San Francisco Housing Bubble (SF Bubble Blog)

District 6B - 390 Hermann ($699K, 1BD/1BA) ...$36K Price Reduction!!!

2007-09-17T15:02:00.000-07:00

How the mighty have fallen. We usually take notice of overpriced properties, especially ones that lack the certain features (location/layout/size/qualify of finish/etc) that can justify the seller's lofty expectations. Every now and then, we come across a polished property that is hitting the SF Bubble blues.

390 Hermann is a townhome located in a four unit rowhouse set of buildings in Hayes Valley, a block over from Duboce Park. Built back in 1983 by the architect Donald Macdonald (no, it's not Ronald McDonald...hehehe), these townhomes provide a fresh perspective of form and function to living in the Hayes Valley and Market Street area.

390 Hermann is a shining example of how to build a very functional, and well designed unit, with only 800 sq. ft. to spare. unit with great Make no mistake, this is still a 1 bedroom+ type of property, but one that has an outdoor patio + small deck + bi-level design (i.e., defined living space + separate bedroom + den).

Let's start on the ground floor. First there's a 1 car enclosed garage. The master bedroom with en-suite bathroom are located on the first floor. Immediately located outside the bedroom is a private patio.

Going up the stairs, one enters the living room area. Vaulted ceilings add a spacious feel to the unit. Note the classic black cast iron furnace fireplace, which adds a nice stylistic touch. The kitchen is cozy, but the materials and finish are of good quality, and includes space for a dishwasher. Off the living room is a separate small deck as well, good for a reading chair and table.

If that wasn't enough, there is a small loft space above the living room area. It's currently staged with a small twin bed. Maybe a good place to stick grandma if she's visiting, but other uses for this space can range from plain good 'ol storage space, to using this as an office area (just watch your head when you stand up). It also includes an in-unit stackable W/D, so no need to trek to the local laundromat.

SF Bubble Perspective: This unit was placed on the market back in late summer for a price of $735K. After sitting on the market for some time, it has recently been reduced by $36K to its current listing price of $699K.

Ironically, had this unit came out to the market even as late as early '06, this unit would have sold quite easily. However, now as we enter a period where buyer's are a bit more savvy with their money (or more likely, the banks are more savvy and tight in lending their money), 390 Hermann is just basically overpriced for the current housing market.

At best this unit is a 1Bd + den, and it's going to need to compete with other trendy 1BD condos/lofts in SOMA and South Beach. Granted, not everyone is a District 9 person, so there's well done, renovated and updated Victorian 1Bds over in Noe Valley that are in the competitive landscape with 390 Hermann.

Conclusion....if you are in the market for a 1Bedroom with street parking, an outdoor patio for BBQ, extra storage space in the form of a den..........and all wrapped up into a non-cookie cutter unit.........then you might want to consider 390 Hermann. We estimate a strike price of $685K should suffice, but if you are aggressive and want to earn your negotiating wings, go for an ideal price of ~$650K.

District 1D - 6020 California ($749K, 2BD/1BA TIC)

2007-09-06T14:49:00.000-07:00

We've typically provide reviews of condos on our blog, but today, we're entering the uncharted waters of TICs.

6020 California is a TIC located in the choice Lake District, a stonesthrow from Sea Cliff and a couple of blocks over from the Presidio. Before we get into why you might want to consider this TIC, here's some pics of unit and general description of its features/layout:

This is an upper floor unit in a classic Edwardian unit. Classic split floorplan, with the family/living room on one side of the building and the kitchen and bedrooms on the other side.

The kitchen is clean, spacious, and bright, albeit with non-upgraded features. A good starting point nonetheless.

The bedrooms are of decent size and retain some nice period features in the overhead lights.

The main selling feature of this TIC though is the shared rooftop deck. It's pretty expansive and look it fits not just one umbrella table, but two!

SF Bubble Perspective: TICs, or Tenant-in-Common units are quite popular in San Francisco. As they technically were not condo units, and hence lack some of the priviledges that come with it (see our TIC Housing Resource guide for more details on TICs), TICs have historically traded at a discount to a similarly spec'd cond unit. In the past real estate market, TICs presented themselves as a great opportunity for home ownership, with the potential advantages of a lower entry price. Ironically, during the big housing run-up of '04-06, TIC prices crept upwards and often times were virtually on par with condo units.

With the potential for condo conversion down the road, many looked to TICs for the ultimate "flip" opprotunity. As with most things in real estate these days, nothing is for certain nor guranteed. Many owners of TICs these days are realizing the pain of holding communal TIC loan or paying higher interest premiums on TIC fractional loans. Others, are saddened with the fact that winning the TIC->Condo conversion lottery is well..............just as difficult as winning a real lottery.

However, there is hope. 6020 California is located in a 2 unit TIC building. If you've read our TIC housing resource, you'll know that 2 unit TIC buildings can automatically convert to condos after 1 year of ownership (both units need to be owner occupied). So think of this as your FastPass to condo conversion. The other unit (6022 California) is owner occupied, so you know there is a vested interest from that party in sticking out the year to condo heaven.

Square footage for this unit is not listed, so we are guestimating it be around ~1100-1200 sq. ft, which puts the comps at $624-$680 sq. ft. In the current market, $590-620 per sq. ft. is a good target to shoot for, so while this unit is not exorbitantly overpriced, there's definitely room for some negotiating (remember, there should be some handicapping as well for the lack of a parking spot -> has a leased spot across the street which the seller will prepay the first 6 months). Negotiations on TICs are usually a bit difficult as the owner is typically trying to sell out the entire building's set of units.............so negotiations on an individual unit are tough at times, as the owner is wary of pricing implications on the other unsold units (similar to a new building developer). However, in this case, as the other unit is owner occupied, you are essentially dealing with the price ramifications on one unit, so it's all a matter of finding the optimal price level that the owner will be happy with. Best of luck with this one and please leave comments on your thoughts on pricing and the viability of TICs (2-unit ones that is). Also, let us know if you want us to review other TICs as they become available.

