Daily Archives: January 26, 2009
Everyone wants to be a Ponzi artist. As the high water recedes and exposes what’s been just below the surface, we’re discovering new frauds every day – bad markets will do that. Here’s another $350 million (ho hum) scam. The guy was a crooked penny stock broker who went into “bridge loans” after his release from prison. His lawyer asures us that his client is working with the authorities “to allay investors’ concerns.” No mention of it, but perhaps he’s sharing Bernie’s penthouse as they work together to allay concerns. Or, of course, he could travel to either 175 or 202 Round Hill Road and work his magic there.
The New York Times has settled a copyright suit and agreed to stop sending a rival web readers. Some paper I’ve never heard of and now never will sued the Times’ Boston Globe for linking to its stories and including an opening sentence of two. That’s how you build traffic, you morons. I love, absolutely love being linked to by any other source, though of course I go into orbit when Instapundit sends a few thousand readers my way. If some rag in Boston can’t figure out that, in this Internet age, the Times and Globe were doing it a huge favor then really, shouldn’t someone repossess their ink and put them out of their misery? Dumb, dumb, dumb.
Guest of a Guest reports that at least one of the Fabulous Noel Girls isn’t letting an icky-poo situation like her father’s impending bankruptcy spoil her fun. Mickey and Judy put on a show in times of trouble – these girls throw parties! How utterly droll, darling.
Because there are people out there who refuse, absolutely refuse, to accept reality. I recently advised a friend on a price opinion he was preparing and between the two of us, came up with a brutal, but honest price that would get the job done.
I asked my friend how it had gone, already knowing the answer and sure enough, the happy homeowner had made his decision on “two things: price and marketing”. By price, of course, he meant, whoever promised him the highest price and by marketing he meant a promised schedule of newspaper ads. Ha ha ha.
Buyers have moved to the Internet. Not a single buyer in New jersey is going to see your wonderful quarter page ad in Greenwich Time and, sadly, most Greenwich residents are locked into their existing homes and couldn’t buy your place even if they wanted to. Besides, they’ve moved to the Internet too.
And price? Going with the agent who offers the highest listing price is so breathtakingly stupid that I assured my friend that he was far better off without adding this moron to his client roll. Suppose you had some GE stock to unload. If one broker told you that he could move it at its current price of $12.50 and another told you that he, like you and unlike the rest of his competitors, could see the “real” value hidden in your particular shares and would advise offering them for sale at $75, which broker would you choose? (No peeking, Mad Monkey). Broker number two has just told you that he’s a liar who will tell you anything you want to hear if it will get him your listing. And if you’re dumb enough to reward him for that, then you deserve to sit in your unsold house for a long, long time. Which you will.
There was a time, not so very long ago, when property on Cedarwood Drive, in the heart of the realtor-coined “Golden Triangle”, sold in bidding wars for far more than asking price. Perhaps remembering that time, the owner of 25 Cedarwood has listed her burned-down house for sale today at $2.450 million. A builder would have to get, what? $6 million for any house he built there if he expected a profit? That’s not impossible, even today, but are there any builders still willing to speculate at this level? Someone merely seeking to build a house for herself will find this location attractive and, without builders to compete against, might be able to land it at an attractive price.
10 Greenway Drive, a 2006 house off of Pemberwick, sold in a bidding war last time it went up for sale: $2,022,500 for an asked-for price of $1,995,000. The winner probably now wishes he’d come in second because he’s just relisted it today, for $1,915,000. Ouch. And possibly more ouch to come.
It’s like a plain old yard sale, only different, and perhaps more fun. We’ve written previously about Dominick DeVito and his troubles with the law (check the search feature over to your right). His propertyat 518 Round Hill Road is going under with a $6.2 million mortgage on a barely-framed house – who advanced that much money, eh? – 11 Vineyard Lane is heavily mortgaged, certainly in default, and listed at a ridiculous price and so, too is 508 Round Hill Road, a tear-down next to the tear-down at 518 and asking $5.9 million, thereby evidencing a serious case of drug abuse. Old Dominick himself was forced to plead guilty to mortgage fraud last year and despite his boasted record of charitable contributions, is presumably watching the snow fall from a barred window as I write. Too bad.
