Tag: real estate

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A House Up the Street

It sold for $550,000 in 2003. It sold for $985,000 in 2015. In 2019, after a small addition was added, it sold for $2,050,000.

You may have heard that the Bay Area real estate market has veered into the crazy zone and about the nutty prices that buyers are shelling out for shelter. Not too long ago, that seemed like something happening far away — maybe down in Palo Alto, the cradle of Silicon Valley and all its wealth, where we used to hear stories about modest old bungalows being purchased for millions just to be knocked down and replaced by something grand, or at least big.

Well, the irrationality — I won’t try to diagnose the causes right now, or comment on the unsustainability or the fact it has made my own neighborhood a place neither we nor our kids could possibly afford if we were buying now — has shown up right on our street. We’ve lived here since the late ’80s after a house turned up that owners were selling “as-is” and we were able to scrape up a down payment with help from my parents and my wife’s employer. I can’t tell you how lucky we felt to be able to do it.

Late in 2017, a house that had been in the same family for more than half a century went on the market. The specifics: two bedrooms, one bath, a little under 1,300 square feet. A relative of the elderly owners, who had passed away, traveled back and forth from Southern California to update the house, which looked nice when the “for sale” sign went up.

The asking price: $875,000. Now, it’s understood that in this market that figure was a fiction, one meant to attract attention and leave plenty of room for the price to be bid up. Friends who long ago lived on the street were interested because their daughter was looking for a place. They have some resources, but were not optimistic that they’d win the bidding war, which they were certain would go well over $1 million. As a last resort, they wrote a letter to the sellers about their past connection to the street.

I’ll bet it was a nice letter, but they needn’t have bothered. The little bungalow sold for $1,650,000 . Nearly double the asking price and well beyond the offer they stretched themselves to make.

Once you’ve seen that happen, it’s not surprising when it happens again. And since early last year, sales in the $1.5 million range have become commonplace in the surrounding neighborhood. Not that that’s the limit: Earlier this year, a nicely redone home a couple blocks from us — four bedrooms, three baths — sold for $2.8 million. The agent sent a flyer around after the sale that bragged the home had attracted five all-cash offers — including one from the eventual buyer — that were over the $1.8 million asking price. (Did I bury the lede there? The house sold for $1 million over that original price, which today is better thought of as a reserve price, a minimum acceptable bid in what is understood to be an auction.)

And this keeps happening. A month or so ago, another home on our street — next door to the one that sold last year for $1.6-million plus. I found the sales history: In 2003, the long-time owners sold the home, which was then probably two bedrooms and one bath, for $550,000. I’m guessing they felt they made out all right on the deal.

In 2015, the house, which I believe was at least modernized by the interim owners, sold for $985,000. High, perhaps, but in the current situation not insane-sounding. The new buyers added a 500-square-foot addition — a master bedroom and full bath — and remodeled the kitchen. A couple of months ago we ran into the owners, who still seemed like newcomers to the neighborhood, on what happened to be their last night in the house before they moved to Copenhagen.

The house was staged for the sale, the sign was posted out front, and I believe the bidding began at $1,395,000. How high did it go? The sale became official just yesterday. The price was $2,050,000.

As it happens, I crossed paths yesterday morning with a real estate agent who was putting up a sign for an open house. I said hi, and he responded with a bright, “Want to buy a house?”

“Ha!” I said. “Not in this neighborhood. You know that story.”

“Keep saving your pennies,” he said. “Maybe someday you can.”

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San Francisco Real Estate Angst, 1855 Style

I’ve been doing some reading on Gold Rush history for a work project — looking specifically at some of the Bay Area’s economic ups and downs. I came across this piece in the June 20, 1855, edition of the Daily Alta California, one of the state’s oldest papers (and one that continued to publish into the 1890s, I think). I picked up the text from a machine transcription of a digital image from the California Digital Newspaper Collection. Apparently, the CDNC is having a hardware issue and the digital image itself is not displayed at that link. So I’ve cleaned up the machine text as best I could, though there are a couple places I couldn’t divine what the original said.

I found this essay, which is a critique of ongoing property speculation in San Francisco, to be interesting in its condemnation of out-of-control speculation as ruinous to the public good. “In a word, it has vitiated the morals of the whole community,” it says. Even if the moral focus of that statement is coming from a Victorian concern about the deleterious effects of speculation — gambling, in effect — it resonates in a present where social justice activists are fighting gentrification taking place amid crazy-seeming spikes in property prices.

