Hmm – Belle Haven now dropped below 2003 pricing?

Going down?

That’ a deceptive headline (I specialize in them) because 471 Field Point Road came up for sale in December, 2010 at $6.8 million, which was already below the $7.2 million paid for it in 2003. The owners did try that bizarre trick of raising it to $6.9 million last spring, without result, but today it’s been dropped to $6.550. We’ve been seeing what appeared to be a bottom at the 2003 level but if Belle Haven, hardly a fringe area, is now south of that well, where exactly is that bottom?

22 Comments

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22 responses to “Hmm – Belle Haven now dropped below 2003 pricing?

  1. Anonymous

    Not in the association. Fringe

  2. Cos Cobber

    Great pool, great pool house and tree house too. The problem here is that they overpaid in 2003 by $1MM.

    Btw, Belle Haven is zoned to Julian Curtis?…huh.

  3. AJ

    I remember looking at the Greenwich Time classifieds back in 1975, and a lot of good North Greenwich houses south of the parkway were priced at around $400 thousand. You have to ask yourself has the US dollar dropped that much in value since then or has the demand increased that much since then. There doesn’t seem to be that much demand right now, and the only thing I see holding prices up is would be sellers not willing to take a huge loss. It kind of reminds me of the highly touted Nortel stock trading at $125 a share, and only a few months later trading at $1.25 a share — glad I wasn’t holding any.

  4. Inagua

    “…in 1975, and a lot of good North Greenwich houses south of the parkway were priced at around $400 thousand….”

    And the Dow was under 1,000. That is the major factor holding up prices — the fact that most Greenwich-type higher end buyers have seen their wealth increase by a factor of about 15x during the last 35 years. The fact that the national population increased by 50% also helped, but it was mostly that the rich got richer. What are those $400,000 houses selling for today? If it is less than the increase in the Dow, or about $6 million, then why would you think the houses are overpriced on a relative value basis?

  5. Long live the Belle Haven Buzzards football team!

  6. FF

    AJ–

    The issue is that Greenwich is “built out”. Back in 1975, there were subdivisions possible (Stonebridge, etc), and there was a lot of big parcels in private hands (Babcock, etc.). Now there is literally nothing raw, just divided parcels with a potential lot much worse than the one split. That scarcity allows for price segregation, and boom, if you want it you no longer can look at 1975 as a benchmark for appreciation. I’d use 1992, when it was really clear that Greenwich was a “have some/have lots” community

  7. Anonymous

    AJ — compounding is very powerful: from 1975 to 2012, if an avg house goes from .4m to 6m, that’s only about 4.44% annual increase, or abt 1.5x long-term inflation.

  8. anon

    @Inagua,

    In what world does real estate appreciate at the same rate as public equities?

    Nowhere

  9. anon

    In 1975, mortgage rates were something like 12 or 13% and you had to actually put down at least a 20% down payment. In the 90’s, Greenspan had the great idea of lowering interest rates to help create a real estate bubble and then the banks made it even easier to qualify by letting people put almost nothing down to buy a house. Now that rates are almost near zero, they can’t go any lower, so the odds of seeing real estate appreciation rates of the old days are much lower. The only thing real estate has going for it now is that Obama is going to refinance mortgages for underwater deadbeats, however, that won’t do much for us 1%ers living in Greenwich. Honestly, even though I already own a house, I wouldn’t mind if prices kept going down. That would make housing more affordable for those who don’t already own.

  10. AJ

    Anonymous 11:49, I’m well aware of the power of compound interest. In fact, the anti-trust laws were established not because Rockefeller had a monopoly on oil but because he had a plan where in thirty years he could own all the money in the entire world, and the government decided that would not be a good thing, according to “Age of The Common Millionaire” by Robert Heller. That’s also why life insurance companies will pay the insured the death benefit on a life policy at age 100 because after that the numbers can become astronomical.

    My point was that that type of drop could happen and did happen in Greenwich after the ’29 crash with many houses losing 75% of their pre-crash value. I know that 4% compounded has been the traditional rate of increase on houses for as long as I can remember, but things are going the other way now and there are all sorts of factors that could instantly cause everything to tank: Europe, 600-700 trillion in unregulated derivatives, at least approximately 100 trillion that I know of covered by FDIC, and for those with the interest and the fortitude to look into it, I’m sure the list goes on and on and on. Also, compound interest is not working so well for people who are in cash or bonds and rolling over the interest and reinvesting. It’s not so easy to make money from money these days. Sure, there are some people who are doing quite well with their investments, but those people are usually employing non conventional strategies, e.g., writing uncovered puts and calls, and are much more likely to crash and burn. For those in cash positions compound interest sort of working in reverse: the result of issuing money as debt, essentially a hidden tax on all of us, and I believe that’s what may be happening in real estate now. All I’m saying is there are a lot of things lurking out there (hidden inventories for example) that could cause the bottom to fall out and it could all happen in the blink of an eye. Just remember no one ever lost a penny in money markets — 2008 that changed in the blink of an eye. No one ever lost money held in a commodities trading account — MF Global changed that in the blink of an eye. What’s the solution: taking the money out of politics and electing Ron Paul might be a good start.

