The sound of one shoe dropping

UBS offers 112,000 sq.ft. for sublease. A commercial broker quoted in the article says this is just the first attempt to sublease a huge block of financial services space - the industry expects many more. I keep thinking of that Antares' principal's quote in the New Yorker, to the effect that he wasn't worried about charging such high rents to tenants at the old UST building in Greenwich because they were all hedge fund firms, "and these guys treat rent payments like lunch money bills." What if someone eats their lunch and steals their lunch money?

I've lost my socks - is my shirt next?

Hilfiger Sale
435 Round Hill Road was purchased for $18 million by Tommy Hilfiger back in October '05, had a ton of new (and expensive) modifications dumped into it and was put back up for sale earlier this year for $27.9 million. It was reduced today 21% down to $21.995. Subtracting the money spent improving it and commissions, taxes and all the other assorted transaction costs, I'd guess that Mr. Hilfiger is already out-of-pocket from owning this house for three years; and he hasn't sold it yet.

Sales since September 1, 2008
A reader asked what's been happening to sales since Septemeber so I looked it up. Remember that some of these sales were contracted for as early as April so their price today might not match that agreed to six months ago. That said, here goes, all 43 of them. (address, original asking price, sell price and % to original - formatting in Blooger is a bitch, so bear with me)

11 Langhorne $28 million - $13.75 - 49%
11 Island Drive $15.75 - $15.5 - 98.4%
4 Old Round Hill $14.5 - $10.875 - 75%
16 Beechcroft $8.295 - $6.15 - 74%
101 Brookside $6.995 - $5.995 - 85.6%
268 Round Hill $5.6 - $4.6 - 82%
18 Sherwood $5.4 - $5.2 - 96%
752 North St. $4.9 - $3.9 - 80%
25 Birchwood $4.2 - $3.6 - 86%
70 Pecksland $3.7 - $3.0 - 81%
123 Shore Rd $3.2 - $2.8 - 87.5%
67 Hillside $2.8 - $2.325 - 83%
21 Wilshire $3.495 - $2.180 - 62%
10 Keofferam $2.940 - $2.415 - 82%
29 Irvine $2.585 - $2.150 - 83%
27 Dandy $2.549 - $2.349 - 92%
11 Hettiefred $3.375 - $2.349 - 69.6%
69 Rockwood $2.295 - $2.729 - 119%
49 Arcadia $2.495 - $2.075 - 83%
62 Cat Rock $2.25 - $1.9 - 84%
83 Circle $2.795 - $1.885 - 67%
18 Orchard Hill $1.895 - $2.0 - 105%
3 Old Farm Rd $1.995 - $1.525 - 76% [pd.$1.75, 2003]
29 Spring St. $1.950 - $1.6 - 82%
17 Suburban $1.995 - $1.695 - 85%
25 Ridge St. $1.695 - $1.650 97%
83 Rvsd. Ave. $1.750 - $1.50 86%
22 Bramble $1.575 - $1.525 97%
5 Lockwood Dr. $1.575 - $1.4425 92%
28 Lockwood Dr. $1.495 - $1.595 - 106.6% [April contract]
47 Will Merry $1.895 - $1.350 - 71%
4 Cross Ridge $1.340 - $1.210 - 90%
7 Ginko $1.150 - $1.275 - 111%
12 Deep Gorge $1.250 - $ 937 - 75%
37 Sachem $ 915 - $ 860 - 94%
29 Old Wagon $ 849 - $ 720 - 85%
5 Hollow Wood $ 699 - $ 650 - 93%
990 North St. $ 672 - $ 685 - 102%
279 Davis $ 899 - $ 550 - 61%
60 Gold $ 610 - $ 481 - 79% [paid $495, 2003]

So not nearly as bad as it has seemed. Of course, we're way down on contracts this month and of the few we have (9? 10?) some are way off asking price but still, the sky isn't falling (or hasn't yet fallen, take your pick)

895 Lake Avenue

I mention below a new condo on Suburban Avenue that seems to have been disposed of at or near cost. Here's another builder who is apparently having second thoughts. BSF Builders, a very successful firm in town with a great track record paid $3.1 million for this place on August 25. They've now put it back on the market for $3.495 million, although why someone else would pay $395,000 extra for the opportunity to pick up BSF's discard is a bit of a poser.

