Rent vs. sell?

A number of readers have sent in this link to today’s Bloomberg article, written by my friend Oshrat Carmiel, on spec builders who are renting their creations when they can’t sell them. The story starts with the lady who built 63 Maple Avenue, discussed here from time to time, who finally threw in the towel and rented the place out for $13,000. Her carrying costs are $15,000, but she hopes to make up the loss when she puts it back on the market next March for $4.9 million, $500,000 higher than it was when it failed to sell this year. Good luck with that, ma’am. As I’ve written before, the house is built below grade on a very busy street with cheap(er) houses behind it. Neither of those conditions will change in the next nine months, so why should its price? The place will be older, used, and otherwise the same.

Carmeil closes her report with this quote, which I think nicely sums up the delusions of these builders:

Renting may not be wise for owners who eventually want to sell, said Mark Hanson, president of M. Hanson Advisors, a housing and mortgage research company in Menlo Park, California.

“It’s really doing nothing but delaying the inevitable,” Hanson said. “These houses are not going to double in price.”

9 Comments

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9 responses to “Rent vs. sell?

  1. Why would someone build below grade instead of trucking in fill and regrading? Perhaps I’m missing something.

    regards,

    • christopherfountain

      I would think, Richard, that they wouldn’t be allowed to. That section of Maple is quite steep, and if you built this lot up to road grade you’d probably cause teriffic water problems on the land behind and below. Rather than build the lot up, a better choice would have been to find a better lot. I think many chastened builders are discovering that truth right now.

  2. HG

    I assume the prospect who arrived in the NYC cab was there on a bet.

  3. Not a Believer

    I doubt anybody in their right mind would take a NYC cab to Greenwich and offer $20,000 a month for rent. I would suspect that they would hire a black car. However, it does make a good story.

  4. Anonymous

    Agree, the cab story was bizarre; likely a gag bet among traders

    Most truly car-averse NYC types who can afford $30Kish/mth rentals also hate suburbs at any cost

    And those rare few “forced” to move to suburbs travel via a rental Linc/Mercedes w/a smelly inept driver, slightly more upscale than a cab

  5. duff

    Hey, my sons Cos Cob Crushers coach arrived in a chauffer driven black Mercedes Maybach the other evening, donned his Bruno Maglis, rolled up his pants leg and got down to business.

    GO CRUSHERS!

  6. Riversider

    Wait a minute; the builder rented out the spec house this week and will put it on the market in March? What is it? A 6 month rental? If not a 6 month rental, who would want to rent from a spec builder knowing that you will have house showings intruding on your family?

  7. Greenwich Gal

    Would that Crusher coach be Mr. Paul Tudor Jones? Or maybe his landscaper…