Contrary to popular opinion, it is in our best interest to paint both sides of the picture. We tend to spend most of our time on the positives, but for those that love the negatives, and possibly fancy yourself finding a deal on some real estate (not on Craigslist), check out “What’s the Diff?” by Submedian.
The “diff”, in our usually optimistic outlook on real estate, is a short term investment gone sour. Don’t forget to look a little further down the time line after you read that. You can’t win them all in real estate, especially when time frames are under 3 years. Regardless, it’s good reading.
–What’s the Diff? [Submedian]
–What a Difference 10 years can make [theFrontSteps]
sure, late comers over paying in marginal areas. i’m still not seeing that in districts 2,5,6,7,8. although i believe we should be seeing it more given the astronomical run up in prices that we’ve witnessed.
i think the real ‘diff’ though is between those who are relishing other people’s missteps and cheering the market down on the one hand and the actual real potential buyers who are hoping to get in. schadenfreude is one thing but that bitterness can be a slippery slope…
First of all it’s always “overpaid” if the property doesn’t appreciate. But an appraisal had to be done, comps had to be established, and a lender had to approve the loan. It didn’t happen in a vacuum. It wasn’t just some crazy buyer going off on a limb and overpaying by 26% because they were wild and loose with the cash that day.
Paco is there any room for depreciation in your analysis? Is it even conceivable in your view that the market could be turning? Or did entire sections of the city just fail to look at the comps before laying down the money?
And Bernal heights is a marginal area? Western addition? C’mon, let’s be real here. When I started looking a year and a half ago I couldn’t find one single property within city limits that was selling for less then what they paid a year or more ago. Not one! Now there appears to be well over a hundred (or at least more then I had time to count), and some of them are starting to be in desirable areas, not just outlying ones.
Look at the foreclosures: I can remember counting the number of foreclosures in the entire city on one hand. Now we’re starting to see that many within the space of a couple blocks. You can’t keep kidding yourself here. There’s a serious housing downturn hitting our country right now, and you are a fool if you think SF will be completely immune.
Finally, I AM a real potential buyer. I have a family to support. I have money. I have great credit. I WANT to live in SF and I WANT to own. I am actively looking every day. So active that I started a blog about it! Most of my friends own their homes, and I don’t want to see them or anybody else hurt. But I’m not going to shut my eyes to what’s going on around me. And while I personally am not without compassion for those who are suffering, it has to be said that I don’t recall any of the people that were cheering the market up spending any time worrying about the people that were going to be negatively affected and/or priced out by the sudden rise in housing prices. Why would people who stand to gain from a downturn owe any special consideration in return? It’s hardly fair to call it bitterness when they are simply happy that the opportunity to own their own home, to live in – not as an investment, may finally be once again within their reach.
You are an investor/developer who has openly talked about your success in evicting tenants for the purpose of profit, and you were proud that you were able to escape paying these tenants any more then the minimum required by law. You seem happy enough with the profits you made, and not too terribly concerned with how it turned out for your tenants. If the market turns and investors like yourself find yourselves on the short end of the stick (and I am not saying this is a certainty by any stretch of the imagination, and I don’t have a clue, nor do I care, what your current exposure is, I’m just pointing out a hypothetical here), why would anyone show you any special consideration? Hypothetically speaking, I think the people you are speaking so dismissively of as “bitter” are entitled to the same glee you experienced after clearing your building of tenants. With all due respect, and absolutely no personal offense meant.
missionite,
how much farther do we have to go for you to find one affordable?
We don’t have to go any farther at all for me to find it “affordable”. I could buy today if I wanted to. But we have a ways to go before I feel comfortable making that decision, and from what I can see I have little to lose by waiting. I don’t think double digit increases are around the corner.
well i hope you don’t miss out on a beautiful house that you could have been happy in for years. only a fool thinks he/she can time the market.
;)
Nah, I’m not trying to time anything. Haven’t found the right vector between what I love, what I can afford, and what my kids can grow up in. Also my pay has been increasing rather rapidly lately, which means what I can afford keeps changing too.