  11. AJ

    Lest anyone think I’m just a prophet of doom and gloom: with all the money they’re printing your typical $3 million house may be worth $10 million five years from now, and real estate may be the only safe bet in town. I haven’t got the slightest idea. Does anyone? Now Bernie Madoff, on the other hand, he was a sure thing.

  12. AJ

    Anon @ 3:49 even if interest rates were to go to zero — I haven’t looked in quite a while, what are mortgage rates at now, around 4 1/2 % — you can’t refi if you’re underwater. I don’t know what down payments are in the US, but in Canada they upped the minimum to 20% about a year ago. New construction which was booming is now almost at a dead halt. Even on a $300,000 house $60,000 is a big chunk of change, especially when so many people are living paycheck to paycheck.

  13. Real Estate Junkie

    AJ – down payments are up to 25% to 30% (unless you’re hooked up with a “private banking” situation – your relationship buys you a 20% down). You need a good appraisal too, which is not easy anymore as they are being very conservative. You also need six months of insurance paid up front at closing (I think that’s right….), and I know you need a minimum of 12 months worth of mortgage payments sitting in your bank account should you lose your job. The bank needs to see you have MASSIVE reserves (sort of like buying a co-op in the city!).

    So, all in, if you’re buying a $3M house say, you’ll need to come to the closing with around $965,000 just for closing costs (30% down, and misc. closing costs), and have around $200K sitting in the bank for reserves. That’s a load of cash. And with WS bonuses down, and private school tuitions on the rise (a 4% increase per year just about), no wonder real estate sales are down.

    Banks need to loosen their tight grip on loaning money – it’s ridiculous how hard it is to qualify for a mortgage these days.

  14. Anonymous

    Chris – can you confirm whether REJ’s analysis/ figures are accurate? They do not see right to me.

    • Here’s what I do know, from a client’s recent experience: banks count this year’s bonus cash (say, 10%) and not what you recived on average over the past couple of years and no credit whatsoever for deferred stock, options or magic beans promised by your employer. They will not count rental income unless you’ve rented it for at least the past two years and have tax returns to prove it. And they want big money in the bank to serve as a cash reserve. It gets worse from there.

  15. anon

    you basically need 30-35% in cash (downpayment + required reserves) to buy a house $2mm and up – and the % goes dramatically higher from there

    home prices are F*CKED

  16. Anonymous

    REJ — We saw what happens when lenders loosen their standards. Putting down 30% and having 10% in liquidity on top of that is not much of a buffer given what we now know to be possible in the real estate market. I just bought a reasonably expensive (3-4M) house and didn’t have a problem taking a 65% mortgage, but think the bank is probably taking too much risk on me, or at least not pricing the risk well. I wouldn’t lend a couple of million to me at 3.25% given the possiblke outcomes, and I have far more net worth and liquidity than they needed. I could lose it all, though, and even if I don’t, I could just stop paying and stay in the house for a few years if I go underwater. If, from the day I purchase the house, I never made a mortgage payment, didn’t maintain the house, and put up the maximumn fight possible against eviction, I probably could make the bank lose money even if the real estate market went up 10%. It is so hard to get people out of the houses they are not paying for that mortgage recoveries are a tiny fraction of the price of a non-distressed home,

    What needs to happen is that prices need to fall where people in aggregate can afford the housing stock in aggregate. People who are in houses they cannot afford need to get into less valuable houses and the market needs to clear. We’ve now got four years of prolonged suffering under our belts because the government in preventing, once again, the market from working.

  17. Cos Cobber

    but we’ll all be better off in the long run under these new – more conveservative lending practices.

    plus, who the f is buying a 3MM house with just 200k of cash on hand after making a 30% down payment….that is a pathetic and a recipe for financial disaster.

  18. Anonymous

    REJ – where have you been for the past 4 years??

    It’s precisely because the banks loosened their grip on loans that the country is in this mess!! Wakey, wakey!!

  19. Anonymous

    This is a beautiful home on a very large lot and if it can’t sell at this price, what hope does “The Baron” have for the abortion he built on Bush Ave?