Another funny tale about 25 Close Road
Funny to me, anyway. When my first book, The New Millionaire’s Handbook had been accepted for publication and was being illustrated out in Kansas City the illustrator was obviously unable to comprehend the size of the monsters we were growing here in Greenwich. He kept sending me drafts of what he thought were mansions and I saw as hovels until, frustrated, I drove my daughter Kat and her camera up to this place and had her take some shots of it as it was nearing completion. I sent those off, the book came out and I thought nothing more of the house until it came up for sale. I brought my book to the broker open house and showed it to the listing agent: “Look! Your house is all over my book! Isn’t that swell?” She closed the book and snapped, “put that away!”
As I said, funny to me.
Curmudgeon! From the comments section, this gloomy assessment from Ib’er, or retired investment banker:
Chris, I would agree that pricing will not go to zero.
I am beginning, however, to believe that the real estate correction is going to be much more severe than anyone is currently prepared for. Most prognosticators offered their peak to trough pricing views assuming a not severe recession or significant rising unemployment. I believe we are headed for a severe recession with much higher unemployment.
How far this will drive down prices I cannot guess. Nevertheless, the aforementioned factors added to the destruction of wealth in the stock market and lenders returning to prudent lending standards are/will be massive headwinds for future real estate pricing.
If you’ll provide your address, IB’er, I’m sure the Greenwich Board of Realtors would be glad to send you a copy of “Everything’s Coming up Roses”, just to cheer you up. I’ve worn out my own copy and it didn’t do me a damn bit of good.
Contrary to what you may have heard, it’s still available, and at pretty good rates. My pal Nancy is in the process of refinancing (oh, those wonderful student loans!) with my own firm’s mortgage banker, Mark Hawkins (203 257-5805) and approval was almost instant. I’m not flogging
Ravies Raveis (tough when your boss points out that you spelled the name of your own G–D— firm wrong) here and I certainly don’t get a piece of the action (illegal and, by odd coincidence, unethical) but a number of large real estate firms have, out of self defense I suppose, pooled their cash and struck a deal with those banks that are still lending. The firms act as mortgage bankers rather than brokers and loans are getting done (for non-real estate customers as well as buyers, fyi).
What’s changed, then? Nothing, if you got a loan 10 years ago, plenty if you borrowed last year. Credit score should be over 700 (there are exceptions, but 700 is a good starting point) you’re definitely going to be putting 20% and perhaps even 30% down, documentation of income and assets is required – no more “no-doc” loans – appraisals may be tighter, and so forth. In short, the bankers have adopted the Who’s credo as their own: “We won’t be fooled again!” Of course, when it comes to reviewing the banks’s own behavior over the past decade, one might be tempted to ask who was fooling whom, but that’s for another day.
What to do with bankers who cling bitterly to their guns, religion and money? The NYT’s Floyd Norris says, “jawbone them”. Worked on asses, I recall, or do I have that wrong? IB’r, CEA, all you other financial wizards out there. Any suggestions?
In the past ten days, exactly four single family houses have gone to contract. That’s not good, for sellers, but if you’re tempted to buy right now, your position is pretty strong because you’ll be just about the only game in town.
Spec Home Update
Or, as suggested by CEA and borrowing from Instapundit, “Carnival of the Spec Homes”.
Either way, there are 44 new homes on the market priced from $6 million to $25 million. Most, but not quite all of them were built before the sellers had found buyers (Tommy Hilfiger’s, $25 million on Round Hill Road, appears to be lived in) and at least one of them, 20 Langhorne, remains unbuilt and is offered as a completed house at $10.998 (down from $14.9) or as land, for $2.995. I’d bet it sells, if at all, for a building lot and I’m confident no more money will be put into this project to create another unsold house.
But that still leaves a large number of seemingly unwanted, very expensive buildings all looking for buyers. How many of those were put up by builders without the financial resources to hold on through this “rough patch” – or, if you prefer, “eff’in unmitigated disaster”? My guess is, not so many and if I’m right, we’ll be seeing these at huge price reductions – perhaps 50% – or as bank-owned properties. Banks are always interested in getting their money back but they aren’t in the business of holding real estate and they like to move those houses they do end up with so they, too may start whacking prices. What will that do to the other spec homes? Common sense suggests that if your stone and clapboard, 11,000 sq.ft. rah da da da house, priced at $12.5 million, is competing with essentially the same house down the street that’s asking $5 … you’re in trouble.
Update: The house pictured here, by the way, 25 Close Road, isn’t included in the inventory because it’s currently off the market. Built in 2003 (by a Russian, I believe – a pioneer!) it never sold, despite all sorts of price “adjustments” from $15.9 million, up to $18 million and down again to, eventually, $15,750,000. Nothing worked. Of interest to me at least is that the seller went through about 5 brokers (it couldn’t have been the price, it must have been the broker’s fault) and only the last bothered to take her own pictures of the place – everyone else just used the first broker’s efforts. I’d expect a little more if I were trying to sell a house in this price range but then, they were probably all very well dressed and to some sellers, that’s all that matters.