Would you pay for prime real estate? What do you think of these cramped quarters and small spaces with a price tag of $1,000 per square foot?
Even with the real estate market slowdown, real estate prices don’t appear to have budged much in San Francisco. Although I have relatives in this city who claim that properties over there aren’t selling well at all, it sure doesn’t seem to be the case, when you see some of the insane prices being quoted for the tiniest of homes: $279,000 to $330,000 each for some condominium units, with homeowners’ association dues hovering at $270 per month.
The real estate market is supposed to suck right now; still, it hasn’t stopped some Bay Area developers from turning around and selling the smallest properties for as much as they can still get for it.
But I forget that some of these latest quotes I’m seeing are for brand new condos in an urban area, where space is scarce. Still, I’ve never figured out what’s so attractive about living in the city (spoken like a true country gal), even if you happen to work in the heart of it.
What Housing Market Crisis? Prime Real Estate In San Francisco
Just to give you some idea what $279,000 to $330,000 is going to buy you in San Francisco today, take a look at these snapshots of the aforementioned condo units sized up to be around 250 to 350 square feet. They are located at the Cubix Yerba Buena building in the SoMa area in SF.
Architect George Hauser is the first to say the studios are too small for many people, families in particular. He and local planning groups, however, believe the so-called micro units represent one means of providing more first-time home-buying opportunities in a city where most prices outstrip most incomes.
“It’s not the last place a person might own, but a great place to spend three to five years as a young single … to build equity and move up,” said Hauser, principal of Hauser Architects in San Francisco. “You’re in a small space with great amenities and the resources of the city.”
For more on what the public thinks about this development, check out the comments provided in the original story.
Feeling like a sardine yet? Take note that I’ve got nothing against small houses — something which I’ve written about in the past. There are indeed, many benefits to owning small homes; I’m just not that crazy about those of the small and expensive variety.
Of course, many people argue that the prices for these city condo units are just right. Since they are seemingly cheap, what with the median price of Silicon Valley homes at $749,000, we’re told that these units are a great way to get in on the ground floor of Bay Area real estate. The argument for buying into such a market is that you’ll be able to build up equity which can help you upsize into larger, pricier homes down the road.
Price Per Square Foot Formula
But let’s look for a moment at how these places are really valued. There are a couple of ways to value property, including checking out comparable sales in the surrounding neighborhood and the price per square foot formula that many use to get a ballpark valuation for a property.
Using the price per square foot calculation, these homes are going for $1,000 a square foot. Is that “normal” by city standards? Am I being naive or simplistic in thinking that such pricing is extravagant? All I know is that there’s no way I’d ever think of forking out money on this kind of real estate, especially these days! I checked MLS listings around the Bay Area and home prices appear to linger in a relatively lower range between $300 to $400 a square foot. In the thick of the real estate downtrend, would anyone really be thinking of spending over $1,000 a square foot anywhere? I’m sure the answer will surprise me.
Unfortunately, rents around here have also gone up and are no longer so affordable either. There isn’t much respite in being a tenant around the Bay Area: everywhere you turn, space remains in high demand and even with the pain of foreclosures escalating, certain parts of our neighborhood remain clearly unaffordable.
More Prime Real Estate: Parking Spaces In New York
But really, who are we to complain about living quarters the size of a shoebox selling for $279,000 when elsewhere in this nation (or the world), real estate prices are even more ridiculously out of reach. What about those parking spots that are actually selling for a similar six figure amount ($225,000) at our nation’s other coast — in New York? The New York Times reports that people are snapping up car parking spots for $165,000 and above, along with $50 monthly maintenance contracts on these spaces. What I find stunning about this is that there are waiting lists and people regretting the missed opportunity to buy at these market prices. I guess if you buy under $200,000, it’s a bargain?
For developers in New York, parking is the highest and best use for below-grade space and fetches about the same price per square foot as actual living space, which costs much more to develop. According to Miller Samuel, the average parking space costs $165,019, or $1,100 per square foot, close to the average apartment price of $1,107 per square foot. Those are averages, of course. A $200,000 parking space is about $1,333 per square foot.
For the record, when people buy these parking spots, many of them look upon these as investments — as they rent out the spaces or flip them just like any other piece of property. Question is: are these values sustainable?
I honestly wonder why we place such a high price on living in denser areas. Whatever happened to simple living in the suburbs, where one can appreciate ample space, fresh air, a spacious garage and a yard. Is it really that much of a pain to commute to the city? And if you’ve decided to live in the city, why the heck would you need a parking space for? I would think that owning a car in the city defeats the purpose of living there in the first place.
At any rate, it all boils down to how we value our space; how we value our lifestyles and where we live. To me, I can see myself finding better uses for a quarter of a million dollars 😉 .
