Buying during the Depression?
A reader asked if anyone had the institutional memory of what happened to real estate in town during the Great Depression (and no, I don’t think we’re going there). I’ll call some of my friends who do have that kind of memory – Bernie Yudain would be a great source, I suspect – but I do know that a friend of mine’s great uncle was offered almost all of the land that now comprises Indian Head Road and its offshoots for $30,000. He saw the value but alas, was no better off than the seller so he turned it down. My friend is still working for a living but had that land been bought …
I also have noticed that some of our most magnificent estates were built in the 30’s, and why not? Land was cheap and labor was cheaper. If you had money during the Depression, there wasn’t a better time to spend it.
There are already great buys out there today. I’ve mentioned my brother Gideon’s listing on Indian Head Road – one acre of beautiful lawns, pool, secluded, with a custom built house, all for $3.6 million. Other agents and I were marvelling today over how much the market has changed because, 2 years ago, $3.6 million in Riverside bought you very little. Heck, I sold two houses just last year at $3.8 each and, while the houses were nice enough, each was on a half acre on a busy road. And no pool. If I had money and wasn’t worried about being forced to move in the next year or two, I’d be out looking for bargains. This period will eventually look like a buying opportunity if you buy the right house at the right price.
And so, look: I found some happy news after all.
6 Comments
September 18, 2008 at 7:08 pm
I could not agree more. As usual throughout history, those with intestinal fortitude coupled with spare cash will do very well…and there will be no better place to start than our fair town.
September 18, 2008 at 7:30 pm
The house my family lives in was purchased by my Grandmother for $15,000 in 1957. There have been several real estate cycles sinxce then, boom and bust, yet today the house is worth, conservatively, $2 million. I have faith in the Greenwich market, over the long run, and I try not to panic – worrying about your house’s value on a daily basis would be even sillier than watching your stocks prices every day. I realize that some people do that but my advice is to take a deep breath, enjoy your house and raise your family. Everything will work out – we’re not Detroit.
September 18, 2008 at 7:59 pm
Chris, I would bet most readers here ALREADY own in Greenwich. While I would love to think about upgrading, it would mean having to sell my current house, and I bet that is the far more difficult part of the equation.
September 18, 2008 at 8:56 pm
“Everything will work out – we’re not Detroit.”
I am not so sure. It is a bit tounge in cheek to be sure – but for decades Detroit has had booom and bust cycles dependant on the fate of the auto market. Is it so far off today, when people are writing about the end of the golden age of investment banking and hedge funds, to think that we could possibly be in for a bust cycle of our own here?
Realistically, your family homestead value will not go back to $57K – but 157K? Why not?
September 18, 2008 at 11:28 pm
The other thing that people tend to forget is that real estate should really not be thought of as a great investment. Chris’ example of $15k to $2mm in 51 years works out to 10% annualized return; obviously maintenance and taxes aren’t reflected. Guarantee that the SP500 has annualized better and without the illiquidity and maintenance costs.
September 19, 2008 at 2:44 am
Like most things in life the critical question is when, not if.
To me, this feels like the real deal in terms of serious wealth destruction. There will be a time when there are tremendous buying opportunities in everything, ranging from stocks to real estate to art to collectible cars, etc.
The winners will be the ones that figure out when the real bottom has occurred, not false bottoms. The rest are going to lose their shirts following the markets down.
For my money, this is just getting started.
Retired IB’er
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