This location has an interesting background. It was part of the Martin R. Frankel compound - he of the insurance fraud, diamonds, international manhunt and all that. Our police ignored many complaints about activities here - they did show up once when the nude body of one of Frankel's Russian sweeties was discovered hanged but, as demanded by the Greenwich Police Manual, labelled the death a suicide and returned to headquarters. Only when Mr. Frankel set fire to the place in preparation for flight did anyone take official notice of the goings on here and even then it was the Fire Department, not the police.

Oh well. Someone bought the house, out of foreclosure, I believe, and did a very nice job renovating it. He listed it for sale in June, 2005 for $3.765 million and eventually sold it for $3.187 a year later. The next owner was not so fortunate and resold it to BSF this August for, as noted, $3.1 million.

And now it can be yours, for the seller's cost and a wee finder's fee.

21 Lia Fail, Cos Cob

Want your own, 500 seat marble amphitheatre? Here's your chance. I've been intrigued by this property ever since Aimee Liu walked me through it on our one date (and only date - Aimee was a really sharp girl) back when we both attended Eastern. Aimee went on to much better things, including Yale and, later, a successful writing career but the amphitheatre is still there, along with a small residence built in 1940 or so from material salvaged from the Havemeyer mansion over in Old Greenwich. First sold in 2004 for $2.2 million (after languishing at $2.8 million for a year - I told the seller not to price it there but she went with the broker who promised more and delivered well, less), the new owners have tried since 2006 to sell it again. They first listed all of its 5 acres (two building lots) for $3.5 million, which, even though they'd updated the original house a bit, didn't strike buyers as much of a bargain. They eventually dropped the price to $2.795 and now offer just the house and amphitheatre on 2 acres for $1.6 million - no mention of what's to be done with the second lot across the driveway.

This is a magical place,set far off of Valley Road and at the right place, would be a wonderful buy. If I were in a buying mood, I might offer the asking price for the full 5 acres and see how badly the sellers wanted to move.

Happy news from happy Realtors What downturn? Every thing's great and now's the perfect time to buy a house, says this economist. Don't let the fact that he works for the National Association of Realtors throw you for even one instant. He couldn't say it if it weren't true, right?

But you'll hurt their feelings!

Here's a stupid bit of advice on pricing and low-ball offers

""Lots of buyers think the market is so bad that they can make any offer and have it accepted," says Carolyn Ratner, an associate broker with Fairfax Realty in Falls Church. "But people need to understand that hiring an agent to be your buyer representative means that you are interested in a fair deal, not that you are out to cheat the seller. You can't sell a home without a meeting of the minds, which means bringing both sides together."

Look: these days, buyers and sellers have different agents so "fairness" isn't an issue, if it ever was. "It's not personal, it's business." Still good advice. The lady quoted above is just silly to think that the choice is between a fair deal, whatever that is, and cheating, whatever that is. See house, like it, make offer. Seller accepts, rejects or makes counter-offer. We're all adults here, we all know how to count, so there's nothing to cheat about. I suspect that Agent Ratner feels uncomfortable presenting low-ball offers so she's set out to convince her buyers to offer more than they want to, all under the guise of being "fair". Phooey.

A tougher stance, one that I like much more, is also found in the article:

Ron Sitrin, a Realtor with Long & Foster Real Estate Co. Inc. in the District, says the nature of this market almost begs for low-ball offers.
"Buyers feel they have a choice, so if their offer isn't accepted, the chances are high that they will find something else they want," Mr. Sitrin says. "There's no fear of loss on the buyer's side."

Atta boy, Ron. My advice is, if your buyer rep starts sounding New Age lovey, lights incense in her car and begins humming Kumbaya, get another agent.

When they came for my Mercedes I remained silent, because I drove a Bentley. When they came for my spec house .... Mercedes in a full-blown sales crisis.

