Daily Archives: April 3, 2009

From a reader – rentals

As a potential buyer who is currently renting in Greenwich and refuses to even look at houses until the Greenwich real estate market drops another 30-40% from current prices, I’m an avid reader of your site.  I’ve read your recent posts about the Greenwich rental market, but I have a question for you:    how do you feel about the rental listing prices of some of the homes in Greenwich?  When I see things on realtor.com that are initially listed at 20,000 per month and are now at 8,500 per month (see link below), it makes me think that a lot of these spec homes listing at 16,000 a month can come down to the 6,000-8,000 range.  Do you have that sense?  Or, am I misreading what the owners are willing to take? 


My take is that almost nothing is worth $20,000 a month (year-round rents – summer rentals are a funny, different category). Desperate builders have some pretty large houses available at $10,000, and I think $6,000 – $8,000 should gain you a very, very nice house. But the landlords with ridiculous rental prices usually also have the same house up for sale at an equally ridiculous price so ….

UPDATE: talk about proving a point! The link the reader sent turns out to be Regis’s home on Meeting House Road, now available for $8,500 (hint – offer him less). He’s had it sitting empty for over a year now as his selling price drops ever so slowly down to the reasonable range. I guess it hasn’t reached that level yet, which explains why it’s currently for rent. Nice house, by the way.

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Obama takes over the car industry

When Harry Truman nationalized the steel industry he was stopped by the Supreme Court. Obama has done more than that but, because he’s doling out federal cash, he probably hasn’t violated the constitution. But we have just seen the state nationalize a major private industry in a move that, had Venezuela’s Hugo Chavez done it, would have generated howls of  outrage from this country’s leaders. We’re moving into socialism and cheering Obama on.

Obama’s automotive task force was created in February and granted sweeping powers. Already it has:

Fired the CEO of General Motors and dictated who would replace him.

Ordered Chrysler to merge with Fiat

Rejected GM’s proposed loan of $150 million to its major parts supplier, Delphi, which GM wanted to keep alive

Has dictated what car models will be made in the future and which will be discontinued

All of that in just a few weeks. Going forward, there is no reason to believe that the ambition and reach of the task force will lessen. History suggests that it will expand, instead. And as Friedrich von Hayek warned in “Road to Serfdom”. that grasp must expand until complete fascism is achieved. 

This is centralized planning, as centralized as ever seen in Nazi Germany or the Soviet Union. This model of economic planning has failed miserably everywhere it’s been attempted and discarded by those who tried it. We are turning to it. Why?

After nationalizing the car industry, Obama promises to turn his attention to health care and energy. I had thought that we could survive four, even eight years of this madness if necessary but there may be little left to salvage if he continues at this pace. And I see no group working to stop him, especially the remnants of the Republican party.


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The Allure of Greenwich misleads again

Clusterstock makes a (small) deal today about spotting an ad for some shysters at the Hyatt paying “cash for gold” (better than chickens, I suppose). In fact, these guys, or operations like theirs, show up every year or so, good times or bad. The Hyatt also rents space once a year to a gun show – if those people return this year, will it be a sign of the times that Greenwich is scared of crime? I think not.

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Who made this mess?

I’m just back from inspecting a spec house – its exact location isn’t necessary because there must be dozens of spec houses in the same circumstances, but I can say that it’s on an undesirable street in a section of town that trades at a discount from more popular neighborhoods. The design is the usual builder eclectic, meaning a mongrel kind of style that isn’t particularly disagreeable but nothing that will elicit appreciative oohs and ahs. Kind of reminds me of my own mutts growing up – nice, friendly dogs, but dogs all the same.

Inside, there’s a (small) dining room where a dining room has no place being, a “living room”, also small, on the other side, with a walk through to a very nice library bumped off to the right and a family room, smaller if possible than that living room, straight ahead. Kitchen’s fine, if the usual, and that’s it for the first floor.

