As of this writing, we have 724 single family homes offered for sale in Greenwich. This compares to 542 in 2007 when, as you may recall, houses were actually selling. The 2007 market easily absorbed 724 houses in the year, whereas, unless we see a sudden and dramatic turn-around, we’re looking at about 4 1/2 years of inventory. And come September, the start of the traditional fall selling season, you can expect to see more houses added to the inventory as sellers who have been waiting for a better market will (some of them) lose patience.
So, faced with this reality, you might think that we’d be starting to see a number of houses come on for sale that were priced to sell. With rare exceptions, we are not. So we’ll all just sit around here, waiting for Alice’s Restaurant to come around again on the guitar …..
This irrational phenomenon can be blamed, I think, both on sellers, who can’t give up the memory of what their neighbor’s house sold for three years ago and simply refuse to admit that the market changed completely last September, and realtors who have the same rosy memories of the past. I keep hearing from my colleagues that it’s the buyers who are out of step, expecting fire sale prices when there’s been no fire.
I’m with the buyers – I look around and see nothing but charred acres. But so long as sellers and their qagents deny this, we’re in a standoff, and maybe we’ll stay in that standoff for the next decade, with a few houses selling as their owners hit financial difficulties, or divorce, or change jobs, and everyone else sitting on the sidelines, waiting for the other guy to flinch. If so, I’ll have time to resume my novel writing, which will please me.
I hear tell that there’s an accepted offer on 253 Round Hill Road, that Billy Gardiner spec house asking $23 million. I’m not surprised, because I’ve had some very wealthy clients interested in the place myself. None were willing to even approach its asking price, and I doubt the guy whose bid was accepted did either, but even if it goes for, say, $12-$15 million (and that’s just a guess on my part) that’s a significant anmount of money.
Similarly, I was reflecting this evening that my clients, combined, have offered something like $20 million on a number of houses. Most of those bids are awaiting a response and some will come out next week but if I’m typical of other agents, the woes of Greenwich are attracting some serious dough. It’s ironic that, of the two bids I’ve had rejected so far, both were closer to the actual market value, in my opinion, than the seller’s asked for price. And one was actually very close to full asking price – the seller just decided that he would stick to what he’d decided he needed, rather than sell for what it was worth. His loss.
So we may see some real movement shortly. Or, the sellers will continue to resist and the buyers will retreat to the sidelines and wait another six months to see what time does to the sellers’ resolve. I have to admit, I am having fun in real estate for the first time in my career because there’s something to do other than just serve as an order taker. Dig up every scrap of information on a seller’s financial situation, talk to banks and private lenders, twist arms, kick tires and, all in all, earn my pay. It’s gratifying.
Sold, 2007: $2.3 million, 75 days
Ask, 2009: $1.9 million (1 year at $2.295)
45 Baldwin Farms South
This spec house started life as an Ogilvy listing a year ago priced at $9.750 million. Buyers didn’t like its long driveway to a back lot, I guess, or perhaps its lack of a back yard (but a killer view of a small pond) and it’s price gradually fell. It’s been with Tamar Lurie for awhile now and she, too has been dropping its price so that today it’s down to 61% of its original price, or $5.975 million.
The other South Baldwin spec house, number 14, never sold for its asked price of $7.9 million (or was it $9 ?) and is now available through its lender, I think. Perhaps not, but it’s not looking like an immediate candidate for sale.
We did have 2 contracts reported today, the land on Round Hill and a 2006 spec house on Orchard that dropped over the years from $3.795 to $3.195 and probably fell to a buyer in the 2s. Bet that’s the last time for a long time that a builder will pay $1.5 million for Orchard Street property, eh?
All told, with those two contracts, we’re up to a whopping total of six for the month and we’re half way through. Time was when 18 contracts a week was about normal. Time was.
268 Palmer Hill Road
This was a well constructed house that came up for sale in September for $3.195 million, which in this market was probably too aggressive for Palmer Hill. No takers, so yesterday it was rented for $9,500 per month. I can’t tell you whether that represents a sum sufficient to carry the place but certainly it’s not going to return great profits to the builder, and I assume he’s just waiting for better times.
I’ll be back in a minute with an exact count of new spec houses currently for sale but I do know that we have over 50 priced over $5 million and 22 priced at $8 million and above. In that latter class, we sold four in the pst six months and zero this year. If they all end up being rented, and many of them are also listed for sale or rent, we’re going to see a further attack on rental prices – these are very luxurious homes, compared to most of our older stock – and a rather miserable year for builders. We have too many houses for the quantity we’re selling, if you hadn’t heard.
During the past 15 months I’ve presented some very low offers on behalf of my clients to sellers’ agents and they were all rejected. I’m not uncomfortable with presenting any offer – that’s my job – but it’s been an interesting learning experience because offers that were rejected out-of-hand last spring now seem to be too high. I’m currently working with another handful of buyers and may soon be repeating that process. Will low bids be accepted now? Probably not.