I’m just trying to make sense of things, and not make any rash decisions, or over extend myself and then find that the economy contracting leaves me in a bad position. I’m content to just build up my savings right now unless some opportunity knocks me off my feet.
hey missionite,
no offense taken! i agree with you that prices are coming down all over the country. i agree that they should be coming down here and i share your frustration when i am wildly outbid on properties i’d like to buy. having been in the market when prices were much lower i have perhaps too much room in my analysis for depreciation. i think that prices and rents are outrageously high but i just don’t see them ever going back to the levels we saw in the 90’s (much as i’d like them to!)
i do have a coupla quibbles though. bernal IS marginal. so is brooklyn. still cool and hip, no doubt. but were prices to fall accross the board that’s not where i’d be looking to buy. you provided one foreclosure in w.addition which does not speak volumes. you say i was proud to escape paying more than the minimum when i removed tenants from my property. that i felt glee. actually i felt a bit ripped off by the process b/c the city mandates a relocation payment that is essentially a windfall to those who receive it. would you have me pay more? how much? why? they were young and able. they tried to extort $240,000 from me. you say i was not terribly concerned for them- actually i was polite. i feel its an illegal taking w/out compensation. and you may recall that the supes tripled that fee in ’05. if someone wants to go out of the business of renting their property the state allows them to ellis their building and take it out of the rental stock. that’s the law. the city puts barriers up to prevent this (potentially tens of thousands of dollars) who really owns these properties?? anyway its ill thought out policies like these that create the very opportunities we profit from so i am only mad in principal, but richer in practice. the other side of evicting tenants from my property was providing cheaper units to first time buyers.
now i certainly would never want any special consideration were i to be caught out on some speculation as you suggested above. i don’t think anyone should play with fire unless they are willing to take the consequences. but i also think its bad karma to highlight, in print, to thousands of people, other peoples misfortunes. i suspect most of those who were burned were the least able to properly assess the risks they were taking. not that i have much sympathy, i just don’t want to rub it in… that is perhaps the diff…
Paco,
I agree with you and doubt they will reach 90’s levels in nominal terms, although I think they very well could reach 90’s levels in real terms (i.e. after inflation/stagflation is taken into account). It’s all speculative though, and only time will tell.
Bernal is marginal, interesting. I want to have your problems! :)
I should add, BTW, that I believe you have oodles more real estate experience then I do, and I’m not making any claims to special expertise here, I’m just applying common sense as best as I can, with all the caveats that come with that approach.
You are reading a little too much into my post. I actually didn’t declare an opinion per se on the current SF tenant laws one way or the other, I was merely pointing out that the vagaries of business allowed you to inconvenience others for profit, and it was perfectly fair and legal. Your gain was their loss. I don’t think any of the sellers whose properties I listed was anywhere near as inconvenienced by my post as your tenants were by your eviction of them, so your expression of concern for the feelings of the owners seems, well, a little hypocritical frankly. My post, like your evictions, was perfectly fair and legal, and unlike your tenants, I think it’s entirely likely the owners appreciated my actions, as the extra attention will result in more people looking at their property and increasing the odds of a sale, which presumably was the goal of listing it in the first place.
So I guess what I’m saying is that I’m not going to take lying down some guy that evicted an entire building of people lecturing me on my sensitivity, or karma for that matter.
And as for the karma, it’s all positive as far as I’m concerned: other potential buyers (such as myself) get a potent and timely reminder of the risks in buying real estate, the owners get added attention to their properties, and we now all have documented evidence of not just losses, but actual and significant *depreciation* within the city limits of San Francisco, which is a fairly recent phenomenon worth noting. Surely those benefits outweigh whatever pang of embarrassment an owner might feel should they stumble across my site, although if they are as ignorant as you just claimed them to be, I doubt there is any chance of that happening.
