Attention Real Estate Contrarians!

A spec story gone bad. 170 Old Mill Road fetched $8.850M, 2006. Closed today for $4.9M.

A spec story gone bad. 170 Old Mill Road fetched $8.850M, 2006. Closed today for $4.9M.

“Honestly”, you’re saying to yourself, “enough about spec houses, surely!”

I agree. After this, no more, but I couldn’t resist this particular example from today’s Greenwich Board of Realtors sales report: It is precisely examples such as this that cause all the confusion about buying a spec house…

170 Old Mill Road just closed at $4,900,000. The owners paid $8,850,000 in 2006 (you mathematicians will quickly calculate that decline at a hefty 44.6%). Why did this happen? Did the house smell like a cat box? Ugly wallpaper? Bus station built next door?

Nope, the explanation is that things got a bit “frothy” in Greenwich’s backcountry during those years. I guarantee that if the buyers had taken their $8,850,000 and bought a brand new mansion on, say, Riverside’s Club Road, the house would be worth at least that today.

The point is, it’s not the fact that it was a spec house, it’s the location of the spec house. Get it?



27 thoughts on “Attention Real Estate Contrarians!

  1. No matter how you spin this and yes, its your job to spin this, this sale is a poster child for ‘backcountry spec devastation.’ Destroying 4M in value is equal to roughly 7M in pretax income. No small chunk of change. Its horror stories like this that have put mid and back country in a serious sh*tstorm.

    OG and Riverside on select streets is performing OKAY on spec resales (not all exceed the original purchase price). But the rest of town, whether its back country Cos Cob, downtown Gwich condos or some 5k sq ft prefab in Glenville, its all negative. The worst is clearly with the white elephants, but there are few winners in all other locales that are not OG and RV south of US 1.

    • Cobber:
      OMG, you’re “clinging stubbornly to your myth”, imagine my surprise, but you’re wrong, laddie, wrong, even about the back country. Have you forgotten these three examples, on Lake Avenue, that I wrote about recently? I can keep coming up with example after example to prove you wrong, but will you ever change your mind?

      • Gideon, the three Lake houses, aren’t these spec homes that have sold just once – by the builder? I don’t have access to the MLS. If sold just once, and not twice, then you haven’t proven anything. The focus of concern has been on new houses selling at 60 to 90% of purchase price on their first resale.

      • Cos:
        My reference to the three successes on Lake Ave was intended to refute your assertion that Greenwich’s backcountry market was in bad shape. When you can get $8M+ for a new house on two acres, then I’d say the market is doing quite well. I know this positive view troubles you, old chum, but the facts are on my side.

      • Gids, you and I have different definitions of a good market. I would say a good market is when 80% of the homes in a market can sell at or above their last sales price (ie new highwater mark) and at figures that at least carried inflation. Instead, particularly in back country, homes continue to sell 10 to 40% off their highwater mark. Yes, riverside and og south of US 1 defy gravity, but no so for most others. Just look at the DOM and months supply….all very ugly for homes priced over 4M and located north of US 1.

        One other comment, not such a great summer for OG/RV waterfront. A pile of waterfront listings seemed to go no where.

      • Gids, I’m losing respect. So all those selling their back country estates at 70% of the highwater mark would agree with you that the market is good?

  2. Wow – I should have bought that property – at that price it’s a steal! You could not rebuild that house and purchase the land for that price. Great value for the buyer. Maybe you have a point, if nicely appointed houses in back country start selling for $350/sq foot and houses in Riverside/OG sell for $600+/sq ft then you will see smart money sell there and get more bang for their buck in back country. Makes sense to me – there is an arbitrage that is starting to open up and it should be exploited.

  3. If in addition to the drought, the house-of-cards economy, and DARPA/Northrup/The US Military dousing the Monterey Coast in chemtrails on a regular basis; Carmel–by-the-Sea/Pebble Beach mega-million mansions might not continue to be that alluring, either.

    This $35M oceanfront in PG two miles from me, obviously was painstakingly custom…one wonders why when it seems it was built for generations it’s for sale:

    And this $13M Carmel-by-the-Sea oceanfront place I walked by daily over the year it was very obviously custom-built for the family, not a spec. So it was interesting that it is for sale so soon, too. I’ve only seen the owners there a couple of times.

    What say you, Real Estate Wise One?

    • Frenchie:
      Oh no, you’re one of those “they’re spraying us with chem trails” people?? Oh well.

      But anyway, yes, it is a commonly observed phenomenon, among us real estate professionals; people build their dream-house, then immediately put it on the market! Why? Was the building process so arduous, what with all the decisions, choices, meetings with architects, builders, and designers, that the new house makes them tired just to look at it?

      • Pilots, scientists, and doctors on Geoengineering:

        One of the smartest guys around on geoengineering:

        I live on the coast, and have in Santa Barbara, San Francisco, and Carmel-by-the-Sea for life. My home office is on the 2nd floor. I watch them spray constantly. The coast here no longer has that fresh invigorating smell, it is chemical and with things dying at a rate I have never seen.

        Since we are the ‘leading edge’ of US weather I can imagine that we get it more than elsewhere, including that it is also related to HAARP and electromagnetically ‘weaponizing the weather”…ie. the Navy is conducting 240 days of electromagnetic warfare off Washington State coast.

        I’m sorry you choose to be ignorant of something of immense portent to the world. I managed over $1B in complex major construction and can assure you my observation/investigation skills are quite advanced.

        My dismissive male asshole skills are too, Adios. And best of luck.

      • Maybe the house was a lust moment and so the moment past.

        As for Frenchie’s “astute” observations, she is a quaint reminder of why I would find it hard to enjoy the beauty of CA. Too many impractical people. The sun and relentless good weather must warp the mind.

  4. This number for this size, style, vintage house is going to cause devastation across back country values…its a terrible transaction comp that Greenwich Association of Realtors should immediately delete from their database so no smart/savvy buyer ever sees it. Then again what ever happened to freedom of information act…I guess it doesn’t apply to Greenwich Realestate

  5. The three Lakes Houses are considered to be in mid country by most realtors, punters and residents. They are south of the Merritt. They are all very nice homes.

  6. Gideon, what would u have suggested to the owners of 170 Old Mill to list at when it was first offered? And what comps would u have used??

    • Anonymoose:
      Ahhh, now you’ve waded into the complex area of broker pricing. It would be so simple if all the broker had to do was show up at the house, meet the owners, show ’em the comps, and everyone immediately comes to an agreement on the asking price.

      Unfortunately, unlike almost every other type of asset sale, real estate draws out an emotional response from its owners. The broker shakes his head sadly and says, “Sorry, but based on these recent sales around you, I would recommend an asking price $1,000,000 less than you paid in June, 2006”. The seller politely (or not) shows him the door, and calls in the next broker. This process is repeated a few times until the seller hears the “right” answer, and then the saga begins…

  7. Gideon, I think that’s a spot-on analysis for the Greenwich market in general but it doesn’t really speak to 170 old Mill. That is, if a home like this sells for under 5M the entire G market is a lot sicker than most know. Just look at the “hot” areas of the mkt like riv/og — way too many 3.5+m listings going nowhere quickly. Even the waterfront props in these areas doing nothing. Serious sea change occuring but not many willing to acknowledge that the tide has turned.

      • Maybe you are both right, there is plenty of demand but resistance to current pricing? Perhaps prices are topping out. Not exactly the end of the world.

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