Daily Archives: August 17, 2009

Another cost for new homes, for better or worse

I just read in Fine Homebuilding that, effective 2011, all new homes must have a fire sprinkler system installed. The author dismisses concerns about cost, estimating that they’ll amount to at most 2% of total construction costs. Well that may be only a few thousand dollars in Oklahoma, but in Greenwich where everything is oversized including construction costs, I’d be surprised if it didn’t add a lot more than that. Maybe insignificant when estimating affordibility of a $10,000,000 mansion but more of an issue at the low end.

There’s no question that a sprinkler requirement will save a few lives – in Greenwich, maybe one every year? But like land use regulations and all building safety codes, there’s a price to pay. I’m not necessarily arguing against this regulation but I’ve never heard of a home buyer voluntarily ordering this equipment when building a house, so it sounds to me like one more instance of people who know better dictating to those who don’t. Keep that helmet on.

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Riverside sale

When 14 Bayside Terrace was first listed for $1.475 back in February I wondered aloud (without identifying it) whether we weren’t heading back to the below $1 million range for houses like this one. Not quite: it sold today for $1.160 (assessment is $1.096), but that’s closer to the $869 paid for it in 2000 than the price they asked last winter. If you’re in the $1 million range, hang on – better times are coming.

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Into the dustbin of history, along with Harvest Gold refrigerators and Swanson TV dinners

1969Reader’s Digest files for Chapter Eleven. Doctors’ waiting rooms will never be the same.

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Branch banks hanging on

Maybe Cos Cob will have to live with nine (or more) banks awhile longer. This article points out that the branch banks are still alive. Yes, on-line banking is rapidly expanding, but old folks still like to look their teller in the face and see if she’s cheating them. And unlike other funds, deposits from these oldsters come incredibly cheap. Pay them nothing, lend out dearly, and the spread is yours to keep. But that doesn’t mean the day of the branch bank isn’t numbered and, eventually, Cos Cob will see the bricks and vaults of Peoples/Chase/BankofGreenwich/Citi/Hudson/Etc. replaced by something more profitable – probably nine new branches of CVS.

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Catastrophe Insurance, update

No sooner had I questioned whether issuers of catastrophe bonds had the financial strength to stand behind them comes this report via BusinessInsider that many states are going naked to save on premiums. It makes sense, I suppose; now that the federal government has taken on the role of insuring everything from hangnails to bad business decisions, why should a state’s citizenry burden itself when they can stick the bill to the residents of the other 49 states? This explains why Greenwich can get “disaster relief” for unbudgeted snowplowing costs, or New Jersey can soak the country’s taxpayers because farmers had a wet growing season. There was a time when farmers expected bad weather and New England towns expected snow, and planned accordingly. No longer.

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So what didn’t the broker understand?

25 Dairy Road

25 Dairy Road

This house on Dairy Road, right across the street from the site of the Andy Kissel Massacree, was built in 2003, sold for $7.3 million in 2006 and put back on the market in April 2008, unchanged, for $10.5 million. Some of us – not just me, but several agents who saw it – weren’t taken by that price, as recounted here, when New York Times reporter Peter Applebome was invited in to take the broker open house tour.

The Greenwich market probably peaked in the fourth quarter of 2005 and has been slowing since, but this is the first time there’s a whiff of panic in the air.

After sampling the quiche and crudités at the lunch buffet in the empty kitchen of one of the new houses in the Golden Triangle area of Greenwich’s mid-country, the brokers wandered around with the air of picky estate appraisers.

Yes, it had the basics: 6 bedrooms, 7 ½ baths (it is practically illegal in Greenwich to build houses in which the future investment bankers of America don’t have their own bathrooms), master suite in the master wing, pool, spa. But at north of $10 million, in this market, well, maybe the closets were a tad small, the fixtures kind of ordinary, the mix-and-match exterior of stone and clapboard generic enough to be best described as neo-neo.

Mr. Fountain figured it would eventually sell for $7 million. Someone else said $7.5. The high estimate was $8, but she was talked down to $7.5 as well.

“It’s going to be an interesting market,” said one.

“It is an interesting market,” said a second.

“It’s going to be a challenging market,” said a third, and the escalation stopped there.

That was then – it took until today, but its price has finally been dropped to $7.750. Catch a falling knife, eh?