Again, I enjoy your posts, and I congratulate you on your success.
hey missionite, by all means i would not want you to take my comments lying down, as it were.
i have stated before that i do not feel one bit bad about exploiting the opportunity that the board of stuporvisors have dangled in front of us. in fact i feel that its almost our duty to do so in the name of property owner’s rights. the more we exploit the unintended consequences the sooner they will (hopefully) be exposed for what they are; STUPID POPULIST POLICIES that harm those they are trying to protect. in a renter’s town populists will rape the golden goose and i intend to reach around with my teeth (and wits) in reply-and not in a friendly way.
now i want to remind you that we did not evict widows and orphans. the day after we purchased the building we delivered a letter to all tenants informing them of our intentions; “we are applyling to the state to get permission to subdivide this building to sell the units individually. we anticipate that this will take 12months. once we receive permission we are happy to offer you the chance to purchase your unit for $x” ($325k-$375k depending on the unit). these tenants were young white collar adults. we were completely straightforward with them. we sent them financing proposals. to be fair, i’ll admit that three of the eleven tenants were reasonable. the other 8 were gold diggers egged on by the r**t board.
visions of a big payday clouded their judgement. they had ample time to search for another apartment but they stayed on b/c they wanted this payday. after eleven months we called a meeting. they demanded $40k/unit to vacate. we responded to their attempted extortion by excercising our legal rights. to put it in perspective for you four of the couples left us a trashed apt and walked with over $10,000 each of our money. again i bring up karma, and sleep well at night…
now missionite, i don’t want to bust your chops but i hafta call you out on a claim you made above- to wit, you state that you feel your highlighting of these unfortunates’ losses (averaging $100k), their ‘pang of embarrassment’ as you called it, is karmically balanced by the benefit of your exposure to others as a warning. i might agree had you not printed their addresses. btw i never called them ignorant. i just think that the ones late to the game with more dollars than sense (er, at least before this) were probably less likely to be aware of the risks.
i enjoy your posts as well (when you are not grave dancing that is..) ;-)
best,
paco
be careful missionite. it sounds like you are in some type of variable compensation line of work, sales or something. don’t count anything more than your salary as your bankable and usable debt/equity ratio. in my experience, if you are in sales, you will always spend 10% more than you make, no matter how much or how little.
as for prices going back to the 90’s, regardless of x-flation, not in our lifetimes. i agree with paco that bernal is way overvalued but it’s never going to see 90’s type pricing again.
too many people having babies and thinking that is the affordable noe.
“i might agree had you not printed their addresses.”
Huh? I posted information that is not only public, but is deliberately being marketed to the public. It’s not like I was down in city hall mucking about in City records (and not that there would be anything wrong with that if I had). The whole post, including research, took me less than fifteen minutes. If you notice, each address links to a real estate site (Redfin), and that site has pictures of each property, the asking price, and all the usual information INCLUDING the previous purchase price. All I did was gather up a few properties that were selling for less then the previous sale and link to them. I didn’t list the names of the owners (again perfectly legal if I had) or even so much as step one foot beyond what was listed on the front page of the advertisment. If you got a beef here then perhaps it’s with the law that requires this information to be available to the public.
“btw i never called them ignorant. i just think that the ones late to the game with more dollars than sense (er, at least before this) were probably less likely to be aware of the risks. ”
So in other words, you didn’t call them ignorant, you just called them less likely to not be ignorant. If there’s a difference there it’s lost on me. :)
James,
I own and run a business that’s rapidly growing. I don’t have a salary per se, just profit distributions when it makes sense.
okay okay, take it easy. i agree that it is appropriate to direct people’s attention to the state of the market, esp. on a real estate blog. and maybe i just misread your tone so for that, i apologize.
good for you missionite. i hope its not that blog.
;)
and as for all condo’s being shitty, they are not.
I hope it’s not the blog too. AdSense has generated a whopping 29 cents in revenue for me since I started it two months ago. At this point I might make it to a cup of coffee by the end of the year.
I didn’t say all condos were shitty. I just said I’m not interested in shitty condos. A lot of the local blogs seem to focus on them, so I’ve decided to do a blog that ignores them.