And if you were one of those lucky ones who were accepted into the Tesla buy-a-car program, it must cause a few sleepless nights wondering where your deposit is, now that the company's laying off 25% of its workforce and looking for money. Nicest touch? They informed their employees they were being fired via a blog. Great.
Oft' promised, never delivered, Tesla sports car ($100,000?)

Update: I stand corrected - retail is $109,000 plus extra for tires, radio and seats.
This article says that the CEO remains upbeat , and that's nice. But I note that he's already sunk $55 million of his $300 million fortune into this deal, is also involved financially with tossing a private-passenger rocket ship into the air and is divorcing his wife, with whom he has five sons, all under six. California's a community property state so there goes 1/2 that $300 million, plus child support for all those kids whose mother will want to maintain a millionaire's lifestyle and, by gosh, I'm not sure I'd start clearing out a space in my garage for my new Tesla's arrival; at least, not quite yet.

Selling advice from Las Cruces, New Mexico. I like Las Cruces, even if my ancestor, Col. Albert Fountain was murdered out there, along with his 9-year-old son, Henry, back in 1896 (by Oliver Lee - the families still dislike each other). Here are some smart selling tips from a local realtor out there. Sounds like Las Cruces isn't experiencing the same hurricane we are but then, it's a long way from Wall Street.

Some Greenwich house-sellers have company down under.

And many more would, if they were willing to accept reality. Sell Sell Sell - Aussie millionaires cut losses on their mansions

New research by analysts Australian Property Monitors shows real estate agents slashing millions from their initial asking prices for homes in some upmarket areas after only a few weeks or months.

RP Data analyst Tim Lawless said affected areas include the northern beaches suburbs such as Manly, Warringah and Pittwater.

"House values there have fallen by 10 per cent and the median is now around $900,000, down from just over $1 million in July last year," he said.

Craig Pontey, from Ray White Double Bay, said houses selling for $3 million to $8 million "have come off their highs by 5 to 8 per cent" since the post-2000 boom time. Property analyst Louis Christopher from SQM Research said: "I have met a number of these people who have been utterly wiped out by the sharemarket correction and are looking to offload their property."

Brian Redican, a senior economist with Macquarie Bank, said that until recently the lower half of the top-end market had been shielded from the falling property value trend.

"But the shakeout of the sharemarket has shown signs of forced selling and it's probably true we have seen falls in house prices in that end of the market, but they are relatively small falls," he said.

Liam O'Hara, a senior economist with Australian Property Monitors, said that while well-off areas were starting to feel the pain, the real falls in property values were in the western suburbs.

And high-end real estate agent Billy Bridges - who deals in properties worth tens of millions of dollars - said the very top of the market was still faring well.

"Our market's incredible. I've got 20 buyers with well over $20 million looking for waterfront. The top of the market is on fire. Hopefully those poor bastards in Bankstown will get some reprieve soon," he said.

I think I'll keep my eye on this Billy Bridges - I get the impression he'd sell one of his listings to his own mother, given the chance. Or find work with Antares.

24 Upland Road, $2.325 Million
The winner and still standing ...
The only house to go to contract this week. That makes seven for the month, in case you're counting.

More on 25 Beechcroft
Peter Janis, listing agent for this house, is miffed hopping mad. He called today to point out that I haven't been in the house to appreciate its quality and that, in his opinion, the price of this house has nothing to do with "the numbers". With deference to Peter, whom I like and know to be a good, knowledgeable agent, I think numbers do control for at least two reasons. First is the affect a sale across the street for $6.2 has on a house going for $7.950. The lower priced house may indeed be, as someone described it, "a total fiasco" but what does the buyer know? Two 9,000 sq. ft houses, both brand new, one on a pond and the other across the street from it, how much does a little body of water add in value? I suspect that the answer is, "not $1,750,000". One can point out all the special features in a house, its superb quality and its great flow, all for naught. At least in my experience, the buyer will still ask, "so why would I pay that much more? They both have plasma TVs in the master bedroom, right?"

