Could Greenwich CT be a harbinger of the overall luxury housing market

Greenwich CT. may not be the most familiar community to those of us who live west of the Mississippi. A wealthy commuter suburb for Manhattan, Greenwich has historically been one of the gilded enclaves of wealth and prosperity for multiple generations looking for a beautiful leafy green suburb and attractive state income tax laws. Yet recently Greenwich and other wealthy commuter suburbs of New York City have witnessed challenges to their historical demand for luxury housing.

Over the weekend The Wall Street Journal ran an article titled ” Wealthy Greenwich Home Sellers Give In to Market Realities”. The lead paragraph reads as follows:

After four years on the market, and three price cuts, a stately Colonial-style home on Greenwich, Conn.’s tony Round Hill Road is being sold in a way that was once unthinkable in one of the country’s most affluent communities: It is getting auctioned off. Once asking $3.795 million, the four-bedroom property will be sold May 18 with Paramount Realty USA for a reserve price of just $1.8 million.

Even the wealthy are not immune to price adjustments. According to Realtor.com there were 45 properties in Greenwich priced at more than $5 million that had their price reduced by 10% or more in the 12-month period between April, 2018, and March, 2019. Not to worry Greenwich continues to be one of the wealthiest communities in the United States and its reputation is intact.

However there are winds of change that may be longer-term concerning wealthy suburban enclaves and their demand for the upwardly mobile and those who have attained status of being counted within the wealthiest 1% of earners.

Property Taxes: The revised federal tax code reduced deductions concerning real estate taxes. While many pundits believed the revision was to penalize the New York Tri-State region where many suburban communities have tax bills exceeding $10,000 annually even on a modest home, the reality is here in Metro Denver the $10,000+ real estate tax bill is becoming more common in neighborhoods such as Denver Country Club and in suburbs including Cherry Hills Village and Castle Pines.

Changing Lifestyle: While the pinnacle of affluent home ownership used to be a large home with acreage surrounding for croquet and lawn tennis more and more affluent are flocking to the inner-city i.e. Billionaires Row in New York City, One Hyde Park and even here in Denver high-rises such as The Four Seasons in Downtown Denver as well as homes in Cherry Creek North known for their enormous size on lots more akin to a postage-stamp.

Concerning Greenwich the news gets worse: The median price for a home in Greenwich dropped by 16.7% last year to $1.5 million in the fourth quarter of 2018. On the luxury end of the market, characterized by the top 10% of sales, prices dropped by 18.8%. 

In addition, the average time a luxury home sits on the market in Greenwich is 357 days from its most recent price adjustment. The only segment of the market performing well appears to be smaller, entry-level homes close to the train station, which are being snapped up by a new generation of buyers. The lowest priced condos currently on the market in that area start at around $330,000, according to Zillow.

Should we be concerned in Metro Denver? Maybe. The blockbuster sales of 2016 and 2017 have not been replicated in 2018 and 2019.  In prior blog posts I have provided evidence based on public sales records how some sellers are taking real dollar and inflation adjusted dollar losses on their luxury homes in the most in-demand neighborhoods of Central Denver and Cherry Hills Village.

Of note with the stock market continuing to gain value and the economy seemingly running on all 8 cylinders seems to defy logic that luxury real estate should be lagging. While I do not read tea leaves I do review sales data; if I were considering dropping a few million on a home in Metro Denver at present I may want to take a breather.

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If at First You do not Succeed Re-list

While I do not necessarily believe the following quote is attributable to Einstein in the context of this blog I find it most appropriate:

Insanity: doing the same thing over and over again and expecting different results.

I use the above quote concerning the some aspects of the real estate market in Metro Denver that I am witnessing. To distill the niche of the market for which this quote is appropriate are the select listings which come on the market, do not sell, are withdrawn or expired and come back on the market at the same or higher price.

Here are just a few select examples:

100 Lafayette Street: A sprawling 2-story post-war suburban style home in the desirable Country Club neighborhood on an expansive lot.

