There, we said it, the words everyone expects us to say, because we’re Realtors, “It’s a great time to buy!” The truth is, it really is a great time to buy (provided you can get funding). There are properties that are getting into contract for ridiculously low prices compared to six months ago, and when they close escrow, some jaws will drop. Buyers are negotiating everything under the sun, and most sellers that are selling in this market do not have the luxury of waiting it out.
Sure, if you buy now, you’re going to look like an idiot to all of your friends because you bought in a spiraling market…but that will be short-lived. Have them over for a few cocktails, show them the nice CeasarStone counters, and wood floors you were able to put in with the money you saved on the purchase. In five years, you’ll look like a champ, in ten, the king of the world (your tiny little world that is, because you really are an insignificant speck of dust in the grand scheme of things, just like us).
If you plan on making San Francisco your home for the rest of your years (as many do), or at least the next 5-10, there are so many opportunities out there, we can’t even begin to point them all out.
There you have it. We said it. It’s a great time to buy (if you can).
I actually think you’re right, but many realtors have shot themselves in the foot in the past because they repeat this “right time to buy” mantra whatever the economic conditions and whatever the state of the housing market.
of course, there are many reasons you that the next 6-24 months will be an even better time to buy, but for all the folks sitting on the sideline right now (like me), it would be great to see some of the properties you think are great buys right now. I predict it would be the most popular feature on the blog.
If you have cash, it is great time to buy.
However, if you need loans (and can afford it), I think the bubble years, even 2007 was a better time to buy. For the same down payment/monthly, you can afford more in 2007 due to the lower mortgage rate, despite higher price (comparing to now).
Glad to hear this. Thanks for letting the sunshine in.
I think that if you are planning buy with the intention of living someplace 10 years — and can afford to live in the home w/o breaking the bank (or the entire economy for that matter) — it’s probably always a good time to buy. Over 10 years I’d bet that home appreciation will always perform decently.
It’s the idiots that got caught levereged up on properties they couldn’t afford with a time horizon of fewer than 5 years. For those folks, there was a 4-5 year window that has now closed….. and likely closed for a long time.
Steve,
Personally speaking, in a perfect world I would love to divulge all the great buys I see out there right now. You’re right that it would make for great reading. However, this is Alex’s blog, number one. I don’t feel comfortable soliciting clients on here. Nor do I feel like information should be given away to readers with agents who may or may not be putting in good work for their own clients. If I were to tell you about a property on here, and you went out and used another agent to purchase said property, shouldn’t I be compensated? Technically, I should. Not that I would ever know about it.
Number three, and most important, I have three clients in the marketplace intently trying to find superior deals. Generally speaking they have their eyes on these properties … in two cases if the price gets any lower, they’re in.
I will say this. To continue our oft-used nautical theme, the tide is turning a bit. Two weeks ago I was lamenting the lack of good deals on the market. It had become ridiculous. We’re continually pummelled by horrible news, there’s fear in the marketplace, and YET … no deals? It made no sense. I think that might finally be loosening somewhat.
[Editor’s Note: Post away fluj. If you’d like to contact fluj directly to buy some of those deals, email him, [email protected], is it?]
One thing that needs to be pointed about here is the following. Real estate transactions occur in every market, every year. A lot of the rote assignment of “oh. they have to sell. they got a toxic loan. they bought two years ago. they [insert bubble popped theory here]” precisely misses the point.
Maybe a seller can’t get as much as they could in 2007. (Maybe they still can, but that’s another story.) But maybe they have lived in that house for 10 years. Maybe they inherited. There are millions of reasons why. Reasons why it can be a good time to sell. Not a historically peak time to sell, but a good time to sell. And if it’s off peak, is it a good time to buy?
Loving the nautical themes…
Fluj is correct about reasons to not publicize potential deals if you have clients looking for deals. And he (and Alex) should be compensated for their sage wisdom. I’ll tell you this much, having never met either Alex or Fluj, you’d be far better served with client-minded agents like these guys than you would picking some random agent sitting a Sunday open house.
One of the benefits of this current market is that it is going to flush out (my aquatic reference for the post) a lot of the weaker / low production agents. This is a profession and unfortunately the barrier to entry are low. The better agents are worth very much worth their salt.
Got to disagree here.
Now is not a good time to buy. Prices are only just starting to correct to sustainable levels. 2010 is the year.