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{ 32 comments… read them below or add one }
I guess you have never lived in Manhattan. Not visited, lived. It is worth the price. People are not crazy to pay so much. The lifestyle and the fun you have is entirely worth the money.
I won’t leave Manhattan even if I get something for 1/2 the price or lower. Oh and it’s not about the commute – definitely not.
@Shan,
You are quite right — I’ve never really lived in a city and don’t have the urge to. My brother used to live in SF and one of my best friends used to own a condo right in the middle of Manhattan. Both enjoyed it immensely, living in the midst of the hustle and bustle.
I guess I have a different concept of “fun” 🙂 . I’m much of a homebody and find it fun to be in the woods or tinkering in my garden. Or maybe it’s just my age…, but even when I was younger, I limited my visits to the city. I guess it’s just not my cup o’ tea. My least enjoyable jobs always turned out to be those that were located in the city… oh well.
In the end, we spend our money as we wish and what makes us most happy — regardless of “valuation”.
I couldn’t agree more. I don’t understand the desire to work 90 hours a week to live in a shoe-box. most manhattanites i know like to justify the premium they pay to live in the city by citing the excellent take-out options. greener pastures, say i. my supposed ‘backwater’ of a small city offers many of the conveniences of a larger urban area, but i never sit in traffic, don’t listen to noise outside my window at night, know my neighbors and can get a nice starter home for (get this) $70,000. I hear we have decent take-out restaurants, too. Only I wouldn’t know, seeing as my kitchen is big enough to cook in 🙂
Prime housing prices haven’t dropped much because prime mortgages haven’t reset yet. Take look at my latest post for more information (particularly the long comment I made) explaining this phenomenon:
http://www.erica.biz/2008/real-estate-erica-predicts-your-news-headlines-for-2009/
Here in San Jose, you can now buy 4 bedroom single-family homes for as low as $249,000. That number was $300,000 at the beginning of this year, and has been in freefall. This is not exactly “prime” property, but it is single-family and only 1 hour away from San Francisco, with easy access to CalTrain.
Much like prices in lower-end areas have dropped, prices in higher-end areas MUST drop. I explain all of this in great deal on my blog, but the short synopsis is that late 2010 will be an excellent time to buy a house in “prime” areas like San Francisco.
-Erica
Its all about location. San Fran, Vegas, New York, Chicago and international cities like Paris, London, Toronto, they are all priced high because that is where the action is. The parking issue is something different, I can’t wrap my head around paying those crazy parking fees!
More money than brains… 🙂
If you had the money though, I suppose you might think “why not”?
I live in a suburb of New York. I can take a train and be in the heart of the city in half an hour, yet I have a big backyard with a garden, a nice , good public schools, two cars etc. In many ways it is ideal and I am certainly pleased with the arrangement. But I will say that my friends who live right in New York, in shoebox apartments that cost more than my lovely four-bedroom house ARE getting something that I’m not getting. It’s not just the takeout, it’s the total immersion of culture. It’s the kind of people they meet. It’s some kind of energy and sense of possibility that is a little hard to describe. Yes, their takeout is better (though we can actually get plenty here, from Korean to Italian), but the real difference is something more subtle than that. It’s being IN that unbelievably thrilling world that is New York City, not just coming to it. It’s a pain in the butt, it costs too much money, it’s gray and packed, but oh my god, New York can just grab your heart and your mind and be the most compelling place on earth.
Some people don’t want to live with higher density but obviously the market has shown that the collective will of people is they will pay a very high premium for such living. The main thing that surprises me is how slow we have been to figure that out. In the last 15 years there has been an increasing awareness of the value people place on living in walkable communities (which are nearly always highly dense) and have been building them by design. They have been very successful ventures.
Although paying $300,000+ for a 350sq efficiency apartment doesn’t appeal to me, seeing the photograph of that tiny space made me think about how simply and consciously one would have to live in order to occupy that space. It has a certain appeal.
As a professional real estate broker, I am amazed by what some people will pay for space. In Austin we top out in the downtown area around $800/sq ft (the Four Seasons Residences), BUT we are only a city of 800k or so inside city limits. Not big at all.
I suppose my disbelief in what some people are willing to pay for space is paralleled, but what those same people think when I tell them that I live a whopping 7 miles from downtown.
To each his/her own, but man, I’d never sacrifice my space for the privilege of paying top dollar for a small central location. Perhaps when I have my mid-life crisis!
Joe
The thing that bothers me about the small space movement is that it doesn’t come with small prices. 1000 a square foot seems high for San Fran from what I have seen in stats. In general it seems that a lot of the architects that are building small houses and condos are still asking pretty high prices which in my mind is kind of part of the appeal of minimalism.
It’s amazing what people will pay just to look cool and live in a cool location, but then, that’s where the jobs are. I am a midwesterner and I have found that the big cities here like Cleveland, Detroit, Minneapolis offer enough to do and I can afford to buy a decent place AND save for retirement.