But this one is really fun, because as he was building it in late 2007 he was interviewed by a New York Times reporter and profiled as one of the up and coming spec builders in our fair town. Dom told her he’d have it done by late December and have it sold for $6 million 30 days later. Well, it’s a year later, Dom is out of the picture for 5-10, pending good behavior, and here’s his still-unsold house back again, asking 66% of that $6 million, or $3.995. He, or his creditors, won’t get it, but I do hope it’s a sign of better things to come for his other properties. That 508 Round Hill Road address, for instance, is nice land, and would be a good buy at, say, $1.9 million, even if it does abut the wreckage of 518. Aren’t things getting interesting around here?
Like this dirt pile? Looks nice, doesn’t it, the perfect place to build your castle? Well it is nice, but no one liked it enough to buy it as it sat on the market for months and months at $3.295, so its owner must have been a bit miffed when his neighbor at 317 Stanwich, right next door and on the same shared driveway, chopped the price of her own, slightly larger lot from $3.875 to $2.250 and went to contract with it last week. There was a difference between the two lots, you see: 317 offered, along with 2.9 acres of land for that $2.2, a beautifully renovated house, a pool, and landscaped grounds with “mature plantings”, as we realtors like to say. 313, on the other hand, offers an approved, but unbuilt, septic plan. The owner of this undeveloped plot whacked his price down to $2.550 million today, but I wonder how that will stand up to appraisal when compared to 317? I mean, as much as I liked the house at 317, someone who didn’t like it could scrape it for peanuts and still have larger, better land, with a septic and, of course, that pool, all for at least $500,000 less. I don’t know whether he did, but if the owner of 313 ever received and rejected an offer on his land, he probably regrets doing so now. My friend and fellow real estate agent Peter Janis insists that what goes on next door has no affect on the pricing of adjacent property but I think Peter’s dead wrong, and I think this owner will discover that sad truth, eventually.
L. Gordon Crovitz of The Wall Street Journal has an interesting column today on what’s wrong with our banking system and, maybe, how to fix it. You should read the whole thing (it’s not lengthy) but here’s a part that caught my eye:
We’re now more than $1 trillion in taxpayer bailouts into the credit crisis, and the one enduring certainty is uncertainty. There is uncertainty about what caused the problem, uncertainty that either Wall Street or Washington knows what to do, and uncertainty about financial models that measured risk until they didn’t. Markets thrive when information flows freely, and they seize up when uncertainty replaces understanding.
Plan B is to go back to Plan A. Regulators urge using new bailout funds to return to the original goal of discovering the true value of these securities. “A continuing barrier to private investment in financial institutions is the large quantity of troubled, hard-to-value assets that remain on institutions’ balance sheets,” Federal Reserve Chairman Ben Bernanke said in a London speech earlier this month. “The presence of these assets significantly increases uncertainty about the underlying value of these institutions and may inhibit both new private investment and new lending.”
Banks can’t resume lending because they don’t know how unsound they are. Private investors can’t know how bad bank debt is, so they hesitate to invest in banks. There are echoes from the experience in Japan, where the collapse of a real-estate bubble in the 1980s became a drag on the economy for years as regulators put off the day of reckoning of the full losses.
That’s pretty much what’s freezing our housing market: uncertainty. Agents and appraisers may know what a house is worth, today (if you can extrapolate from such a tiny pool of recent sales), but we have no better idea than Barak Obama what it will be worth next year (yes, even the Obama can’t predict the future). Sellers know what they paid for their house and are certain that it must be worth at least that much and buyers are waiting to see what the future brings. As Krovitz says, this lack of information causes hesitation.
