2121 Broadway #5
As we wrote in August (Will A 2005 List Price Yield A 2005 Result For 2121 Broadway #5?):

Listed for $2,995,000 in June 2005, the sale of 2121 Broadway #5 closed escrow six weeks later with a reported contract price of $3,111,000. Today, the full-floor Pacific Heights co-op with big views returned to the MLS with a rather familiar list price of $2,995,000.

A sale at asking would represent a 4 percent drop in value below its 2005 sale price.

This past Friday the sale of 2121 Broadway #5 closed escrow with a reported contract price of $2,825,000, call it “only” 6 percent ($170,000) under asking but 9 percent ($286,000) below its year 2005 price for the full floor Pacific Heights co-op.
Will A 2005 List Price Yield A 2005 Result For 2121 Broadway #5? [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by ex SF-er

    faults and all, I really like this place.
    it has a great layout, good kitchen triangle, good light.
    needs some updating, but the bones are very good.
    pretty big capital loss for the previous sellers, but at least they’re rich and didn’t throw money away on rent.

  2. Posted by eddy

    I’m still impressed they got 1000+ $/psf. For a condo. Impressive.

  3. Posted by lol

    There’s definitely some thick red ink vs renting on that one.
    Loss = 286K
    Transaction costs = 150K
    5Y @5% on 80% = 600K in interest/opportunity cost
    Property taxes = 180K
    Tax deductions would roughly cover maintenance costs.
    Total 5-Y cost = roughly 1.2M
    A fair rent wouldn’t be more than 7-8K/month. say rounding up at 100K/Y. Over 5 years this would have amounted to 500K.
    This confirms that for the pride of owning, some people are ready to pay 2.5X rent. To everyone his own.

  4. Posted by Q

    @lol: “This confirms that for the pride of owning, some people are ready to pay 2.5X rent. To everyone his own.”
    I don’t dispute your analysis, but I do dispute the penultimate sentence. I highly doubt that the owners, upon buying in 2005, thought they would sell their house for a loss. Unless they expected to lose money, this transaction doesn’t confirm that people are “ready to pay” anything.

  5. Posted by Denis

    Yes, they lost quite a bit of money on this one, but the sale price is actually pretty decent considering this isn’t an A+ building and it’s on the south side of the street. 1000 per foot for an unrenovated view condo makes for a surprisingly strong comp. The same agent has another view condo on Vallejo in contract also asking 1000 per foot.
    Overall the high-end market seemed decent this fall… Now that the holidays are here and the stock market is slumping again, it’ll be slow going until spring. I think the sellers here were very, very fortunate to move this when they did.

  6. Posted by lol

    Q,
    Without the net sale loss, the cost of owning would have been 920K+ compared to 500K. That’s almost 2X the cost of renting and the buyers could do the math themselves. For most people who live in average areas, a 2X ratio is a “bubble in progress” signal. For good nabes, the economics are different. People now know the numbers will never add up at these prices, but it seems it doesn’t prevent them from keeping on overpaying.

  7. Posted by A.T.

    $1000/sf for a top-notch Pac Heights view co-op is indeed still pricey. But then you think that 1000/sf got you a subpar place at the Beacon three years ago, and it puts the bubble era into some perspective. But even at a 9% drop from five years ago — a substantial decline — the numbers still don’t make sense, and further declines will continue.

  8. Posted by condoshopper

    my guess is you can rationalize paying 1.x or even 2.x to buy over renting if you truly believe, as many still do, that real estate, especially in SF, generally only goes up and even skyrocket again, and that any declines are relatively temporary and minor.

  9. Posted by M

    Don’t think that everyone in this market believes that RE will always increase. Although this was no doubt a poor deal for the owners, it might not have been that horrible.
    Using the numbers above and assuming an all-cash deal:
    $150k transaction costs
    $286k loss
    $210k opportunity cost @ 2.5% AND after tax @ 40%
    $126k property tax after deduction credit
    All told, still a big loss but if one credits the rent that would have been paid you’re only looking at around a 10% loss. Not bad for the this time period.

