The latest condo development to go up in the Mission District is proving that a sales tag aimed at first time home buyers can fill in units faster than you can say condominium. It also indicates the possibility for more developments of this kind in a neighborhood strapped for housing.
In its first week of landing on the market, 555 Bartlett, located on the bustling corner of Mission and Cesar Chavez Streets, had 13 of its 58 units already in contract. By the second week, anxious buyers had reserved another 15. At the end of last week, 30 had been sold.
“We thought we’d have maybe five in contract into the week,” said Joshua Lawrence, a broker with the Climb Real Estate Group. “There’s definitely a market for one and two-bedrooms under $600,000. By far the best deal possible.”
Indeed. The highest price for a one-bedroom at 555 Bartlett is $540,000. A two-bedroom unit ranges from $520,000 to $710,000. Not to mention the nine below market rate units that range from $209,000 to $305,000. This weekend, another 12 units came available – one bedroom condos that don’t exceed $490,000 – and four of them sold.
These are prices that, coincidently, could qualify buyers for FHA financing, allowing them to pay a down payment as a low as 3.5 percent. Seven Hills Properties is the development company behind the new project and with first-time homebuyers as their target audience, they needed lower prices to meet FHA requirements. Tom Rocca, who heads Seven Hills Properties, explains that although the FHA loan limit is up to $700,000, most of the loans that are actually financed in San Francisco range between $400,000 and $500,000.
Generally, banks require 20 percent down on a condo purchase. So FHA financing means the difference between putting $24,500 down or $140,000 down on a $700,000 condo.
“The [mortgage] payments aren’t what’s stopping people from buying,” he said, “it’s the down payment.”
FHA loans give potential buyers flexibility in their down payment for loans below $700,000. At 555 Bartlett only three units are priced above this amount – two three-bedrooms that range between $715,000 and $735,000, and a two-bedroom at $710,000. Rocca estimates that about 35 percent of their buyers have signed contracts with a down payment of less than 20 percent.
Bernadette Barnum, a sales associate for UnionSF – a 76-unit development in the Mission that came available last October, said she tells buyers who can’t afford UnionSF to try 555 Bartlett.
“Their price points are great,” she said.
At UnionSF, the lowest price is $565,000 for a one-bedroom, that’s $90,000 more than the least expensive market rate condo at 555 Bartlett. A three-bedroom at UnionSF caps at $795,000 – $60,000 more than at 555.
But Barnum considers UnionSF’s sales successful as well. In just six months they’ve sold all but 12 of their 76 units.
Jason Chapin, a real estate consultant for McGuire Urban Bay, likes the new project. There aren’t any new condo developments with the size, the price or the finish of 555 Bartlett anywhere in the Mission District, or in San Francisco for that matter, he said.
Aside from UnionSF, two other new developments came live around the Mission recently. All but one of 1495 Valencia’s eight luxury two- and three-bedroom condos have been sold. The remaining unit’s sales price is $915,000.
On Guerrero Street, NOVE offers nine 3- and 4-bedroom condos at $1,125,000 – two have been sold since it opened last month.
Chapin noted that 555 Bartlett had to keep its prices down because the location at Cesar Chavez and Bartlett is simply not as attractive to high income buyers.
“That side street, Bartlett, doesn’t have the best reputation,” said Chapin. “They needed to shoot for the low end. And these guys jumped the gun and went aggressive in timing.”
But Rocca believes other developers will see 555 Bartlett’s success as a sign for what works in the Mission. Aside from the attractive sales prices, the property is “straightforward, clean, and modern, and not over the top,” said Ariel Sutro, the marketing manager for the new condos.
“I think [555 Bartlett] will show that the model is viable,” agreed Rocca.
In the last six weeks Brett Gladstone, a land use attorney in San Francisco, has already received more calls than usual from developers wanting to build housing or retail in the neighborhood. Developers have said, however, that it’s still difficult to find lenders or equity investors willing to take a risk in the Mission. Gladstone believes this will change, and the sales activity at 555 Bartlett could potentially be a key factor.
“I think that lenders with whom my clients are talking to will look at the sales at 555 Bartlett more carefully than anywhere in the city if they plan to develop in or around the Mission,” he said. “Not just how many are sold, but at what price.”
The Mission’s restaurants, coffee shops, and centralized location aside, Sutro, the marketing manager, also attributed the high number of sales to perfect timing. Interest rates are at an all time low – five percent – and the federal tax for first time homebuyers comes due April 30th, prompting many to buy now.
Given the current rate of sales, Rocca, the developer, expects 555 Bartlett to be sold out by the summer.
“Let me knock on some wood,” he said.