted by: Outsider at April 27, 2010 1:53 PM

I think "peak" in this neighborhood came a couple years after 2005.

Check out this big old place just on the other side of BV park:

http://www.redfin.com/CA/San-Francisco/119-Frederick-St-94117/home/1476307

Just about right at its 2001 -- apparently pre-renovation -- price. To goth for me, but that is a nice big house.

Posted by: A.T. at April 27, 2010 1:57 PM

This is what happens when people buy these old Victorians and paint all the beautiful old dark wood trim white and then stage it with ugly fake dark wood furniture.

Posted by: Ronald at April 27, 2010 2:07 PM

Considering peak in 2007, probably 15% over the 2005 purchase price, there's a 25-30% maximum drop from peak.

Of course, that's only paper money.

Real tangible loss at current asking for the "gotta have this" sellers is in the range of 200K-300K:

165K real net loss
100K commish

Add to this:

Overpaying to live in your "own" place (the real owner is often the bank) vs. renting: easily 3K/month over 5 years. 180 K?

Plus Property taxes, maintenance, etc...

In all, more than 400K in the red.

Ouch.

Posted by: lol at April 27, 2010 2:20 PM

I'll wait for ebguy to respond. If it is a joke, yea, it's sorta funny. I guess.

If not, it's stupid.

Posted by: noearch at April 27, 2010 2:26 PM

lol: Bought a 2002 Porsche for $74k including tax. In five years, spent $4k on insurance, $7k on fuel, $3k on maintenance, $2k on registration - total cost $90k - sold it for $23k.
That's $67k in the red and I didn't get to sleep, shower or throw a party in it - okay, may be a small party...

Posted by: Outsider at April 27, 2010 2:48 PM

yeah, but it actually costs more to lease a Porsche.

Posted by: J at April 27, 2010 2:51 PM

Hey, noearch, welcome to the 21st century. See this link (PDF) for California's new graywater regulations. Yes, something of a joke for a 'house of this stature'. It does look like I may have jumped the gun on totally disconnecting from the sewer, as graywater systems must "allow the user to direct the flow to either the disposal field or the sewer". In California, regulation of composting toilets is left up to individual counties. At some point we will change from our bias that favors defecating in potable water. Note that our neighbors to the north are experimenting with disconnecting from the sewers. I'm going to have a Sunmar (note: receptacle) encounter this summer, so I'll let you know if I recommend it for modern Ess Eff design.

Posted by: EBGuy at April 27, 2010 3:17 PM

With a Porsche, at least you can impress a girl wherever you go.

Posted by: John at April 27, 2010 3:36 PM

Outsider wrote:

> lol: Bought a 2002 Porsche for $74k including tax, sold it (in 2007) for $23k…

You should look for a late model used car next time… I bought a low miles 2002 4S Cabrio in 2005 and the previous owner took the big depreciation hit of more than $10K a year (his depreciation hit was bigger than average because paid more for the factory carbon fiber interior bling than I paid for my first 5 cars).

Not to give you a hard time, but unless there was something wrong with your 996 you sold it at a real low price in 2007, did you trade it in? My quick backing in to $7K for gas in 5 years at the average mpg for a 996 and average gas prices in the 2003-2007 years means you didn’t have high mileage. Odds are that the guy who bought your car today could sell it for close to $23K if it was in good shape and had under 80K

Then J posted:

> yeah, but it actually costs more to lease a Porsche.

Outsider lost $850 a month in value over 5 years and I just found a Carrera lease on line for just over $1,000 a month (about 20% more)… It sure would be nice if we could buy a place in SF for 20% less than the average rent.

Then EBGuy posted:

> With a Porsche, at least you can impress a girl wherever you go.

You might impress a lot of “girls” (the age that still goes to Marina Middle School) with a Porsche, and even some twenty something women, but you will impress the women over 30 that want to get married a lot more with a SF home or condo (even one with a 120% LTV loan)…

Posted by: FormerAptBroker at April 27, 2010 4:29 PM

You might impress them even more by living in the same place for 1/2 the price of the fluffy home-ower. Impressing a girl with a house is so 2006: "Looking for some safety? I have managed to pull 100K in extra "income" per year from my house for the past 5 years!" Followed by the inevitable question "And what's your FICO, babey?"

Joke aside, I know an engineer making 80K a year down south who used his house as an ATM each-and-every-year between 1999 and 2006. All the equity went into lifestyle and his girlfriend's ever changing education. The king of refis/HELOCs. Of course he doesn't have the house anymore (though he married the GF)

Posted by: lol at April 27, 2010 4:54 PM

ok, boys.

Can we cut the hetero/teen-boy, car as penis extension commentary now?

I'm really here to learn about making my next million in real estate.

:)

Posted by: noearch at April 27, 2010 6:21 PM

This going to end up very badly for the seller. Bite the bullet and drop the price another 100K or put that second bathroom in pronto...Lets face it it's still unlikely to sell at the new price.