District 9-F - 340 Ritch #7 ($660K, 1BD/1BA Loft) ...$85K Price Reduction!!!

2007-08-29T14:40:00.000-07:00

UPDATE (10/6/07): Our psychic powers are getting pretty good of late. As we predicted, another price drop was around the corner. After pulling the property off MLS, 340 Ritch #7 was relisted on 10/3/07 as a "new listing", but this time with a new lower price of $639K (with a new agent as well). That's a $21K price reduction from its price of one month ago, or more importantly, a total price reduction of $106K!!! (14.2%) off its original list price of $745K this summer. The "bubble" has clearly spoken on this property.

Its currently showing unstaged and it looks like they have corrected the sq. footage discrepancies (its now shown as 1017 sq. ft. per the appraiser). When we wrote about this property back at the end of August, we suggested a strike price of $640K (when the property was listed at $660K). With the recent delisting and relisting shannigans, we smell blood, and suggest those interested in the property to not be afraid of coming in with a lower, aggressively priced offer. Any offer in the $625-630K range should do, as they are likely pretty desperate. However, as there are plenty of fish in the ocean these days, see if you can get it for $600K.

UPDATE (9/6/07): Apparently the owner and agent have pulled this listing off MLS as of today. Yet we hear from our sources that they are still entertaining offers......go figure. Perhaps they were afraid of the recent publicity? Or more than likely, they plan to relist this condo after the requisite cooling off period in MLS. In any event, score one for SF Bubble.
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First of all. We're Back!!! I know our SF Bubble faithful have been patiently waiting for our property reviews. To be honest, we have been quite busy this year with property research, but with the lack of volume in the market during the first half of '07, there wasn't much to write about.

When we started this blog back in the beginning of 2006, we did so, based on the premise that a high percentage of homes/condos purchased in the San Francisco in the past 5 years, were done so with ARMs and other exotic loans. Now in Aug. '07, the cheap-financing induced housing bubble has become reality and has started to set in with folks, both current homeowners as well as the media. As mortgages get reset to higher rates, folks who stretched to get into a property (especially those that bought in 2005+) will feel the pain.

Now, let's get back to business at hand.

340 Ritch is situated in the area in SOMA/South Beach near Townsend and 3rd Street is a happening place. Not only are you a stones throw from AT&T Park, but this area of SOMA/South Beach is sunny, has easy access to 280 and Caltrain, and has good access to Embarcadero (nice Sunday walk to the Ferry Building).................not to mention a Safeway and Borders to boot. Condo developments such as 170 off Third and 188 King, have joined a crowded market, with numerous resell units in The Beacon, Glassworks, and One Embarcadero South hitting the market in recent months. 340 Ritch, is located in a narrow alley way off of Townsend........exit the Borders cafe and cross Townsend at 3rd St. Make a left down Townsend and you'll see the alley way to your right. For foodies, it's in the same alley as Koh Samui (so-so Thai food).

340 Ritch has your standard 1 bedroom loft layout. It's rectangular, with high ceilings, but lacks some of the period details and architectural nuances of some of the other lofts in the area (which are renovations of historic brick warehouses, factories, etc).

The kitchen is clean, but not high-end. The same goes for the bathroom as well (note: This is a 1.0 bath unit only, so no common 1/2 bath downstairs when entertaining guests).

The upstairs loft, houses the units only sleeping area. It's relatively spacious, but does not really provide a decent flexible-use layout to add say an office workspace (without having it right up to the bed).

When the property was originally listed, it showed a square footage of around 1500 sq. ft, which seems quite large vs. actual. This appears to be builder sq. footage, which likely includes the large deck outside the unit. Remembers, builders typically measure square footage from the external dimensions of the building. Perhaps this is why the listing agent has decided to take square footage off the listing, to avoid any confusion. Our guestimate is that this unit is likely closer to the 1150-1200 sq. ft. Speaking of the deck, it is quite large, and does have some nice outdoor access for BBQs and sitting under the sun. Note, although you can see the city, this is not a cityscape view, rather one that reminds you that you are living in an alley. 1 car garage parking is included.

Now, let's turn the sands of time back 4 months to the end of April. The Dow Jones Industrial average was in the mid 12,000s, and starting to begin its meteoric rise in the next couple of months into the high 13,000. The majority of our readers had just completed filing their taxes and were looking forward to the approaching summer months.

On April 26, 2007, the property at 340 Ritch was listed at a whopping price of $745,000. The owner of this unit must have been ripe with anticipation. The media hadn't picked up yet on concepts such as the "housing bubble", "sub-primes" and their domino effects on the financial markets and impact to buyers in getting financing, etc....................perhaps the owner might luck out and snag an offer in the first week (just like how they do it on the those house-flipping TV shows).....................Well apparently not. After sitting stagnant on the market during month 1, it underwent a series of prices drops.........$725K, $699K, $669K (and probably some more in between)...............until its current price of $660K. That's more than 11% off its original price.

Now for some past comps in the building:

340 Ritch #5 sold for $705K in Oct. '06
340 Ritch (undisclosed unit) sold for $532K in April '04

Some immediate thoughts come to mind in looking at this data. Recall, the beginning of 2004 was the early phase of a strong housing market that carried well into 2005/early 2006. By the time of late 2006, the cracks were beginning to show, with the market teetering back and forth on whether a top had occurred or not. In some ways, similar to the Dot.com decline in the equity markets, there was "dead cat" bounce on pricing (i.e., a 2nd reversal upward in pricing, albeit temporarily). So in short, the Oct. '06 sale was likely a temporary spike in pricing due to an uninformed buyer.

