June 27, 2011
The 85 Buena Vista Terrace Over (2000)/Under (2008)
In April 2000 the restored single-family Edwardian at 85 Buena Vista Terrace sold for $1,820,000. In September 2008 it sold for $2,200,000. And in August 2010 it returned to the market with (mis)expectations of $2,595,000, was listed for $2,295,000 in September, and then withdrawn from the market two months later unsold.
Back on the market today with an official "one day" on the market and asking $2,095,000, to which year might a 2011 closing come closest for the Buena Vista home with an "estimated total interior space" (including the garage) of 2,827 square feet?
While the listing was briefly withdrawn from the MLS, the sale 85 Buena Vista Terrace closed escrow this past Thursday with a reported contract price of $1,950,000. Call it 7 percent ($130,000) over its year 2000 sale but 11 percent ($250,000) under 2008.
UPDATE: Unfortunately we can’t even claim a fat finger error, but as a plugged-in reader correctly notes, the most recent sale was $250,000 (11%) under its 2008 price, not $150,000 (7%). But hey, what’s another $100,000 between friends...
∙ 85 Buena Vista Terrace Returns Back Between 2000 And 2008 [SocketSite]
First Published: June 27, 2011 7:00 AM
Comments from "Plugged In" Readers
Man I was WAY off. $20,000. I must be slipping.
Posted by: tipster at June 27, 2011 9:44 AM
Not a terrible outcome in terms of comp prices. Buy high / sell low is not a great strategy. At 890/psf it actually beat my 830-880 range. Wonder why the pulled it from the MLS and then update the listing.
Posted by: eddy at June 27, 2011 10:21 AM
If this property had appreciated at 5.5% from 2000 the way that wages and rents did then the price would be up to almost $3.3 million. Apparently buying low isn't enough.
Posted by: Mole Man at June 27, 2011 11:15 AM
250,000 below 2008 - or was 2008 price actually 2,100,000?
[Editor's Note: Good catch and since corrected. Cheers!]
Posted by: Matt at June 27, 2011 12:49 PM
"Oh geez. No way does this hit 2000 pricing. They could be looking at a half million dollar loss." = Tipster's prediction.
Posted by: curmudgeon at June 27, 2011 3:19 PM
It actually looks like the honors are shared by hangemhigh at $2 mill and justme at $1.9. Although hangemhigh's guess was based on a math error. :-)
Tipster initially guessed $1.93, which was admittedly very close. But he took back his estimate when we all realized the square footage was counting the garage.
Just keeping it honest, folks.
Posted by: curmudgeon at June 27, 2011 3:28 PM
So, including selling costs, they only lost $10,000 EVERY MONTH for almost three years for a top-notch place in an excellent neighborhood (plus more in actually holding costs). I just took a really nice two-week trip to Europe with my family for about $10k all-in for all of us. But we each choose how to spend the fruits of our labor in our own way, I guess.
Sold for more than I expected, but 7% over 2000 prices is about right for top-notch places.
Posted by: A.T. at June 27, 2011 3:31 PM
"but 7% over 2000 prices is about right for top-notch places"
Like a lot of things you say on here, that's forced, baiting, and simply untrue. Top notch places in these sort of top area 5 will fetch ~3M in this market. In 2000 only five area 5 properties broke 2.5M. This year there are already 18 area 5 sales over 2.5M.
Posted by: [anon.ed] at June 27, 2011 8:08 PM
Whoo boy, you're right, he "only" lost three hundred and fifty thousand dollars to live in a modest sized home for three years (and a big part of that time was spent prepping the home for sale and showing it endlessly) instead of the half a million I thought. He's probably jumping for joy he only lost that much money. LOL!!
This illustrates A.T.'s point perfectly: the "surprising resilience" of the SF market is still resulting in dollar losses that exceed the losses on anything in Modesto or Las Vegas for a similar home. You could live like this in Las Vegas and lose $150K with prices down 40% or live like this in SF and lose $350K with prices "only" down 20%. I think I'd rather be in the non resilient market and keep the two hundred thousand dollars for myself!! That's one vacation per year for the next twenty years the guy in Modesto gets that this guy doesn't.
Posted by: tipster at June 27, 2011 11:34 PM
One could live in a place like this and lose much less, more, or from a 2000 purchase, experience a significant gain as well. As we see illustrated here often. This is one case. Once again this need to be so sweeping and broad with your words is nothing short of weird.
