Market Conditions

We have 638 single family houses for sale right now, of which 70 were built in 2008, 26 in 2007, 17 in 2006 and 13 in 2005. Not all of those 113 houses are spec houses, but it’s reasonable to assume that most are – certainly, 2008 homes are.

What’s going to happen to these, in a market that’s seen three houses go to contract all month (and, although twenty 2008 -built houses sold or went to contract in the past year, only six did in the past six months)?  I am guessing that we’ll have a mixed bag. Financially weak builders will lose everything and some of these will go for forty – twenty cents on the dollar. Those builders with the wherewithal to stay the course might lop a few million off their asking price but should, maybe, be able to eventually find buyers with the ability to pay millions of dollars for a house they like.

Long range, I think the best hope for builders is the realization that the houses they’ve erected won’t be available again for a long, time. No lender will ever again risk $6 million on a spec house until this crisis is long forgotten. Land values will fall to reflect the lower asking prices of new homes – let’s say, just for an example, Havemeyer drops back to the $950,000 range. A building lot then, will be worth something like $350,000, at best. The luxurious baths and kitchens buyers like so much just won’t be available in spec houses: the price of those homes won’t support them.

So I think we’ll see a new batch of modest homes with the occasional splendid, custom built mansion to accommodate the wants and tastes of, say, under-bosses from Queens or Ukraine. And a few heads of industry, perhaps. If you want a taste of what I think is our future, drive out Sherwood Avenue from Riversville to King Street, and cast an eye on what was built there during the seventies. I’m sure the houses are adequate to raise a family and enjoy a nice life, but they aren’t inspiring examples of the builder’s craft.

So if you think you may want something “special”, however you interpret that term, you may want to keep an eye out now for houses going under and houses selling for 70% of what they might have fetched two years ago. I have a feeling we won’t see their likes again. Which will come as a relief to many people but, judging from the way these things sold in their heyday, lots of folks liked them.

6 Comments

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6 responses to “Market Conditions

  1. Front Row Phil

    Another wise and insightful sermonette from the Pope of Greenwich real estate. Thank you, CF.

  2. Stanwich

    CF, you need to do a post on architecture of spec homes. I think I can pretty well discern a house’s date by the look of it — and I don’t just mean California ranches from the ’70′s or contemporaries from the ’80′s. I am talking about newer stock. One of the most obvious trends is the over-use of cape-style homes (even if our particular version is decidely super-sized). The ubiquitous georgian colonial seems timeless but I swear I can spot the variety built is the early ’90′s.

    So the question is, do the trends that look so “traditional” today become tomorrow’s ugly step-children? What should buyer’s consider as “safe” bets if they have an eye towards resale?

    • christopherfountain

      Yes, I’ve been toying with that, Stan. I wrote some years ago that, while the neo-shingles style was “new” in the 90s, it was getting a little overdone by the early 2000s. And builders keep building them because they continue to sell. The usual trend is builders do that well past the state of exhaustion, then move on to the next hot deal. Stone clapboard has reached that stage, I think. More as my dim thoughts develop.

  3. Accolay

    90s= brass fixtures, ugly wallpaper, french country kitchens with faux painting… your typical back country chic.
    early 00s= red dining rooms
    now= small(er) homes???

    Chris, it would be interesting to see a post on the architecture of the not so distant past.

  4. anony-moose

    The pope of Greenwich real estate? Talk about inflating his head. Seriously though, if this blog continues growing steadily, it may eventually start to affect your bottom line in a positive way — it’s a rather nice way of getting your name out there, particularly for buyers, these days.