Daily Archives: October 6, 2008


Here’s bad news

Always looking for a silver lining, I had blithely assumed that the Wall Street bust had driven OwlGore and his minions under the bedcovers, if only for a few blessed weeks, but no: Googling for news of the fat fraud disclosed that he’s still touring the country in his private, solar powered jet, spreading his girth and ignorance around our fifty states. Latest sighting was in Iowa, where the Nobel Prize winner assured his audience that their recent floods and tornadoes were caused by, quell surprise! – global warning!

Sure, his wacko theories were immediately debunked by meteorologists who concluded that the man doesn’t understand basic meteorology, much less climate change , but do Gore acolytes listen to or hear scientists? To judge from their behavior, no.

So that’s too bad. My own forecast? We’re doomed to still more years of this nonsense, stretching on forever; unless, of course we’re all swept out to sea by rising tides and tornadoes.

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Yelling fire in a crowded theatre?

A supposed financial guru, Jim Kramer, warns investors to pull their money out of stocks. I don’t watch TV and this man makes me glad I don’t but apparently he’s a “respected analyst”, whatever that’s worth and, because he yelled his warning on the Today Show, I assume people will follow his advice.

I’m not a financial analyst nor, unlike Mr. Kramer, do I play one on TV but this sounds like bad advice to me. I think that, if I had money to risk, I’d be buying, not selling. Taking losses today guarantees what – a 20% loss? I don’t see the stock market recovering tomorrow but most companies seem to be in pretty good shape and I’d be tempted to bet with them rather than against them.

Again, what do I know? Except that buying into whatever has the media in a frenzy today (and that panic changes from day to day – the media doesn’t care what the hot issue, so long as it can whip its viewers and readers into the right mood) is usually a losing proposition.

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Buyers and their agents

I don’t have much (any, actually) sympathy for home owners whose house doesn’t sell when they set their own price. And I lack much empathy for those sellers’ agents who, against their better judgement, took the over-priced listing in the hope they could get the seller to see reason somewhere before the listing expired (especially because I’ve done the same thing myself but, I hope, no longer). We can all make mistakes in pricing a house but that’s what price cuts are for. The owner who stubbornly refuses to hear what the market is telling him deserves what he gets, in my opinion.

But I do feel sorry for those sellers who take the (bad) advice of an agent and continue to do so in the face of marketplace condemnation. I suspect that these folks decide that they have to trust someone and if they trusted their agent to begin with, why abandon him or her now?

Because that trust is misplaced, I suggest. I’ve seen situations where sellers just wanted out, either because of a job transfer or retirement, yet grossly overpriced their house because their agent told them to do so. That agent, in turn, keeps the price too high, probably through false pride, but who knows? Maybe it’s actual malice. Worse still is when the agent persuades the poor saps to put more money into the house that won’t sell so that they can not sell it at a still higher price. It’s a losing strategy but one I see employed all over town. The result: the newly purchased retirement home sits vacant while the would-be sellers sit in and maintain a house they no longer want. I don’t understand this because nobody wins in this game – the sellers remain stuck and the agent remains unpaid. So why is it done? Beats me – I’ve already guessed it’s because of either pride or malice but perhaps I’m missing something here. Feel free to hazard your own guess or impart your knowledge.

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Extraordinary delusions and the madness of crowds

I saw a local builder quoted in one of our weekly rags recently, pointing to his unsold new construction in Riverside as evidence of a slow (or dead) market. Usually, he claimed, his houses sold immediately but this one had sat on the market for ten months. Proof, he says, that the market’s screwing him.

I like this guy and wish him only the best but the fact is that he over-priced his project originally and even a year and ten months ago, it wouldn’t have sold where he wanted it to. I sold two new houses in Riverside this year, each in what I (and the market) felt was a better location and each substantially cheaper than this one (but over $3,000,000, lest you think we’re comparing apples to oranges here).

So yes, the market’s in the doldrums, but before you leave your house priced where it is and throw your hands up, a victim of impossible circumstances beyond your control, consider the possibility that you muffed up when you set your price.

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Dickie Fuld; “Your fault, your fault, nah nah nah!