Posted by: [anon.ed] at June 28, 2011 7:35 AM
"One could live in a place like this and lose much less, more, or from a 2000 purchase, experience a significant gain as well"
Note that tipspter's calculation doesn't even include the monthly gain/loss vs rent. Which would probably increase the loss.
Even if this was held from the 2000 purchase it would seem to be a loss from a ROI point of view.
This is just one case, but when was that last case on SS of a regular purchase that showed a positive ROI? Some builders and courthouse steps flippers seem to have done well, but I can't recall the last time some poster even penciled out a regular purchase being ROI positive.
As far as generalizing goes, some concepts are indeed general in nature. The Journal recently had an article pointing out that some financial advisors are deceptively benchmarking fund returns with dividends to the S&P without dividends.
"Beating the market is easy. Just understate its performance.
Various investment promoters are touting their stock-picking prowess by comparing their returns, including dividends, to the Standard & Poor's 500-stock index without dividends.
It is a lot easier to beat the market when you don't count its entire return. Over the past decade, according to Standard & Poor's, the S&P 500 benchmark gained an annual average of just 0.72% without dividends. But with dividends included, the S&P's total return reached 2.81% annually.
"There are two main ways to earn returns: price appreciation and income," says Stephen Horan, head of private wealth management at the CFA Institute. "If you systematically exclude one of them from your benchmark while knowing that your strategy includes them, you're making a fundamentally unfair comparison.""
When written out in the article this seems like quite an obvious deception, but yet it seems to occur on a regular basis. One could look at this specific example in isolation, but it should be obvious how this should generalize to housing where only by looking at both price changes and monthly gain/loss do you get the true picture.
After taxes and accounting for gain reinvestment/lost opportunity cost, what difference is there between a dollar gained/lost on the purchase price and a dollar gained/lost for monthly costs?
Posted by: tc_sf at June 28, 2011 8:32 AM
"This is just one case, but when was that last case on SS of a regular purchase that showed a positive ROI? Some builders and courthouse steps flippers seem to have done well, but I can't recall the last time some poster even penciled out a regular purchase being ROI positive"
When you start talking about 11 years, it's going to be tough to find a true apple. Most people with nicer housing stock are probably going to change something or other during tha ttime. So you need to look at the market in general. And positing that we're only 7% higher than 2000 does not hold water. It's starkly higher, across area 5. I mean now there are Glen Park houses selling for 1.8M and higher now, every few months or so. You think that existed in 2000? Of course it did not. And that's probably regarded as the least desirable area 5 district.
Posted by: [anon.ed] at June 28, 2011 12:27 PM
Everyone tends to look at each home on a stand alone basis. For all we know this guy sold his 400k home from 1989 for $1.9M in 2008 to buy this place. Not every person rushed to the bank to take out a no-doc, I/O, ARM with a balloon payment. Pretty much everyone that bought a home in the bubble also sold a home in the bubble. SF isn't primarily known as a first time buyers market as far as I know.
So, while yes, there is a loss here and on many of these types of situations; we're not often taking into consideration the sometimes massive premiums & wealth people were gaining in these related "sales". A lot of this is just giving back to the "system". It surely would have been genius to sell and rent at the peak and it would have been similarly genius to short LNKD at $124. But alas, many did not.
The fact that were seeing so many people absorb these massive financial losses is telling to me. I certainly would have suspected to see a lot more jingle mail that we are actually seeing. But people are taking the hit, which means that they can take the hit.
Posted by: eddy at June 28, 2011 12:42 PM
"When you start talking about 11 years, it's going to be tough to find a true apple. "
But any money sunk into a house to update it makes the ROI result look worse. It's possible that some negative calamity hit a house and was not repaired, but this wouldn't seem to be the typical case.
Similarly some houses selling for $1.8M doesn't tell you anything about the ROI outcome.
Conversely, looking at the outcome of an owner's lifetime RE experience as eddy indicated is a bit too broad since you are buying the house along with its expenses and rental value, not any talent the owner may or may not have with respect to buying RE (As opposed to looking at investing with a fund manager where you are in fact buying the manager's expertise). Looking at the outcome of 1989 era purchases has value though, but that was quite a while ago.
Posted by: tc_sf at June 28, 2011 3:23 PM
"But any money sunk into a house to update it makes the ROI look worse."
Hardly. There could be all manner of variables along improvement lines, and ROI. Presenting contemporary versus 11 year old design + a shifted market ? Grabbing deadspace? Etc? There are a million scenarios pro and con. Embrace the realistic instead of the sweeping on occasion, bud. My points and language are measured. Yours are inside out from your own foregone conclusion.