Upstairs is just bizzarre. A master bedroom suite is comprised of a bedroom so small that the person given the right hand side of the bed will have to pass within a foot of the fireplace, if she doesn’t end up in the fireplace itself, a long hallway leading to a “sitting room”, destined to be used, if at all, as a spare bedroom for one spouse when the unhappy couple is on the outs, no walk-in, master closet, another “sitting room” – I kid you not, and the ubiquitous huge bathroom.

Four childrens rooms, all tiny, make up the rest of the second floor and an unfinished “bonus area” awaits the homeowner’s pleasure on the third. The back yard is flat and level, but the expensive sod job is dieing. My guess is the sod was laid over too much rock and too little topsoil – this entire lot was blasted into being and the builder probably used up his landscaping budget on dynamite – and the fact that the water drains diaganolly across the yard to the north while the sod was laid east to west – the grass has drowned.

So far, so what? Lots of badly designed buildings out there and this one’s no different. What sets it apart, maybe, is that it was initially priced at over $5 million. This place was never worth that. At the height of the craziness, some fool might have been persuaded to spend $3.5 for it or, just for fun, let’s suppose it could have fetched $3.9. The latter number is about where the builder has priced it now, but the marked has moved away from him and whatever he could have grabbed in 2007 is no longer available. I figure that you could move this house today for $2.9 -$2.5 million; it’s 5,000 square feet of new construction and someone ought to want it at that price. But if you were to buy the place with an eye toward resale you presumably will want to make a profit on the deal, so you pay the builder, what? Maybe $2.2 million, tops.

And that would be fine, too, if there weren’t a $4 million mortgage encumbering the property. $4 million! I don’t necessarily fault the builder because builders are by nature incautious optimists, but what about the lender? Who at that bank did any sort of market analysis before giving out so much money? This project was doomed from the start with that kind of loan, just on location alone. Banks may have no ability to distinguish good from bad design (although if any banker wanted to start a course on the subject, a tour of this house would serve to excellent pedagogical effect), but surely the comparative values of different locations can’t be beyond their ken. You’d almost think they didn’t care whether they were repaid, just so long as they earned a loan fee upfront.


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One man’s ceiling is another man’s floor

It hasn’t been reported yet but there’s a house closing today on Owenoke that will “set a new floor for the street”, according to an agent I spoke to. I assume it’s the Nokia – owned house at 30 Owenoke, which started off at just about what was paid for it in 2006 (somewhere around $2.7, I believe) and fell rapidly from there. Will it break the $2.0 barrier? We’ll find out soon. That will not be helpful for other Riverside sellers if it does.

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Well if anyone would be an improvement this qualifies, barely

Our former First Selectman Roger Pearson, that amible do-nothing dunce perhaps best known for impersonating police officers and stopping motorists, has decided to challenge Dodd for the Demmerkrat nomination. Dodd, who now enjoys a 60% disapproval rating in the Nutmeg state, is in more danger of laughing himself to death than lose his seat to this clown, but it’s a start. Greenwich’s other least favorite son, Richard Blumenthal, remains aloof from the fray and will stay on the sidelines until Dodd actually quits. Greenwich Time, by the way, sees nothing newsworthy about any of this, although they did finally post the poll results for Dodd today, 24 hours after the rest of the country knew about them. Did you notice that the paper raised its price to seventy-five cents recently? Never mind for what, it’s fun to speculate that GT has been taken over by one of those insane house builders here in town who, when no one will buy his product at one price, raises it to teach them a lesson in gratitude.

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Question from the Midwest

A reader sent this along and gave me permission to post it so here goes. I have to leave to (a) break the bad news to someone about how little his house is worth and (b) go talk to a banker about short selling his dead spec house but I thought I’d post now, get comments while I’m away and then see what the consensus is when I come back. Midwestern Peg, you’re out that way – what do you think?

