February 1, 2013
Noe Valley Apples-To-Apples And The S&P Over The Past Two Years
As we wrote about the renovated Noe home at 3715 22nd Street in January:
Listed for sale at $2,750,000 in 2010, the "exquisitely renovated [with] hi-end finishes & impeccable detail" Victorian home at 3715 22nd Street ended up selling for $2,500,000 that October, which included the legal one-bedroom unit below and Noe Valley views.
Back on the market and listed for $2,825,000, a sale at asking would represent annual appreciation of 5.7 percent over the past two years for the Noe Valley property on an apples-to-apples basis, total appreciation of 13 percent since the fourth quarter of 2010.
The sale of 3715 22nd Street closed escrow last week with a reported contract price of $2,890,000. Call it total appreciation of 16 percent since the fourth quarter of 2010 for the Noe Valley single-family home on an apples-to-apples basis, effective annual appreciation of 6.7 percent over the past two years.
Over the same two years the S&P 500 is up 28 percent, up 16 percent since May of 2012 when Facebook, which is currently trading at $30.16, went public at $38 per share. We'll let you decide which is having more of an effect on the market.
Speaking of Facebook and Noe, the list price for the modern home at 1507 Noe Street was reduced to $3,399,000 in January.
∙ Renovated Noe Valley On An Apples-To-Apples Basis Since 2010 [SocketSite]
∙ Look Past The Overhyped Facebook Effect [SocketSite]
∙ Facebook On The Home Front [SocketSite]
∙ The Facebook Effect On Noe [SocketSite]
First Published: February 1, 2013 9:00 AM
Comments from "Plugged In" Readers
was this an all cash deal though? If not, the return on this house would far exceed that on the S&P.
The effect of leverager - oft quoted on this site on the way down, but seems to have been forgotten on the way back up!
Even after closing costs, a 20% down would have lead to a nigh on 50% return..on a 2 year hold!!
Posted by: REpornaddict at February 1, 2013 11:01 AM
totally agree REpornaddict. on top of that, if this person lived in the home for 2 yrs, they would get 250k of the gain excluded from tax (500k if married). You'd be paying full boat on the sale of stock.
Posted by: oscar at February 1, 2013 12:10 PM
Still surprised how much this went up, however, it is a good location (great street).
I think SS was pointing out though that the rise in the market (S&P, etc) has likely more to do than FB stock.
Posted by: DanRH at February 4, 2013 9:53 AM
So by that logic, if the house had been purchased in 2010 for $0 down and all leverage, and sold for one dollar more a few years later, wouldn't that be an infinite return?
After all, you'd be making a $1 on a $0 investment. Divide $1 (or any amount, for that matter) by $0, and you get an infinite return.
You have to consider change in total price, and not back out the amount that was financed, otherwise you'll end up with nonsensical results and sloppy thinking.
Posted by: DataDude at February 4, 2013 11:31 AM
Well no, the outlay on buying a house is never zero..theres some other buying expenses, plus more significantly selling expenses.
I don't think the results are ever nonsensical...I think thinking that itself is sloppy, and doesn't demonstrate much understanding of leverage.
Posted by: REoornaddict at February 4, 2013 11:47 AM
What we're looking at here is whether there is evidence that apple home prices in Noe Valley have changed since 2010.
Based on this one apple, there is evidence that prices have gone up. There are probably other apples out there that tell a different story.
If you want to determine the return captured by the 2010 buyer, then backing out leverage (and all the other expenses you mention) makes sense. This is how a developer would look at "What's the best use of my $1,000,000? Should I buy one $1,000,000 fixer with no leverage or two $1,000,000 fixers with 50% leverage? Or ten $1,000,000 fixers with 90% leverage?"
This is a question of perspective - what are we focusing on? Apple price trends from year to year? Or the return on downpayment for Mr and Mrs 2010 Buyer?
Posted by: DataDude at February 4, 2013 12:03 PM
^^^^ hehehe, yes I remember how leverage worked in 2008. Market goes up, I win. Market goes down, taxpayers lose.
Posted by: The Milkshake of Despair at February 4, 2013 12:03 PM
Milkshake - exactly!
Posted by: DataDude at February 4, 2013 12:04 PM