On the other hand, we know that housing will historically over the long-run track with the inflation rate (i.e., more closer to a 3.5-4% average annual appreciation). If we do a quick back of envelope calculation using the 2004 sales prices of $532K at 4% annual appreciation, we get a ballpark figure of $598K in 2007. Naturally, there's a +/- band range around this number, which we can pull when using a larger sample size. The point is not to focus on the specific price target, but look at things from a relative scale. In other words, this property is a low $600K-type of property, and definitely not a $745K type of property (as the seller would have liked you to believe).

Conclusion: This unit is perfect for singles or a young couple. It's an interesting hole in the wall location, which is off the hustle and bustle of Townsend/3rd, but within easy access of the area's amenities. On the con side though, some buyers may lament the fact that although you have a view, it's stuck within an alleyway........definitely not your impressive water or city views from some of the other condo developments. With the series of price reductions, the unit is approaching a more reasonable range in relation to its competition. While this unit is slightly larger than other 1 Bds in the area, the layout challenged unit is still a 1unit (not a 1BD + den) type of setup. Also, it lacks another 1/2 bath, which makes a difference. Our cursory checks of preforeclosure listings do not indicate any trouble with this unit, so perhaps it appears the owner was just greedy and wanted to get the big price. Assuming a buyer will put $100K down, this will still require a jumbo mortgage (you would have to put $243K down to fit a conforming loan). Given the price reduction history, don't be afraid to bottom fish and wheel & deal on this one. Put in an offer for $640K and see how they bite. If they don't, then just move along to the next opportunity..................or wait another 3 weeks for their next priced reduction! =)

Price REDUCTION!!! - District 9H - 75 Lansing Street #2 ($66K reduction, now $699K)

2006-12-06T16:17:00.000-08:00

UPDATE (9/6/07): This unit was sold on 3/8/07 for $699K.
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Maybe the sellers do read our blogs afterall. After sitting on the market for over 1 YEAR, 75 Lansing Street #2 has undergone its 2nd price reduction. This time the price reduction is a whopping $66K (8.6% reduction).

Originally listed at $795K, this was subsequently reduced to $765K. While we feel this is still overpriced, considering the work you have to do in the kitchen, keep on eye on this property and make an aggressive offer if you are interested.

Check out our past review District 9H - 75 Lansing Street #2 ($765K, 2BD/1BA) for the right price range to bid.

District 1D - 225 26th Avenue #3 3BD/2BA (Was $975K now REDUCED $55K to $920K)

2006-11-08T22:13:00.000-08:00

UPDATE (9/6/07): This unit was sold on 1/22/07 for $900K. No doubt our blog helped both parties in this transaction: a) increased traffic for a poorly marketed and overpriced unit and b) better information for the prospetive buyer. Another SF Bubble succes story.
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What's worse in this day and age, a seller who doesn't recognize the housing market is way past its peak or their realtor who thinks the "pump & dump" strategies of last year still work in this housing market?

The property at 225 26th Avenue #3 is probably a good example of the disaster that can happen when two idiots collide. Let's start with the basic survey:

3 Bd and 2 BA condo with a listed square floorplan of 1598 sq. ft.
Condo is on the top floor of a 3 unit building and located in the quiet Lake District (1D), close to the upscale Sea Cliff neighborhood
HOA is reasonable at $328/month, and unit has a deeded parking space and in unit W/D

The interior layout is your standard Lake district-style condo, with an open kitchen connected to the living room/dining room space.

Walk down the hallway to the rear of the building and you will find 3 modestly sized bedrooms. The master bedroom has its own bathroom, while the other 2 bedrooms share a bathroom.

One nice touch is an outdoor deck that connects to both bedrooms in the rear. Unfortunately, it's an west facing view into the backyard of another building, which is a shame considering a northerly facing view would enable you to see parts of the coastline.

We initially saw this property back in the early September timeframe, when the property was listed at $975K. The condo was quite obviously staged for the MLS pictures shown above. However, when we visited the property in person, we found a condo that was in complete disarray, with dirty laundry left quite visible in the bedrooms and cluttered papers and bags scattered throughout the house. A heavy funky kitchen cooking or spice odor was left hanging in the air as well. Apparently the owners must have sunk all their money into the house and can't afford to use Lysol or to hire a maid, as they obviously cannot pick up after themselves.

While most of this unslightiness was cosmetic (nothing a good cleaning and scrubbing couldn't cure), we were very surprised to that the listing agent would go ahead and show the property in such a poor condition. This callousness by the owners and agent is a direct insult to any prospective buyer. If this was 2004 in the housing boom, sellers could get away with such shannanigans, as buyers would be clamoring at the door trying to overbid each other and willing to overlook such lack of effort.

So after sitting on the market for many weeks, the sellers and the agent tried to do mind games and started playing around with the price. Words such as "motivated seller" and "final offers by xxxx date" were put in the MLS listing in a juvenile bid to spur demand. Eventually, both seller and agent realized that perhaps their product was a bit overpriced in this market. So what do they do? They dropped the price a measily $5K to $970K.

Even our friends at SocketSite noticed this foolishness. Shortly after being chided by the bloggers, they relisted the listing under a new MLS number, bumped the price back to the original $975K, and removed some of the desperate language from the MLS listing.

However, tick tock, tick tock, every week, is another week towards the mortgage payment. Finally, after getting no 2nd looks, the price was dropped down to $945K around the October timeframe. However, still no looks, so back to word games on MLS, like "This condo will be taken off the market if no offers received by xxxx." Well of course no one is going to offer if they know you are just full of s**t and will drop the price another $25K in a couple of weeks.

Conclusion: 3Bd condos in the 1400-1600 sq. foot range in the Lake district are quite common, so 225 26th Avenue is not particularly differentiated vs. its competition (both past and present). The dramatic gains of the past few years have created a false sense of pricing in District 1. In most districts (including Lake), pricing of $1M condos are not sustainable (with the exception of larger and more upscale condos in Jordan Park, district 1C.