In his testimony before Congress today, Mr. Fuld revealed a myriad of hitherto-unknown enemies of his company, all of which conspired to bring down the empire. Oh, for shame.

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Charge of the Light Brigade
Someone’s got to be daring!
There’s a new listing today on Thornhill Road (north of the Post Road, between Riverside Lane and Sheephill: $850,000 for 0.23 acre, which yields a maximum FAR size of about 3,600 sq.ft., if you dared build a house that big on this street and, the listing promises, “endless possibilities”.

Well okay then, if there are endless possibilities, let’s go for it. Applying the traditional rule of thumb of 3X land cost, you’d want to get $2,550,000 for your new project but, because the highest sale on this street is only $1.2 million, in a good year, you might want to reduce that ratio a bit. Tossing in carrying costs and overhead, figure that you’ll spend $900,000 building this house. Add in the $850,000 cost of land and you’ll break even at $1,750,000, if you pay the real estate commissions and taxes yourself. You don’t want to do that, better price this thing at $1,850,000. You want to be compensated for your time and effort, you ungrateful wretch? Okay, take an extra $150,000 and sell it for $2,000,000. If you can accomplish that, you’re a friggin’ genius and should be snapping up all those failing projects on Round Hill rather than wasting your time here in bungalow land.

Is it unfair to point out that a Stamford broker priced this house?

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Slappy says, “let’s be happy!”
Okay sure, the stock market’s a little gloomy today, and there’s a world-wide collapse of stock and credit markets going on, but have you stopped to consider the good things in your life? Slappy has. For instance, the price of gas is going down! Of course, now that real estate agents don’t have to drive all around town showing houses that’s not quite the blessing it might have been this Spring, but its still a darn good thing, you betcha!

The builders of all those empty spec houses are happy, too – can you imagine what it must cost to heat 25,000 square feet of empty home during the winter, all winter? Lower fuel prices must be a real blessing for them.

Cross-word editors are happy because real estate lawyers and title searchers now have the time to idle away just hours and hours filling in the little squares. Imagine how proficient that extra experience will make them! Slappy sees a demand for entirely new crossword puzzles that are much more demanding than today’s.

Bar tenders are happy counting tips from all their new customers who come off the train and head for the counter, rather than home; divorce counselors must be doing well and our churches will soon be over-flowing.

Those are just a few of the improvements to our life Slappy sees. Surely, if you’ll look deep inside, you’ll find many, many more. Ta ta for now.

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11 Lindsay Drive
I’m not picking on anyone here. This a lovely looking house in a convenient and desirable neighborhood, but it’s been around at least since April ’07, when its asking price was $12.950 million (and perhaps longer – there’s a notation on the listing that shows the original listing price as $13.750 million but if that’s accurate, someone’s expunged the original listing from our records). Regardless of its pricing history, it’s still for sale and still well above the $12 million mark; its latest price is $12.750 million. I’d love to see it go, as that might embolden buyers in lesser price ranges, but will it? Not today, probably.

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A readers asks,

I would be curious to know what % of Greenwich houses are bought with a mortgage. Because if it’s, say, 70% are bought with borrowing, then that is 70% of the market that no longer can get get funds to buy a house at a low enough rate to make it work for them.

I called Anne Sweeney, Jeremy Kaye’s top assistant, and she gave me a top-of-the-head answer of 80% (I’ve known and worked with Anne for about two decades and you could take her top-of-the-head calculations to the bank, if you still had a bank). Some of those buyers take out just a million dollar mortgage to take advantage of the tax break and I suppose they could dig up that much extra cash, if they needed to but it’s probably safe to say that at least 75% of our buyers require a mortgage.
Some very rough calculations show that you’d need approximately $270,000 in income for every $1,000,000 you borrowed ($6,000 interest and principle, $1,500 property taxes = $90,000 per annum, X 3 = $270,000). Multiply that by two or three to cover the (current) price of a typical Greenwich house and you’ll see why the collapse of Wall Street is damping our sales. As one of my friends once pointed out, before he’d made millions and traded humility for the certain knowledge that his gifts and riches were sent directly from God, “who else is going to pay me this kind of crazy money?” Probably no one. And that’s not good news if you want to sell your house.