  • 4/2/16           Listed at $1,350,000 – subsequently withdrawn or expired
  • 3/9/17           Listed at $1,300,000 – subsequently withdrawn or expired
  • 5/18/17        Listed at $1,300,000
  • 6/6/17           Price Adjustment to $1,280,000
  • 7/18/17        Price Adjustment to $1,250,000 – subsequently withdrawn or expired
  • 3/18./18        Listed at $1,250,000

As of today this residence will have been on and off the market for two calendar years. During that time, while there has been a $100,000 price reduction or approx. 8% the residence continues to search for a buyer. Yet the pricing over the past year has remained static. Yes, one may argue inventory for the neighborhood continues to be challenged and just waiting for the correct purchaser i.e. one who desires a larger home at a below comparable PSF pricing. I will continue to watch as while the residence has many positives i.e. finished square feet and larger lot. However being adjacent to 1st Avenue, even with a sound/privacy wall will be a challenge for many prospective buyers (I know the challenges;  I have transacted residences along the 200 Block of Colorado Boulevard).

600 High Street: A sprawling large brick potential duplex configuration situated on a coveted 100’ x 125’ lot. Personally I have had my eye on this one for potential redevelopment HOWEVER I too cannot make the numbers work (due to pricing, location adjacent to 6th Avenue and Historic District inclusion) yet its pricing history continues to baffle me:

  • 8/26/14:       Listed at $1,495,000
  • 8/26/15:       Price Adjustment to $1,445,000
  • 11/20/15:     Price Adjustment to $1,395,000
  • 1/9/16:          Price Adjustment to $1,345,000 – under contract and active again
  • 4/8/16:          Relisted at $1,150,000
  • 10/8/17:       Price Adjustment to $1,250,000 (yes adjusted upward)
  • 10/27/17:     Price Adjustment to $1,150,000 (1.5 years to get back to that price)
  •                       -Status to under contract multiple times and falls through
  • 12/11/17:     Price Adjustment to $999,000 (under contract and falls through)
  • 3/23/18:       Relisted at $999,000

At present this residence has been on and off market for 3.5 years. While there had been a substantial price reduction from the original $1,495,000 to a more realistic $999,000 the home has still not sold. I will not get into the details of Time Value of Money and Inflation. Yet I will suggest the history of this house seems to repeat itself, look at the sales history:

  • 7/13/1995:   Sold for $670,000
  • 2/20/1997:   Sold for $670,000
  • 6/15/2002:   Sold for $625,000

Thus between 1995 and 2002 the home actually lost $45,000 (more if factoring in inflation) and now with 3.5 years on the market continues to look for a buyer. While there may be a buyer willing to pay $999,000, when considering in inflation and rising interest rates is it worth the wait coupled with maintenance and carrying costs including real estate taxes.

140 S Claremont Street: This is a home I have watched as I walk by weekly when looking at opportunities in Hilltop. With its coveted location within 2 blocks of Graland as well as Cranmer Park coupled with great curb appeal I have literally watched this home bounce around concerning pricing as follows:

  • 6/15/16:       Listed at $2,375,000
  • 8/30/17:       Price Adjustment to $2,275,000 – Subsequently withdrawn
  • 1/12/17:       Listed at $2,275,000
  • 4/10/17:       Price Adjustment to $2,175,000
  • 6/14/17:       Price Adjustment to $2,075,000 – Subsequently withdrawn
  • 8/7/17:          Price Adjustment to $1,999,000
  • 10/4/17:       Price Adjustment to $1,900,000 – Subsequently withdrawn
  • 4/1/18:          Relisted at $1,950,000

During its almost two years on the market there were multiple price adjustments coming down to $1,900,000 in October 2017 only to be placed back on the market in April 2018 at $50,000 more. Again, I understand spring selling season yet I guarantee you any good broker representing a buyer will review the history of the listing and share with their client before making an offer.

Back to the definition of insanity. While I am not suggesting the above examples are insane. I believe it is more a function of the market or the PERCEPTION of the market i.e. unabated demand, low supply and continued low interest rates. Yet the markets are a changing i.e. interest rates are ticking up, inflation is on the horizon and the equity markets are buoyant yet the charts are showing a downward trend from their peak i.e. 10% off the high of 3 months ago.

I do not fault the brokers or their clients i.e. the sellers…..this has happened to yours truly!