At its original listing price of $975K, the price per sq. foot was at $614 /sq. ft. At its latest price of $920K (yeah right), the sq. ft rate is still a very aggressive $579.

Perhaps the best comp is to look at what's been sold in the building. The latest sucker to buy was early this year (Feb. 2006). The unit below, 225 26th Ave #2, was sold for $870K at a rate of $543 / sq. ft.

In this market, the 10% reduction off original list is a good starting point in figuring out an offer price. 10% off their $975K puts this in the $877K bracket (which matches up nicely with the comp of unit 2). However, what we are dealing are stupid sellers and an equally incompetent agent. Given all their missteps, they have backed themselves into a corner with little negotiating leverage. If you are looking for a 3 Bdroom in that neighborhood and are willing to put up with a bit of cleaning and deodorizing, then make an offer in the $840-$850K range. If you offer a quick close, you probably will make the day for the sellers and agent.

District 9H - 75 Lansing Street #2 ($765K, 2BD/1BA)

2006-09-24T20:47:00.000-07:00

UPDATE (9/6/07): This unit was sold on 3/8/07 for $699K.
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Rincon Hill has had a storied past and is a prime site of future residential condo development in San Francisco. Properties like the Infinity and One Rincon will soon cover the skyline in the next couple of years.

While some are awaiting the coming of Miami-style condos to this area of the city, others may want a return to the years of old. In fact, if done correctly, it is quite possible to restore and revitalize a neighborhood for the 21st century. South Beach is a prime example of how a neighborhood can be reinvented, while at the same time retaining the charm of its rich past. Walk around this southern waterfront and you will find former brick warehouses, some dating back to the early 1900s, having been converted to bright and cheery condos and lofts during the past decade.

So for those wanting something historic to live, how does living in a former knitting mill sound? Located on an easy to miss sidestreet off 1st street, 75 Lansing Street #2 is a 1182 sq. ft condo located in the former Smitty Knitting Company building.

This is a 3 unit property:

Unit 1 - A 1 bdrm work/live loft located on the bottom floor
Unit 2 - A 2 bdrm on the 2nd floor
Unit 3 - A gorgeous 2 bdrm expansive unit spanning the entire 3rd floor, with bdrms on the 2nd floor as well

It appears that the developers spent their entire load on redoing Unit 3. Sometimes pictures are worth a thousand words, so below are some shots of the upper unit:

Or how about this view on their private deck?

Unfortunately, we have to come back down to reality. Unit 3 was listed last year originally for $2.995M and eventually sold for $2.8M. Meanwhile, Unit 2 has been on the market for over 1 year. So why has this property not sold?

Let's start with Unit 2's layout:

One enters the unit in the kitty corner of the master bedroom. Walking down a couple steps one enters the kitchen/family room area. This unit shows its warehouse layout, as the kitchen reminds us of your typical office coffee area. A good layout for work, but a freakishly small kitchen for home use. Notice how the refrigerator cannot even fit in the kitchen and needs to go in the family room.

The living room is of decent size, with a large window expanse at the far end. Unfortunately not much of a view, as Lansing is a very narrow street and you have a nice view of the neighboring building.

As far as the bedrooms, the master is open and does not have doors (although you could probably fit one for privacy). It is quite expansive, but there's quite a bit of wasted space which should have gone towards a larger walk-in closet and/or larger master bath.

There is a small 2nd bedroom tucked in the back of the unit. Once again, large paneled windows provide light. Too bad this window faces the inside courtyard of the 81 Lansing condo complex. Just make sure not to walk around in your underwear!

Conclusion: Some comps for the neighborhood:

81 Lansing #310 (8/06) for $585K = $684 per sq. ft
81 Lansing #408 (3/06) for $769K = $689 per sq. ft
18 Lansing #405 (2/06) for $825K = $660 per sq. ft
18 Lansing #101 (1/06) for $575K = $564 per sq. ft
18 Lansing (1/06) for $769K = $532 per sq. ft
81 Lansing #309 for $550K (1/06) = $464 per sq. ft
18 Lansing $207 (4/05) for $794K = $600 per sq. ft

Unit 2 was originally listed in 2005 for $795K and was kept at that price for most of the first half of 2006. The price has subsequently been lowered to $765K, which translates to roughly $647 per sq. ft. Yet with this price reduction, we are not completely sold on this property.

Undersized bathrooms, kitchen.........no view, no outdoor patio access............the list goes on. The problem is this is really a LARGE 1 bedroom loft space + DEN in disguise (and not a true 2 bedroom). On the flip side, this unit comes with 2 deeded car parking spots, which is a plus, considering street parking is virtually non-existent these days on Lansing street ever since The Lansing condos went up. So while the <$700 sq./ft price looks attractive relative to other South Beach properties, consider carefully what you are getting.

Had the owners priced 75 Lansing #2 more realistically in 2005, they could have easily sold the property in the $725-$750K range. However, with the San Francisco housing market now fully past its peak, buyers can now be more critical and selective. This unit cannot shake its 1 bedroom DNA and buyers who want more functional space in District 9 will likely seek SOMA, where $500 / sq. ft pricing is now quite attainable. For those who are insistent in staying in the South Beach/Rincon Hill area, there is a plethora of condos in development, with much better views and feel. Unit 2 is worth a look in the $550 / sq. ft range (~$650K). Otherwise, it's one for the SF Bubble Wall of Shame.

District 9F - 1277 Howard/776 Tehama ($679K-$715K, 2BD/2BA)

2006-09-20T22:07:00.000-07:00

With the housing bubble starting to burst in San Francisco, it's starting to be a common sighting to see the words "Price Reduction" or "Motivated Seller" for private party real estate listings.

