Daily Archives: February 18, 2009

Driving down the market

Bloomberg picked up on John Cooke’s, of Prudential, press release showing that (shhh!) Greenwich home sales have evaporated. John issues these statistics without, so far as I know, his manager receiving furious phone calls denouncing him from other broker/owners. So what’s the difference? John issues a single chart which I doubt some of these brokers can read. I appear on television and that they watch. If you’d like to gauge the intelligence of some of the notables in the Greenwich real estate market, consider this: they actually watch TV news at 5:30 in the afternoon. That’s disturbing.

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I find this too depressing to investigate whether he really is part of the Connecticut educational system but I fear that he is

Greenwich Roundup has posted a press release from some outfit called “Write to Learn” (it could be worse – they could call themselves Right to Learn), which reads as follows:

Dear Connecticut Educators,
My name is Al Green (not the singer) but you’re Connecticut-based Measurement Consultant for Pearson Educational Assessment.
As you may know, the CONNECTICUT STATE DEPARTMENT OF EDUCATION DIVISION OF TEACHING, LEARNING AND INSTRUCTIONAL LEADERSHIP has released RFP 994.
The purpose of this grant program is to create pilot sites that will allow the Connecticut State Department of Education to examine the effectiveness of using technology in the teaching of writing in Grades 6-12, including the use of artificial intelligence to provide specific, frequent feedback to students on their writing.
Up to $60,000 is available per district!
A copy of the RFP can be downloaded at the link below. Just copy the link into your browser.
Pearson is committed to helping you acquire this funding by offering WriteToLearn™ an innovative Web-based teaching tool that combines summary and essay writing activities.
I would be delighted to meet with you to discuss WriteToLearn. If you are interested, please utilize the contact information at the bottom of this email.
Between the improper use of a parenthetical remark, the use of “you’re” for “your” and “utilize” for “use”, this letter must surely have been generated by the computer-generated program it’s pitching. My question is, are our schools using it too? I hope not.

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Here’s what the economy needs

EPA to start regulating CO2 emissions.  Say goodbye to cheap energy, say hello to our next step down – I understand Haiti is an attractive model to emulate.

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I pass along the news, I don’t create it

From the WSJ, a few minutes ago: Fed says economic forecast sucks

Feb. 18, 2009

Citing a “continued sharp contraction in real economic activity,” the Federal Open Market Committee on Wednesday said it is expecting GDP to contract by up to 1.3% in 2009, a larger drop than it had forecast in October.

The Fed’s latest projections also show the FOMC expects unemployment this year could rise as high as 8.8%, higher than its October projection of 7.1% to 7.6%. January’s unemployment rate hit 7.6%, according to the Labor Department.

Separately, the Fed said in the minutes from its meeting Jan. 27 and 28 that members saw no indication that the housing sector was beginning to stabilize.

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The Antares Byram disaster

So what’s happening with the failed Antares projects near  Western Junior High? A reader wanted to know and so I asked my friend Frank Farricker who knows everything about local real estate news and is always an unimpeachable source of information unless you want to know (a) how many houses will sell this year (Frank, we will sell more than fifty – really) or (b) politics. Frank was dropped on his head repeatedly as a baby and as the result became a Democrat. We love and cherish him anyway and of course, pray for his soul (in fact, I voted for him when he ran for First Selectman, but that was only because I thought the job would keep him off the streets and out of trouble). Here’s what he says happened to the Antares’ dream of becoming residential kings:

The buildings are owned by Lehman Brothers, who, in its most simplistic form, took the property back in December, 2007. They then hired a company called RADCO (www.radco.us) to execute a “turnaround” strategy. RADCO only turned around Putnam Green, in which there was a significant expense to fix up apartments and rent. I understand they are about 60% full, with rents hovering in the $3-$4000 a month range.
 
They just left Weavers Hill alone along with the 15 or so senior tenants that beat Antares. There was a rumor that it was for sale, but that was knocked down by Marsal and Alvarez, the bankruptcy trustee charged with disposing of Lehman assets. They will probably begin the cleanup to Weavers Hill soon, then when it is finished they will try to sell $2 million condominiums, because there is no other logical way it makes sense to pour another $50 million into something that has already lost $360 million. Yes, between the purchase, the fees, the construction, the marketing, the lawyers, the new operators with their construction, marketing, fees and lawyers $360 million has been poured into those two projects.