Here’s the Alta California piece in full:

One of the greatest evils which has ever overtaken the city of San Francisco — the greatest because the parent of many other evils — has been the overvaluation of property. It has not been properly confined to the city, but has manifested itself ail over the State, and its results are to be noted throughout the length and breadth of the land.

Now that Real Estate is “down,” it may not be improper to say a few words concerning a subject which is of unusual interest to every permanent resident of California. The available area of the pueblo of Yerba Buena for business purposes was very small. It extended only from about Pacific to California and from Montgomery to Dupont streets. We indicate the boundaries by streets which were laid out after the pueblo became the city of San Francisco. This space, although ample to accommodate the limited trade of 1846-7, proved wholly insufficient to meet the requirements of the wholesale immigration incited by the gold discovery.

By a natural law, the working of which never deviates, the price of lots within the available area of the town, after those discoveries, rose enormously. Thousands of people were rushing into the State, the most of whom landed in this city. Thousands of tons of merchandise were poured in upon us, which had to find storage in town, and had to be disposed of here. Rents naturally rose to the most extravagant rate, and the price of land advanced with equal rapidity, although not in a proportionate degree. There was no telling where the thing would stop, particularly as money was most abundant, and there appeared to be no end to the immigration. So far the speculation was a legitimate one. Afterwards it assumed another character.

It was evident from the first that this state of things could not last forever. The capital which had been introduced into the country in the shape of merchandise was quickly turned to enlarging the limits of the city proper. Wharves were extended, and the water invaded on the one side, while hills were cut down and streets graded on the other. All this time rents still kept up, if not to their original point, at least to one which proved highly remunerative, and the immigration still continued larger. It still appeared that there was more room wanted, until at last San Francisco attained her present size. But the tide had turned, and rates at last, after a long period — unexampled, indeed, for duration in California — began to decline. They have been declining ever since.

The city of San Francisco is to-day out of all proportion to the State. Where we originally did not have enough room, we have now a superabundance, not merely for today or this year, but for years to come. The Real Estate speculation, which was originally a [legitimate?] one, has for the last two or three years [become?] merely a bubble, liable to burst at any time, and kept [abreast?] of inflation merely by the activity of those interested in it.

There is no reason why, with the present population and prospective increase of our State, fifty-vara* lots two miles from the Plaza should command thousands of dollars, particularly when they are so situated as not to be available for purposes of agriculture. They should have a value, of course, and a vary considerable one. They may and do furnish legitimate objects of permanent investment for those who look forward to a return for their capital years hence; but their intrinsic value is not to be rated by thousands. We have been going too fast. We have followed out the speculative [?] to its full extent, and now we must stop.

It is an indisputable fact that nearly all the prominent operators of 1852-3 are now bankrupt, and the mass of smaller men are utterly ruined. A year or two ago they thought themselves rich — they lived extravagantly, kept their horses and carriages, furnished their houses magnificently, and now — they have nothing. Some few still hold out, and, with retrenched expenses, are waiting impatiently for a “rise.” They will probably be sick at heart before it is realized.

But this system of overvaluation has not merely ruined those engaged in Real Estate operations: It has to a certain degree debauched the whole community. Parties who saw futures in land have neglected their legitimate callings to squat on fifty-vara lots, and drag out unprofitable years waiting for a settlement of titles. A recklessness of human life has been engendered, which has told very badly on the interests of the State at large, preventing many who would have made excellent citizens from coming to these shores. It has kept rates of interest extravagantly high, thereby eating out the vitality of the republic. A disposition to speculate desperately — in other words, to gamble — not merely in land, but in everything else, has been fostered by it, and manifests itself in the frantic effort to “get whole” which have led men of high social standing to the commission of the most debasing Crimes. In a word, it has vitiated the morals of the whole community.

The Real Estate market is at present in a curious position. The asking and offering prices for land show no approximation whatever to each other. Outside lots are unsaleable except at a ruinous discount from cost prices, while in some parts of the original plat of the city rates still keep up. The lot at the corner of Washington and Montgomery streets on which Burgoyne’s building stands sold, a few days since, at auction, for $39,000, or about $1,000 a front foot. At the same time, fifty-vara lots on the hill, which were valued eighteen months ago at $15,000 to $16,000, to-day only command about $2500. It is a singular fact, that a person owning a lot in the business part of the city, on which a brick building has been erected, can to-day borrow more money on it than it would sell for!