But some of you may ask, what about major developers selling new homes?..........They typically are quite resistant to lowering prices, as subsequent price reductions on unsold homes can have an adverse domino effect; likely causing buyers who have already placed deposits on homes to renege and back out when they see sudden property devaluation. It's human nature to be stubborn and in 2005 we saw new home developers staying firm on the asking price and giving out token rebates on the backend to lure buyers. However, in 2006 they are dancing to a different tune...........it's a song called..........."Reality".

With new homes sitting stagnant on the market, developers are lowering prices. A perfect example is the condo development on 1277 Howard/776 Tehama. This is a new development situated in the block between Howard and Tehama (near the corner of 9th street). As well as having 2BDs, there are 1BD units in the building as well.

The interior is laid out in a conventional modern condo format, with a combined living room/dining room area connected to the kitchen. It has an open feel, but overall sq. footage in the 2BD units run ~1000-1100 range, so nothing to get excited over.

Nice hardwood laminate floors in all the rooms unify the look. There is a "deck" if you call it, but it is more decorative and rather small..........big enough to stand in and to put plants in, but definitely not big enough for BBQ or entertaining.

Bedrooms are of adequate size, but not exceptionally large. W/D in the unit, which should be standard in most new condos these days. There is 1 assigned parking in the garage below, with the option to purchase another spot. The garage does have a unique feature in that it uses mini elevator lift so that two cars can park in the same spot. Hard to visualize and explain, but it's analogous to tandem parking, but controlled from an elevator button. This is a nice feature, something I wish more builders would utilize.

SF Bubble Research: Normally we run an exhaustive query of our database for neighborhood comps. For The 1277 Howard/776 Tehama condos though, it's a much easier analysis.

Below is a copy of the original price list from their opening week back in March:

Now look at data below which shows the actual selling price vs. the original list price. Pretty clear picture, eh?

1277 Howard - SOLD DATA

Unit 2 (1BD/1BA) First listed at $499K --> Sold for $475K (4.8% Price Reduction!)

776 Tehama - SOLD DATA

Unit 7 (1BD/1BA) First listed at $549K --> Sold for $515K (6.2% Price Reduction!)

Unit 10 (1BD/1BA) First listed at $559K --> Sold for $515K (7.9% Price Reduction!)

Unit 11 (2BD/2BA) First listed at $739K --> Sold for $695K (6.0% Price Reduction!)

Unit 15 (1BD/1BA) First listed at $549K --> Sold for $470K (14.4% Price Reduction!)

Unit 16 (1BD/1BA) First listed at $579K --> Sold for $550K (5.0% Price Reduction!)

And more importantly, here are what the remaining unsold units are currently going for on MLS:

1277 Howard - ACTIVE LISTINGS

Unit 3 (2BD/1BA) First listed at $749K --> Now on MLS for $679K (9.3% Reduction!)

Unit 5 (2BD/2BA) First listed at $789K --> Now on MLS for $699K (11.4% Reduction!)

776 Tehama - ACTIVE LISTINGS

Unit 12 (1BD/1BA) First listed at $529K --> Now on MLS for $459K (13.2% Price Reduction!)

Unit 17 (2BD/2BA) First listed at $775K --> Now on MLS for $715K (7.7% Price Reduction!)

Conclusion: Those of you who have read our review of the sister property on 773 Tehama, know that this area of SOMA is going through a makeover. The recent bubble years have definitely spurned developers and investors to revitalize this area. However, the properties of 1277 Howard/776 Tehama seem to have joined the party a bit too late and are now feeling the pain of being post-bubble.

These properties have solid construction and some nice features, but just don't have the wow factor (sq. footage, outdoor space, location, style) to justify the lofty $700+ /sq. ft charges that new developers would like. In some ways, had the developers been less greedy and built out larger 2 BD units (or even put in 3BDs) and foresook the smaller higher volume 1BD units, the layout and overall functionality of the condos would have been drastically improved.

If you are truly interested in getting into these properties, don't leave any money on the table. Even if you don't believe in the Housing Bubble, the units are not selling, hence the price reductions. Be aggressive and make sure you get an offer well below their asking..........afterall, it's going to be a long time before these properties increase in value.

PRICE REDUCTION!!! - District 7B - 1869 California #1 ($46K reduction, now $849K)

2006-03-02T17:45:00.000-08:00

Looks like the sellers are starting to realize the wrongs of their bubble pricing. After months of sitting on the market, 1869 California #1 has finally experienced its first price reduction, a whopping $46K reduction.

This 2 BD condo in Pacific Heights, originally listed at the overpriced value of $895K, has now been REDUCED to $849K. We still feel this property is overpriced, so check out our past review (District 7B - 1869 California #1 SF Bubble Review), for the right price range to bid.

District 9F - 773 Tehama #1 ($625K, 1BD/1BA)

2006-02-27T21:28:00.000-08:00

Take a stroll today in the South of Market Area (SOMA) "south" of the 80 freeway and you will find an area that has gone through a drastic revival. Since the late 90s, the area, which was once full of decaying warehouses and industrial buildings, has been transformed into a vibrant mix of modern lofts, restored historical buildings, and trendy restaurants (e.g., Bacar).

However, go "north" of the 80 freeway in the SOMA area, and you will find a neighborhood that is........ how should we say......... a bit more rough on the edges. It's fair to say, the northern part of SOMA (between 5th-11th Ave/Harrison-Mission) is a bit more dirtier, rowdier, and edgier. A good environment, perhaps, to catch a drink at the Wish bar or to party it up at 1015 Folsom, but what about to live in?

With this question in mind, we decided to make the trek one sunny weekend to check out 773 Tehama #1. This is a new 1 Bedroom condo, built in 2005 and located in a quiet sidestreet between the hustle & bustle of 8th and 9th Avenues. Let's be honest, the exterior isn't pretty. For those that have visited the UC Berkeley campus, it looks like a mini-Evans Hall, with the only difference being the addition of a very earth-tone hued paint job.

