Will The High-End Drag Down Everyone Else?

If no one buys this Bugatti Chiron for $2,998,000, will that hurt the sales of $90,000 Mercedes Benzes? Gideon says no.

I was belly-aching about the lack of high-end ($7M+) sales the other day to my friend* Chuck Royce, who certainly knows things, and he said “We lost 300,000 financial jobs and those buyers just aren’t there anymore”.

I won’t argue with the Voice of Royce, certainly the government-caused melt down of the housing industry, followed by the near collapse of the financial sector, took a terrible toll on jobs in the investment business.  But I still think there’s more to this. After all, there are now PLENTY of young couples out there getting into bidding wars over $2M tear-downs, particularly in Riverside and Old Greenwich. It’s one of our busiest segments, and consider the money being spent: they’ll pay anywhere from $2M to $4M+, just for the land, then spend $2M-3M to build the dream house.

Take the folks who just paid $4,325,000 for the right to tear down 206 Shore Road, Old Greenwich: they will be all-in for around $7M when they’re done building. Does that sound like a weak market?

No, what’s going on here besides Royce’s observation of 300,000 eliminated jobs is that young buyers, more than ever, want brand new. That means if you dumped millions into a property 15 years ago, you may not get that money back. Maybe your $12,000,000 house is now only worth $7,000,000, but the buyers are there. Their tastes have changed, but they do exist!

We notice this loss of value most in our extreme high-end properties, but will that erosion inevitably drag all the other prices down? I say no. It’s like the Bugatti example above. Prices in the rarefied categories, whether it be art, property, or automobiles, don’t really have much influence on the rest of us.

 

*You qualify as my “friend” if you can reliably pick me out of a police line-up.

Two More Bellwethers

200 Guards Road, Conyers Farm, Greenwich, closes for $13,500,000. List: Michele Tesei. Sell: BK Bates

These two sales, one at the high-end, one at the low-end, tell you everything you need to know about the state of Greenwich’s real estate market.

Starting with the high-end, a Conyers Farm sale for $13,500,000: this sale dispels the myth that “no one wants these big, backcountry estates anymore”. Yes, they do, and they will buy when the price looks right. It started at $27,895,000 and found no takers for two years, four price reductions, and two brokers.

But when the ask got down to $17,500,000, lo and behold, a buyer appeared! Do you see the message in that last sentence? It’s not that people didn’t want Conyers Farm and the backcountry, it’s just that they don’t value it the way they did 15 years ago. That, too, will change some day, so people buying Conyers now will reap the benefit as surely as those who bought Manhattan co-ops in the 1970’s.

11 Dialstone Lane, Riverside, likely tear-down, comes on for $1,095,000, gets an instant deal. List: Helen Maher. Sell: Danielle Scialpi-Malloy.

Next we have this low-end, Riverside tear-down example. At $1,095,000, this is really about as cheap as it gets in this part of town, south of Route 95. It came on the market Feb. 21st and had a deal about 10 minutes later. Hasn’t closed yet, so we don’t know the price (wouldn’t be surprised to see it went over ask), but the lesson here is buyers are SO ready to buy!

Whether it’s a builder who knows he can easily get high $2M’s, maybe low $3M’s on this site, or a young couple who might actually use the existing house, there is money waiting on the sidelines, ready to jump in when the price looks irresistible.

Despite the self-imposed headwinds coming from the economic illiterates in Hartford, people continue to want to live in Greenwich, and they will buy your real estate. All you have to do is price it right. So simple.

Biggest Sale Of The Year?

60 Oneida Drive (within the Indian Harbor Association neighborhood), asked $21.9M, sells for $19.250M.

60 Oneida Drive (within the Indian Harbor Association neighborhood), asked $21.9M, sells for $19.250M. List: Shelly Tretter Lynch  Sell: Anne Ward

What? It’s January, for heaven’s sake, yer telling me someone can’t top a lousy $19,250,000 sale before December 31, 2017?? Yes, that’s what I’m saying and I base this prediction on my recent conversations with high-end buyers and fellow brokers.

Bloomberg estimates “equities’ global market value has jumped $2 TRILLION since the election”., so our high-end buyers are feeling confident of the future, right? The answer is yes and no. They are confident of the national economy’s continued improvement, but they are uniformly concerned about Connecticut’s economy and its tax picture. Not one buyer or broker I spoke to expects (those idiots in) Hartford to do anything but more harm to Fairfield County.

General Electric’s recent departure is certainly the biggest “canary in the coal mine” so far, but plenty of lower profile financial services companies and hedge-funds have also cleared out, not to mention a gun company or two.

So, as Connecticut’s Governor Malloy and his legislative allies proudly maintain our fair state’s “business unfriendly” atmosphere, most expect it to get worse this year. And let’s not forget our big, fat estate tax, which chases away older zillionaires on a regular basis.

So yeah, it’s great to see such a big land sale, it’s encouraging, by golly. I just wish it was the beginning of a trend.