Posted by: Willow at April 27, 2010 6:44 PM

FAB: 70k miles and needed a set of clutch. Then I did the unthinkable - went american - bought a beautiful Lemans Blue C6 Corvette for $55k, a mistake. Sold it a year later for $34k. Now much much happier in a M3. Point is not cars but the fact that most lovely things in life cost money to enjoy. The bottle of vintage Bordeaux and a meal at Le Cirque all ended up as fertilizer. If you are lucky enough to have bought into your dream home, lived there for a few years and made money when you sold - then more power to you. My experience tells me otherwise. When I made money selling my home during a bull market, I ended up paying too much for the next home. That's just the way it is. No one intentionally sold in 2006 for a nice gain and then rent for four years just so he/she can buy in a down market. If you are that smart, you won't be wasting time posting on Socketsite...

Posted by: Outsider at April 27, 2010 8:07 PM

lol: The big winner is that engineer you knew. Lived well, enjoyed life and got the girl all on someone else's dime. May be minus the FICO score...

Posted by: Outsider at April 27, 2010 8:14 PM

No one intentionally sold in 2006 for a nice gain and then rent for four years just so he/she can buy in a down market. If you are that smart, you won't be wasting time posting on Socketsite...

Er... okay, sold in 2007 instead of 2006. I can't take the credit for being smart, though. A friend divested himself of his real estate in 2006 and 2007 and he made a good argument for selling sooner rather than later. There are plenty of folks smarter than me posting to SocketSite, and that's why I read it.

Posted by: RenterAgain at April 27, 2010 8:39 PM

No one intentionally sold in 2006 for a nice gain and then rent for four years just so he/she can buy in a down market. If you are that smart, you won't be wasting time posting on Socketsite...

Or maybe just maybe they're like the now AWOL LMRiR simply bored with having made too much money and trying is wares on the SF RE market.
Fronzi looked very similar in his logic. He cashed out and was waiting for the next trough. Bored rich guys pontifying on the internets. So much for the renter loser with his wall-to-wall carpet...

Maybe both left SS to go do some real bottom fishing outside of SF. Many subprime areas now sell 60 to 75% less than in 2006. Check out Merced or even Vallejo. Sounds like the time to get in... SF has local params that do not make it attractive in either rental ROI or appreciation potential which means this might be the next deflation battleground, Japan-style. Plenty of falling-from-the-sky funny money waiting to go to heaven if you know what I mean.

Posted by: lol at April 27, 2010 10:14 PM

No one intentionally sold in 2006 for a nice gain and then rent for four years just so he/she can buy in a down market.

I did! And if I understand the law correctly, I'll even be eligible for a "first time homebuyers credit"... The question, of course, is "when?".

Posted by: Po Hill Jeff at April 28, 2010 2:39 AM

@Po Hill Jeff

Good move!

Watch out for the Deflation Gods: they want their bubble money back.

Their current M.O. is luring new money to SF RE.

Posted by: lol at April 28, 2010 9:08 AM

No one intentionally sold in 2006 for a nice gain and then rent for four years just so he/she can buy in a down market.

I did! I'm still renting too, and enjoying watching my nest egg grow.

Posted by: WasOnDolores at April 28, 2010 9:21 AM

No one intentionally sold in 2006 for a nice gain and then rent for four years just so he/she can buy in a down market.

I only wish I would have! I suggested it in 2007 but my wife nixed the idea. At least she admits I was right!

Posted by: A.T. at April 28, 2010 9:41 AM

Price has dropped to $1,399,000. This is a nice place and may get that price, or close to it. Looks like they are now serious about selling the house. A bigger (I think) 4BR place around the corner on Steiner, a better block, went for this same price a couple months ago, so this price may still be a little high. Almost 15% off the 2005 price; about a quarter million dollars gone to money heaven (not including the monthly loss on the "owner's premium" or selling expenses) in 5 years, but that actually would be better than many have fared in this market.

Posted by: A.T. at June 4, 2010 8:54 AM

Ha ha, it's nearly exactly the list 2005 price they so carelessly disregarded as they happily outbid the prudent buyers who refused to go higher.

Karma's a bitch!

Posted by: tipster at June 4, 2010 10:52 AM

2 loans totaling 1.285M show more or less where the "hard stop" would be for the seller. Salesmen will want their cut and a little chunk of slave-debt was probably repaid which puts the breaking point at around 1.3M.

Sad to see the downpayment is basically gone. The Deflation Gods are getting their juicy pound of flesh. Will they ever stop?

Now let us all please observe one moment of silence for the 100s of 1000s of dollars that are now on their way to money heaven. Except if they find a bigger fool to make everyone whole which I seriously doubt.

Posted by: lol at June 4, 2010 11:20 AM

I see this is in contract now. This will provide a good 2005-2010 "apple" indicator for a fairly high-end place.

Posted by: A.T. at June 30, 2010 9:23 AM

This is a short sale - downpayment is gone. Let's see where/if it closes.

Posted by: anon at June 30, 2010 11:34 AM

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