Similarly, another listing, this one at 591 Round Hill Road, was purchased for $4.584 million in 1998, placed back up for sale in 2007 for $9.5 million and reduced today (same broker – a busy weekend of client meetings?) to $7.150, a little below its assessed value of $7.277. My point, if I have a point, is that you can list your house at the highest price any agent promises you but in the end, you have to concede to the market. And the market isn’t rewarding silly prices right now. That was then, this is now.

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Price check, aisle 5

43 Glen Ridge Road, way over by the Merritt in Glenville, is a great big house (9,000 sq. ft.) built around 2000. It was listed in 2006 for $$3.950 million and, nice as it was, I didn’t think it could fetch anywhere near that price given its location. But it did, and very quickly, too, selling for $3.8 million. Now its back on the market three years later at $3.195. That’s near where I thought it would sell in 2006 but since I was wrong then I’m probably wrong now. Regardless, it’s a lot of house on an acre and a half, with pool, and a nice buy for someone who wants that location. If I were living in across the line in Westchester County, say, and wanted to escape NY taxes while not leaving my friends too far behind, I’d jump. Good house.

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A sale in Darien

527 Middlesex Road

527 Middlesex Road

Rarer than hens teeth, a contract for new construction has been reported in Darien. This house was listed on the Greenwich MLS and I viewed it a couple of times with clients. Really a beautiful house, across from the polo field, and after being reduced from $5.950 to $4.450, a pretty good buy, it would seem. Interesting that Greenwich builders used to justify their high prices by citing the high costs associated with building down here. I can’t believe Darien is any cheaper, and this house was built to a standard that would have had an asking price of at least $7.5 million in Greenwich. Hmm.

Another point of interest: I showed this to clients who loved the house but rejected the entire town of Darien after speaking with friends and deciding that Darien is still anti-Semitic. Is that true? I know that “A Gentleman’s Agreement” was written here, but that was in the 1950s. Greenwich has travelled light years from that sorry past but at least in the perception of some people, Darien has not. This is, of course, a verboten subject for real estate agents to discuss under the Fair Housing Act but I have never claimed to devote this blog entirely to real estate, so the heck with it – I’m interested.

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Speaking of flopping, stunned fish, my dream date’s getting closer

"I'm sorry, Andy, but can we still be friends?"

"I'm sorry, Andy, but can we still be friends?"

The feds are supposedly closing in on the Madoff boys, Andy and Mark, and may indict them after Labor Day (even prosecutors like to take the last two weeks of August off). Real estate mavens may want to start focusing on the boys’ Greenwich homes on Cherry Valley and Tomac, liens and all, but I’m thinking that Andy’s girlfriend Catherine Hooper may finally be ready to dump the fellow – fishing sucks in Ossining, from what I hear.

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FWIW steps (gingerly) into technical trading and chart analysis

I’ve resisted adding my deep knowledge and perspicacity to the ongoing discussions of the Dow Jones Index before now, figuring that you guys knew even more than I, hard as that is to believe. But the more I read of chart analysts the more confident I am that I can bring something to the party. Here, for instance, is a snapshot of the Dow at 2:00 pm. I call it the “stunned mackerel, writhing on the floor” chart. Time to scale back, so to speak. 

dow

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And so it begins

Price cut at 5 Dialstone

Price cut at 5 Dialstone

The new construction at 5 Dialstone Lane in Riverside was built by someone who, readers may recall, chased me from the premises for predicting that he’d price it at $3.4 million and, because he was stubborn, would ride it all the way down until he sold it for $2.6 sometime next year. The man was furious and with good reason: he had in fact priced his masterpiece at $4 million and doubtless felt a little sensitive on the subject.

Anyway, that was during a period when he’d given a number of brokers an “open” listing: if they found a buyer, they’d receive a commission but the builder was free to sell to anyone he could find on his own, free of obligation. Today he’s given up that approach and given an exclusive listing to my old pals at William Raveis – good choice – and listed it for $3.625 million. I don’t think that will do it, although I hope I’m wrong, but it’s kind of funny that he’s taken a $375,000 price cut even before officially putting it on the market. We’ll put this one on the Blog Watch and report price cuts and eventual disposal.

