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Posts Tagged ‘san francisco bay area’

The weather has been weird this year, the rains lasting surprisingly long into spring/summer. I watered my flowers for the first time this year. And in other summer signs, the for sale signs are popping up in our East Bay Redwood Heights neighborhood. The next door neighbors are selling surprisingly enough, and we’ve been watching the prep effort on a nice house in the neighborhood, on Jordan Street, in the valley behind the hill we live on. The house on 3253 Jordan St. just listed at $699,000, which while below the peak of a few years ago, is still not cheap by any measure.

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What do you do when a property you bought for 5.4 billion is now only worth 1.8 billion? Why you give it back to the lender of course.

Several people who track the commercial real estate market have warned of a coming wave of commercial property defaults that might make the current residential real estate problems look like peanuts. Adding credibility to this claim, Tishman Ventures recently defaulted on Stuyesvant Town & Peter Cooper Village in Manhattan and returned the property to its lenders in a deed-in-lieu arrangement.

With a loan more than double the property value, the action by Tishman makes financial sense. They are not the only ones giving property back to the banks, recently several towers in San Francisco bought by Morgan Stanley at the peak, were returned to the lender. Note the quote in the article: “This isn’t a default or foreclosure situation,” …. “We are going to give them the properties to get out of the loan obligation.”

The Huffington Post, a popular blog, contrasts the Stuyvesant situation with a borrower who is underwater on a mobile home. Entitled “Tishman Speyer Walked Away From Its Stuyvesant Town, Peter Cooper Village Mortgage. Why Can’t You?”, one has to wonder at the double standard here.

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I must admit I’ve been far too busy to keep up with the media.  But when I walked into a convenience store last Friday and saw this headline screaming up at me from a stack of San Francisco Chronicles I took note.

Up to this point, the inner San Francisco Bay Area seems to had a teflon coating against the declining RE market.  Yes the outer Bay Area is bad for a while, lots of foreclosures and huge price drops.  My personal opinion is that the severe downturn in the outer bay has been hastened by the high cost of energy.  Many in the outer Bay Area commute many more miles to get to places like San Francisco and Silicon Valley where the housing prices have always been higher.   At some point the commute stops making sense.  And let’s not even talk about further out into the central valley, where Stockton is ground zero for foreclosures, driven by speculation gone bust and really not much in the way of jobs.

But the inner bay has been immune, or so I thought, severe building restrictions, an awesome climate, great culture and high paying jobs has always kept prices high and competition for houses intense.  When I bought in 2000, I was incredibly lucky to be the one picked out of 14 offers.  But the cancer of the housing market has spread inward and yes even San Francisco has suffered a double digit decline (11%). 

What’s dragging down prices?  The large inventory of bargain priced bank owned properties.  The individual owners don’t really have much of a chance unless they have something really special that the right person will want.

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