The sale of the single-family home at 159 Cervantes closed escrow last week with a reported contract price of $1,875,000, just 1 percent ($20,000) under asking but 9 percent ($175,000) under its purchase price of $2,050,000 in June 2007.
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The sale of the single-family home at 159 Cervantes closed escrow last week with a reported contract price of $1,875,000, just 1 percent ($20,000) under asking but 9 percent ($175,000) under its purchase price of $2,050,000 in June 2007.
Anyone know how the original Feb 2009 listing was priced? It seems like these owners on Cervantes “chased windmills” for 18 months to get this place sold. They got the listing price right the second time, since it sold in ~40 days.
Listed on 2/17/09 for $2,295,000. Withdrawn 6 months later on 8/20/09.
Anyone know when the remodels/seismic upgrade were done? Might not be much of a factor– still trying to keep track of things in watching how these SFH’s are doing over the last few years . . .
New roof in 2003
Seismic Upgrade in 1991
These are the only “completed” projects acording to the DBI. A few other permits were marked cancelled or expired…
Not too bad. They paid about 16,000 per month to “own” a 3/2.5, no doubt with a 3/1 ARM they couldn’t refinance. All for a 3/2.5 home they could have rented for about 1/3 of what they ended up spending.
Maybe when they retire, they won’t need the $350K they pissed away. Might come in handy for the rest of us, though.
Even ignoring the loss based on rent vs. own, the 2007 buyers blew about $220,000 in lost value and transaction costs since mid-07. And that was on a loss-from-peak that was actually pretty modest compared to most places we’re seeing.
This is why I’ve predicted we’re going to see as many or more walk-aways from these nicer places going forward than from the low-end. It is now irrefutable that anyone who bought during the 3-4 peak years is significantly underwater, and a decreasing minority thinks that will turn around any time soon. This is a relatively recent change in midnset. While someone who paid $400k for a place that is now worth far less is in a world of financial hurt, if they walk away and rent somewhere, their monthly out-of-pocket cost is not really reduced that much. But someone who paid $2 million for a place that is now worth a few hundred thousand less is out real money, and can save a TON by skipping out and renting a comparable place for far less each month — shedding not only the debt (assuming no refi) but also saving a big chunk each month going forward.
I have no reason to believe these sellers walked away, but it would have saved them about a quarter million dollars to do so.
I have to dispute the notion of ‘skipping out’ on a mortgage. A mortgage is a debt instrument secured by real estate. You have, and always have had, three options at any given time: pay the monthly payment, pay the note in full, or surrender the collateral underlying the note.
It is perfectly legal and ethical to take any of the above three actions at any time as your personal circumstances dictate.
A peak to trough drop of 8.5% for this apple in the midst one of the greatest real estate depressions in our nation’s history? This shows instead how powerful the SF market is.
You would hardly notice if one of the stocks in your portfolio dropped 8.5%.
“I have to dispute the notion of ‘skipping out’ on a mortgage.”
Agree with Jimmy (NLB) here. A mortgage is a contract, and under every contract you have certain rights. By handing the keys to the bank, you’re using one of those rights.
I don’t know why people have to get all moralistic about it. Tishman Speyer and Blackrock certainly weren’t moralistic when they got out of their $4.4 BILLION loan for Stuyvesant Town. If jingle mail is good enough for large corporations, it’s good enough for individuals.
The banksters should have priced the loan knowing what the risks were. If they didn’t price the loan correctly, it’s not the mortgagor’s problem.
“A peak to trough drop”
Are you predicting that last week is “trough”? Note that this is a 13% drop when adjusted for inflation, even though people usually focus on the nominal number. I’m not sure we’ve seen bottom yet because housing busts take a while to play out. Part of this is because housing markets aren’t very liquid — there are only so many transactions per year. SF’s bust is only 2-3 years in so far, so give it some time. As many people have mentioned, it’s like watching grass grow.
“You would hardly notice if one of the stocks in your portfolio dropped 8.5%.”
You sure would notice if (as is typical with a home) you borrowed 80% of the money to purchase that stock. And you had to pay a 1.4% tax each year to hold it. And then you had to pay another 5% commission to your broker to sell that dog!
But I guess you could take some solace in the fact that nearly all similar stocks did far worse.
