A Little More Perspective

Yesterday was a strange sort of milestone, it was the 2nd anniversary of a sale I had of this house on A Street in South San Francisco. My client’s had bought this place originally in August of 2004 for $520,000 and decided they wanted a bigger place and a neighborhood upgrade and we listed it on July 29 2006 for $645,000. The house was on the market for 44 days and during that time we received 3 offers…all of them zero down, subprime borrowers, the first two of which fell apart.  It became clear pretty early on that subprime was going to be the only offers we were likely to get in that area and on our third ratification we accepted an offer of $630,000 and hoped and prayed that it would close! It did on October 6 2006. This was a really cute house folks, my clients had put alot of love and attention into it in the 2 years they were living there. Here’s some pictures:


I noticed it back on the market last month as a short sale listed for $399,000. It didn’t sell and went into foreclosure. It, most likely, will end up back on the market as an REO, bank owned, and sell at some price lower than $399,000. Amazing! I’ve got some clients who are interested in houses in Daly City or Pacifica on the west side of 35 and I was amazed to see how many homes up there are just like this A Street place in price. There are 6 houses on the market on Oceanside, both active and pending, listed in the mid 400’s to high 300’s. One’s owned by Frankfurt based Duetsche Bank. Most of these houses had sold a few years ago for as much as $720,000.

With the possible exception of that foreclosure at 250 Curlew earlier this year, we have not had this kind of spectacular erosion of values in Foster City folks. Foster City is nothing like these other areas. There have been a small handful of short sales or foreclosures but certainly nobody who bought a home in 2004 has lost 20% of their value since then…not to mention those who bought after that. Why, you ask? Because very, very few homes sold here via subprime loans with zero down and stated income. People who bought here had down payments and they were qualified. What’s really going to be interesting going forward is that in the future only those who truly qualify will be buying homes…and thus we’re really going to see a Bay Area of haves and have nots. In areas that are really quite close to one another geographically.


  1. Yes, but what about Alt-A resets that will happen over the next 1 to 1.5 years? And then there are people who have been taking out equility line of credits from their house. All these problems exist in foster city and will hit sooner than later. Prices can easily go backto 2002-03 levels and it will continue to be a buyers market. Not every couple in bay area makes 250K+ to afford million dollar houses.

  2. Great post. And great example. While it’s true that loan requirements will continue to become inflexible and thus segregate certain would-be borrowers from the ‘haves’ (especially through ’09), this results in a price correction like you’ve illustrated, making homes dip on the peninsula overall. Now you’ve got affordability for those who could not own for the past decade. Just gotta hope some good credit scores out there. Hmmm.

  3. Jim Minkey says:

    Kind of gloomy there Liko, and maybe you’re right. I think not though. First off, Alt-A are subprime loans. If you’re anxiously awaiting them coming due and causing a Daly City-esque disaster, I would ask this…why hasn’t it happened already? Are you assuming that all of the subprime loans only began in Foster City (or San Mateo, San Carlos, Burlingame…etc)in 2006 or later? If they existed here they would have started at the same time they did in DC, San Jose, Hayward…etc. Now if you’re thinking of borrowers who got interest only adjustables that will reset next year…I have no doubt that we’ll see those. I actually know of some already myself. The borrowers will have the chance to refi before then, or sell since these folks most likely bought 5 years ago. Remember, these folks had down payments so they’re most likely NOT under water…as in Daly City et al. As for the homeowners who have pulled out equity? Who knows? As a percentage, do you think a large number of homeowners will lose their homes because of that. I don’t think you’re giving these folks enough credit.

  4. Jim – is that a freeway overpass behind the backyard? Seems like things like that will drive away most buyers in today’s market.

  5. Jim Minkey says:

    That’s great observation Edward!! It does look like an overpass…actually it may possibly have been worse! It’s the parking lot for the Arby’s on El Camino in South San Francisco. At least the Arby’s there doesn’t have a drive thru or you would hear people ordering all day and night. (That was a selling point for this place…no drive thru!)

  6. I will remember not to toss out the soda can out of my car window while on that overpass, otherwise it will fall straight into this house’s backyard 🙂

  7. Jim Minkey says:

    No, No, it’s not a soda can…it’s a Jamoca Shake. Straight from Arby’s itself.

Speak Your Mind