But perhaps we should look past the exterior, and examine the inner qualities of this condo. There are 3 units total in the building, with 2BD condos located on the 2nd & 3rd floors (the 1 BD unit is located on the bottom floor just above the garage). The garage is spacious, with the ability to fit cars for all 3 units, as well as having extra storage space. The garage door is quite interesting; it has a grated wire mesh that is fairly opaque when viewed from the outside, but is see-thru when looking outward from inside the garage (thus letting ample light and fresh air into the garage).

The unit is listed at 845 sq. feet and is optimally laid to take advantage of every square foot. The kitchen is modern, with quality finish on the cabinets and countertops. The kitchen adjoins a decent sized family room (with fireplace). Additionally, this unit comes with a functional den, big enough to use as a mini office workspace and/or storage area (den is located in the picture below.....left side of the picture, where the plant is located).

The bedroom is spacious and although it faces north, the large windows provide ample light to the room. W/D hookups are available inside the unit as well. The best feature of the apartment is the large private patio located in the back (adjoining the family room). The patio is nicely done, and is large enough to hold weekend parties or just to relax.

If the patio isn't good enough, then there is a common area on the rooftop (shared by all 3 units), with spectacular views of the city, like the one shown below.

SF Bubble Research (from www.SFbubble.com): This street has been slowly redeveloped over the years, with many of the old rundown warehouses being converted to residential properties. Here are some comps data:

737 Tehama (Feb. 06): $800K, 997 sq. ft --> $802/sq. ft
761 Tehama (Jul. 05): $530K, 721 sq. ft. --> $735/sq. ft
761 Tehama (Aug. 04): $505K, 838 sq. ft. --> $602/sq. ft
761 Tehama (Jun. 04): $600K, 1137 sq. ft. --> $527/sq. ft
737 Tehama (Apr. 04): $397K, 997 sq. ft. --> $398/sq. ft
761 Tehama (Feb. 04): $415K, 721 sq. ft. --> $575/sq. ft

Conclusion: As you can see, this little neck of the woods is a bit of a microcosm for the massive run-up in the San Francisco housing market. The upward momentum in the housing market during 2004 to the first half of 2005, has volleyed average $/sq. ft. rates to levels that are on par with that of the South Beach district (which is arguably a more desirable location).

So what does this mean for 773 Tehama? Well first of all, we do like the features of the property. The builders realized that in order to sell a home in this area of SOMA, it needs to have full amenities, as buyers will want something in return for the trade-off in location. To their credit, 773 Tehama delivers in these areas; it has parking, W/D, patio space, views, etc).

The million dollar question is whether this area of SOMA will be revitalized in the years to come, similar to how southern SOMA has changed over the past few years. There are some signs that this is happening (albeit slowly). There is another multi-unit condo development being built on the same block of 773 Tehama, so it's safe to say that the remainder slum buildings on the street will be fixed up and converted to better facilities.

The other two 2BD units in 773 Tehama appear to have been sold, with the sole 1 BD being the remaining unit (and on the market since early Dec. 05). The 1BD unit is currently priced at $740/sq. ft. For those willing to take a gamble, this is the time to use your bargaining powers. Be firm and don't pay more than $700/sq. ft. and you might find yourself walking away with a diamond in the rough down the road.

District 7B - 1869 California #1 ($895K, 2BD/2BA)

2006-02-10T18:21:00.000-08:00

Most people believe in 2nd chances, both for themselves and for others. Ask your famous politicians or fallen sports heroes, and they will tell you that everyone deserves a second chance. The key though, is that you should always learn from your original mistake, otherwise you will never improve.

So do 2nd chances exist in the real estate market? The owners of 1869 California #1, would certainly like you to believe so.

The property was originally listed back in the Nov. 2005 timeframe for $895K. With no obvious takers, the property was delisted at the end of the year (like most unsold properties) and then miraculously relisted on 1/25/06 (to give the impression that this was a "fresh" listing). Before giving our SF Bubble analysis, let's first check out the property:

For starters, the property is in a good area, located in Pacific Heights (albeit on it's SE most side, bordering Van Ness). This is your classic early-century Edwardian style architecture. Property records indicate it was built in 1917.

The property is located in a 7 unit building and is classified as a condominium. Although it's located on the busy California St., the unit itself is tucked towards the back of the building as a ground floor unit. As with most Edwardians, the layout is dominated by a long entrance hallway, with rooms branching off on both sides. Interior has the classic details, with nice hardwood floors, crown molding, and wood trim details that aren't found in modern homes.

Both bedrooms are of decent size and can accommodate a Queen size bed easily, without dominating the room. The master bedroom has an adjoining bathroom that has been remodeled quite nicely.

The most typical complaint of Victorian and Edwardians is the lack of an ample sized family room (or one that is integrated comfortably with the rest of the house). Remember, during this time, people still used "sitting rooms" and "parlour rooms"............so the concept of having a spacious room that the whole family could use as a family room was nonexistent..........afterall, the television hadn't been invented yet. 1869 California impresses in that the family room is very functional, having space to drop the couch, TV, bookcases, stereo system, without feeling cramped. Furthermore, the family room adjoins the dining room, which makes watching the TV from the dining table a definite reality (just like a modern house!).

Both the family room and dining room overlook the best feature of the house: the patio. This is a gorgeously laid out patio wood deck/garden. The patio is quite large, rivaling a small backyard that you may find in the suburbs. Whether entertaining guests over a BBQ or just relaxing under the moonlight, the patio is a gem.

The only area of complaint is the kitchen. Entering the kitchen, you get the feeling that the previous owners were probably not good cooks and spent all the redecorating money on the patio and bathroom. Nothing structurally wrong with the kitchen, but just that it has a dated look and could use a refresh in materials. Note, you will not see any pics of the kitchen in the MLS listing, for good reason.

Finally, property square footage is listed at 1350 sq. ft., but this value likely includes the patio area in its measurement. Taking out the patio area, the interior area is probably closer to ~1050 sq. feet.