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When I go to open houses and see a couple expecting a kid, I know my bid will compete with a primal need that knows no reason. Put 2 together on the same deal and you’ve got the perfect seller dream. This factor got a friend of mine to overbid in 2007 by 20% on a dump that since lost the overbid amount plus 10%. Hey, but from his words at the time they “won” against the other pregnant couple…
unwarrantedinlaw – if those stocks had been bought on margin then you would notice a 8.5% drop. You might even receive a margin call.
Most real estate is purchased on margin. That’s why these “little” drops are so significant.
“You sure would notice if (as is typical with a home) you borrowed 80% of the money to purchase that stock.”
Good point, and that’s why gains need to be considered in a similar context too (which is why outsized gains during the boom were truly outsized). If you put 20% down, this was a 43% loss of your stake, and if you put 10% down, this was an 85% loss of your stake. If you put 0% down, good for you!
I’ve heard stories like lol too, but btchs was a little over the top [and since removed].
No doubt, sfrenegade. Those who got in before the bubble and — more importantly — out before it popped, did great. Profits on borrowed money. No tax on the gain. But leverage bites twice as hard on the way down (and no write-off of home RE losses, unlike just about every other investment class).
For those that think price drops in housing is done I suggest you cruise on over to Calculated Risk and check out this chart.
They are estimating over 12 months supply nationally which typically means steep drop in prices. Of course as Ex-SFer has done an incredible job pointing out, with all the government intervention in the market it is very hard to predict the trend.
The other thing about housing busts is that the last part of the bust is often close to flat nominally. This means that your house could sell for $1M in 2005, $1M in 2010, and still be $950K in 2014. Is that really only a 5% loss? People who think about inflation and people who realize that housing markets are illiquid know better.
The sellers were a young couple that relocated to East Coast following a job promotion. The $2.3M ask in 2009 was a trial balloon — that fell short.
Do relocation benefits still cover the shortfall? If so, it might impact the seller’s behavior. Not sure that was factor — speculation on my part.
Btw, 4% nominal increase and 1.6% real increase from the previous $1.36M buyer in 2002. That’s about what it should be, although it’s possible the 2002 seller made some money through tech-bubble appreciation.
These apples are great for market reality even if cherry picked. -9% feels about right and could have been worse since we’ve seen full on -20-30%. The bears scream WIN but this seems fairly neitral given the fact that RE is depressed. As for these owners, buying / selling over such a short period is just not a sound strategy.
Seems that all the properties that were squeaking up over the $2M mark in the Marina are all trending back under the $2M level. The same is happening in Pac Heights at around the $3M level. Seems there are a smattering of homes now selling in the $2s when that was the exception.
“It is now irrefutable that anyone who bought during the 3-4 peak years is significantly underwater”
b.s.
^^ x2. While it’s probably generally true it far to broad a stroke to make an irrefutable statement, especially without defining the 3-4 year period. There have already been demonstrated gains during this period so that statement is irrefutably bs.
Right, Ken. The place you bought at the exact peak of the market has, I’m sure, held its value just fine.
A.T. is not exactly right. Those who put a decent amount down during the bubble may not be, technically speaking, “underwater.” But they do have to kiss their down payment goodbye.
“I have to dispute the notion of ‘skipping out’ on a mortgage.”
Very well said Jimmy NB! I’m so sick and tired of hearing the “moral hazard” argument applied to the ordinary person who exercises a portion of a legal contract.
considering we are in the worse economic downturn since the depression a 9% drop from peak is not bad.
my opinion is that homes in affluent older inner bay neighborhoods are holding their value a lot better than the houses in the newer exurbs.
the job prospects for cardiologists and other highly specialized professionals is a lot stonger than a laborer or someone working at home depot,
also more homes affluent older inner bay neighborhoods were purchased in the 80 and 90’s when these exurbs did not even exist a so more equity is present
This is the second time recently I’ve read a thread where the apples posted on this site were described as “cherry picked”. It’s my understanding that the editor chooses them *before* they have been sold and thus the results known. In this case, the original post was on July 2. Is there something I’m missing?
“Is there something I’m missing?”
No, you’re not missing anything. It’s a common disparagement tactic used by bulls around here who usually respond by “cherry-picking” (after the fact) prices that go up. Usually, these houses they pick are not apples.