What are these builders going to do?

I was showing some properties to a buyer and neither of us liked what we saw, at least at the price the builder was asking – $1.5ish. Two decent houses, side-by-side, one a renovated older home the other brand new but both overlooked the Cos Cob Foot  Food Mart parking lot which is not nearly as attractive as, say, a view of the ocean. These houses are by far the most expensive on the street and that sends a cautionary note as well.

The builder, if memory serves, paid $1.3 for the two lots, so he’s got $650 into each one. A sale for much less than $1.4 million is almost certain to cause him to lose money and that’s assuming he built the houses for $680,000 or less – I doubt he did.

But I don’t think he will get $1.4 million for these. If I’m right, he’s going to be losing money sooner or later; the question is, when will he acknowledge that?

Maybe I’m wrong, and perhaps there are buyers out there willing and able to pay the asking price. My point is, even if these two work out, there are a lot of houses currently for sale that aren’t going to. Their builders paid too much for marginal building lots back in the land rush, spent too much on building and now are going to have to take a bath. I’m seeing a lot of price cuts but, so far, few deep enough to move undesired houses. I think that’s going to change soon but, for now, it’s keeping a lot of buyers on the ssidelines, waiting. It occurs to me that the builder who cuts his losses now and gets out from under a failed project will be far ahead of his competitors when their building loans come due in February.

12 Comments

Filed under Buying/Selling Greenwich Real Estate, Cos Cob, current market conditions, pricing, spec houses

12 responses to “What are these builders going to do?

  1. ACF

    Two decent houses, side-by-side, one a renovated older home the other brand new but both overlooked the Cos Cob Foot Mart parking lot which is not nearly as attractive as, say, a view of the ocean.

    I should think not. Just out curiosity, though, what is the price-per-pound (or are they sold by the pair) of feet these days?

  2. Anonymous

    Anything particular about February that makes it a marker for prices cuts? Or were you just throwing that month out there as a date in the future?

  3. CEA

    Then, don’t you owe an apology to poor (figuratively-speaking) Mr. #39 Boulder Brook, who lowered his price since he realized his house wasn’t on par with the others he was trying to compete with? (that, or he needed the money, fast).

    “Solidarity” is a luxury no builder can afford when the bank is asking for its interest payment.

    Builders aren’t the only people with this problem. There are many people (we know of a couple, and we’re not exactly socialites) who built houses, sparing no expense, and now cannot sell them for anywhere near what they put in. They can live in them, so it is not exactly comparable to the builders, but there are a lot of parties guilty of spending too much when it looked like prices would reach the moon.

  4. Cos Cobber

    These are nice homes, but even in hot times their location baffled me. My guess is that they clear at $1.25.

    The new owners should be prepared to own the nicest houses on their street for decades to come.

    PS – I do love the design of that one that did sell at the end of Taylor behind the bank. That one has great curb appeal in my opinion.

  5. christopherfountain

    These are asking about $500 sf, wise guy, and I doubt they’ll get it. But a man’s grasp should exceed his reach and all that …

    Nothing special about February except that I keep hearing that a ton of building loans are coming due in January and February, the Wall Streeters will have finally acknowledged that they aren’t going to get a bonus and many of us (I, at any rate) think we’re going to start to recognize that the traditional spring market’s going to be a bust. Under those gloomy conditions, can acceptance of reality be far behind?

  6. Anonymous

    So as a house hunter in Greenwich with a 3-5 hold in mind, should I be jumping in now or waiting it out further?

  7. christopherfountain

    I’m sure #39 lowered his price because the bank was breathing down his neck and not out of a sense of shame that his building skills were subpar. And I wasn’t really suggesting that he should have stuck to his ridiculous price out of solidarity with his competitors but rather, pointing out what happens when you build next to a schnook – something like the situation on Beechcroft, but do I want to open that can of worms again?
    What should a $3-$5 buyer do? I’d go make some lowball bids on houses you like and see what the reaction is. If it’s negative, make a note to come back in February (or leave your number and see if they don’t call you). If positive, you’re ahead of the game.

  8. CEA

    Don’t get me started on Beechcroft. That house on the pond continues (slowly, it seems to me) and it is enormous.

    It overwhelms the lot, and is now exactly even with the other enormous spec house being built directly across the pond from it. Any potential owners would be able to see exactly what you are having for dinner by merely gazing out the window across what is probably 100 feet away.

    The “pond” house bought his lot after the $6.15 mil house guy bought his, but before $6.15 built. so he didn’t know it was going to be Schnook time. I don’t know what 601 Lake was thinking. That was a bad, bad lot that the house next door to it on Lake should have just bought and subsumed.

  9. christopherfountain

    The builders of 601 Lake have a $2.0 million lien on their residence at 2 Parsonage so perhaps they regret their impetuousity in engaging in spec building. Or not – maybe that Wall Street bonus will make all things right.

  10. CEA

    Chris, Credit Suisse and Goldman did big layoffs today in equity, fixed income, and to a lesser extent in wealth management. The only bonuses most people will get this year will be the ability to hold onto their jobs.

  11. christopherfountain

    I was employing that brilliant sarcastic wit I’m so admired for. But bummer about the layoffs – I’ve heard that Goldman’s been laying off huge swaths of employees every other week so twice a month on Fridays, moral is pretty low around their halls. Even if the professional builders can hang on, which I doubt, there should be some bargains among the spec houses built by Wall Street entrepreneurs.

  12. flatliner

    bail out the builders.