  10. Posted by lol

    That’s a nice way to present numbers.
    Opportunity costs: in 2005 a 5-Y CD would have given you 5.7%. I rounded down to 5%, same as interest. Of course if you take today’s CD rates you’d be lower, but your all-cash buyer would have had the option of a safe cushy return.
    As I said earlier, I merged the tax savings and maintenance costs. I did not include the $1500/month HOAs which would have added 90K to the tab.
    It’s not 10% compared with renting. More like 20%.

  11. Posted by M

    Okay, if one assumes that the buyer purchased a UST Note in 2005 @ 3.625 (June 2005 Auction), the gross opportunity cost was $563,868. Of course anyone who would buy a place like this is in the top marginal tax bracket and would therefore only net $366,515 (no state tax on USTs). That is the true opportunity cost for this purchase.
    Jumbo CD’s have their own set of risks. The alternative of a 5.7% CD at IndyMac would’ve made this purchase look like a great decision.

  12. Posted by eddy

    The fascination with individual losses is just rationalization for renters (I’ll refrain from using the “S” word). This persons loss is not relevant in the macro sense. For all we know this person sold their D7 SFH purchased in 1994, moved their property tax basis to this new condo and sacked away massive gains in the process? The only thing that matters here is the 2010 comp vs the 2005 comp. -9% in that time frame isn’t that bad. We’ve seen much worse out there.

  13. Posted by lol

    eddy, I am just looking at hard cold numbers. 9% is not a lot, but prices probably gained 15 to 20% until crazy 2008. And a half-mil in 5 years might be nothing to you or the seller. But I’d be pretty angry.
    I just purchased, by the way. Renter no more, you can strike me out of the “S” crowd. I am betting on overall inflation in the next 20 years but first prices need to catch up with incomes. I have plenty of powder left in case prices fall further. Not trying for the bottom, just the trend.
    I still find a lot of today’s buying in town very emotional and not very rational. Perfect or near-perfect places make people go dizzy and do stupid things.

  14. Posted by A.T.

    eddy, I agree with you somewhat, but the real loss is not irrelevant. I’m no renter (owned since 2000 and paid less than comparable rent from the get-go — otherwise I would not have bought). I agree with you that the key takeaway is the 9% loss since 2005 — nb: not from the “peak.” But there is a very real dollar number embodied in that, and a very, very large one. The RE industry aggressively sold the potential upside of buying a home for many years, and it is helpful and relevant to point out the massive real downside even from “only” a 9% drop in five years. To all the loss numbers floating out there, I’ll just add (again) that unlike other “investments” one cannot deduct the losses from a home sale. Buying a home that is likely to decline in value — as in the current market — is a terrible financial move.

  15. Posted by tipster

    “Buying a home that is likely to decline in value — as in the current market — is a terrible financial move.”
    Yes, but what about the new crop of sellers who bought in 2004? Their homes weren’t “likely to decline in value” and in fact they had significant appreciation. But now even they have started losing money as the market continues to sink.
    This one just closed for $510K, but was purchased in 2004 for $610K. It just sold for nearly 20% under its 2004 value! I think buying *anything* right now is a terrible financial move.
    http://www.redfin.com/CA/San-Francisco/255-Berry-St-94158/unit-507/home/1391650

  16. Posted by the glass is half?

    I kind of see both sides. I think $1000/sf is still impressive and a good and fortunate outcome for the seller. But I also have seen the whole progression of:
    “the real SF can’t go down”
    “it’s only down from the peak”
    “if you bought more than 2 or 3 years ago, you’re fine”
    “-9% from 2005 isn’t bad (ex other costs)”
    I agree it’s not bad given the context of the market, but from a buyer’s perspective, I think r/e is always slow to adjust lower without forced selling and in the meantime there is so much more selection out there just sitting and slowly lowering prices or going on and off the market than there has been in the last, say, seven years or so.
    No one knows– next year we could bottom out or we could be saying consistently “people who bought in ’03 are not down that much and buyers from the 90′s are fine. Anecdotally, it doesn’t seem like there’s much harm in patience for buyers though, given the nice properties in nice neighborhoods that aren’t selling.

  17. Posted by Dan Clark

    Following tipster’s link to Redfin’s site, I was amazed to see the drop in $/sf for this zip code in 2010. It hasn’t dropped like a rock, but more like a gigantic boulder.

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