The second reason numbers count is that bank appraisers count them. These guys can't get into the houses they base their comps on so they mostly ignore special details built into the house they're examining. Does #16's construction match that of #25? They don't know, so they don't care. They look for the most recent sale in the neighborhood, calculate its square footage and age, toss a little pixie dust into the air and presto! They have a value. In this case, the appraiser need merely look across the street to see a house the same size and age of the subject property and, when he learns that it sold just last week for $6.2 million, he's going to be inclined to value the house he's appraising at close to the same price. Or so I think. I'm wrong on all sorts of things (like how to spell Patrick Daniel Moynihan) and I could be all wet on this one. I don't want to see Peter or his listing encounter difficulty; I pointed out the two houses merely to illustrate what I fear will become the dreaded domino effect in Greenwich housing, as more spec builders dump their projects for whatever they can get.

Lies, damn lies and statistics.
A real estate columnist in my old paper writes today that

"The Pending Home Sales Index representing contracts signed in August increased 7.4% from an upward revision in July and is 8.8% higher than August 2007."

That would certainly be encouraging, if it were accurate, and I'm confident that her paper will receive no complaints from its real estate advertisers about her column. And that, according to the paper's editor and publisher, is precisely the point.

But what if readers are being delivered a wheelbarrow full of dung? Here are the real statistics for Greenwich contracts.

July, 2008: 39; July, 2007: 40. Call it a draw.
August, 2008: 22; August, 2007: 46. That's 48% down, not 8.8% higher, by my math (and, though I don't pretend to understand what an "upward revision from July" means, Aug. '08's contracts represent a 56% decline from the preceding month, not a 7.4% increase).
September, 2008: 24; September, 2007: 33 - 28% decline
October 1-17, 2008: 6; October 1-17, 2007: 17 - 65% decline.

The last Democrat I admired (and probably ever will), Daniel Patrick Moynahan Moynihan, once said, "everyone's entitled to his own opinion, but not his own facts." At least one paper in town didn't get that memo.

NYT: House prices have a long way (down) to go. Darn it, that ol' pessimist IB'er who plagues these pages must have gotten to them!
I'm kidding about our local Casandra of course and besides - in my darker moments I completely agree with him. One thing to note in the article is the "home price vs. rent ratio". According to experts, whoever they are, that ratio should be 15:1 and in parts of Florida it's still as high as 22:1, indicating plenty of room for more deterioration. What good are ratio's like this? Well, an earlier commentator on this blog noted that the price to earnings ratio was still way above historical levels and predicted that stocks would continue to fall. He was right.
I really don't know what Greenwich's sales to rent ratio is but I'll find that out today (hey - it's early, gimme a break) and post it here. I'm guessing that it's way above 15.

25 Beechcroft
Another Beechcroft spec house
This house is on the other side of Beechcroft from # 16, also a spec house, that started at $8.5 million and finally sold last week for $6.2. Undeterred by his competitor's loss, this past June this builder raised his own project's price to $7.950 from $ $7.5 million (which in turn, was an increase from the original price of $7.2). He paid $2.950 for the land back in July 2007 so I suppose he's stuck at a high price, but the sale price for the place across the street can't be encouraging.
Assuming a $400 per square foot construction cost ($3.6 million and adding in land cost of $2.950, this guy has $6,550,000 into the house before he begins considering pools, landscaping, conveyance taxes, commissions, overhead, etc. Not much wiggle room there, so he'd better hope for a (very) strong housing recovery, starting soon.

(Click to enlarge only known photo of Jeffrey Gendell)

Now he tells us: "Mistakes were made."

Greenwich resident (7.27 acres in RA-2 zone, 5 bedroom, 6 bath brick colonial circa 1936 - ironically enough, that would mean it was built in the last Great Depression) Jeffrey Gendell's hedge fund, Tontine Associates, is down a wee bit this year: 65%, as of September 30, and possibly a bit more today, say what? He's certainly made tons of money for himself and his investors over the past 10 years so I'm not going to lose sleep over the possibility that he'll have to move from that colonial. But I was struck by this quote:

[Gendell's] fund is named after 17th century Italian banker Lorenzo de Tonti, who invented an annuity where several partners invest and receive annual dividends. As each investor dies off their share is credited to the remaining partners, leaving the last man alive with all the money. The name is a play on Gendell’s desire to be the “last investor standing.”

