We missed it when it was picked last month, but as a number of plugged-in readers have now noted, the sale of 330 Gates closed escrow on 5/21 with a reported contract price of $1,092,500 ($614 per square foot).
Purchased for $1,250,000 in June 2007, call it an apples-to-apples drop of 12.6% for the remodeled single-family Bernal Heights property over the past three years.
∙ Bernal Heights Single-Family Apples To Apples (And New Supply) [SocketSite]
Oof. I hate to do this to the owner . . . but running the numbers will hopefully demonstrate the danger of home ownership to others.
June of 2007 jumbo rates were 7% so they put $250,000 down. They lost all of that on the costs from the recent sale (assuming 6% costs). They probably also lost any meager principal reductions they had gained.
So chalk up $250,000 as a loss.
But they were also overpaying to rent versus own. I calculate the monthly cost of ownership on this place as $6,858. No way this place rents for more than $4,000* over the last three years.
So that’s another $102,888 on the chalk board.
For a total loss of $352,888 over the last three years. That’s bleeding around $118,000 a year premium to own versus rent.
*yeah, I pulled that number out of my ass. But it’s a smart ass. Go ahead, dispute it.
Didn’t mean to imply that the 7% interest rate had anything to do with the 20% down payment. Just trying to show my work.
Ah, jeez. Now I realize my math is off and the owners will get to keep some of their $250,000 down payment.
I don’t know what I’m thinking doing math to myself this late at night. Is this thing on? Bueller?
So I’ll dispense with the exact numbers but they probably only lose $220,000 of their down payment. Which makes a grand total loss of around $330,000 over three years.
Still big numbers.
Yes. Brilliant analysis. Perhaps for your next trick you can let us all know if we should have bought pets.com stock for $100 per share and held onto it…
“will hopefully demonstrate the danger of home ownership to others. ”
gee, i dunno about that. all those houses and apt. buildings that i’ve bought and sold have made me tons of $$$. but i did not over reach at the top and i did not try to sell in a bad market.
i think this is what has been demonstrated in this example. of course i don’t want to let the facts get in the way of your opinions here…
I made a lot of money in the ’90s buying tech stocks I’d barely heard of. I guess that was a risk-free form of investment because it worked out for me.
Ok, SFHawkGuy, I’ll bite.
First, my ass says the house would rent for $5k.
Second, i think you’re ignoring the TAX BENEFITS. At least 70% of the mtg payment is tax deductible, which at a 33% marginal tax rate translates to serious savings — over $2200/mo by my calculations. Monthly costs come to something like $5700 after taxes. So that’s a rent-versus-buy loss of $700/mo.
So that’s about $25k over three years. Add that to the actual capital losses of about $220k and you’re looking at about $250k losses from buying at the top of the bubble.
Pretty awful, actually, without any need for exaggeration.