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You ain’t seen nothing yet

Front page news on the Stamford Advocate but not grist for its sister Greenwich Time, lis pendens, the filing that starts a foreclosure, spiked 70% in Stamford the first six months of this year, from 1,751 in 2008 to 2,380. The reporter sounds a little confused; wasn’t the economy supposed to be improving? Weren’t housing prices beginning to go up? Not around here they aren’t; here, the fun is just beginning.

I’m not picking on Patriot Bank – it’s just a lender I’m somewhat familiar with – but when a bank can acknowledge a doubling of its troubled loans overnight, it’s a safe assumption that there’s something going on besides a sudden collective movement of borrowers to default on their loans. As a reader on these pages commented last week, just as there are homeowners too far underwater to be able to afford selling their homes, there are under-capitalized banks that can’t afford to recognize bad loans. An acknowledged bad loan requires an offsetting increase in capital to keep the bank kosher with the regulators. If a bank is tapped out of new sources of capital, acknowledging too many bad loans means trouble – like shutting down trouble. So bad loans are ignored. Rolled over, put in suspension whatever tricks there are that bankers use to avoid telling the truth. If, as rumor has it, Patriot received a fresh investment of $55 million from a third party, that would explain how it was able to suddenly recognize $47 million in bad loans last month: “lookee here at what we just discovered!”

Again – I’m not intimately familiar with Patriot’s finances and it’s entirely possible that there’s some other reason for this increase. But whatever, Patriot is not alone among banks carrying some really bad loans. I see in their note to investors that they’re still highly optimistic that these loans have a good underlying market value and that they’ll pay off without any significant loss. I don’t share that optimism – not from the properties I’ve seen, at any rate.

Greenwich is no different from Stamford – sorry, Mad Monkey. If the banks are finally moving to foreclose bad loans across the border, they’ll be doing so here soon, too. Like many realtors, perhaps they thought Greenwich was different, and hoped to avoid taking losses by holding on until the market came back. They’ve run out of time.

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Madoff sparks a new industry- books

Lots to come, and I hope one of them will be mine (I’m concentrating more on the Walter/ Greenwich side of the story because it’s more fun) but the Journal excerpts “Madoff With the Money” today. I particularly like this part where Peter Madoff, having known about the scam for at least 24 hours and spent that time discussing things with his lawyers and the FBI, announces that, to his shock and amazement, Bernie’s been arrested. It’s such a nice scene I may lift it and use it for when I have Walter admitting to his Round Hill Club investors that their money is gone.

Around 10 o’clock that morning, the boss’s younger brother, Peter, the number two in charge of the family-run firm— Bernie’s sidekick for some four decades— entered the trading room on the 18th floor and called for everyone’s attention.

His hands were trembling, and he needed to lean against a desk to steady himself. His voice was tremulous.

“I have some bad news,” he told the gathered workers. “Bernie’s been arrested.”

“He looked scared, teary-eyed, and everyone was suddenly in a state of shock,” vividly recalls one of those standing there, listening in utter disbelief. “Someone asked Peter what happened, and he said he did not know why Bernie was arrested, or for what reason—or whether it was personal, or whether it was business. He said he didn’t know whether it was for good, and he didn’t know whether it was for evil. (This was a claim that would later turn out to be untrue.) And he said, ‘Don’t discuss this with anyone.’

“When we found out later that day what Bernie had done, I remembered how sincere Peter had sounded that morning, and I thought, ‘In his next career he could win an Oscar.'”

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Dow heads down

Way down so far this morning. The end of the fake bull market and beginning of the bear, or just traders clearing their desks in preparation for a two week vacation? I’m no trader so what do I know, but when we have uncontrolled spending, unemployment at 10% and consumer spending, which traditionally makes up 70% of our GNP, spiralling down and the experts say we’ve hit the bottom and are headed back up, I think to myself, “sell”.

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Wanna bet?

New listing today at 25 Peepers Hollow Road (off Riversville) Ml #74110, asks $750,000 and offers this description: “NEEDS WORK TO BRING IT UP TO DATE. FRESH PAINT & HARDWOOD FLOORS THROUGHOUT. SEPTIC IN GOOD SHAPE W/LITTLE OR NO POSS OF BACK UP SYSTEM – NO EXPANS. PURCHASE SUBJ TO PROBATE COURT APPROVAL.”

