| The Sky is Falling! The Sky is Falling! Or is it?? | October 18th, 2006 |
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(http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/10/18/MNGTTLRF721.DTL) in today’s Chronicle about the “bubble bursting in home values”— These kinds of stories irritate me because they front-load the article with gloom and doom, then bury the good news in paragraph three or four. I want to quickly parse the article and let you know the real scoop: First off, the statement that, “In San Francisco, the price of an existing single-family home rose 5.5 percent to $800,000, the biggest increase of any Bay Area county,” is buried in the middle of the article, as usual. Second, the reporter cites two examples of San Francisco homes having problems selling, but fails to mention that both homes are located in the worst spots of their respective neighborhoods– one next to the Bernal Heights (St. Mary’s Park) Recreation Center, and the Potrero Hill Recreation Center, where jobless youths congregate. She also fails to mention that the home in Bernal Heights is being listed by an East Bay agent. As with any market, up or down, quick or ’slower’, it’s all about “Pricing Correctly”. It’s also about hiring the most knowledgeable, experienced and competent people to handle every aspect of the sales transaction. A careful review of stats reveals that while fewer homes are selling in San Francisco, we aren’t seeing a drop in prices. There is one exception to this rule— the median condo price city-wide is down 1.3% over the past year. This decrease is attributable to the rules of supply/demand in SOMA/South Beach, where there is a high concentration of condos. New construction in those neighborhoods has dramatically increased supply, and any condo buyer in those neighborhoods who bought within the past two years is unlikely to do better than break even right now. I suspect, however, that condo sales in other neighborhoods have not dropped (if you want me to prove this, email me and I’ll send you the stats.) If you’ve been in your condo for more than two years however, you’re up 15% from $649,000 to $750,000. The average price for the same period also took a leap, from $716,000 to $835,000. The rule of thumb for any home buyer is that if you hold for five years or more, you will do well. There may be bumps in the road during that time, but ultimately your investment will yield excellent returns. For a more balanced view of the market, please see the post directly above this one. It presents a different viewpoint and get into the heads of these people who make such compelling arguments about the sky falling on the real estate market. |
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This Buzz is a quickie—I wanted to address an article| Attention all Cassandras, Pollyannas, and Chicken Littles | October 18th, 2006 |
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The following article is by Nicolas Retsinas of the Joint Center of Housing Studies at Harvard University. It was published in major papers throughout the country last month:HOUSING BUST AHEAD.” The headline hints of catastrophe: a dot-com repeat, a bubble bursting, an economic apocalypse. Cassandra, though, can stop wailing: the expected price corrections mark a slowing in the rate of increase — not a precipitous decline. This will not spark a chain reaction that will devastate home owners, builders, and communities. Contradicting another gloomy seer, Chicken Little, the sky is not falling. Let me alleviate some fears.Fear One: Prices will plummet. From the start, the much-vaunted housing “boom” was an uneven phenomenon, driven by a strong demand for housing, coupled with constrained supply, particularly on the two coasts.In much of the nation, housing prices rose modestly; in a few areas, prices did not budge.
In those overheated markets — often fueled by immigration — prices were rising by as much as 20 percent a year.But even with soaring demand and limited supply, that escalation was not sustainable. Even with too-good-to-be-true mortgages, people cannot afford to buy homes that cost five times their income.
So in those overheated markets, moderation is expected.Moderation means that prices will stop rising at meteoric rates: The home owner who expected a double-digit profit after one year will be disappointed. A home will once again be more of a domicile, rather than an investment. In some regions, prices will flatten, rising around the inflation rate, which is the historic average. The fundamentals behind high prices — strong demand (more households will form in the next decade than in the last) and constrained supply — persist.