It is time that we began to awaken to the real value of property here. San Francisco is not New York, a city of half a million of inhabitants, with an immense population behind it; it is a small place — an important one, it is true, and destined one day to be the central point of the Pacific, but nevertheless a small one — the entrepot for a population of less than four hundred thousand people. There is no reason why property in it should rule at New York rates, and any attempt to force them up to such prices can only be a purely speculative movement which must, like all gambling — be it with dice, or cards, or Peter Smith titles — redound to the injury of the community at large.

*A vara was a Spanish unit of measure widely employed in parts of the Southwest that had been part of Mexico. According to sources I find, the vara in San Francisco was equivalent to 2.75 feet, or 33 inches. Fifty varas would have measured to 137.5 feet, and a 50-vara lot would have been 50 varas square, or 137.5 feet by 137.5 feet. That’s 18,906,25 square feet, just a bit over four-tenths of an acre. What would that land go for today? Well, here’s a listing in the city’s rough Tenderloin neighborhood, about one-third the size of a 50-vara lot, going for about $3.2 million.

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How to Win Friends and Monetize People

Just after New Year’s, I got an email from a former colleague. The subject line carried the sender’s name and said, “Do Not Delete.” I recognized the name — we’ll call him Stephen, since that’s his name — though it’s been years, I think, since I last saw him. His message asked for my home address so that he could mail me something. He was a little cryptic about what it might be, saying only that it wasn’t what his mother hoped he’d been sending. (What his mother hopes for, I’m guessing, is a wedding announcement.)

I let the email sit there for a day or two before replying. I sent him my home address, which is publicly available for anyone who wants to spend 10 seconds looking for it, along with a 23-word greeting. Why did I reply? What was I expecting?

I was curious. What was it my non-bosom-pal Stephen wanted to share with me? Maybe he was inviting some old acquaintances to a party of some kind; nothing extraordinary in that. Maybe he had just found out he was terminally ill and wanted to bid his friends goodbye (I’ve never shaken off the shock of getting a flyer in the mail announcing the memorial service for a friend I hadn’t seen for awhile and hadn’t known was dying). Maybe he’d won the lottery and would be showering those most dear to him (me?!) with surprise checks (that’s what I’d have done if I won — I’m sure of it). I didn’t think about it too hard, though, and by the time a big manila envelope from Stephen arrived in the mail last week, I had more or less forgotten about it.

Here’s what was inside:

A one-page letter from Stephen talking about how, after 15 years as a writer and editor, he had changed careers a couple of years ago and gone into real-estate sales. You can probably guess what came next: He talked about how rewarding and challenging his new line of work was. He cleared $6 million in sales last year. And now, he wanted to reach out to his wide circle of buddies and semi-buddies to spread the good news and ask for referrals, either directly from us or from anyone we know who might be contemplating a real-estate deal. For our convenience, he had enclosed his business card.

I’ve got to say this: The letter has as much class as any of its kind can have; which is to say, not much. It was well thought out. It was nicely crafted. It had a friendly tone (I’d quote it, but the message seems to have found its way into the recycling). But at its heart — the mysterious email, the group letter personalized with the salutation “Hi, Brekke!” scrawled at the bottom — the effort was still crass, right out of some playbook on how to “leverage” friends and family as part of creating a successful business enterprise: “I know and like you. You know and like me. I’m in a new business now. Won’t you let me sell you my service? It’ll help you as much as me.”

Don’t get me wrong. First, I’d feel different if I were dealing with someone I’m close to. With a real relationship in place, I certainly wouldn’t resent the suggestion that I might consider using a service, and chances are I’d try to figure out a way to help. Second, I don’t have anything against people who make their living in a tough, unforgiving profession. Sales is brutally direct in its feedback on your product and performance. To do well at it requires a combination of knowledge, preparation, endurance, optimism and perhaps charm with which I, for one, have not been abundantly blessed. Third, I don’t dismiss the advantages of engaging someone you know and trust to help with a daunting business transaction. I got an attorney who played on one of my old softball teams to help Kate and me when we bought our house in the late ’80s. And the last time I wanted to refinance the (same) house, I looked up a former colleague from my last news gig who has since become a mortgage broker.

Would I have gone to either guy if they had first let me know beforehand, the way Stephen did, that they viewed our acquaintance as a sales opportunity? I can’t say for sure, though it’s clear that I have a low tolerance for marketing. For me, the difference is that the only marketing either the lawyer or the mortgage banker did was to be themselves; and until I initiated a conversation about doing business, I never got the feeling either one of them saw me as a potential source of income or our relationship as a resource to be monetized.