Which is interesting – it’s kind of like a lease of indeterminate length. You could buy it and live in it happily ever after or the septic could fail they day you move in, have the house condemned and be back on the street before you’ve unpacked. $750,000 for that opportunity is beyond my risk tolerance but perhaps a drop out from Gamblers Anonymous will like the odds.

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Good things come to those that wait

It seems that California Senator Barbara Boxer, long a contender for title of dumbest Senator in the sack of rocks that is Washington, may face a reelection battle from Carla Fiorina, Hewlett Packard’s former CEO and one smart person. Could the country be so lucky? Could Californians be intelligent enough to dump Boxer back into San Francisco Bay? We can only hope.

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Contract on Hooker Lane

Well, it’s known as 41 “Stonebrook” now, but we’ll always know it as Hooker – it’s in Cos Cob, need I say? In any event, it went to contract this weekend, with an asking price of $1.759, so that’s encouraging.

There’s another house in Riverside whose address I won’t mention because it’s not yet a finalized deal, but I thought it was fairly priced at $1.550 and was a steal when it was reduced to $1.350. My own clients loved it but were sensible enough to offer only what they were comfortable with – if every home buyer had acted so wisely the past five years we wouldn’t be in the mess we’re in right now – and lost it to a higher bidder; in fact, there were multiple bids, according to the listing agent. I mention this because my clients and I, as well, I’m sure, as the other bidders, have looked at the entire inventory in Riverside and Old Greenwich in this general price range and this was the only house that enticed to bid so high. Yet, there are many houses out there right now priced between $1.3 and $1.6 million – if their owners could see what $1.3 delivers, perhaps they wouldn’t be so adamant about holding their own price, because they’re nowhere near this one’s quality, condition or even location.

Of course, they won’t do that – sellers have an amazing ability to deny reality and to insist, all evidence to the contrary, that their own house is better than one that just sold for several hundred thousand dollars less. There’s no arguing with them, but they might wonder why they aren’t getting offers near their asking price and the house down the street is drawing plenty. They might.

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Do we need a civic center in Old Greenwich?

I’d say no, but others disagree and they’re back to work trying to drum up support for the project. There’s no question the existing building is obsolete and on its last bricks, and the playing fields are a soggy mess, but I smell mission creep here, from an original desire to fix the drainage on the fields to, now, a $40 million facility complete with swimming pool, exercise classes, day care etc. – in short, another YMCA project, but this time in Old Greenwich. The Y’s project hasn’t done so well – work has stopped, the contractors have walked off the job and liened it for more than $5 million and the Y is looking for another $10 million (uh huh) to finish the job. Do we need to replicate that situation in Old Greenwich? I think not.

Even if funds were somehow raised privately to erect this monument to social welfare and physical fitness, it seems likely that the town would be saddled with the expense of running the damn thing. I don’t want to pay to maintain yet another pool, let alone day care centers or pilates classes. You want yoga? Join a fitness center. Or join the Y – they need new members.

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Stamford Marriott comes to its senses, withdraws claim that rape victim was at fault

Last week, after it came to light that Marriott Hotels had filed a special defense alleging that a young mother’s rape at gunpoint, in front of her children, was a guest’s own fault because she was “careless of her own safety”, I suggested that I could think of nothing more certain to inflame a jury than a defense such as that. Apparently the hotel’s management agreed and is moving to withdraw that pleading – “it was the insurance company lawyers”, they say, and, having dealt with those people over the years, I believe them. They have no common sense and, in my opinion, no grasp of a picture larger than the immediate suit in front of them. So it’s nice to see that there is a bit of common sense still working in the business world, even if it took exposure in the Stamford Advocate to make the owners see the light.

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Catastrophe bonds

Until last September, I thought catastrophe bonds – sort of re-insurance for catastrophic events – were a neat free market alternative to under-funded state recovery funds and weak insurance companies. They’re still selling and in fact are at 2009 highs today because there have been no hurricanes – yet. Traders are so short-sighted that if August 15 th passes without a storm they assume it will never happen. Ana, Bill and Claudette are about to prove their optimism wrong but never mind – the real issue I see is, who is issuing these bonds and do they have the financial wherewithal to back them? AIG taught us that there often is no substance behind these companies and now I worry that, should a major hurricane hit Miami and cause, say, $200 billion in damage, we taxpayers will be faced once again with a “too big to fail” situation and get screwed again. Not that that’s likely, of course.

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