I wrote about this area off of Field Point Indian Field Road awhile ago and I thought, given the number of spec and almost-new houses for sale in it, that sales would suffer. Wrong. I hear that one house there has an accepted offer and this one, while it was reduced in price today, was reduced from $2.195 million to $2.175. A $20,000 price reduction indicates a confidence that I wouldn’t have shared a few weeks ago but obviously I underestimated this area’s appeal. Live and learn.
Tag Archives: spec houses
This house was built on land purchased for $2.440 million in May, 2007. The house was listed for sale in May 2008 at $7.850 and reduced about a million to $6.895 in January. It’s reported as under contract today by an “out of town broker”. If it’s going for anywhere close to its final asking price, that’s encouraging news for builders. After all, what’s a million dollar shaving from an imaginary list price?
1 Butternut Hollow Road has a tortured history. Listed as land for $2.4 million back in August 2003 the frustrated seller raised his price to $2.65 that November after no one would buy it at the lower price. That didn’t work, for some reason, so he eventually dropped all the way to an even $2 million in June ’04 and, naturally, a bidding war erupted and the current builder/owner bought it for $2.050 two weeks later. The existing property was razed and this one took its place, priced at $5.895 million in April 2005. it’s been begging for a buyer ever since. The builder dropped it 8 times without success so in November 2007 he raised its price, forgetting how well that had worked for the previous seller, from $4.450 to $4.650. This daring approach also failed so it was back to price dropping and the place ended up at $4.350 in June, 2008. Today it was withdrawn. Is the builder moving in himself? Turning the keys over to a lender? I don’t know, but the poor guy’s been carrying this place for almost five years and has yet to see a dime on his investment. I doubt he ever will.
UPDATE: This should read 1 Butternut Hollow (it does now, thanks to an alert reader) not 186. Don’t know how those last two digits crept in, but isn’t to “86” something to toss it into the deep? Maybe that’s it. And brother Gideon informs me that the builder did see a few dimes from this place in 2006 when he rented it for almost $20,000 a month. That probably explains his price raise in 2007. After it had been lived in for a year and was broken in, it was worth more. Maybe he’s withdrawn it today in order to try renting it again. Unfortunately, rents have followed house prices down, but it will still generate some cash. Just not as much as before.
My brother Gideon alerted me to a contract that was reported late yesterday afternoon – we both missed it. Jordan Saper’s spec house at 80 Perkins Road, listed at $7.995, has found a buyer (Herb Erlich was the buyer’s rep – good for you, Herb). No report on price yet but builders everywhere should take heart from this unless, of course, it sold for 5 bucks. I’ll bet it didn’t. Jordan Saper builds houses that are not to my personal taste but he clearly knows what buyers want because his projects sell. I’ll dig up pictures tomorrow and see what I can find out about the selling price.
Go belly up, I think, or at least, many of them will. Of the 549 single family houses currently listed for sale in Greenwich, 113 of them were built in 2005 or later (104 of those were built after 2005). While a few of these have sold once and are now back on the market, even more new houses are hiding behind their builders having moved into them or rented them out for less than their carrying costs.
So let’s assume that 113 is a rough figure of unsold spec houses for sale. Their prices range from $25 million to $1.350 million and, while I won’t say that I’ve seen every single one, those I have seen are, without exception, suffering under handicaps like poor location, poor land, crazy prices, etc. I don’t expect any of them to sell for their current price. Many of these houses probably still have some profit built into their prices; many do not. Some builders have the financial strength to take a big hit; many more do not.
This happens every cycle – builders get wiped out and are replaced with a new generation of optimists. I think we’re going to see more of that this year, however, than we ever have before.
The upcoming problem for Greenwich will be sellers watching the prices of their neighbors’ competing houses drop level with theirs and then continue a free fall towards the bottom. Foreclosed competitors are not a major problem now and I hope they won’t be – sellers have enough trouble.
But in other areas of the country homebuilders, if they want to stay in business, have to convince buyers to buy their new product rather than the brand – new, never-lived in foreclosed tract house down the street. What to do? One big builder, KB, will today introduce its foreclosure buster – a smaller house, priced just 5%-10% above foreclosed ones.
KB in response recently launched in California’s foreclosure-burdened Inland Empire a new strategy of building 1,200-square-foot homes priced about 5% to 10% above local foreclosures. KB plans to expand to other regions.
It is too early to tell “how profitable this model will be, and I’m not sure how much we’ll get” on the conference call, says David Goldberg, a UBS Securities analyst. But “it’s a big part of what we’re looking at in coming quarters.”
KB’s hurdle: that glut of foreclosed homes that, in some cases are barely lived in, if lived in at all. At the end of the day, says S&P analyst Kenneth Leon, home builders like KB may be looking at a painfully slow recovery in home prices.
This seems to make sense; I’d think a buyer would rather buy from a going concern and take advantage of existing warranty laws and avoid the uncertainty that comes with a mystery house that’s sat empty and unattended for a long period. But the KB houses will be smaller than their competitors and neither KB nor analysts is sure of its success. It will be interesting to watch what happens.
No, not the house pictured – that’s Leona’s place which, despite a $30 million write-down is still for sale. I wonder when Ogilvy or Leona’s heirs will mark that to market? In any event, 8 Hillcrest Park Road in Old Greenwich did go to contract yesterday. This house was built new in 2000, put up for sale in 2003 for $2.650 and eventually sold in June, 2004 for $2.4 million. The buyers returned it to the market in May of this year at $2.750 and when that didn’t work chopped its price until on November 21 it hit $2.495, which has flushed a buyer from the bushes. I would assume that the winning price was less than the asking price so someone lost money here.
And speaking of losing money, two new houses were listed in New Canaan yesterday for $6.775 and $6.895, respectively. They’re both part of the same subdivision on 2 acres each and are sized at 9,500 sf and 10,900 sf. I don’t pretend to know the New Canaan market but these prices, and maybe these sizes, seem out of whack.
As long as I was looking up eastern Greenwich projects I thought I’d also check in on the other two districts. Ouch. Cos Cob has 14 spec houses on the market, from $1.495 to $6.795 million. The latter is on Cognewaugh and at the risk of offending my Cognewaugh reader again, I think its builder will be incredibly lucky to land a buyer in that price range on that street.
Greenwich proper? Oh gosh, who were the bankers who loaned on all these? There are 73 spec jobs listed, from $999 (after it didn’t sell at $1.495) to $25 million for that monster at 253 Round Hill Road. Monstrous in size, I hasten to add – I’m sure it’s a very nice house inside, even if it does lack something in the way of coziness. A few of these houses haven’t been built yet and probably never will be but I also know of still more houses that are being built that haven’t been listed so 73-75 seems like a supportable number. Looking for a bargain? I’d skip Old Greenwich and focus on this group of disappointed contractors. I suspect that, just as in cycles past, we’re going to see a good number of local builders disappear from the scene. I’ll be sorry to see them go but if experience is a guide they’ll be replaced by a new batch. There’s always someone who slaps his hands together and says, “I hear there’s money to be made in Greenwich”. And indeed there is, until there isn’t.