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.

5 Comments

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5 responses to “Train wreck coming or just a rest stop?

  1. pessimist

    Train wreck coming.

    Town and State government needs to lay off 25% before this economy gets balanced again. And get rid of the pension for life mentality no taxpayer can afford.

    We have become lazy. Unemployed people need to find their passion and start a business again. That employs people and generates the taxes. And gets that steam engine going again. Wall St needs to stop speculating and start investing in good small businesses and growth companies again.

    Then we can afford shelter again at balanced prices.

    Realtor needs to stop relying on one home sale at 10 million a year to live off of.

  2. anonymous

    Well summarized, CF

    Enjoy your blog’s refreshing mix of facts, opinions and humor

  3. somwhere in O.G.

    Neighbor told me that there is a house/lot for sale in Old Greenwich south of town for less than $1 million. That has to be a sign of weakness in O.G.

  4. Anonymous

    Hi Chris, I really enjoy your blogs and you tell it like it is. It is what I have been telling my client buyers. (the few I have) I hope I’m wrong but I think it is going to get alot worse!!!

  5. edgewater

    You might be getting too thin-skinned. Why even respond to those who accuse you of ‘causing’ [or abetting] the decline in Greenwich housing prices? I don’t recall anyone suggestiong that Citigroup’s collapse is the fault of Meredith Whitney, but maybe the rest of the world is more sophisticated and discerning than our neighbors who attribute to you the power to move a multi-billion dollar market.