How much trouble can builders bear? I know of one builder with three unsold projects, all ranging from $4ish to $6 million and nothing in that price range has sold in his end of town in six months. There’s another builder with three houses, all grossly overpriced, two in downtown Greenwich, one in the midcountry, with huge mechanics’ liens being foreclosed as I write – he’ll have to either come up with a couple of million dollars or lose all three. His banker must be nervous. Continuing up and down North Street there’s project after project, completed and sitting empty with more to join them soon. Leaving that street and moving east or west there are still more failures, some built four years ago, all going nowhere.
I asked a few years ago what would happen to our market of older existing homes if they were suddenly joined in their price range by brand spanking new mansions all trading at fifty cents on the dollar. I think we’re about to find out. Some of these new ones (most of them, in fact) are devoid of grace and charm and won’t necessarily compete with a grand old house but there are plenty of older homes built from the late fifties to late eighties that are just as charmless and just as ugly, only smaller. I think those are the ones that are in trouble because they’re basically just teardowns and, as we’re seeing, the market for teardowns has just about vanished.
So those are my gloomy thoughts for the evening. I wouldn’t mind being wrong but I don’t see where the market for all our inventory will come from. The sellers who refuse to sell will, sooner or later, retire their house from the active list and that will thin out the ranks but I can’t imagine hitting our old rate of sales for years. And if we don’t, we have years of inventory, sitting idle and growing older. Interesting thought.
What you’re telling me is that I had better plan o retire in Greenwich – which, aside from the winter weather, is not necessarily a bad thing. However, it does mean I and my peers will be very interested in service providers who can meet the needs of an aging population. That means, as far as I’m concerned: a vibrant library, a reputable hospital, contractors who respect my budget, and a well managed YW/YMCA.
What happened to high-end houses and NYC co-ops in ’70s may offer insights; don’t believe that era had so much new, super-sized supply, though; but perhaps similarly anemic demand
It seems to me that the market for all that inventory is out looking right now, but not bidding yet. I hear this from broker after broker that I speak with. The prices will undoubtedly have to come way down, however, since buyers are not yet bidding. But my point is the buyers are there, and pent up demand will soak up the inventory when buyers and sellers pricing expectations merge.
I think you may be understating the price declines to come. Do you think that people listing houses for sale in today’s market are doing it to see if someone will bite at an inflated price?
Isn’t the opposite more likely: i.e. they are listing their properties because they need to sell, be it for financial or other reasons. If so, look for increasing inventories and declining prices!
P.S. I was in those builders’ shoes in the late eighties in Greenwich with three spec houses. The results were not pretty for me or my lenders and I think this one is far more severe.
Chris, I live in a tear down and let me tell, its still worth a million!