SF Bubble Research (from www.SFbubble.com): As mentioned above, the sq. footage includes the patio. If we give the owners the benefit of the doubt and use the entire sq. footage in our analysis, 1869 California has a ratio of $663/sq. ft.

The best set of data points for running comps was to look at 2 Bd condo sales 1 block away on Sacramento street (also in Pac Heights, District 7B):

1855 Sacramento #1 (Aug. 05): $650K, 1164 sq. ft. --> $558/sq. ft.
1855 Sacramento (Aug. 04): $705K, 1456 sq. ft. --> $484/sq. ft.
1855 Sacramento (Dec. 03): $530K, 1109 sq. ft. --> $477/sq. ft.

Conclusion: Unlike some of our past reviews, we actually LIKE this property. It has a good balance of location/functionality/wow-factor.

But before we get carried away with this property, we still need to be objective and to look at the facts. Although still a Pac Heights address, this condo is located on the extreme SE edge of the district, bordering Lower Pac Heights and the Van Ness/Civic Center area. While $663/sq. ft. is a reasonable rate in the heart of Pac Heights, in this neck of the woods, the market rate is probably closer to the $575-$585/sq. ft. range (definitely south of $600/sq. ft).

Perhaps the most important data point is the fact that this condo wasn't able to sell last year, even with the real estate run-up. In a market where most condos are on typically sold within 25-30 days, 1869 California apparently was not one of them.

We've not been able to find any major faults with the interior and location. Running a quick Megan's Law check doesn't show any abnormal abundance of nondesireable characters in the neighborhood, so why is this condo not able to sell? Can we go out on a limb and say, maybe it's the PRICE?!?!?!

We started this blog by talking about 2nd chances. Apparently the owners didn't learn their lesson. Back in November, there was still a glimmer of hope of people overbidding on properties. Now, with consecutive increases in the interest rate and a slowdown in the housing market, do they really think they will get takers on this property, at this level of valuation?

Even if you don't believe a housing bubble will happen in San Francisco, a modest 3-5% price correction is one that will likely happen this year. 5% off of $895K is almost $45,000! This property is setting itself up for a price reduction like those on our SF Bubble Wall of Shame.

So to answer our original question, don't give 1869 California a second chance, until they show some indication of understanding the changing market dynamics in the San Francisco housing market. This is a quality property, but not one that Buyers should overbid their hard earned money on. If you feel compelled to give them a 2nd chance, an offer in the range of $575/sq. ft. is more than generous (~$775K).

District 8C - 1635 California ($679K-$835K, 2BD)

2006-01-19T18:22:00.000-08:00

Ahhh...the famed California Street. Those in commercial real estate will tell you the prestige and much higher $/sq. footage that the California street address brings. In fact, architects have been known to be asked by their corporate client to find creative ways in design (such as creating eavesments) just so that the client can legally claim a California Street address.

Take the Bank of America building, for example; it's really located closer to the Pine St. / Kearny St. corner of the block (big building on the SW corner), but they have managed to successfully pull off 555 California Street as their official corporate address.

While the commercial real estate hoopla for California Street is mainly in the Financial District area, the residential prestige of a California St. address at the top of Nob Hill is not too shabby either. There's currently a $3.5 million, 2 Bedroom condo available at the top of this building at 1001 California Street.

Well, what about the lure of California St. beyond the Financial District and Nob Hill? I decided to check out the long awaited NEW condos at 1635 California Street firsthand during its debut last month. This is a development sponsored by Vanguard Properties, who typically are involved in fairly decent home projects.

For starters, this area of town has a lot of hustle and bustle, probably the best way to describe it. You are 1/2 block over from Van Ness, with a lot of cross-town traffic going East/West on California. So those who view the glass "half full" will like the accessibility to Van Ness/Franklin/Gough....good for the commuter crowd who need to get to 101 quickly. Similarly, a good mix of the shops and restaurants on Van Ness. Those that view the glass "half empty" may not like the noise and heavy traffic (but hey, if you want to live in this part of town, then that's what you get).

Entering the building, you'll see that this is new construction from the ground up. These condos are not a remodel of an existing building. In fact, if you view the Google maps and select the satellite view, you'll see the empty lot that existed where 1635 California condos currently sit.

This is a 36 unit building, with an individual parking spot allotted to each tenant, so a decent size garage downstairs. My only concern is that both the entrance & exit ramp to the garage share the same lane. This system works good for small 3 unit buildings, but not a good idea for such a large building. Imagine ready to leave to work in the morning and driving your car up the garage exit to California St., only to find your neighbor trying to enter the garage. Not fun, especially if you are in a hurry.

As with most new buildings in recent years, overall construction and materials appear to be sound. Adjacent to the garage are ample individual storage rooms allotted to each condo owner. When you enter the building, there is a large open air atrium that dominates the middle section of the building. This provides a lot of air (albeit it city air) and sun to the center of the building. While this format works good for corporate offices, this attempt at zen like balance, essentially takes out at least 35-40% of usable square footage on each floor of the building.

This is not an accurate representation (as I tossed their brochure a while ago), but the picture below gives you and idea of what I'm talking about. This is a birdseye view (i.e., view looking downward) on a typical layout on each floor.

Birdseye View of Floorplan of 1635 California Street Condo Complex

Don't get me wrong, open space is not a bad thing, but it is when you try to shoehorn six 2 bedroom condo units per floor (in a space that really should house 4 condos, given the layout).

The units themselves range from the low 900 to mid 1000 square feet on the high side. Great if this was a 1 Bedroom, but a bit tight for 2 Bedrooms. The irony is that I have seen other 2 bedroom condos in the city that still seem spacious, despite only having ~1000 square feet; however, the 1635 California units fail miserably on this front. The units lack wide space in the family room, which is quite unfortunate, as this space is the main visual focal point when you first enter the room. As a result, a person entering the condo will tend to notice the cramped layout and the relative "apartment-like" atmosphere.

