Recent Reductions in Saratoga

Even the blissfully upscale town of Saratoga is not immune to the downward price pressure seen in the South Bay due to market conditions – and many incredible mansions have prices that are now spiraling downwards towards earth!  Here are a few of the bigger reductions in price seen this week:

 15550 On Orbit Drive:   Recently reduced from $2.895M to $2.295M (a whopping $600K reduction), this home has five bedrooms on 9.8 acres with a creek and a waterfall, plus views of five counties! The price is still in orbit, but is heading down to normalcy. 

13973 Quito Oaks Way:  This upscale rancher was recently reduced from $1.48M to $1,295,888.  It has 2323 square feet, a nice circular driveway, a gas BBQ in the kitchen, and of course – a Saratoga address.

13431 Quito Road:  A more “down-to-earth” home, it features 4 beds and 2 baths in 1832 square feet of living space.  Originally priced at the “outer reaches of Saratoga” price of $1,099,000 – it has been reduced to $899K. 

Saratoga will always be a great place to live – and these reductions make it more affordable for us mere mortals.  When the market comes back up, Saratoga will be sure to follow.  One caveat is that Saratoga was notoriously overpriced relative to other upscale areas such as Los Gatos and Cupertino – so I do not see a return to inflated values.   Look to Saratoga’s near neighbors when planning what your potential ROI will be.  

Mansion Mondays: San Francisco Part II

Last week, we entered the realm of the San Francisco mansion. With so many to choose from, I started at the lower end with a unique property designed by Joseph Esherick. The home at 3074 Pacific Avenue was only on the market four days when I wrote about it, but it must have piqued someone’s interest, as it looks to already be sold.

This week we head over to the Marina District. Currently there are two homes for sale in this neighborhood, 3310 Baker, on the market 45 days, and a new mansion listing at 3157 Baker. the market 3 days, this Mediterranean-style home consists of 4 levels and 5600 square feet. Listed as “the only home in the Marina that is completely new construction,” this home has a lower floor two-car garage, multiple balconies, and an unfortunate one-color paint scheme throughout. (Although if you can afford this home, it’s small details like this that can be easily and cheaply overcome.)

The property is located in a small triangle-shaped block of the city that only has 3 lots (and what looks like 2 homes). This means that this particular listing is bordered on 3 sides by streets: Baker, Francisco, and Richardson (a multi-lane thoroughfare). However, the builder did install triple-paned windows, which should eliminate a significant amount of road noise.

Recent Redfin Neighborhood Data shows that the median list price/sf is $1,020 for homes, while the median sold price/sf is $576. This new home sits smack in the middle at $893/sf. Given the price history of homes in the neighborhood, (28.6% experience price reductions, with the median total reduction at 12.7%), you may want to take a wait-and-see attitude on this one.

Recent Sweet Digs Posts:
First Hand Account: My Visit to a Home Auction (very informative)
SF: Have these Listing Agents Been Drinking? (hilarious)
The Second Great Depression and How to Survive It (classic film clip accompaniment)
Neighborhood “No-Nos” if Buying for ROI (some sage advice)
10 Reasons to Love (and Perhaps to Live in) Berkeley (although we know there are more….)

First Hand Account: My Visit to a Home Auction

Earlier in the month, Susan wrote about the huge home auction event being facilitated by Real Estate Disposition Corporation (REDC).  Before her blog, I had already set my sight on a foreclosed and very small one bedroom condo, just around the corner from where I live.  It had been on the market for quite some time for about $275,000, with obviously no takers.  The starting bid: $139,000.

Prior to going I had done my diligence by attending the open house and visually “inspecting” the property.  Given that I live around the corner, I knew it was a well maintained complex.  By doing some Google and other property website searches, I also learned that the bank owned the property, most likely winning the 1st foreclosure auction for around $247,000 and the assessed property value was just over $200,000.  My max budget:  $170,000.

Held at the Oakland Marriott City Center, the auction was an all day event, starting at 9:30am.  The property I was eyeing was pretty far down on the list and it was recommended to arrive by 3pm.  Very courteus of REDC to provide these guidelines so bidders didn’t have to loiter around all day.  I arrived pre-reigstered with all the other required items (cashier’s check for $5,000 and blank check for the balance of the 5% winning bid) and got a handy dandy number.  The auction was in full swing with folks from all walks of life.  I wasn’t sure what type of crowd to expect, but it was just an international smattering of folks, from people who looked like they were looking for a home on the cheap to investors willing to renovate some of the fixer properties.

