Yes, the market is booming, but it's still not preventing owners from taking losses

55 Mooreland Road

So I spent yesterday in Greenwich, meeting with clients but also speaking with four agents who have extensive knowledge of current market conditions, and if their observations can be condensed in one sentence, it’s this: the boom(let?) is seeing old, stale listing finally move off the inventory list, and sales are brisk, but almost everyone who bought in the past ten years is still going to be left underwater after completing a sale at today’s prices.

“Almost everybody” is not “everybody”, of course, but there’s an irrational exuberance out there that is doomed to disappoint. Take this example, from a Westport agent quoted in that article on the new wave of New Yorkers flooding Fairfield County that I linked to Tuesday:

“I’m putting a property on the market this coming week in Southport,” Oshrin said. “And I said to myself, this is the one time my seller is going to get a chance to try his magic number.”

The consensus of all the agents I spoke with yesterday was that this fellow is a fool, and he and his client are going to be sadly wiser a year from now. Of course, he’s not alone: the Greenwich market also has owners who, inspired by the market rebound, are putting their own house up for sale and are pricing them as though we’re back to the fevered market of 2000-2007. We aren’t. Most of the more expensive sales we’re seeing, even though they’re in the multiple-million range and look expensive, represent a substantial loss. Yes, a $6 million sale is impressive, but if the owner paid $9 million for it in 2004, it’s still got to sting.

Here’s an example of a sale that illustrates what’s going on so far as recouping sunken cost:

55 Mooreland Road, currently priced at $5.250 million, is reported under contract. It started at $6.250 million 359 days ago, at $6.2 million, so indeed, old inventory is being cleared out.

The sale history of this property also illustrates another point. It sold for $5.6 million in 2003, when it was hugely dated and needed extensive renovation. That work wasn’t done, and when the buyers put it back up for sale in 2005 at $5.905 in 2005 they had to wait until 2007 before the current owners showed up and paid them $4.880. The house is beautiful now, and clearly the owners spent a lot of money to make it so. How much, I don’t know, but a sale of, say, $5 million isn’t going to come close to making them whole. But at least it’s finally selling, and they can thank Kung Flu for that.

On a brighter note, I showed a house yesterday (whose address I won’t share because I’d like to sell it) that is priced $300,000 less than what the owners paid for it when it was new in 1999. You’d expect some depreciation during that time, of course, but the owners have obviously maintained it meticulously over the past 20 years and made some substantial improvements, and it’s not surprising that the town appraises it at $1.5 million more than is being asked. A very good agent came up with the asking price and a wise client listened, and I expect this house to be gone shortly. So the lesson today is what I’ve always preached: price it, sell it.

Just don’t believe an agent who tells you that this is finally the time to “try your magic number”. If you do believe him and follow his advice then you deserve each other, and I’ll see yiou next year.