A suggestion for resolving the banking situation is to mark down all the bad loans to zero, wipe out all shareholders and start anew. That’s too drastic a remedy for our residential market, I hope, and I’m not suggesting that we all set our prices down to zero and see what bids come in. But it might be a good idea to ignore what you paid for your house and concentrate instead on what value it still offers. There’s shelter value, there’s a Greenwich premium – I agree with Mad Monkey on this latter element; we just disagree on how much to value it – and there are those few scattered sales to provide some guidance. If your mortgage balance is high and your equity low, there’s also the pain factor to consider, but that pain will only increase during the year if prices continue to plummet. In a way, the banking mess is an easier problem to fix.
Apologies to James Taranto but if he can’t use my contributions, I can!
Rumors going around – no one wants to be specific yet – that this past weekend saw a good amount of offers made and accepted. That wouldn’t surprise me because I did see a lot of other agents out and about with buyers and, even if many listings remain over priced on paper, it’s entirely possible that the owners got religion on Sunday and, faced with a real, bona fide offer, took it. I hope so. We’ll know soon, if contracts are reported.
But I said, “why? I already have a suit.” Now I’m sorry: Hartmarx declared bankruptcy today. Blame the depression on me.
The Arbor Rose condos on E. Elm Street keep plugging along but the rest of the Milbank Avenue condominium land rush seems to have ebbed. Newly constructed condos, including a pair priced at the improbable level of $5.9 million are going nowhere and builders, at least for now, aren’t clamoring to buy tear-downs. Case in point, perhaps, is this great old (1904) house that was pitched as a developable property back in 2004 for $2.325 million. It didn’t sell even then, in a hot market, so the owner waited four years and put it back up for sale last fall at $3.295 figuring, I suppose, that the market had gone up 10% per year during his spell on the sidelines. He figured wrong and today it’s been marked down 23%, to $2.550 million. I’d love to see someone buy this and restore it to its original condition – it has a great location and enough is left of its 1905 construction to make that effort really worthwhile. And if a builder doesn’t grab it, so much the better.
From today’s Wall Street Journal: “Home resales rise as prices tumble”. It’s good news because it shows that buyers are still willing to purchase homes. They’re just worried about over paying and don’t want to pay one price now only to discover that they could have paid less later. But the answer, if you’re trying to sell your house now, is to price it below the competition, at a level that will move buyers off the fence, where they’re waiting patiently to see what happens, and into action. As this article shows, where that’s been done, it’s worked.
Not much, now that you ask. I keep seeing some substantial price reductions including 114 Overlook, purchased a few years ago for $1.896 million and now asking $1.749, so I thought I’d check to see whether we were seeing a huge decline in Milbrook prices. For the most part, we aren’t, yet. Milbrook, as a broad generalization, was trading in the low to mid 2s in 2001-2006 and my personal guess is that we’ll see current prices eventually drop below that. But – and again, I’m speaking generally here – the houses currently for sale were originally priced as though it was still 2006 with some extra appreciation tossed in for the privilege of their current owners having lived there. So a house marked down from $2.7 to $2.1 actually reflects a reality adjustment rather than any huge bargain. There are a number of Milbrook houses out there that I think will eventually fall into the $1.8 range, or lower. But then, I’m a pessimist about these things.
One note: silly prices have never worked in Greenwich. In pulling old records for comparisons I came across 54 West Brother Road, which sold for $2.4 million in 2000 and was put back on the market less than a year later by the new owner for $2.750. Nothing had been done to the house in that brief spell and buyers balked at paying $350,000 more just for the fun of dealing with a prestigious real estate firm. It took a long time, but the seller finally bit the bullet, reduced his price and sold it in July 2001 for $2.4 million, just where he’d come in. Today, I’d say he’d be lucky to get $2.1.
This Riverside house sold for $2.995 million in 2004. It came back on the market today asking $3.095. Even assuming a minimal amount of negotiation, and I’d expect there would be more than that, we’re back five years. Probably more.
This can’t help. Caterpillar’s earnings per share will come in at $2.50, compared to analysts’ estimates of $4.32. The company is laying off 20,000 employees, or 18% of its work force. I realize that the woes of bulldozer sales don’t directly affect most of us in Greenwich, but it can’t be good for anyone when such a solid company struggles.