I’m not the real estate whiz that Frank is but if those condos ever sell for anything close to $2 million, I’ll give up the practice and go back to lawyering, a horrible fate indeed.

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Hampton retailing going south?

So says this article but, if you wade through it, it seems that vacant retail stores in January and February are common out there and no one worries until March. It’s not March, so why this story? Anyway, someone’s nervous out there.

Speaking of retail, I spoke with a friend who should know and she tells me that Saks in Greenwich isn’t leaving. We’ve had readers weighing in on whether Saks is breaking its lease and pulling up stakes – according to what I hear, it’s not. I’m no customer of that place (except when its wares show up at the Greenwich Hospital Thrift Shoppe) but a healthy Greenwich Avenue is a good thing for everyone.

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The More the Merrier up on Round Hill Road

Feeder funds like Walter Noel’s Fairfield Greenwich Group lost billions of dollars with Bernie Madoff and not surprisingly, their clients would like their money back. FGG alone is on the hook, perhaps, for $7.5 billion and no amount of real estate appreciation in either Greenwich or Mustique (or Southampton or Manhattan) will permit enough cash to be squeezed from the Noel real estate holdings to make people whole.

But the Wall Street Journal reports today that a number of accounting and legal experts see liability on the part of the feeder funds’ auditors to at least support actionable claims of negligence. I don’t know if the accounting firms’ insurers have anything left after paying off Enron claims but if they do, maybe Walt’s friends will forgive him and at least let him play the back nine at the Club, out of sight.

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Oh Darn

It's back!

It's back!

30 Strickland, a nifty 1749 house on Mill Pond was listed for $1.750 million last year (bad move) and finally dropped to $995,000 (good move) and was reported as under contract last November. Something must have gone wrong and in today’s financial climate, that’s not infrequent, so today it’s come back. It’s identified as a 1980 house, which I assume is a typo. It’s also been re-priced at $1.195 which seems counter intuitive because if it took a drop down to $995 last fall to move it, one would think (I would think) that the market hasn’t improved so much since then as to permit a price $200,000 higher. But it’s a funky old house that would be worth far more in a different location. If you like this sort of thing as much as I do and can stand a wee bit of road noise (sometime between 1749 and today a highway seems to have gone up nearby) take a look.

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More good news: Overlawyered.com has a new look

Great new format, same good stuff. Try this post, on how the lead paint law is not only knocking out small toy manufacturers and thrift stores but children’s book publishers and libraries. The New York Times thinks this is a good thing, surprisingly.

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Old Greenwich south of the Village

A reader states that there’s a house for sale south of the Village for less than a million, and wonders whether that’s a sign of market weakness. I’d call it market reality but in fact there are two such houses.

16 Irvine

16 Irvine

This one is a completely renovated house – granite counters, new appliances (new mechanicals, I hope, since they’re far more important, and expensive, than a flashy dishwasher), asking $895,000. That’s a great price compared to 2006. These days, who the heck knows? But 3 bedrooms on a good street here in Old Greenwich looks pretty good. Tiny lot (just 0.15 acre) but that’s what Tod’s Point is for.

8 St. Claire is pretty much a land sale, 0.27 acre asking $975. Again, this would have been a good price three years ago and it may still be, given the desireability of dead-end St. Claire. It’s certainly true that builders would have been all over this place in 2006 and now? We’ll see.

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Professionalism (and manners) among Realtors

Angry reader # 20001, “Greenwich Realtor” writes this gently chiding note:

Hey Mr. O so Cynical (or should I say O so stupid, not to mention bad speller!).