ALEX: You have a job to do, I appreciate that, but “buy now” is just a realtor line. Suppose prices will be 30% lower in 18 months. Would you still say people should “buy now”?
[Editor’s Note: “Sure, if you buy now, you’re going to look like an idiot”…and unfortunately, no tengo no crystal ball, so no know when is z bottom, zanon.]
Now is not a good time to buy. Prices are only just starting to correct to sustainable levels. 2010 is the year.
This is of course also opinion.
Further, putting a fine point on when isn’t even a credible opinion. You contrasted someone who has been observing the market on a daily basis, someone noticing that FINALLY lines are being redrawn somewhat in some places. And your counterpoint is a fine point on a future date?
If the assumption is that prices will continue to drop, the banks will continue to restrict Loan to Values. . .Imagine a 50% loan to value max.
Rates are still solid, and again. . .the days of buying for the sake of a quick flip is gone.
Value will simply be a matter of opinion.
@fluj, I’m glad you are protective of your clients’ interests and, of course, I agree that you should be. What would be interesting to me, and I trust other readers, would be a “wow, that was a great deal” series of posts. The focus would only be on closed properties.
Unless you’ve seen a place, you never know if it was a good deal or bad when the sale price becomes public, so it would be fantastic if we could benefit from your knowledge in a way that wouldn’t hurt your business.
To all Realtors:
You have no idea whether this is a good time to buy or not. So save it. You are not an economist, you do not study markets, you are not a CFA or any type of financial expert (Neither am I FYI). Tell me…what are your qualifications for giving financial advice especially when it comes to using leverage?? None, except that you made a living selling properties during the largest specualtive bubble in WORLD HISTORY. Save your realtor spiel for your ignorant customers.
YD
I would argue that dotcom was quite a bit more speculative, one. Two, we are speaking to those in the market. Three , no economist has gotten sf city right yet, four we are the ones who can see lines shift best, five always adjust time horizons
fluj it’s true you would see the line shift but realtors also have a huge conflict of interest when it comes to giving advice. Saying it’s a good time to buy without showing some sort of evidence is hard to accept. This is not a market in which people are willing to make investments based on faith regardless of the investment (stocks, realestat,… )
Editor: I assume you are Alex. Maybe not. Anyway, I could not understand your comment, it seemed like you were saying no one can predict the future. But, if you are Alex, then saying “now is a great time to buy” suggests that prices are not going to go down in the future. This is a prediction of the future. Tengo crystal ball now? You say you see some softening in the market now. I see more softening in the future.
As for “value being a matter of opinion” — sure, but cash flow is a matter of math. If you can show me a cash flow positive $1M-$1.5M property in SF, then I will wholeheartedly agree that there is value there. But if you’re buying a property for $2M that you can rent for $2K/mo (which is what I see down here in the Peninsula) then we are past the “opinion” zone and into the “twilight” zone.
[Editor’s Note: Zanon, I am the editor, Alex. And yes, in my off-beat poking fun way I was saying you cannot predict the future, neither can I, which is why I say again, buy now…look silly in the short term. Hold for the long term, might not look so silly. And no, I have absolutely no idea when we’ll see bottom.]
Why shouldn’t people wait till the unemployment numbers start to flatten out? I have been thinking about getting a rental property somewhere in eastbay. Yeah you can go cash flow positive now in some areas. But while the hi-tech companies are still letting go of employees, it makes no sense.
You can call it “advice” if you like. In my opinion I have only ever advised two posters at this forumm. The operative term is opinion
It’s simple.
Real estate has always performed in the long term. Period. Invest or sit the sidelines. No one’s twisting your arm either way. If you want in, know what “long term” means for your area.
33 y/o yurt dweller said it best.
realtors will try and sell a rotting, termite infested dog house in the back yard to their aging mother…
and call it a great opportunity.
I’d love to see the vague debate about future prices transferred to specific comments on a “Wow! That was a great deal” post. Fluj or Alex could write up a “I can’t believe they sold it for that” article and folks could weigh in. Perhaps zanon or asad could find a deal that was even better as a point or comparison, or make an argument about how much lower that could go next year (10%, 20%, 30%? seems hard to imagine for something prime).
Hopefully it would be great fun for all, but it would help the buyer on the sidelines wondering when to get in the game. If there are (closing)deals out there capturing the attention of the fronsteps editors, we’d love to hear about them on the blog.
Steve: I’m on board with that idea. My test is easy: if it comes close to being cash flow positive, it’s a great deal.
