Two Years Later, The Last Condo At Mission Modern Returns (Discounted $250K)

Update 6 October 2022: The list price for 3620 Cesar Chavez Street #301 has been reduced to $1,099,000.

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When we last featured Mission Modern back in May 2021, all but three homes had sold. Those remaining units — all featuring two bedrooms and located on the building’s third floor — had each received price reductions in the preceding 12+ months to settle at $1,199,000. Subsequently, two of the homes went under contract and closed escrow with purchase prices below asking. The third and final home was ultimately withdrawn from the market.

Now, more than two and a half years since it was first listed for sale, the developer has put 3620 Cesar Chavez Street #301 back on the market. The 2-bed/2-bath/1,144sqft condominium is seeking $1,175,000.

Despite the $24K adjustment downward from its 2021 list price (and more than $250K from its original $1,434,000 price in early 2020), a buyer today will actually pay almost 40 percent more for the home now than they would have one year ago. A borrower who qualifies for conventional 30-year fixed-rate financing may be looking at an interest rate just shy of 7 percent according to the latest Freddie Mac survey. The national average rate was less than 3 percent and near and its all-time low when 3620 Cesar Chavez Street #301 was previously listed.

Is 3620 Cesar Chavez Street #301 overpriced? Perhaps. The market will answer that question in due time.

Last month, the median sales price of 2-bed condos in San Francisco jumped to $1,340,000 — off just 3.9 percent year-over-year, according to data reported by NorCal MLS Alliance. Home buyers’ purchasing power is reduced by 10 percent, generally, for every one point increase to mortgage interest rates. So, this small pullback in prices comes nowhere close to compensating for dramatically higher borrowing costs. And interest rates are, unfortunately, likely only going up from here.

But, regardless of how anybody feels (frustrated comes to mind) about the incongruity of home prices and interest rates, the reality for many home buyers is that their leverage is not-so-slowly slipping away.

Buyers should not expect prices to continue falling as they did during this past spring and summer. Full stop. Since at least 2005, the median sales price of homes in San Francisco has increased by an average 14.4 percent in the first half of the year. Not once in the past 18 years have prices decreased during the January-thru-June period. Even immediately following the catastrophic decline of financial markets in late 2008, the median sales price still rose by 4.04 percent.

Sellers who do not have to sell will choose to hold on to their property instead of accepting an offer that they do not like — or worse, realizing a loss on their investment. Case in point: The number of cancelled listings between June and August 2022 was up more than 70 percent from the same period last year, according to NorCal MLS Alliance data. The market is no longer in sellers’ favor (especially if selling means financing a replacement home) and, accordingly, lackluster inventory next year is all but certain.

Meanwhile, rents will rise alongside apartment demand as would-be buyers post-pone their search and/or get priced out of the market. In turn, high rents will inspire a growing number of real buyers to take the leap to ownership. A normalization of conventional 30-year fixed interest rates in the 5-10 percent range (which is, in fact, normal) will further bolster purchase demand amidst San Francisco’s forever undersupply of housing. And, well, you know the rest — Bidding wars. Extreme overbids. Frenzy.

Buying and selling real estate is, of course, often at least as much of a personal decision as it is a financial one; when the time is right, it’s right.

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