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Squirrel Snaring
My son just called me from Portland Maine and he’s worried: his peers (the 25ish crowd) are sending around emails urging each other to buy survival gear and stockpile food for the coming Armageddon; should he listen?

I assured him he was okay and reminded him of what one of his heroes, Bob Dylan had to say on the subject: “when you ain’t got nothing, you ain’t got nothin’ to lose.” No one’s coming to repossess John’s guitar. Besides, I assured him, I could buy some ammunition for my hunting rifles and we’d go squirrel hunting or, if unsuccessful in that endeavor, we’d pick off a few of the hysterics in his neighborhood and dine on them – tastes like rabbit.

But it can’t be helpful to our economy if they media has scared even the 18-25 year-old set. If these kids are worried, what’s happening with older people who are watching their pensions and IRA’s melt? Are they likely to decide that today’s a great time to buy a house? I think not.

As I reminded John, however, there’s no useful purpose served by worrying about things we can’t control and, unless he knew some trick I didn’t, the two of us going down to Wall Street and yelling “stop” would be a waste of subway fare. But he should keep his powder dry.

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Slim Pickens Waves Good Bye
Well this should be exciting: Dow down over 500 [update: 570 and falling], slips below 10,000

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Sitting on the sidelines

Where have all the flowers gone?
A reader asks, “where are the buyers?” I believe the picture to the left neatly sums up my answer but if not, here’s another picture depicting what everyone is either expecting or fearing:
October 29, 1929
I just tried logging on to Bloomberg to grab a snapshot of today’s market activity but the site wouldn’t load. In the past few weeks, I’ve noticed the same phenomenon on days when the market news is particularly bad and I assume that’s the same story today. Bloomberg could probably use a new, more robust server, but can it afford one?

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Well, it’s a start
Coldwell Banker initiates nationwide, 10% cut in all listing prices in the hope of jump-starting sales. I doubt 10% is sufficient. Coldwell says that these cuts will only last for a “ten day sales event” but what are they going to do on the eleventh day, rest? Raise the prices back up? Neither seems particularly useful.

And here’s a quote from one disappointed homeowner who could easily be (but isn’t)speaking from Greenwich:

This is the first time we’re lowering it, and we really didn’t want to do that because we listed it to sell,” she said. “We knew things were tough, but the home is a really desirable unit in a neighborhood that rarely has anything come open so we didn’t think it would have any problems selling.

None so blind as those who will not see, I suppose.

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Expulsion From the Garden of Eden
The Times runs an article today on Lehman’s Fall. Other than a sobering tale of Dickie Fuld’s last days as he frantically sought to find a savior for his company I’m not sure what to take away from the story. But here’s what struck me: the article concludes with an interview with a Riverside resident who fell when his employer did. I looked up the man’s address and, though I have no interest in disturbing his privacy I’m comfortable saying that he lives in a nice neighborhood but nothing at all like Fuld’s. The poor guy, still shell shocked, learned last week that Lehman was immediately cancelling his severance pay and health benefits, no doubt so that Fuld could continue to pay his landscaping fees. “This is wrong, and I can’t stand for it,” he fumed. “They need to just do the right thing.”

Livvy Floren weeps. Having witnessed how Merrill Lynch treated my own father when it took over White, Weld & Co., I (a) shed no tears at its demise and (b) would caution this Lehman ex-employee not to hold his breath while waiting for Fuld et als to do the right thing.

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209 Bedford Road
If the GMLS records are accurate, the current owners of this place bought it, newly renovated, in 1998 for $1.525. Nine years later, in May, 2007, they put it back on the market and asked $3.495 million. I thought that was aggressive – renovations new in 1997 don’t read as new, in this market, ten years later – but regardless of my view, the market wasn’t impressed and the house didn’t sell, despite a long series of price cuts. Today it was marked down to $2.5 million, or about 70% of its original asking price. Maybe it should have started there 1 1/2 years ago; now, it may be too late to get that price.

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