Half-full or half-empty?

Nationally, the good real estate news is that sales of existing homes rose 7% this past July from July of last year. And even in Greenwich, we at least held our ground: 40 Contracts in July 2009, versus 39 in July 2008 and 40 July 2007. Before you pop that cork on the bottle of Cold Duck you’ve been holding in your otherwise-depleted wine cellar, though, consider whether we’re seeing purchases merely delayed from the traditional springtime market or whether it’s a true recovery. For the year through July, we’ve sold 175 houses, compared to 281 in 2008 and 419 in 2007. The true test, I believe, won’t come until September and October. If sales in those months come back to 2007 levels, we can breath easy. My guess is they won’t unless Greenwich home sellers do what sellers in the rest of the country have already done: cut their prices. What we’re seeing nationally is foreclosed homes and short sales and in Greenwich, the houses that are selling are, for the most part, restricted to those that have slashed their prices. I don’t see enough price cutting going on to give me confidence in the continued vitality of our market so either that will happen, or sales will stagnate again or, as is entirely possible, I’m wrong again, and buyers will go back to paying 2007 prices for houses. I don’t think that’s likely.


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6 responses to “Half-full or half-empty?

  1. Retired IB'er

    The “good” news in the housing market reminds me of something an old colleague use to say: “The good news is we’re gaining speed, the bad news is we’re losing altitude.”

    Volumes are up (which is to be expected due to seasonality) BUT prices are still down YOY. Add to that approximately 2/3’s of sales were either distressed or first time buyers/investors driven by government stimulus of low rates and $8,000 tax credit and the analogy seems to fit.

    Also, do not lose sight of the fact that July saw yet another large increase (record) in the foreclosure market. Moreover, we have yet to see the upper correct much which will pressure the mid-market, which in turn will renew pricing pressure on the low end.

    The other shoe to drop in the future (though only God and a bunch of Washington bureaucratic idiots know exactly when) is the removal of aforementioned government stimulus (i.e. higher rates).

    As you point out, Chris, the fall numbers will be interesting tea leaves to read. Until then, this is all a bunch of noise on what still remains a downward trajectory.

  2. Anonymous

    Excellent summary as usual, IBer

    Indeed, simply too little sales volume in the >>$2MM zone anywhere to discover prices in upscale places like Greenwich

    Will also be curious if a secular change in the rent vs buy mindset occurs among middle-income consumers…esp with “challenged” expectations of housing as a somewhat liquid “investment”; decreased job security/income growth; creditworthiness issues; aging US demographics; and many investor-owned, previously-foreclosed houses/condos available for cheap (and decreasing) rents…perhaps a repricing of liquidity and shelter on many levels, even among the financially illiterate “normal” consumer of shelter

  3. Anonymous

    Default Loans are in the $40 billion nationally,growing geometrically and much of them stored in regional and smaller banks (Patriot?)……….The FDIC is looking for buyers of these banks so they are not stuck holding the bag(construction loans)….the next 12 months should be interesting……Locally..I wonder when the truth will come out and these higher priced “spec” homes will have to be priced to market by somebody???

  4. Accolay

    What do you think prices will be like in the coming months? 2000-01 levels?

  5. Jack Martin

    Watching this real estate bubble ease down, is like watching a frog sitting in a pot of water than is slowly rising in temperature. The frog never jumps out but dies in the pot.