You are obviously a 1 dimensional thinker.  To pontificate that the brokers have such power as to manipulate housing prices is laughable.  And BTW, Greenwich realtors are among the most professional you will find if you could only get your head out of your a** for just 1 moment.  Enjoy your day and please, get a life……

Here’s an example of the professionalism Greenwich Realtor is so proud of:

15 Almira Drive
15 Almira Drive

 This bank-owned property is currently for sale at $534,900, not a bad price for a remodelled house, even if it is just 864 square feet according to its tax card. It was sold, unremodeled, by a real estate agent for $630,000 in October 2005 and another agent relisted it after the remodeling for $989,000 in March 2006. Our local MLS shows that it expired unsold and I hope that’s true, but Trulia shows that someone paid $960,000 on July 28, 2006. All that magic was performed by one of my colleagues. Nice work.

Another house, one that is actually very nice, if a tad geologically challenged, is 72 Laddins Rock Road in Old Greenwich. It sold as new construction for $1.3 million in July ’04 and its buyers re-listed it, with a Greenwich agent, for $1.850 million in February last year. That was an unrealistic price, at least from my perspective with my head tucked away where it is, and its price slowly dropped. A few months ago I mentioned it in this blog and suggested that it seemed somewhat over-priced. I wasn’t telling anyone anything new, because the market had spoken during the past nine months and said exactly that, but I still received a phone call from its miffed listing agent, complaining that I was hurting her sellers. I hope not, and I wasn’t trying to; I was just reporting on what I saw. Regardless, without any commentary whatsoever, I will now report the latest news about this property: its price dropped to $1.375 today.
UPDATE: I just heard from “Greenwich Realtor” – he was actually responding to one of the commentators who seems to think that Realtors make the market. Oh well. We do have some really good, professional people in our ranks (of whom Greenwich Raealtor is one, which is why I was so surprised to track down his identity) and then we have some who wouldn’t know a zoning regulation from a wet bar. Takes all kinds.

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Bank foreclosures in the Sunshine State

24,000 cases equals fifteen seconds before a judge.

Lee County judges say they are trying to screen for cases that would benefit from mediation, but Chief Judge G. Keith Cary opposes making such a requirement. “A guy hasn’t paid his mortgage in over a year,” says Judge Cary. “What’s there to talk about?”

I believe that can be described as speaking power to truth.

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Bank Foreclosures in La La Land

No, not California, but everywhere that housing prices are falling. This article points out that banks buy their own foreclosed houses for what they’re owed, then carry them on the books at at least that value, if not a bit more. Welcome to the land of toxic assets.

A good local example of this is the recent foreclosure auction on Round Hill Road (414? I forget – the land and tear-down behind Round Hill Community Church, once owned by Robert Weiss). Seven indivisible acres with a house riddled with mold, the bank was owed $3.9 million and I believe that’s what they bid. I don’t think the land is worth anything like that – very nice property, but in this market, if I were a guessing man, I’d say somewhere between $2.7 and $3.3 ought to take it. If I’m right, there’s as asset on that bank’s books that’s being carried for at least $700,000 more than it’s worth. If I’m right. Here’s a portion of the article I link to – don’t miss the paragraph, “Dislocation Ideology” – it sums up what’s happening here, in my opinion.

Dropping Prices Mean Hidden Losses Mount.  The bank’s purchase of the house may have put a floor on the immediate losses from the mortgage default but it doesn’t stop housing prices from dropping. If the housing market continues to deteriorate, the house now owned by the bank could be worth even less. The bank bought the house for $175K and booked it at $190K. But the market value of the house could be far less. If the value of the house drops to $150K, the bank is sitting on unrealized losses of 25% but has only booked a 5% loss.

How To Invent A Toxic Asset.
Let’s conclude with the idea that this is exactly how a toxic asset is created. A bank buys something and books it at a value that winds up being far higher than the market value. It can’t sell the asset without realizing horrific losses. Investors and creditors of the bank know that it is holding these things at far above their real value, however, and discount the credit worthiness and profitability of the bank accordingly.

Dislocation Ideology.
All of this is made possible by one thing: an ideological conviction that the national housing slump should have been impossible and therefore that housing prices are sure to recover shortly. That’s what we call the “Dislocation Ideology”–the idea that housing markets are temporarily dislocated and will soon find themselves back on the old path onward and upward.

If a long term downturn were acknowledged, a conservative bank would avoid buying foreclosed houses and prefer to take the losses up-front, letting the outside buyers pick up the home and the downside risk of further price slides. But banks are still long housing, so they keep buying houses and booking them at inflated values.

