Tag Archives: real estate prices

Market values

A reader comments,

In Riverside, 30 Owenoke sold for $2.3 million or 22% below its peak sale price in 2006.  That’s not too bad, and certainly not 40% down as many bloggers may have wanted.  That’s also higher than its full 2005 market value assessment of $2.2 million.  So going back to 2005 prices from 2006 prices ain’t so bad after all (there was a thread on this earlier).

First of all, neither I nor any other blogger I know “wants” prices to have fallen to a  particular level – we’re just trying to give an accurate picture of what’s going on. Second, the reader misses an obvious point: the market value for 30 Owenoke was not, as the town thought, $1.5 million, but what it sold for, $2.950 (in fact, the broker originally thought it was worth $3.4 million). Houses in town in 2006 routinely sold for 2X their town-estimated market value – the average was 2.1 X. So to measure where prices have dropped to, you shouldn’t use the old assessed values as a starting point: they were just a point prices met on their way down.

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WTF?

Back from open house tour and it’s obvious that Greenwich home owners are standing firm against the disaster that’s afflicted real estate in the rest of our fair country. Good for them; I just hope they aren’t planning on moving soon. I saw one house that is strictly a land sale – there is a house on the property but it would be foolish to put on a new roof, update the bathrooms, kitchen and mechanicals because you’d still have a 50-year-old house of questionable value. I’d say its land value is $750,000 although I suppose another agent might say $1 million. They wouldn’t get it, but they might get it. Asking price? $2 million.

I saw another house, quite beautiful, asking $2.5 million. While it’s certainly a far better value than the one mentioned above, even at $500,000 more, I’d have thought $1.850 might have been a good starting point for negotiations with a final price settling somewhere in the high 1.5s.

Then there’s one I didn’t bother seeing, a “private broker showing” for a house on Field Road in Riverside. Nice house, built by one of the town’s better builders, but asking $6 million on a street that’s never seen north of $3 million. If the seller is playing Zillow’s “Make me Move” game, I suggest he relax: no one’s going to be making him move from here at this price, ever.

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Tough question

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.

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Talking down the local market

46 Terrace Ave. Rvsd

46 Terrace Ave. Rvsd

This house was sold as a shell for $902,000 in December 2003. The buyer gutted it, renovated it and resold it seven months later in July, 2004 for $1.775 million. That buyer sold it in August ’07 for $1.925 and now it’s been placed back up for sale, first at $1.850 and, today, for $1.745 – below its 2004 price. I, of course, take full responsibility for this unhappy result. If only I didn’t write about falling prices buyers would not only be paying 2007 prices they’d be happy to pay even more, all for the privilege of living in Greenwich.

I knew about the power of this blog, naturally, but even I was surprised to see that I’ve infected our new president with my pessimism. Here is what he said yesterday,which should do nothing to help the current climate of fear. Had he not read this blog, we could have expected a sunny prediction of good times to come:

And if there’s anyone out there who still doesn’t believe this constitutes a full-blown crisis, I suggest speaking to one of the millions of Americans whose lives have been turned upside-down because they don’t know where their next paycheck is coming from.

That’s scary enough but the man continued with this bit of economic wisdom that really alarmed me.

It is only government that can break the vicious cycle, where lost jobs lead to people spending less money, which leads to even more layoffs. And breaking that cycle is exactly what the plan that’s moving through Congress is designed to do.

I know that I attended the University of Connecticut Law School while our president’s degree is from Harvard, but somehow I seemed to have learned a little economics along the way while his career as a community organizer seems to have closed off that path of learning. Too bad for all of us. Would you go out and buy a house today with an expectation that its value would remain steady or increase in the coming year? I wouldn’t.

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Well this settles that!

Forbes: Real estate resurrection begins.

Bloomberg: No recovery for real estate as speculators dominate sales

J.P. Morgan: It will fluctuate

Clear now?

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House prices still too high?

That’s what we’ve been saying, but here’s someone else saying the same thing. Prices are returning to normal but aren’t there yet if you use almost any income to purchase price ratio. And if the financial services industry has the kind of year we’re all expecting, the income side of the equation is going to drop further. I think buyers are waiting for more than regular pricing anyway – they want, and won’t move, until they see panic prices. So far, only a few builders have hit that stage of desperation; look for more come the new year and if so, those sales will drag down everyone else. Good for buyers, bad for sellers.

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