Dear Mr. Fountain,
I have a question for you.
We have a home in Old Greenwich which we own out right. Typical Old Greenwich home, great house on a very little lot. We’ve been looking to move to central Greenwich for three years,I’ve seen every home in our price range (which keeps changing) but just haven’t felt like we were getting enough for the money. My husband’s been very bearish (smartly so) for the last two years, so we haven’t made the jump. We still need a larger home for our kids, but don’t know when to start thinking Greenwich real estate is at the bottom. Right now, considering the global economy and the future of the financial market, what do you think is a bargain price for a home that’s been on the market for over a year? 30% off asking? Should we give it another six months? I’d like to know what a bargain looks like in the Greenwich Real Estate market. Thank you
It’s questions like this that prompted me to include the quote of that financial guru last week, to the effect that “if someone tells you he knows where the bottom is, he doesn’t know”.
But I do know what a bargain looks like, I think: When I see a house marked down 50% from its original asking price, even if that first price was ridiculous, it’s a sign that the price reflects the current market. Similarly, when a house falls several hundred thousand dollars below what its seller paid for it in, say, 2003, we’re getting somewhere. 30% off original asking price, a year after a house was listed? Depending on what that first price was, this could be a bargain, or not. I know of at least one broker whose listings routinely sold for 1/2 their listing price, years after first being put up for sale, in the best of markets. 30% off one of those prices still isn’t close. But 30% off a decent price (bear in mind that if it were the right price a year ago, it would have sold) may well be closing in on good value.
Should you give it another 6 months? I don’t know. I’ve said before, the only way we’ll know that the bottom has been reached is when prices rise and stay up and by that time, the really great bargains will be gone. I think my advice would be to go looking now but not to commit unless you find a really desirable house at a good price. If you do, then even if prices continue dropping, you’ll be in a house you like at a price you can afford and all will eventually be right with the world. This isn’t the time to over-pay for a house in the hope that a rising market will bail you out, but there are some good houses out there, right now, at excellent prices, that I think you could do well with. There are far more houses for sale, of course, whose owners and prices need more seasoning. I’d let them ride.
Update: further reflection – don’t forget that while you’re waiting for central Greenwich prices to drop, the value of your existing house is too. Assuming you’re moving from less expensive to more expensive, then that’s probably alright (10% off a million being greater than 10% off $500,000) but Greenwich prices don’t always move in lockstep.