If not, then you’re either:
1) betting on appreciation (if you are an investor)
2) don’t care about the money, it’s worth it to you
Either is a legitimate position, but “It’s A Great Time To Buy!” doesn’t have the same ring to it if it becomes “It’s A Great Time To Buy — if you don’t care about the money!”
And I tip my hat to Steve and Fluj. SF has shown tremendous resilience, certainly more than most people expected, and there still seem to be transactions underway that would have struck people as crazy in 2003/2004. SF is no Tracy!
Binnings said….”Real estate has always performed in the long term”
Why should this continue? What is your basis for this BOLD statement? Stock Brokers told their clients in 1998 that the market always performed long term. Fast forward to 2008 and we are still at 1998 prices!! Again, save your spiel and listen to facts. YOU HAVE NO IDEA WHAT YOU ARE TALKING ABOUT. This is why you are despised. Good luck adding value in this market. I feel for you. Honestly I do. But not when you make baseless claims you are not qualified to make. And especially when it comes to borrowing massive amounts of capital to buy a potentially depreciating asset.
“33 y/o yurt dweller said it best.
realtors will try and sell a rotting, termite infested dog house in the back yard to their aging mother…
and call it a great opportunity.”
Except for the fact that 33 y/o Yurt Dweller didn’t say that. You did.
fluj you just stole my quote.
To Zanon: “If you can show me a cash flow positive $1M-$1.5M property in SF, then I will wholeheartedly agree that there is value there. ”
Buy any 1 or 1.5m property in the world all cash, put a tenant in it, and it will cash flow.
Yurt Dweller, there are a lot of charts that show SF appreciation over longer time horizons. There may even be one on this site somewhere. Again, what is the time horizon? What is the criteria? A ten year hold? What? If your criteria is apples to apples, well, guess what? Those people typically didn’t hold the property very long.
I have said it many times, but I’ll say it again. Anyone who buys real estate in any market should understand that if they just chill out and do nothing to upgrade the property, AND then sell in a year or two or three, they should not reasonably expect to profit. I call it static appreciation.
And to answer Steve’s question, I have one idea. Let’s look at the Delmar street property once it closes. In my opinion it was priced lower than it would have been a few years ago. So even though I know the market for that one was still competitive with 42 disclosures going out and I heard 10-12 offers, I bet someone got it for less than peak. Again, let’s see what it sells for. I think with less than 600K invested into it, it could be a $2.5M property. I base that future value upon a search going back quite a long time in area 5-E and surrounding … $2M+ sales existed in Ashbury Heights and Buena Vista going back 10 years or so. Or pre-runup, really. Late 2004 was the biggest spike in the whole cycle.
JAN: OK — you got me! I will amend: 20% down, 6% 30 year fixed loan.
zanon,
that’s a different story and obviously I knew where you were going, but i couldn’t resist.
In all seriousness to folks like Zanon and Steve. If and when I get a chance to really do a nice post on the deals I’m seeing (keep in mind I can’t disclose a lot of information at the moment as tons of this information is given to me in confidence for the sake of my clients), I’ll do it right. The deals are out there, but what is important to note is that a deal to you and me, may not be a deal to someone else Real estate is all relative. A home is only worth what one person is willing to sell it for, and what another is willing to buy it for.
Jan…good one @ zanon. I got a good laugh out of that one. ;-)
@thefrontsteps, thanks! you have a very savy audience, and, although I suspect there will be spirited debate on price, there tends to be agreement over the qualities of nice property. your select “deals” will be a helpful reflection on the current state of the market.
Alex: Of course I would not expect you to reveal anything that might compromise your business and your clients.
One test I like to use is the craigslist/zillow test. You find a rental on craigslist, get the zestimate, and see if the zestimate is anything like the rental payment.
This is all public information, no one is divulging anything. Usually you see a $1M-$2M property renting for $2K-$3K a month. Epic fa1l from a cash-flow perspective, as they say! My test is easy — let rent get within 25% of 20% down, 30 year 6% mortgage rate.
If you can find something like this, or you have a property close to one of yours that fits, or you find something where you think the zestimate is *way* off (based on better comps you know) then you can certainly post those on the board without revealing anything about your clients.
I love it. Its a great time to buy but all real estate is relative. Yeah, philosophy will get you out of this argument (sacrcasm).
Its a great time to buy if you spend money to upgrade your property. What a joke.
Give it up.