I had never participated in a live auction before, but after watching a few, I got the gist of it.  Each property had a starting bid and a previously valued to price, to give bidders an indication of what the property was once either sold or valued for.  However, this was a deceiving number as it reflected the highest price the home peaked at, at the height of the bubble.  The current value is probably nowhere near that now.  As evidenced by the property I was interested in.  It was previously valued to $400,000.  Ha.  And it didn’t sell recently when it was listed for $279 something.  

Overall, there seemed to be good deals.  Most homes went for under $200K.  Just a couple of examples:

2020 57th Avenue Oakland – Sold for $135,000

119 Silver Ave Richmond – Sold for $65,000

More than a handful of properties came back for “2nd chance.”  Not sure what the circumstances were (maybe the winner didn’t qualify for financing) that brought these homes back, but even better deals were had.  As the day went on, many bidders left, so when the 2nd chance homes came back, there was less competition.

This house in Richmond first went for $260,000.  It then came back for a 2nd chance and the next winner probably had some remorse, as it then went for $285,000.  Surprisingly, in the last 20 minutes of the auction, probably a good 1-2 hours after the 2nd winning bid, it came back on the block again.  Two bidders went at it and the final price:  $215,000.  Good for them, too bad for the bank.

As my property came up, my heart did start to race.  I didn’t want to get caught up with the whole fervor of the auction.  The auctioneer and the folks working the floor were definitely professionals.  They were animated, charismatic and kept things entertaining and lively. 

Unfortunately, I didn’t win.  The listing went by quick and I was outbid by $5,000.  I must admit I have a tad bit of regret, as in the whole scheme of things, an additional $5000 is not that much relative to a $170,000 purchase price.  But I’m proud I stuck to my guns.  And now I tell myself, I don’t have to undergo learning to be a landlord.

The auction is going on for a few more days.  For those of you in the South Bay, the San Jose area homes are going on the block this Saturday, the 27th.  Unfortunately, it’s too late to attend the open houses.  But if you are bored, it is worth a visit to see it in action.

SF: Have these Listing Agents Been Drinking?

Seems most readers agree that even SF’s real estate market is not immune to the economy’s downturn. With that sentiment in mind, I bring you a few listings that appear to be, frankly, delusional, harkening back to a time when living in (or near) San Francisco meant paying huge quantities of money, even in the crappiest neighborhood and even in the most falling down, sad hulk of a home.

Those days though, at least for now, are over.

So, are the agents for these homes overly optimistic, misinformed, clued in to a secret none of the rest of us know… or are they drunk?

To illustrate:

Here in Bayview, at 180 Orsi Court we have a 3/2.5 townhouse for  $739K.  Um, okay, but nearby 50 Lydia Ave, a 4/3 with more square footage, sold for $265K in June of this year. Further, 180 Orsi hasn’t changed price since it went on the market over 130 days ago.

In the same area, we have a 4/3 at 88 Orsi Circle. This one, at $700,888 is less than its neighbor above, but still seems awfully steep to me for one of the city’s most troubled districts. The owners bought the place in ’97 for $269,500, but they may have missed the boat on tripling their money. At least this agent has had the sense to reduce the price (not once, but twice) since the listing hit the market in April.

For comparison sake, there is a 10/4 multi-family (rental income!) for $838K at 1453 Newcomb.

Moving on to Hunter’s Point, we find 2 condos in the same complex that show signs that someone has been tipping the bottle. At 114 Kirkwood, #2 is a 3/2 condo, 1300 square feet, offered at $448K.  Yet here, at 126 Kirkwood Ave., #8, we have a 3/3 offered for $190K. To be fair, the latter property is listed as a fixer, but I’m thinking you could do a lot of fixing with more than $200,000 to play around with, not to mention the interest, taxes, etc.

In the Outer Mission, what but boozing explains the fact that this 2/1 at 41 Mt. Vernon is $705K while this rather attractive looking 2/1 at 41 Farragut is $525K. They both have in-laws. They both have garages. And incidently, they’ve both been on the market over 50 days…

So if not too many cocktails, what logic explains these listings?

Disclaimer: Agents, no disrespect intended. I’m just kidding. Love for any of you to comment with vitriolic and/or humorous thoughts which put my firmly in the corner.

