Location, Location, Location

The classic mantra of real estate is location, location, location. No two markets are the same and no two buildings. For example, I once managed a portfolio with a loan on an office building that was near a major intersection in a southwest city. Adjacent on the corner, was an identical office building. While mine was fully leased. The corner building went into foreclosure. Why – because it was a great intersection, full of traffic that backed up and blocked the driveway to the corner building. The owner of the building on which I had the mortgage eventually bought his competitor at a discount, cut through the parking lot separation, and leased the now easily accessible building. Location, location, location.

Two interesting charts showing stark differences in two nearby but totally different real estate markets (Altos Research).

S&P/Case-Shiller numbers showing contrast between regions (via Seeking Alpha).

Exodus of S.F.’s middle class – SF Gate – 22 June 2008

“The trend of well-heeled and upwardly mobile young professionals moving into cities across the country, drawn by a newfound affection for the amenities of urban life, is by now well documented. It’s led to many benefits: Cities are revitalizing aging downtowns with new buildings and businesses, people are walking and using transit instead of making long commutes in polluting autos.

But it’s also been putting pressure on housing prices for existing stock and, many argue, steering much of the new development toward the high end.

Since 2002, the median price for all San Francisco home types has risen 113.5 percent to $790,000, according to DataQuick Information Systems. While the housing slump has dragged down values by more than a third in some parts of the region, it’s only nudged prices in the city down 5.4 percent from their peak……..

Rents have also climbed rapidly. In the first quarter, San Francisco was, as always, the most expensive Bay Area city for renters, according to RealFacts of Novato. The average for all apartment types stood at $2,326 in the first quarter, up nearly 25 percent from 2002 and 14.4 percent from a year ago.”