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The Obama Mortgage Plan

At first blush, doesn’t look like there’s much there that will help but I’ve just skimmed this cynic’s take on it. Mayber there’s more – I’ll check.

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Here’s a relief

Finally, a scam artist who knows when to fold ’em and get the hell out of Dodge. Authorities can’t locate Texas fraud Allen Stanford and have no idea where he might be. From the Enron crowd to Madoff to Greenwich’s own Noel family, it’s been frustrating to watch these crooks all just sit around waiting for the shackles to appear. You ever watch a horror film and some dumb girl stays in the house that you just know she shouldn’t? The killer has crawled in through a basement window and is making his way up the cellar stairs, and you’re saying “Go, girl, go!”  But no, she first has to call her boyfriend, tell him she’s hearing creepy noises and what should she do? Then, as the axe draws nearer, she calls her girlfriend who is just picking up when ….

Something like that.

So while I’m certainly sorry for Mr. Stanford’s victims – all 50,000 of them, reportedly- at least he put his fleet of jets to good use. I don’t know where one goes to these days in this era of easy extradition, and as I recall, Cuba didn’t work out so well for Robert Vesco, but it’s still a big world and I’m glad Stanford’s set out to explore it. It’s about one of these guys showed a lick of common sense. Otherwise, they all look so stupid, we’d have to wonder how we could be so dumb as to trust them.

And that would be uncomfortable.

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Train wreck coming or just a rest stop?

That difference of opinion seems to be what’s making some home owners and real estate agents so angry with this blog. I think I’m watching a train wreck and am reporting from the caboose as we head off the trestle. Other’s think that we’ve pulled onto a siding and, once something (unspecified) good happens we’ll get back on to the mainline and chug into Happy Valley. Either way, it may help temper that anger to remember that no one, and certainly not a solitary blogger, can tell a 200 ton engine where to go, where to stop or whether to jump the tracks.

And, although my late real estate column may have been somewhat gloomy about the prospects of a steady 20% price increase year after year, the market kept soaring despite that pessimism. This blog only got going in July, 2008. By that time, just to cite an example, 21 Cornelia Drive, listed for $11,750,000 in September, 2005, had already dropped to $7.4 million. That it dropped still further in November to $6.950 million was not due to my blog – I don’t recall mentioning the house at all, come to think of it. The house didn’t sell originally because it was overpriced. It still hasn’t sold because the market has collapsed. The house’s prospects aren’t helped by the presence of a building lot, empty except for an abandoned bulldoze, lying fallow next door with its promise of disruption to come, but that, again, has nothing to do with my cheerleading or lack thereof.

Many of my colleagues who berate me for my “negativism” will, if pressed even a little bit, readily admit that the Greenwich housing market is in the toilet, and why shouldn’t they? That’s the truth. And here’s another truth: for at least the eight years I’ve been touring other people’s houses, I’ve walked out and had other agents ask me what the listing agent was drinking. It has never been a secret, among agents, that many, many houses for sale were grossly over-priced. Some houses sold anyway, due to either an entirely different opinion of their value by an experienced real estate agent who successfully convinced her client of that view or by shills who did their clients a disservice by not telling them the truth. Most overpriced houses, though, sold after the pressure of the market place reduced their asking price to a reasonable level. We’re seeing that same phenomenon now, but the market pressure is more intense.

There are 102 new spec houses (built between 2007 and 2008) currently for sale in Greenwich, priced from $1.350 million to $25 million. Of that number, 53 are priced over $4.5 million and 23 are asking more than $7.5 million. Figure it out: if the market doesn’t pick up, at least some of these builders won’t be able to hang on and either they or their lenders will have to dump them at a bargain price. And that, in turn, will bring down the price of all houses.

The alternative view is that the builders will be able to hang on, or those that can’t will be too few to affect the market, and sales will pick up again at the same price level they were at when the market dies last September.

One or the other. I won’t be gloating if the former scenario plays out, although I will certainly be busy with buyers. And, since I’m on the same train as every other homeowner in town, I will certainly not be disappointed if a full recovery occurs. Surprised, but not disappointed.

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