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PHOTO: Media Canada

The Second Great Depression and How to Survive It

Last week’s meltdown of the financial markets is going to change the world as we know it. As fellow blogger Brenda Keener said in a post yesterday, some are speculating that global markets are in a state of collapse that rivals that of the Great Depression of 1929.

A friend of mine went to her bank (Washington Mutual) Friday and discovered a line of people waiting to withdraw their money going out the door and snaking around the block. Talk about your Great Depression. Is it time to show the film clip from “It’s a Wonderful Life” when Jimmy Stewart, playing a banker, explains to a mob trying to withdraw their money, “I don’t have your money in a safe. It’s in Joe’s house, and Bob’s house….”

I agree with Brenda that the U.S. economy is not going to collapse, and with MDAccount, who doesn’t think unemployment will be anywhere near the 25 percent it was in the first depression. (It’s around 7 percent in California now.) That said, things are going to be less than comfortable for a while. What can we do to ride it out as best we can?

Some excellent tips: Frequent commenter Brendan said in response to an earlier post, ” Read the rest of this entry »

Neighborhood “No-Nos” if Buying for ROI

If you are looking for a better place to park your money than a bank or the stock market – and haven’t lost the faith in real estate investments yet, then good for you!  You do have a much tougher task than in years gone by in making sure that you maximize your investment by watching out for issues that can limit or stall ROI growth.  No longer will all homes in a sector or city be swept up by the tide of rising home values!

By watching the market over the last year, I have learned that property appreciation (and depreciation) is no longer homogeneous across a city or area, but is now much more specific to individual neighborhoods.  School systems tend to drive property values to a great degree, but in many areas, there is a wide gap in property values even within the same school district.  For example,  in the city of Cupertino – homes next to Collins Elementary school and homes in Rancho Rinconada are all zoned in the Cupertino High School area, yet the homes in the older Rancho Rinconada area have appreciated much less and sell for less.  

What are some things to watch out for when selecting a neighborhood to invest in?

a) With gas prices at an all time high and showing no signs of dropping, close proximity to public transportation and freeways is critical to the working professional.  Homes that are close, without being too close, to transportation and major highways will appreciate more than those that are inconvenient.

b) Avoid neighborhoods with heavy traffic noise.  This degrades home value, and only worsens over time.

c) Neighborhoods in a state of decline, with many foreclosed homes reeking of a lack of care are also to be avoided.  Even though cities are working to try to make sure vacant homes are not simply abandoned, who knows how long this situation will continue?

d) Neighborhoods that look like every driveway is a parking lot are also to be avoided.  Old trashy cars parked in the front yard drive down property values.  The same goes for old trashy RVs, boats, lawn mowers, etc.  

e) Run, don’t walk, if you see groups of teens wandering the streets with nothing to do.  This goes double if you see any wearing gang colors. 

f) Any neighborhoods with a combination of older, run down homes and newer or remodeled homes are to be avoided.  In the thriving market, these neighborhoods would have gentrified.  Now, the gentrification process will most likely be slowed or halted due to economic conditions, driving down the prices of the newer homes to match the older ones.

g) Avoid graffiti strewn neighborhoods

In general, the best investment homes are the ones in nicer neighborhoods where prices have gone down uniformly – with good school districts, and where yards and home facades show obvious pride of ownership.  So called “bargains” with location flaws will not be bargains in the long run.  

10 Reasons to Love (and Perhaps to Live in) Berkeley

Three years this summer; that’s how long I have lived in Berkeley. So, as the chillier autumnal air creeps over me’ windowsill, I see no more fitting way to mark this anniversary than with a round-up of what — in no particular order — makes this city so special.

1. UC Berkeley (above right) All university cities are to some extent defined by their colleges. Berkeley happens to have a first-class one to boot. And while we may not be supping with Nobel Prize winners on a regular basis, we, the unassociated, benefit with a vibrant student culture; intellectual pickings day and night; and the general air of a place where wise thoughts are being thought at all times.

2. Tilden Regional Park (above left): Inspiration Point, doggy paradise, walking, cycling and hiking trails, great big gulps of gorgeous Eucalyptus scented air, and views to die for. On your doorstep.

3. Alice Waters: You may only eat at Chez Panisse once in a blue moon, but its owner’s influence, in the Bay Area and across the world, cannot be underestimated. Whether this daughter of Berkeley is transforming our kids’ school lunches or urging us to slow down, it’s all good.