Thank you for all the real estate advice that you’ve given me personally and through your blog.  I am still out here trying to “sell low in the Midwest to buy low in Greenwich.”  Since I value your view, may I ask what your opinion is on list vs. net selling price and how much cushion there should be in a market with a lot of inventory and little activity? 
My home has been listed for 2 years, first at $1,995, then $1,895 and it’s now listed for $1,795.  We haven’t been urgent to sell until now, so we’ve been behind the curve on pricing.  But we want to move to the NY area this spring and be in a position to buy out there while prices are low. 
I have been negotiating with 1 guy for months starting at a very low price of $1,200 and he is now at $1,550, so we are close since I’d take $1,600.  At that price, I will still lose money vs. what it cost to build 5 years ago.  If he bought the lot next door it would cost him $2,000 to build the same home.   So I think we are at a sufficient “reset” since our market was never that inflated in the first place
I have asked my realtor, if I would sell it to him for $1,600, why not lower the list price to $1,699 or even $1,650 to let the market know it can be had for that price and attract some competition to get him off the dime? 
My realtor responded that
100K off a $1,795 home is not a big enough deal to sway anyone
In a market like this, you need to allow for at least a 10% negotiating leeway since customers want to feel they are getting a deal.  So, if you lower it to $1,699, you’ll be at $1,500 if he goes away. 
I know this probably varies a bit by market, but there are 26 homes in our county in this price range not 1 has sold in the last 18 months.  As nice as our home is, I have a feeling it’s not going to be fun sitting here next year!  Thank you for your view. 


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Walt, you sly devil!

A reader alerted me to this story about Walter and Monica redoing a house in Palm Beach. Before reading it, I supposed that it probably wasn’t true, because who would put money into a house that would soon belong to creditors? But I speculated that perhaps this was Walt’s way of showing what a drooling idiot he is, not responsible for any sins committed by that evil Andres or wicked Jeff Tucker. And, since the story is true, I guess Walt’s due a  a tip of the hat – he may be boiling socks in spaghetti water, but he still remembers how to work a con!

By the way – check out the breaking bit of news at the end of the story – Walt’s White & Case attorney now says that Walter’s retired from FGG! No wonder he has time to write us such charming notes.

PALM BEACH, Fla. — It’s ripped apart and being renovated. But far from picture perfect, another Palm Beach mansion has attracted the attention of attorneys and the courts.

 Palm Beach County property records show the home is owned by Walter Noel, the founder of Fairfield Greenwich, a Bernard Madoff feeder firm now being sued by the Commonwealth of Massachusetts. ….

A growing list of investors who claim they were duped have already filed suit against Fairfield Greenwich and Walter Noel. WPBF News 25 was told the people who invested with the feeder firm are worse off than if they had just gave their money to Madoff himself.


“I know they’re not going to fit into a safe harbor,” said tax attorney Richard Lehman.



Just like Madoff’s home, Noel’s place a few blocks away is also wanted by investors. A Connecticut judge already froze the millionaire’s assets on behalf of a group of town employees who lost their pensions.


Noel’s attorney, Glenn Kurtz, told WPBF News 25’s Cathleen O’Toole that Noel retired from Fairfield Greenwich before Madoff’s Ponzi scheme came to life. But Kurtz couldn’t say when Noel did retire.


“The Commonwealth of Massachusetts hasn’t charged Walter Noel in any respect,” said Kurtz. “Walter Noel is not a defendant or a target.”


About the Connecticut court granting a temporary restraining order in another case that froze Noel’s assets, Kurtz said, “The TRO was obtained ex-parte. There was no opportunity at all to speak to the court.” [uh, that day will come April 13th – Ed]


Noel, said Kurtz, had “no knowledge that he was enganged in a Ponzi scheme.”


“He lost his personal money and feels terrible about his involvement in all of this,” said Kurtz.


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Mark of the Devil: 666%

121 Old Mill Road

121 Old Mill Road

Or perhaps the mark of a sensible seller. This house on Old Mill, perfectly nice but showing definite signs of wear started off at $8.250 back in June. Today it dropped to $5.495 million, which is getting there.

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Will Walt’s troubles never end?

Bernie Madoff’s Florida mansion has dropped 20% in value since last appraised. Down to just $7 million. I’m not worried about Bernie – he’s found other accommodations – but what about Walter’s cottage at 175 Round Hill Road? It was never worth all that much to begin with and if this depreciation continues, he’ll have that much less money to pay greens fees and lawyers’ bills. When bad things happen to good people, and all that.


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