You asked a few specific questions and they were answered by others to the best of our ability, in a civil manner. A time horizon is not all that philosophical or esoteric a notion in real estate, quite the opposite. Just hanging out for a couple years in order to see appreciation is something I do not believe in, and I’ve counselled clients accordingly. Your attitude begs the following question. If you’re just going to be rotely dismissive, and feel as if the market is terrible and will only worsen, why are you even here in the first place?
FLUJ: I hope your comment was directed towards yurt dweller, and not me. One should always be polite, and never dismissive.
That said, are we on for my challenge? Since you and Alex are so much closer to the market, can you share with us a rental on craigslist that’s cash flow positive compared to its zestimate, 20% down 6% for 30 years, in San Francisco?
Sure but you might have to wait a little while
No in SF. But in east bay there are a lot
http://www.redfin.com/CA/PITTSBURG/182-MAE-Ave-94565/home/646256
http://www.zilpy.com/US/California/Contra_Costa_County/Pittsburg/Zipcode_94565/182_Mae_Ave/0,0,1,3,0,0,38.00143,-121.9001,1,1402
10 mins to bart
fluj never gives it up. he argues like a 3 year old who just had his bottle taken away.
anon8mizer: Yes, there are lots of properties that fit my criteria in East Bay. But I’ve seen *none* in SF or on the Peninsula. That’s what we’re talking about (well, SF anyway, TFS is a SF blog)
noearch: Be nice. Fluj has been totally reasonable.
fluj: you’re on. And I think I will need to wait a while — maybe a year or two ; )
20% down, 6%, 30years.
500K: 100K down. monthly payment $2398 + $500monthly taxes.
rent above $2900 ???
1M: (same maths) rent above $5800 ???
HOWEVER, you should still consider what else you would do with your downpayment. If your 200K downpayment was instead in stocks, you could have lost 100K in the past weeks. Spread that loss over 100 months and you compare now your 1M house with a rent for the next 8 years at $4800.
This to say that again, one’s loss is someone else gain and there are LOTS of things to consider. As my better half says, it’s always easy to * look backward and redo the math in the past * or life in what-if-land.
As of today, I guess most of us are getting wet by the financial storm, and in my shoes, it feels less painfull to loose 100K on my house than loosing 100K in stocks… my house is still my home.
* or LIVE in what-if-land oooops
fluj: you’re on. And I think I will need to wait a while — maybe a year or two ; )
No, hopefully like a month or two. And hopefully my client buys the property I have in mind too.
Noearch, I’m struggling to understand how I ran afoul of your skewed moral compass today. But thanks for continuing to play villain on here.
Here is a property we viewed that certainly was cash flow positive for investors, meaning non-resident borrowers. Such borrowers need 40% down in this lending climate. For 20% down and 6%, it still works out to 30K positive, gross income versus APR. Factor in there’s a latent 7% rent increase to be applied to all tenants, increasing the rent by nearly 8K annually. Also factor in that there was a garden apartment being used for storage by tenants that could be rented at market rate. This property went for slightly less than asking.
Here: http://sfarmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Sanfrancisco&PRGNAME=MLSLogin&ARGUMENT=xtKKlLT9ANa%2Bf2r76xYMfmoupMSVnBYpEZQyn217dnU%3D&KeyRid=1&Include_Search_Criteria=
FLUJ: A $1.7M unit renting for $9k/mo certainly counts. You’d get cash flow positive with 20% down at 6% at $8K/mo. This totally passes my test, and is a good price for a good investment. Congrats to the buyer!
However, you need to have 3-4 families living in it to make the numbers work. I have not seen any $1.7M single family homes with $8K/mo rent.
I’m not saying you did not come up with a property that passed the test, Fluj, you did and I tip my hat. I think it also underlines the huge gap that remains between rent and price, though, and that gap has to close, either through rents going up (300%-400%!) or prices coming down, or both, before it becomes “a great time to buy”
The buyers paid $1.6M too, not $1.7M. And again with a 7% rent increase, as well as the studio being rented out for say $1200 and not 800 and change, another 10K in rent roll was possible.
I know of at least one other property like this one. If there are any latent/ currently passive/ patiently waiting investors out there, and since the Ed. gave me the go ahead the other day, do contact me if you are interested. (Ed. a finder’s fee would of course be in order.)
Zanon, I didn’t know that SFR was the objective. Off the top of my head, and without being conversant with rent prices over there, Bayview is probably the place to buy for a longterm SFR as rental play right now.