As Mary mentions though, there is an appeal to simple modern living. I have too much stuff for a single person and I am working on getting rid of things I don’t need.
Like rats in a cage. You couldn’t pay me to live in the city to start with. But, to each his own.
I don’t have a problem with small houses – I live in one. But 1000 sq ft for $100,000 is only $100/per sq ft.
And there’s plenty to do in rural areas – I am always busy! But the nice thing is I don’t have to make/have a lot of money to live in such splendor as the prices here are so reasonable. I’m 5 minutes to the bay, 10 minutes to the ocean, and 10 minutes to the mountains! Couldn’t be much better!
This reminds me of an MTV episode of “True Life: I’m A Competitive Eater” where it showed Takeru Kobayashi’s apartment. It was a single room with padded floors that doubled as his bed. It reminded me of a prison cell for the mentally insane. But space is even more at premium in places like Japan so I don’t think it is wrong, wicked, or evil that they live the way that they do. I actually think it would be nice to live really simply in a small space – just as long as I don’t have to pay thousands of dollars a month to do it!
It is all about location. Living in a 350sq apartment doesn’t appeal to me but obviously the demand is there.
Everyone’s lifestyle is different and what may apply as logical to one, might not be for another. I live in a 740 sq. house and that’s fine with me,being single, it’s not so bad. I had to pay $1500 per month for a city apt once per month. It was too much to spend w/ my budget.
Real estate business is the field to be in right now and this is mainly because there are so many people out there wanting to buy land! So I would not think much when I buy a house or whatever.
Not everyone understand that this business is safe, investing in real estate gives you guarantee of more money in the future. You can always use the land for yourself. The best part is anyone with some capital can foray into this business.
There is no time like now!Hop in!
Well the price that you’re ready to pay one day is not enough the next day. I think this is the time to just sit back and see how the price is.
I would pay anything if I can foresee a good future for the property.
It’s crazy what real estate costs per square foot in different parts of the country.
We live in Wichita, Kansas. In mid 2006 we bought a older custom built home, 3000 s.f. finished and about 700 s.f. unfinished on two acres, a lot of mature trees and just inside the city limits. The cost plus upgrades to new home status puts in in the price range you mentioned below.
“Just to give you some idea what $279,000 to $330,000 is going to buy you in San Francisco today, take a look at these snapshots of the aforementioned condo units sized up to be around 250 to 350 square feet.”
Same craziness here in the real estate market of Spain, lol…
it’s all about location. my house in hawaii is good bit north of $1000 per sq/ft but the one in kentucky is bigger and cheaper at only $150 per sq/ft. where would you rather be in january? if you want to live in the city you have to pay to play, if you want to live on the beach it’s the same thing. a person really only needs so much square footage, isn’t it just as wasteful to buy a huge house for cheap as it is to buy a small house for a huge sum? pick your poison, you wana burn money or burn space and resources? what’s more important to you your location or your toys and 7 bedrooms? it takes all kinds to make the real estate world go round, and good think too, if we all had the same priorities we would be in wichita with rebecca driving up the prices of their 4000 square foot starter homes.
That’s right, it’s a matter of what matters to you regarding quality of life. If you want to live in the hustle and bustle of Manhattan, you’re going to pay for that action. If you prefer the solitude of the country, build away!
Prime real estate is not nearly as important to me as the quality of the facilities. Don’t get me wrong, if I had millions of dollars I would pay the money to live on the water. Under the current conditions I will continue to get the most bang for the buck.
I exactly don’t know
that’s crazy! in our area you can live ocean front in the nicest resort for far less than that.
If all you know are these prices because you’ve never lived anywhere else, that would explain your complacency. There are many locations/states that provide triple the space for that figure and double the fun and entertainment. This isn’t prime real estate, it’s prime thievery! I wouldn’t do it, no chance.
I would love to own a condo in a place like that! I think about buying a condo in Maui because it is a great tourist destination and I can rent it!
Didn’t realize Yerba Buena is SOMA is considered Prime real estate with the unlimited amount of construction.
If you want to talk about prime real estate, look at Pacific Heights, The Marina, Cow Hollow, and Presidio Heights. Now that’s prime and prices will always remain up there.
In San Diego prime real estate is not moving as fast as medium and low priced properties. It seems that fewer people are looking for luxury; even the price is 20% lower than it was a year ago. Most buyers are looking at rental investment properties and also at sustainable mortgage payment investments. Most of our transaction activity is generated in this sector.
The way people think about buying a real estate investment should be dramatically influenced by the current circumstances. We need to be more conservative and careful choosing the right property and estimating the yield on investment.
Well I would pay anything if the property has a good future and promise. However the problems lie that the price that you’re ready to pay one day is not enough the next day. It’s more of a matter of waiting for the right property.