Mosaica 601 on Alabama Street
Is it affordable or not?
Is it affordable or not?

Todd McCormack has been waiting more than 10 years for this moment—the ability to consider buying a new condominium in the Mission District.

“I have lived in San Francisco long enough to know that I missed the last window 14 years ago,” said the 37-year-old insurance broker.

It’s a moment that others too are considering, buyers and agents at the Mission District’s new condominium projects said during interviews on several consecutive weekends. Transactions citywide have been down as much as 50 percent in the past six months, some said, but prices have fallen by as much as 20 percent and interest rates are at an all time low. This dynamic has meant that for the first time in more than a decade, an increase in foot traffic at the new projects includes first time buyers, many of them the middle class earners long shut out of the city’s pricey market.

“This is a new beginning for the middle class,” said Jim Hurley, a senior real estate broker at Vanguard Properties who has been in the business for 21 years. “Teachers can afford a condo in the city which they could not 10 year ago.”

Hurley and other agents, however, confirmed what the shoppers indicated—potential buyers aren’t jumping into the market quickly, but are hovering nearby, some taking the leap and making an offer and others weighing the possibility of future price declines against the historically low interest rates.

McCormack was typical of that profile. “I have been hit pretty hard by the stock market,” he said. “It hurts the down payment situation. But on the other hand, the interest rates are low, so it is kind of a trade off.”

Dan Dodd, the Coldwell Banker agent for a $995,000 condo at 303 Guerrero, said that nowadays it takes 40 days to sell a property compared to the same period last year when it took only 10 days. “People are on the fence with uncertainty. But it is a terrific time to buy with the low interest rates, and there is room for negotiation” Dodd said.

Steve Nye, a software engineer who recently looked at a new $999,000 condo on 480 14th street, agreed that prices had come down quite a bit. Still, however, many condominiums require 20 percent down, which means coming up with $200,000 on a million dollar property.

Mitch Laufer, director of marketing and public relations at Vanguard Properties said “January and February have been amazingly good.” Vanguard is one of the district’s biggest realtors and represents properties in the Mission, Noe Valley and Castro.

Mosaica 601 on Alabama Street
Mosaica 601 on Alabama Street

One of its clients is Mosaica 601 on Alabama St., a new 34-condo complex with separate senior housing and rental units. On the first Sunday in January that they opened, Laufer said, 180 people went through. As of mid-March, 20 out of the 34 units were in escrow including 17 of the 21 below market rate units and three of the 13 market rate units.

The below market condos sell for $181,089 to $344,727 to buyers who earn 80 to 120 percent of the 2008 San Francisco median income of $66,000 and the market rate condos range from $579,000 to $659,000.

While most condos require a 20 percent down payment, Mosaica has FHA financing and so the down payment is 3 to 5 percent of the price with interest rates at about 5.5 percent, the agent said.

San Francisco’s median home sales price in January was down by 24.5 percent to $562,000, compared to January 2008, according to DataQuick Information. Hurley, said that condo prices in the Mission have come down about 15 percent compared to the same time period last year. Others put that drop at 20 percent.

The monthly Commerce Department report on new construction released this week, however, appeared to confirm the cautious optimism that Mission District realtors expressed. In February, construction of new apartments and homes—and indicator of confidence–jumped 22 percent from January.

“I see lots of first-time home buyers coming,” said Hurley, who also attributed the phenomena to the low-interest rates and the decline in prices.

Most of the new construction available in the Mission District does not have the low-interest FHA loans that Hurley is able to offer at Mosaica. That means buyers must put down 20 percent. In addition, prices jump west of Mission St.

Katherine McCall, a 44-year old attorney, who is looking to sell the 100-year old Duboce Park house she bought in 2002 to buy new condo in the Mission, said that  “there weren’t a lot of choices” when she bought in 2002. Nowadays, she said, it’s a buyers market.

Not all new construction in the Mission District was in demand. Patrick Gardner from the Polaris Group, which represents the new condominium project, 2200 Mission, said they had 500 lookers come through in the first three weeks after the property opened the second week of January. He estimated that only 1 or 2 percent of the lookers were serious shoppers.

“There is a strain in the credit market, which means banks are not willing to lend easily,” Gardner said. “Until their credit bumps up and until we see shifts in their lending practices, it is going to be hard to find buyers.” In mid-February, six out of 23 units that sell from $450,000 to $700,000 were in contract, according to Gardner.

Some bankers disagreed. “Banks are lending,” said a banker in charge of financing for the below market rate units at Mosaica. She said that in February, her bank made $60 million in loans just in San Francisco. She added, however, that banks are checking credit scores and documents more closely than before.

Real estate brokers said that based on San Francisco’s history the market here is unlikely to crash as it has elsewhere in the country. Even during the dot com meltdown in early 2000, which hit the Bay Area hardest, the real estate market slowed, but then quickly picked up.

Travis Pacoe of TRI Coldwell Banker said that overall transactions were down 50 percent, but that this did not presage a huge drop in prices because developers here have the ability to withstand a slow period. He said that one strategy on new construction is to lower prices, sell enough to cover the construction loan and take the remaining units off the market. Once prices rise, these units will again go on the market.

The developers of Chelsea Park at 3620 19th Street and 29 Oak Street, he said, did just that. The project opened 10 months ago and when the market remained slow, the partners calculated how many of the nine remaining condos—the project had a total of 39– they needed to sell to pay off the construction loan. They then reduced the prices from $679,000 to $619,000 in November.

Pacoe, who has 20 years of experience, said the units again started to move and as soon as the fourth unit is sold, the remaining five will be taken off the market. This strategy, he said, “is better than bleeding.”

Dodd from Coldwell Banker agreed. “The San Francisco real estate market is a bizarre place,” he said. “People are realizing that it is not going to tank, it is a good time for investment and good opportunity for the first-time buyers.”

McCormack, however, decided against buying a unit at Mosaica because it wasn’t quite within his budget, although he said that he will keep looking. “It gets more interesting as the market starts to take a downturn. It is a good time to buy, even though it is not cheap.”

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