4. Adventure Playground at the Berkeley Marina: This extraordinary place has to be seen to be believed. Equipped with real hammers, nails, saws and paintbrushes, children as young as seven, largely left to their own devices, build the playground of their dreams (rather than have it imposed on them by risk-averse adults). They say the inspiration was found in Europe, but I’ve never seen anything like this there.

5. Berkeley Bowl: No apologies for another foodie entry — it’s one of the reasons we love to live (and nosh) here. This verging on anarchic market is nothing short of superb. The freshest, most delicious produce, much of it local, a huge range of deli goods and great prices ensure it’s frequented by gourmets of all shades — whether home cooks, renowned food connoisseurs or top chefs. And now we’re getting a second one.

6. Moe’s Books: The tragedy is that I can only list this literary institution, the city having bid farewell to several great book stores in the past few years, most notably the much lamented Cody’s. Moe’s has been around since the heyday of the beatniks. Let’s hope it has many more birthdays to celebrate.

7. Berkeley High School (above left): How encouraging that another educational establishment makes the grade. Parents have been known to lie about their place of residence and beg, borrow or steal to secure an out-of-district transfer for their munchkin to attend this highly respected school — which ranks a more than respectable 286th out of 1,300 in America’s Top High Schools list.

8. Tree huggers: OK, so you may not want to spend your days suspended from a giant oak tree growing increasingly smelly. But aren’t you glad there are still people out there willing to suffer for a cause and stand up to The Man occasionally on your behalf? They are inevitably Berkeleyians.

9. Berkeley Repertory Theater: Consistently high standard of productions in an intimate setting. And once in a while they get to show Broadway how it’s done.

10. Peet’s Coffee (above right): Alright already, I know it’s a foodie one again, but surely coffee deserves its own category. And this really is excellent coffee. The stores are always inviting, even if you do have to form an orderly queue for your morning brew, and it’s the one thing Bay Area expats invariably say they miss the most. (Good thing they can order it online.)

That’s it. I fully expect people to disagree with some of my choices and look forward to hearing what theirs would be — if they are inclined to share.

[Photo credits: Tilden -- www.flickr.com/photos/maplebed; UC -- www.berkeley.edu; Berkeley High -- http://bhs.berkeleyschools.org/; Peet's -- /www.peets.com]

Update: Just spotted this rather OTT column on Berkeley Bowl, published in the LA Times today. Hat-tip Eater SF.

Welcoming Fall in Mill Valley

It’s that time of the year again.  With summer officially coming to an end this weekend, the Mill Valley Fall Arts Festival kicks off the autumn season.

This year marks the 52nd year of this festival, which means they’ve been doing this way before hosting art and wine festivals became the cool thing to do.  Held in Old Mill Park, this is quintessential Mill Valley.  The festival attracts over 130 different artists and is family friendly with entertainment for children and adults. 

While you are there, doesn’t hurt to take a look at the curren Mill Valley homes on the market.  With good schools, a great community center, access to outdoors and open space and a charming downtown with a variety of restaurants and shops, it’s an idyllic place to be.  With all that you will be paying a premium.  Average price according to Redfin’s Mill Valley Overview is around $1.25 million.

Here’s what’s currently available:

277 Sycamore Ave - 3 beds, 2 baths – $1,050,000:  A sample of what you get for under the average asking price.  A nice average sized family home at 1,550 feet in the Sycamore Park neighborhood.  Good sized lot of 6,000 feet provides potential for expansion.

295 Corte Madera Ave  – 4 beds, 3 baths – $1,649,000:  A Craftsman home in the redwoods.  Walking distance to downtown adds to the charm of this home that exudes Mill Valley Charm.  It’s been onthe market for quite some time and first asked over $1.7 million.

110 Locust Ave -  3 beds, 2 baths – $1,250,000:  Take a look at what the average asking price in Mill Valley will get you.  This one is also located in Sycamore Park area, which is central to many Mill Valley amenties.  Cute yellow bungalow with the white picket fence.

107 Highland Ln – 3 beds, 2.5 baths – $1,550,000:  Located in the Almonte area, which is southern Mill Valley, this place will put you onto 101 and get you to SF in a snap.  Large lot (9,365 SF) and water views. 

Time to Buy……or Hide?

Prices have dropped below even the wildest expectations of potential buyers, yet the summer increase in sales is drying up rapidly in the face of the failures of financial stalwarts AIG, Merrill Lynch, and Lehman Bros, as well as the bailouts of Freddie Mac and Fannie Mae. 

