I was showing some properties to a buyer and neither of us liked what we saw, at least at the price the builder was asking – $1.5ish. Two decent houses, side-by-side, one a renovated older home the other brand new but both overlooked the Cos Cob Foot Food Mart parking lot which is not nearly as attractive as, say, a view of the ocean. These houses are by far the most expensive on the street and that sends a cautionary note as well.
The builder, if memory serves, paid $1.3 for the two lots, so he’s got $650 into each one. A sale for much less than $1.4 million is almost certain to cause him to lose money and that’s assuming he built the houses for $680,000 or less – I doubt he did.
But I don’t think he will get $1.4 million for these. If I’m right, he’s going to be losing money sooner or later; the question is, when will he acknowledge that?
Maybe I’m wrong, and perhaps there are buyers out there willing and able to pay the asking price. My point is, even if these two work out, there are a lot of houses currently for sale that aren’t going to. Their builders paid too much for marginal building lots back in the land rush, spent too much on building and now are going to have to take a bath. I’m seeing a lot of price cuts but, so far, few deep enough to move undesired houses. I think that’s going to change soon but, for now, it’s keeping a lot of buyers on the ssidelines, waiting. It occurs to me that the builder who cuts his losses now and gets out from under a failed project will be far ahead of his competitors when their building loans come due in February.