Note: that address-link for 60 Oneida Drive works better on your desktop than your mobile device.

On The Other Hand, There’s This

 

22 Mimosa Drive, Cos Cob: everybody wants!

22 Mimosa Drive, Cos Cob: $1,200,000… everybody wants! List: Roseann Sarica Benedict

UPDATE: Closed 12/01/2016 for $1,320,000. That’s the power unleashed by “underpricing”.

Everyone likes Mimosas, don’t they? Of course they do. And they also like streets named after the flower or the drink.

So no one will be surprised to hear that 22 Mimosa Drive, which hit the market a day or two ago, attracted multiple bids from builder and end-users alike, and the whole thing went to sealed-bids!

This a nice, fairly level one-acre parcel and the asking price was smart. Result? Bidding war.

 

Note: My happy little face appears on the listing link, but this is Roseann’s listing.

The Market’s Up! No Wait, It’s Down

See, here’s why this business is tough, at least, the business of trying to figure out market direction. These two properties have both sold twice in the last year, one went up in price, the other went down. One’s “close to town”, one is way back-country, does that explain it? Are back-country Greenwich properties still dropping, is that what we must conclude?

I, for one, am not sure.

504 Indian Field Road, just inside the gates of Mead Point, sat on the market for a few years, finally sold Feb 2015 for $2,501,000. Now it has sold again,  no changes made, for $3,000,000.

504 Indian Field Road, just inside the gates of Mead Point, sat on the market for a few years, finally sold Feb 2015 for $2,501,000. Now it has sold again, no changes made, for $3,000,000. List/Sell: Jill Kelly.

528 Riversville Road, nice tear-down on 4 acres, got $2,000,000 Jan. 2015.  Came back on a few months later at $1.950M, later reduced to $1,690,000, now has contract. List: Jeff Jackson.

528 Riversville Road, nice tear-down on 4 acres, got $2,000,000 Jan. 2015. Came back on a few months later at $1.950M, later reduced to $1,690,000, now has contract. List: Jeff Jackson.

Riverside Spec-House Glut Called Off!

145 Riverside Avenue, nearing completion, NOT a spec-house!

A builder-reader has brought it to my attention that many of the on-going Riverside construction projects that I thought were specs are in fact custom homes. I investigated a bit and sure enough, at least four, maybe more, are being built for specific customers who ordered them.

So instead of the thirteen I predicted, we may see seven or eight new ones hit the market in the coming months, probably not an un-absorbable number.

All this custom-building got me to thinking…these projects are a clear indication of a thriving, active market, yet they go completely unrecognized in our market statistics!

For simplification, let’s imagine a scenario where, in 2016 Riverside records a total of just 20 house sales, priced between $1.5M and $2.5M. All of them get torn down by the buyers who then hire builders to build new ones. Riverside stats would therefore indicate the following: 20 sales, average price $2,000,000.

But where’s the statistic showing all that additional economic activity? A year later, there are 20 new houses worth $4.5M+, but no recognition of that fact.

This, my friends, is what I would call “invisible prosperity”.

P.S. By the way, the sales history of 145 Riverside Avenue provides a nice, neat little picture of Riverside’s price performance in the last decade or so. Here’s how 145 Riverside Avenue’s price changed since 2004:

2004   sells for $1,285,000.

2005   sells for $1,320,000.

2015   sells for $1,500,000.

During that eleven year history, not one red cent was invested in this house! The 2004 people lived in it for a short time, but the next couple of owners had it mostly on the rental market, getting a lousy $4,000/month, so the price increase is solely attributable to increased land value.

Now compare that experience to the typical back-country Greenwich property’s since 2004. Remarkable, is it not?

145 Riverside, before! Back in 1955, a charming cape, owned by the local window-washer, Mr. Meany. But by 2005, it was time to go.

145 Riverside, before! Back in 1955, a charming cape owned by the local window-washer, Mr. Meany. But by 2005, pretty much a run-down dump.

Coming Glut Of Riverside Spec Homes?

This 1950's beauty (hint of sarcasm) is no longer with us. it has been replaced by a VERY LARGE spec house. To be priced at what? $5M? $6M? Higher?

234 Riverside Avenue, before. This early-1960’s beauty (hint of sarcasm) is no longer with us. it has been replaced by a VERY LARGE spec house. To be priced at what…$5M? $6M? Higher?

Could we soon have a glut of $5M+ spec homes right here in River City? Maybe, maybe not. It really depends on how they hit the market. If it’s all at once, that’s bad. If they dribble out one at a time, that’s better (and of course, like it or not, some of them are going to end up on the rental market).

In any case, there are a bunch on the way. On Riverside Avenue alone you’ll find at least four that will hit the market soon. Then there’s a couple on Hidden Brook, two more on Bayside Terrace, two on Lockwood Road,  one each on Lake Drive South, Winthrop, Summit Road, where else? Anyway, that’s about thirteen…

Here are eight Riverside sites about to come back on the market.