Here’s the problem, as I see it: I can tell a buyer, with a reasonable degree of certainty but with occasional huge error, what a house is worth today. In the past, that was usually enough to help a sale go thorugh because we all “knew” that the house would be worth at least as much, if not more, a year later. Not now, so while I can say that a house is worth, say, $4.5 million, give or take $250,000 today, I have no idea what its value will be six months from now. Nor can anyone else.
So my buyers, at least, aren’t willing to pay what a house is presently worth – they want a protective cushion that will shield them from a further precipitous decline. I don’t blame them and I’d want the same thing but it’s tough on sellers, especially those who have already pared their price down from an extrapolation up from 2005 prices to a figure that reflects today’s market. They feel as though they’ve done their part, and balk when more is demanded of them. Stalemate.
But for sellers, if you do receive a low-ball offer from your agent, don’t bite her head off or get angry at the offeror. Haven’t you been saying, “just bring me an offer”? Well, someone just has.
Prediction: Price fall to continue through 2010
Jan. 14 (Bloomberg) — U.S. home prices, already down 23 percent from their July 2006 peak, will continue to fall until the third quarter of next year, PMI Mortgage Insurance Co. said in a report.
Ninety-seven percent of the 381 U.S. metropolitan areas surveyed are likely to have lower home prices in September 2010, according to the Walnut Creek, California-based insurer’s Market Risk Index, which assigns a score to every region based on the likelihood real estate values will be lower in two years.
All real estate is local. Until it isn’t.
And boy is he sorry now. Freed from the inhumane pressure of accepting a huge salary and First Class trips around the country provided by his employer, NAR economist David Lereah now admits that he was just a paid flunky who said whatever his bosses demanded, including predicting a “soft landing” for real estate in 2006 when he knew better. But no more -now he’s an independant, free-thinking type, ready to provide objective advice. Trouble is, no one’s listening – his $495 newsletter has less than 50 subscribers, which won’t even pay for the fuel for his Mercedes.
Mr. Lereah now works in a small upstairs office that doubles as an exercise room. He has started his own company, Reecon Advisors, that puts out a weekly newsletter on the housing market and provides consulting services. “I feel I have such a refreshing view now because I’m not representing any interests,” says Mr. Lereah.
He charges $495 annually for the newsletter, and currently has fewer than 50 paying subscribers — a number Mr. Lereah aims to increase to 1,500 by the end of this year.
“He’s starting to make some money off it now, not much,” says Mrs. Lereah. “We have an expensive lifestyle: a big house, a housekeeper once a week, college tuitions, the country club.”
Every morning, Mr. Lereah drives to a Dunkin’ Donuts or McDonald’s and eats in the car, just as he would have on his commute to NAR.
Mr. Lereah’s real-estate portfolio has taken a hit. He says his 3,068-square-foot five-bedroom, 5½-bathroom brick house has lost about 20% of its value in the past two years. (It is worth $780,000 now, according to Zillow.com.) His condos are down, too. He now says housing prices won’t recover for some time.
That’s a bummer, of course, but don’t worry – there’s a new source of optimism at my organization:
His successor at NAR, Lawrence Yun, however, says things might be looking up. In his latest news release, Mr. Yun says that although the pending home-sales index based on contracts signed in November fell 5.3 from a year earlier, with a “proper real-estate focused stimulus measure,” home sales could rise more than expected, by more than 10%, to 5.5 million, in 2009.
Go belly up, I think, or at least, many of them will. Of the 549 single family houses currently listed for sale in Greenwich, 113 of them were built in 2005 or later (104 of those were built after 2005). While a few of these have sold once and are now back on the market, even more new houses are hiding behind their builders having moved into them or rented them out for less than their carrying costs.
So let’s assume that 113 is a rough figure of unsold spec houses for sale. Their prices range from $25 million to $1.350 million and, while I won’t say that I’ve seen every single one, those I have seen are, without exception, suffering under handicaps like poor location, poor land, crazy prices, etc. I don’t expect any of them to sell for their current price. Many of these houses probably still have some profit built into their prices; many do not. Some builders have the financial strength to take a big hit; many more do not.
This happens every cycle – builders get wiped out and are replaced with a new generation of optimists. I think we’re going to see more of that this year, however, than we ever have before.
National Association of Realtors fesses up: the market sucks, we want money.
Damn! This is a first for the NAR – until now, the market was always “stabilizing”, “growing”, and one hell of an investment. As a small government proponent may I point out that only when the federal government started its bailout for everyone scheme did the real estate market crash? Cause and effect, clearly.
"There's gotta be a subsized mortgage in here somewhere!"