16 Stillman Lane, an excellent, well built house, hasn’t sold in a year priced at $5.850 million so today it’s dropped to $4.950.
And 18 Bowman, new construction on the western side of town, was first offered for $2.685 million in February 2007. It wasn’t able to overcome a triple handicap – back lot, water tower looming overhead and an adjacent graveyard – at that price so today it’s marked down to $1.795. It’s a good looking house inside and at some price a buyer will like it. But you have to wonder where the builder’s break-even point is.
Which raises another question: how much profit was built into these spec houses to begin with? All these million dollar reductions raise the implication that the original price was a rip off. I’m a firm believer in charging what the market will bear but buyers seem to take these price manipulations personally. Those spec houses that came on in the 9’s last spring and dropped almost immediately into the 5s, for example, did other builders no favors.
For What It's Worth 
What about Khakum Wood, on at $25 mil and dropped to $15 mil?
I can’t wait to see the price drop on that turreted $8 mil one on the Merritt entrance.
Professional builders suffered that same “if just one buyer…” mentality that we “amateur” homeowners do. Expect the best, plan for the worst turned into Expect the best, ignore the worst.
CEA. Khakum Wood sold for $12.5, down from Mariani’s first demand of $25 million. He was furious when, after it first came on at $25, I opined in my column that there were better houses available for 1/2 its price. He had a gofer call to express his displeasure but no call came after three years when it sold for what I said it would. He must have lost my number.
Not very difficult to figure out land costs and roughly estimate build costs
One pays a premium for immediacy of moving into a new house tomorrow, as opposed to ~18mos from now, post-build process
But also need to discount usually weak land choice, architectural/build quality issues of any spec house
Buyers who can’t perform the simple arithmetic of buy vs build are about as illiterate/innumerate as subprime buyers in SunBelt in ’05….and deserve paying whatever for some POS house…that’s what makes a market, right?
Chris, you stole my argument I made a few weeks ago. If you can drop a price by sooo much tne what the hell price were these guys making to begin with? It is worse then the profit margins Wall Street was making. It also doesn’t create any goodwill towards builders….buyers are getting their 20 pounds of flesh right now. Bids, if they are forthcoming, are painfully low and builders will have no choice but to grit their teeth and take their licks sooner rather than later.
The other I wanted to make was that there is absolutely no recourse for a buyer who buys a new spec house. Odds are that the builder cut some corners, especially on the things buyers can’t see like poor quality wood for supports, improper flashing, poor insulation, etc. I go back to my point about 23 West End Ave where a piece of exterior trim was rotting……and this house is a “new” spec house. I wouldn’t trust a builder to build a quality dwelling, especially after you realize how much money they had been making in the boom times.
I don’t steal from my readers, Stan, I learn from them!
Stan, you do get a one year warranty for new houses – doubt that applies to bank-owned properties. But the good local builders I work with or just know about will come back, even a couple of years later, to correct things – it’s their name on that house and the last thing they want is an unhappy homeowner living in one of their creations bad mouthing the builder. It’s always been reputation (and a sense of pride) that’s protected local home buyers when they bought new. Unlike, say, California, where the builder builds and moves 200 miles away, Greenwich builders tend to live around the corner. I’m not saying they’re perfect but generally, if you buy a new house in Greenwich from a reputable builder, you’ll be in good shape.