Fear Two: The economy will collapse.Housing now represents over 20 percent of the gross domestic product (compared with 18 percent from the manufacturing sector).For most families, the investment in a home constitutes de facto savings: the build-up of equity is in the trillions of dollars. And home owners have tapped into that equity, using their homes as ATM machines for refinancing and home-equity loans. Consequently, we are “well housed.” Indeed, two bathrooms, air conditioning, garages — the amenities our grandparents called luxuries — are standard. All this activity has fueled consumer spending.A Cassandra fear is that as home prices moderate, the moderation will show up in the gross domestic product. Yet, again, moderation is not a free-fall. The housing market will adjust slowly, with fewer sales and starts. History tells us that housing booms are not eternal — that most end — enabling incomes to catch up with prices. Furthermore, builders have been building to meet demand. In regions where the number of households is growing, so is the need for housing. That demand will not slake. So the incentives for developers remain strong. We will see more construction over the next decade than over the last — and the last decade set a record. Of course, Cassandra has not been the only one watching housing prices fall. Some Pollyannas have cheered the fall, predicting that at last housing will become more affordable: The $200,000 home will go for $150,000; the $150,000 home (in some parts of the country, this is a rare ramshackle) will go for $100,000. Renters desperate to buy into the American dream yet lacking the down payment — much less the income to finance a mega-mortgage — will get their raised ranch. And as more middle-income renters buy homes, the shortage of rental housing will ease; rents will drop; and the “affordability” crisis will fade. Pollyanna, though, is shortsighted. Yes, some would-be owners, previously shut out of the market, may at last buy a home. But the “affordability” crisis will persist — exacerbated by rising interest rates. The working poor face their own income-and-expenditure imbalance: Their incomes fall short of their need for housing, food, transportation, and health insurance. They will still be hard-pressed to pay for a basic apartment close to their jobs. If the market “self-corrects” in the fast-growing parts of the country, that self-correction will not trickle down far enough to help the Wal-Mart clerk or diner waitress. In our new economy, low-wage jobs are growing. These people will still need public intervention.Cassandra can stop wailing, and Pollyanna can stop cheering. Home prices in some regions are moderating, but for a nation inured to CNN’s headline-of-the-moment, this moderation does not rate high on the Richter scale of cataclysm. |
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| How Now 77 Dow Place | October 12th, 2006 |
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This Sunday I will be holding open a loft near downtown at 77 Dow Place, unit #300. Dow Place is one of the City’s secret corners– an itty-bitty cul-de-sac (with an itty-bitty street sign) running East off 2nd between Folsom and Harrison. Completed in 2002, 77 Dow is a one-of-a-kind high rise loft building also known as “Hawthorne Place” It was designed and built by the same guys that did the Yerba Buena Lofts on Folsom. A lot of people miss learning about 77 Dow Place because they or their Realtors have trouble finding it. The building also competes with a number of mega-condo buildings like The Metropolitan or the new construction at Rincon Towers or The Infinity. By comparison, 77 Dow Place is a small intimate building with just 83 units tucked into 12 stories. I think 77 Dow Place offers a rare combination of cool and class. First off, it’s a pocket alley that’s close to lots of fun and play. South Park is just down the street as is the Ball Park. Second, they’re lofts, which you hardly ever find in a high rise building. Third, the finishings include raw concrete and pale plaster walls which proximate the feeling you get in a warehouse conversion (without the low ceilings and exposed plumbing). But that’s just the beginning. . . 77 Dow Place condos also offer some key opportunities for investors and pied a terre dwellers. Because of their proximity to the Financial District, they can rent quickly for a premium price. You also get a better return on your investment, since the building offers the lowest price per square foot (under $650) for any steel and concrete building South of Market. A 21-story building full of luxury condos is going in right next door to 77 Dow. Once completed, it will renew interest in this corner of the City and more investors will recognize the benefits of the location. The area is also going back on the map with the opening of the Westfield Center just four blocks away. I think this location will enjoy better than average appreciation in the coming years. There are three units available at 77 Dow Place right now. #300 is the lowest price and best value, at $695,000 for just under 1100 square feet. A corner unit with light on two sides, the loft is big enough to divide into a sleeping and den area, and a closet big enough for a clothes horse. So please come by. I’ll be there Sunday afternoon from 2:00 to 4:00 and would love to see you. Even if you don’t come by, I still love your emails and good feed back. So don’t ever be afraid to call or write. As always, there’s no such thing as a stupid real estate question! See you next week! |
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This posting offers an overview of Dow Place, a downtown high rise condo building that is probably off your radar but should go back on it. . .| Update on 310 Townsend - Brick and Timber Warehouse Conversion - Like A Loft But Better | October 11th, 2006 |
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310 TownsendI urge you once again to contact me instead of the sales office or developer. You deserve quality representation on the purchase of new construction and the benefit of a Realtor working in your best interests. If you want references on the good job I do representing buyers of new construction just ask– I’ll give you the names of some new owners who will sing my praises. 310 Townsend is a 1908 brick warehouse that is being converted to forty-five condominiums. Technically they’re apartment, but have a loft-style feel, with extra-high ceilings, exposed brick and timber posts and beams. and post. Like a loft, the extra high ceilings also make the units feel bigger than they actually are. Prices range from $470,000 (don’t get excited, it’s small and dark) to $1.85M for a 1500 square foot 2br/2ba with skyline views. Most of the units are in the $700-900K range and run 860-940 square feet. Please keep in mind that while this seems like a high price per square foot you are buying a brick and timber conversion building. There are only 9 other condominium buildings like it in San Francisco. The brick feature walls are wonderful and the units facing the street will get the benefit of wonderful arched windows. Parking is an additional $20,000 (I know this boosts the psf, but I still think the units are a fair value). Only 28 parking spaces are available. They will be sold with the most expensive units, unless someone doesn’t want one, in which case it will be sold to the next highest unit without parking. Finishings include tile in bathroom, w/w carpet in living area and hardwood in kitchen. They will be offering an upgrades package. The developer has quietly sold roughly 15 of the units already. That leaves 30 left. There’s a good assortment of sizes and price ranges still available. . . Showings are by appointment only. Be aware that the building is still under construction and you need lots (lots!) of vision to see what these places will look like once completed. I think they will be beautiful. The high ceilings makes the units seem so much bigger than they are, and the brick and timber is wonderful. It’s also a smaller building with a more intimate feel than its neighbors like 170 Off Third or The Beacon. Wanna see it? Just call me– 415-577-0809. I hope to hear from you! |
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OK, as promised in my weekly email Buzz (you really should subscribe if you haven’t already) here is some initial info on 310 Townsend, a brick warehouse covered in scaffolding near the Ball Park.