What do I know? Maybe being 65% down for the year is to be on top of the heap right now and Greenwich is indeed hosting the last money manager still paying his groundskeepers. I never could figure out hedge funds but I feel better about that ignorance now that I know that they couldn't either.

Price reductions!
Some readers tell me they find this topic boring. I think it illustrates two things: the danger of overpricing your house to begin with; and what's happening to the market. Those who disagree are urged to skip this post and come back later.
42 Richmond Hill Road. original price $15.9 million; as of today, $9.950 - 37.5% off. Remember, if the first price is ridiculous, a huge price reduction is not necessarily an indication of how much the market has dropped. Still, someone must have received a pretty hefty dose of reality out there on Richmond Hill.
45 Baldwin Farms South. Original price last January, $9.750. Today, $6.450; 34% drop.
38 Khakum Woods, land. Original price $8.5, today, $5.5; 35% drop. The pretty house pictured above is an artist's idea of what a house might look like, if it were built. As it is, you get a foundation only. Considering that the current seller paid $4.8 million for the lot in May, 2005, in a stronger market, I'm not sure that's enough.

There were another 17 price changes reported today, but these were the most interesting.
Update: Zillow.com
If you believe Zillow, 45 Baldwin Farms should be worth only $4.694 million but if I were the builder I wouldn't despair: Zillow has him in Glenville, rather than off Round Hill Road, and uses houses on such desireable spots as Thunder Mountain Road to compare value. Bah, humbug. Its possible that in this market their pessimism might just prove out, but I'd be more confident in their calculations if they got the location right.

Scraping the bottom of the barrel?

Here are some folks who think it's time to invest in stocks. Makes sense to me, but what about Greenwich real estate? I remain cautious.

No doubt about it, Greenwich prices have softened but, with the exception of some spec houses and a few anxious owners, the price reductions so far aren't stirring many buyers into action and I don't believe they should. Even many of the massive cuts I've seen recently are simply lowering properties to where they should have been when they were first listed a year (or more) ago - they still don't reflect current market conditions.

I do disagree with some of my readers, though, who think that, just as stocks are trading for ten cents on the dollar houses should too. That's not going to happen or, if it does, you won't want to live in Greenwich anyway. I'd be on the lookout for prices that are, and this really is just a top of the head guess, 20% off three years' ago prices. There's bound to be a floor out there somewhere and I do hope that we'd be approaching that floor at that level. If I'm wrong, as is so often the case, well hey - you'll still be living in a great house that you wouldn't have been able to afford in 2005, so you can enjoy your new digs, including that swimming pool and tennis court, while you wait the market out. How bad is that?

(Two Greenwich residents, one named Lauer, who have absolutely nothing to do with this story)


7 Dwight Lane
Soon - to -be felon Michael Lauer may have lost his Greenwich house but he's still got a fan following in the financial press. Nothing new here but it must be reassuring to Mr. Lauer that he hasn't entirely disappeared into obscurity. Yet.

Short sales, or scooping up bargains when the homeowner is screwed
A reader asked about short sales, which occur when a borrower's house is worth less than what he owes the bank (picture that 6 year car lease in year 5, when the ol' SUV's worth $3,000 and you're still in the hole to the bank $12 grand). Our GMLS has added the category "short sale" to listings in order to alert agents that they're in for a long haul on that listing - these things are tough to negotiate because there are often multiple parties involved and none want to lose money, which they'll have to do, if the sale is to go through.

I believe that the category was added proscriptively: everyone "knows" we're about to see a flood of these sales but, so far, they're still rare. May that continue.

This company claims to act as a go-between for buyers and sellers in short sales situations. I know nothing about them but one principal is coming to Raveis next Tuesday to tell us what she does and how she does it so I'll have a better picture then, maybe. Details to follow, as they say. I note that their website has no Greenwich listings; that may be because we don't have any short sales right now or, more likely, this company doesn't. The latter would explain why they're coming down to speak with us - they want business.

One thing that does set my teeth a little on edge is this quote from the company's website:

CT Property Network
is a network of creative, friendly real estate investors, with heart.

Believing in tooth fairies is probably what got you into trouble with your sub-prime mortgage to begin with.