Posted by: anon.ed at June 28, 2011 3:39 PM
"Hardly. There could be all manner of variables along improvement lines, and ROI."
Taking this house, they paid $1.82 in 2000, got $1.95 in 2011.
Had they spent $300k to update the house in the interim their ROI would be worse then that of an identical house with the same sale price pairs where no money was spent.
When you are just seeing the buy and sell prices, as you point out you don't know the backstory, but the more the backstory involves sinking money into the house, the worse the actual ROI.
Posted by: tc_sf at June 28, 2011 3:59 PM
Yes, taking this particular house, that is correct. I began there. You still wish to broad with your conclusion, however. That's pretty silly when you're talking about D5 Sf, a 2000 purchase, and improvements. Get real.
Posted by: anon.ed at June 28, 2011 4:04 PM
Err "be broad"
Posted by: anon.ed at June 28, 2011 4:06 PM
"Hardly. There could be all manner of variables along improvement lines, and ROI."
How is this not broadly correct for all houses? You mentioned "all manner of variables along improvement lines", but given the buy and sell prices all these manner of improvements all lower the actual ROI depending on how much was spent on them.
Posted by: tc_sf at June 28, 2011 4:08 PM
I think that tc_sf is highlighting one of the myths of D5 appreciation. Part of the difference in prices over the last decade is due to a large amount of investment in improvements. Modest middle class homes (many with deferred maintenance) were upgraded to modern standards (some to brand new condition).
If you look at the price trends in NV you see a huge rise. Certainly much of that was true appreciation driven by gentrification. But a large chunk was simply physical improvement done at significant cost. I have no idea how you can determine how much was invested in NV improvements over the last decade so it is really hard to determine the true appreciation of such a neighborhood. C-S provides a pretty good metric though even that discounts the "new car smell" loss since those oranges are tossed out of the dataset.
I'm guessing that a segment of the buying market doesn't realize that direct investment drove prices higher than natural appreciation in NV and hence will overestimate future RoI.
Posted by: The Milkshake of Despair at June 28, 2011 4:31 PM
Precisely, MoD. We looked in Noe in 2000 when we bought our place (elsewhere), and the typical Noe 2000 offering is far more modest than the typical 2011 (or 2007) Noe offering. That's why statements like "only 2 homes in DX sole for over 2mm in 2000 but 8 have already this year -- see, prices have gone up!" are nonsense. Apples and oranges.
It is true, of course, that an improving neighborhood will also generally pull up the values of places that are unimproved. But I'm more interested in the ROI of a particular place. This is also why medians are not much use as a measurement, particularly in a very diverse housing market.
You buy a home for 1mm, put 1mm into it, and sell it for 2mm, and your ROI is zero. But many reading industry stats will crow that the ROI is 1mm.
Posted by: A.T. at June 28, 2011 4:53 PM
Yeah well, again, I made that point initially. Eleven years is a long time for a true apple. So you take what you can get. And your 2000 plus 7% notion is still bogus.
Posted by: [anon.ed] at June 28, 2011 4:57 PM
" Certainly much of that was true appreciation driven by gentrification. But a large chunk was simply physical improvement done at significant cost."
As you mention C-S attempts to account for improvements, using public records I believe, but since not all work is permitted this is probably not fool-proof. The recent change to Zillow's Zestimate algorithm incorporates more user reported data to attempt to factor out improvements from true home price appreciation. Presumably since people want their Zestimate to go up there is incentive to self report. Zillow's backtesting certainly showed an improvement with the new method.
Posted by: tc_sf at June 28, 2011 5:24 PM
I think you're all right, but I only have my own anecdote to prove it. In 1995 I bought a run down but classic NV house (not Anderson, but similar) on one of the best blocks for 340K. Adjusted for inflation that would be a little over 500K now. I track homes, and it's absolutely impossible to find anything similar (even now) for under about a million. I sold it in 2008 after I put a lot more into it, so it was one of those apples to oranges homes that showed ridiculous appreciation. But it was BOTH pure appreciation and renovation that contributed to its eventual value.
And yes, though I'm pleased with the sale, I had hoped that things would crash a bit more so I could get back in more comfortably. :-)
Posted by: curmudgeon at June 28, 2011 6:13 PM
Way to time the market curmudgeon!
Posted by: The Milkshake of Despair at June 28, 2011 6:25 PM