My awakening began in 2012; the market has just experienced the Great Recession and was beginning to show signs of activity. I will not disclose the address of the residence as it has since been sold and closed, however the neighborhood is the NW quadrant of Cory-Merrill.

The house a pop-top (first and to this day the largest on the block) sold after renovation in October 2005 for $810,000. While 1-2 years before the peak of the market the buyers in retrospect over-paid for the residence based on the opinion of myself and other brokers. In addition to purchasing the house for $810,000 the buyers added an additional $40K in interior cosmetic upgrades while neglecting the rear-yard (usually a strong selling feature for most buyers), thus in their house for $850,000 in 2005 Dollars.

I was contacted in early 2012 about listing the residence. The sellers planned on retiring and relocating beyond Denver. I visit the residence with a peer broker armed with comparable sales data. My co-broker and I confer and suggested based on empirical data i.e. sales comps an asking of $715,000. Now the saga begins; per the seller’s request the house is listed in April 2012 for $819,000! Yes, $819K or $100K+ over what we suggested.

  • 4/25/12:       Listed at $819,000
  •                      -3 weeks, one showing off an open-house.
  • 5/15/12:       Price Adjustment to $739,000
    • -Seller still believes this is the eventual selling price dismissing our $715 suggestion based on verifiable comparable’s one month earlier.
  • 9/30/12:      A mutual termination concerning the listing and I am thankful as endured  50+ showings and not one single offer.
  • 10/4/12:       Relisted with another broker for $739,000
  • 11/2/12:       Price Adjustment to $725,000
  • 12/14/12:     Sold for $710,000

In addition to the $100K loss i.e. $810,000 paid in 10/2005 to the $710 paid in December 2012 over the 7 years, during my 10 months as broker the seller’s paid in excess of $40,000 in mortgage and carrying costs only to sell the residence for what my peer and I suggested 10 months earlier.

On a more technical basis, here are the inflation adjusted #’s: The $710,000 in 2005 was actually $834,673 in 2012 Dollars, thus their real dollar loss was closer to $225,000.

The lessons are simple:

  • For sellers, even in a hot sellers market be realistic.
  • For brokers, while a listing may look attractive, if it does not sell, it is a challenge both financially and psychologically for all parties.
  • For buyers, trees do not grow in the sky, they need soil and moisture.

Finally from Wall Street: “Do not fight the tape”…..the DJI is off 10% from its high of 26,616, trading at 24,037 as of this posting, interest rates are going up per the Federal Reserve Minutes, inflation is an actual concern on the horizon and wages while ticking up are still considered stagnant.

My humble suggestion, price correctly and sell immediately, the market conditions known as Goldilocks can change to Papa Bear in a moment’s notice.

Sell like its 2016 not 2005.

Country Club Real Estate Recap for 2015

Greetings from Cherry Creek. As you are probably aware 2015 was a banner year for real estate in Central Denver. From the depths of the Great Recession we witnessed a true market reversal. The Country Club neighborhood continued to witness strong growth concerning prices. Of note, the average sales price was just under $1M, a significant amount within Metropolitan Denver. Below is a recap of 2015 real estate activity from our Multilist Service:

Country Club: 1st Avenue to 8th Avenue, Downing Street to York/University Blvd:

Average Home Sold: 4 Bedrooms/3 Bathrooms)

Average Size: 2,373 SF Above Grade / 3,417 SF Total

Average Days on Market: 41

Average Price: $983,520

Of interest, Country Club is truly a collection of smaller unique sub-neighborhoods. In general homes south of 3rd Avenue and east of Gilpin Street commanded the highest prices due to lot and home size coupled with location.

The homes sold in the 400 and 500 blocks from Downing Street to Gilpin St enjoyed serious equity appreciation with a few sales generating 30%+ appreciation from 2-3 years prior sans renovation or updating.

North Country Club considered the neighborhood between 6th and 8th Avenues from Downing to York St. continued to prove popular providing buyers with larger homes and lots when compared to their south of 6th neighbor’s and generating increasing values. Of note from Williams St east includes the 7th Avenue Historic District. In general Historic Districts command higher prices and resale values.