Rewards could be handsome for investors with the guts to face these events and move forward – yet the risks include losing everything if the markets actually collapse. 

From the San Jose Mercury News, Chief Economist for Quicken Loans, Bob Walters was quoted as saying,

“Whenever there’s turmoil, it’s a natural human emotion to go into a defensive mind-set and choose to do nothing.Buying when everyone else is afraid and selling when everyone else is greedy tends to be beneficial over time. But why don’t more people put it into practice? It’s hard to do. It’s hard to buy when you are scared, and it’s hard to sell when you’re greedy.”

What risks do home buyers face?  There is wide spread speculation that global markets are in a state of collapse that rivals that of the Great Depression of 1929. If so, then reaping ROI from a home purchase now may never happen, as the entire currency structure could change.  But how likely is this?  The US economy is among the strongest in the world, and emergency measures such as a temporary halt to all short trading have been enacted.  If it is inconceivable that the US economy could collapse, and I believe it is, then opportunity for upside still exists as it is inherent to a democracy. 

The other question that defines risk is how long will it take for the market to recover?  The Great Depression was a ten year span – should we expect another ten years to go by before our investments bear fruit?   In my opinion (and I am no economist but have had the great fortune to study Economics under one of the greatest profs in the world), the answer to this can be found by studying the difference in transaction time between the two eras.  In the late 1920s, the Internet with its lightening speed transactions did not exist.  Deposits were made to banks by hand, and the US mail carried most sensitive material as faxes did not exist.  The pace of life moves much faster today – which means the near catastrophes we are experiencing now happened quickly, and a recovery can also happen quickly.   

The biggest impediment to a speedy recovery is the red tape associated with the buyout logistics, and the renewal of consumer confidence in the traditional markets.   My best guestimate as to the length of time we will take to recovery is then five years, not ten as in the Great Depression.

But I do believe we have entered into a Depression – and all attempts to call it anything else are attempts to head off the impact by pretending it isn’t happening.  

If you review the history of the Great Depression, many businesses emerged as did the Phoenix from the ashes – portending that those who have the courage and strength to fight the fear and continue to invest will eventually reap even greater rewards for their leap of faith.

Some examples of businesses that actually increased advertising spending during the Great Depression include Kelloggs, Proctor and Gamble, and Chevrolet. All flourished and won out over competition during and after the Depression.  Radio advertising saw a huge growth spurt during this time as well, showing that there is money to be made even in a down economy by driving or even spotting key trends.  

In conclusion – yes, things are bad.  But hiding will not solve anything, and by investing and not losing heart if things continue to worsen before getting better – savvy capitalists stand to show even stronger profits when this mess is behind us and school children are writing papers about the “Great Depression of 2008″.  

I suggest taking the plunge, but only if you are looking for a healthy longer term investment.  Short term thinking is part of what got us into this mess in the first place!

Will Superhero SF Real Estate Prices Finally Fall from the Sky? How Far?

We’ve enjoyed a pretty bullet proof status here in our pretty little city, our housing market staying (mostly) strong while to the east and south, prices plunged.

But with the latest stock market news and the fear surrounding the proposed Government bailout, will SF real estate finally prove to have a chink in its metal?

Kenneth Kohlmyer, over at the Frontsteps blog, investigated “the have we hit bottom thing” in his recent blog, analyzing some data that shows a trend toward lower prices on homes sold than last year at this time. Looking at Districts 3 and 10 in particular, he writes:

In fact, in areas 10 and worst of 3 there were four more sales this year than last, at 10% cheaper.

Areas 10 alone had four more sales this year, 42 over 38, and cost 423 a foot as opposed to 515 last year. Average sales were 559K this year, 718 last.

His thoughts echo those of Carolyn Said, of the Chronicle. In her article, she notes the general punch in the face the Bay Area has suffered, and asserts that this time, not even SF has been able to duck the blow.

…..foreclosures made up 8.6 percent of San Francisco resales. San Francisco had the smallest decline in resale median price compared with a year ago: It was down 12.1 percent to $780,000. Still, it was noteworthy that even the best-performing county underwent a double-digit price decline.

Further pushing our market down is the higher standards for issuing jumbo loans, even to qualified buyers (and we can all agree they should never have been issued to anyone else). Obviously, in an area where so much of the housing for sale is well over the jumbo loan mark, buying is going to get harder; thus selling will too.

Does this mean prices will come down? Will SF hit bottom? How severe will the impact be?