So how best to describe the interior? Take your pet mouse or hamster, stick it in your Addidas shoebox and ask him what he sees. If he could talk, he would probably say, "I'm in a freakin shoebox, what do you expect me to see!"

All kidding aside, the bedrooms are quite small, with no true master bedroom between the 2 sleeping rooms (or at least one that warrants such a distinction). Perhaps my biggest complaint is with the bedroom windows. In the theme of getting good light to the units, the builder put ample windows in the room; the only problem is that you have wonderful views of the hallway and your neighbor's bedroom! In fact, you can see how close your neighbor's window is in the picture below (upper left hand corner of the picture). I don't see anybody in their right mind leaving the drapes open in their bedroom, which almost makes the effort to put windows in the room quite ridiculous in the first place.

SF Bubble Research (from www.SFbubble.com): Not much sales activity in this area in the past few years, none on the block. There were some condo sales a couple blocks away on 1715 Polk in the 2004 timeframe....all 1 Bedrooms in the $453K - $610K range, with an average of $673/sq. foot. The closest sales listing on California Street that existed was at 1817 California #2E, with a sale that closed in the Oct. 2005 timeframe at $650K, for a 787 sq. foot place.

Conclusion: I think if the builders had rolled this out as a commercial space, this building might have turned out to be a decent property. The atrium seems like something you would see on your way to your chiropractor's office. In fact the internal layout of the condos, are very office-like......a receptionist located in the current kitchen area, the waiting area in the family room, and the patient room in either of the bedrooms.

It appears that the condos at 1635 California cannot shake their office space or apartment-like DNA. The nicer units (both in size and view) will be on the upper floors on the corner units, with their selling prices in the $789K to $835K range. While they are fairly priced at the current bubble-rate for new condos (~$750+/sq. feet), there are much better alternative of condos in the South Beach area (like the Towers and Beacon, or even slightly older ones like Portside).....ones with better views, layout, and even location.

Remember, we are entering a period in 2006 when a lot of homes that were purchased on ARMs are entering their interest rate adjustment phase and you might see some desperate sellers emerge from those that bought condos in 2003-2005. As these 1635 California condos are new, so not much negotiation that you can do on price.....something to keep in mind.

As for me, there is a new condo development called "The Palms" over in SOMA which I plan to check out (appointments available for registered VIPs on 1/23/06). Look for a review in the weeks to come.

District 8A - 39 Dashiell Hammett #201 ($729K, 2BD/2BA)

2006-01-16T22:56:00.000-08:00

Well....where do I start. Those that have visited our site, www.sfbubble.com, know that our goal is to provide you with the proper data to guard against getting sucked into the impending bursting of the Housing Bubble.

As in most periods of devaluation in the real estate market, the Condos and Lofts are typically where you see the rapid drops in prices (i.e., leading indicators of impending widescale price drops). For the past few months, the relatively tight supply of new homes on the market has been keeping housing prices relatively stable....so we haven't seen the drop yet in home prices, despite the upward movement in mortgage interest rates.

However, we are now beginning to see some downward price movement in the 1BD condo/loft market. So for the first time in years, we are starting to see $50+K price drops on selling prices. In the coming month, the words "Reduced" and "Reduction" should become the norm for the 1BD market. I'll post some interesting stats and key "bubble" areas in the weeks to come.

So before I digress, let's talk about 39 Dashiell Hammet #201 (some maps may still show this under its former name, Monroe St.). I was in the Nob Hill area this past weekend and had to check this one out. Afterall it's on a street named after the famed writer of the Maltese Falcon. It's 2BD/2BA, has parking, over 1360 sq. feet. Less than a block over from the Ritz Carlton, and at $535 sq. foot, looks like a Winner, right?

Well.........did I mention that this was built in 1982. I don't think students of architecture and interior design will rank the 80s high on their list. Like most homes built during this time, the floorplan follows a standard box shape, with a sophistication (or more like, lack of) akin to an Olds Cutlas Supreme.

Oh but wait, did I mention this has a minibar? The only thing is, this sucker is right near the entrance. While the owners have decent decorating taste, they still couldn't integrate this monstrosity with the rest of their living room. You can't see from the picture below, but the tabletop of the minibar is a cheap presswood type of covering. In fact, I don't think the owners knew what to do with the minibar, and it looks like they in fact are using this as a desk/workspace. Not a bad idea, except you are literally 12 inches from the home entrance.

The rest of the home is pretty unspectacular. The kitchen is dated, with tile countertops and cheap plywood cabinets. Both bedrooms are remarkably small, which is surprising, considering there is supposed to be 1362 sq. feet in this condo.

For those that like sunlight........this is not the home for you. It faces East, which you would think would have a nice view of the Bay from Nob Hill..........except for the fact that there is a 7+ story building directly across the street from it, thus blocking any sun.

SF Bubble Research (from www.sfbubble.com): This is a small 8 unit building and not much sales activity in the past few years. The only recent sale we could find was one that closed in the June '04 timeframe. This was a larger 2BD (1726 sq. feet) and sold for $749K. Running the comps, we see this is at $433 / sq. foot, back in the red hot summer housing market of 2004 (compared to $535 / sq. foot on the current listing).

Conclusion: Like a bad film noir, not something to get excited over. Even if you factor in the housing market momentum in the beginning of 2005, we shouldn't be paying more than $475 / sq. foot for this place. Even if you were willing to live with low sunlight, no view, and a cramped layout, there's going to be minimum outlay of $$$ to fix up the kitchen and bathroom when you decide to sell this place down the road (and maybe do something about that minibar!). =)

The listing just came out 1/12/06, so if the cache of living on Nob Hill appeals to you, then wait for the sellers to make the price drop. With the way the market is slowing down, don't be surprised to see a $30-50K price drop in Feb. if this place has not garnered enough interest.