1 year ago
Tuesday, July 15, 2008
The Marvelous Chuck Schumer
The Wall Street Journal a has a great editorial on how this dreadful man single-handedly brought down a bank. I assume most of my readers also read the WSJ but just in case you missed it ....
The Wall Street Journal a has a great editorial on how this dreadful man single-handedly brought down a bank. I assume most of my readers also read the WSJ but just in case you missed it ....
One Off, One Still On
18 Sherwood Farm Lane, a very nice house built in 2001 on the Rockefeller land in Glenville, has gone to contract just two weeks or so after being listed. What impresses me is that (a) it wasn't brand new construction and (b) any sign of market activity in this price range $5,400,000 is always welcome.
53 Park Avenue South, on the other hand, has been reduced again and is now asking $2,295,000, a steep drop from its January listing price of $2,777,000. I liked this house and said so when it was first listed, but its failure to sell serves as a cautionary lesson: don't over-customize a house to your idiosyncratic tastes (this one was built as a modern Victorian, with garish or authentic, you take your pick-colors), don't build a three-bedroom house in Old Greenwich, where buyers expect a minimum of four, and add a family room. This house is ideal for a couple; most buyers in Old Greenwich have a passel of kids.
53 Park Avenue South, on the other hand, has been reduced again and is now asking $2,295,000, a steep drop from its January listing price of $2,777,000. I liked this house and said so when it was first listed, but its failure to sell serves as a cautionary lesson: don't over-customize a house to your idiosyncratic tastes (this one was built as a modern Victorian, with garish or authentic, you take your pick-colors), don't build a three-bedroom house in Old Greenwich, where buyers expect a minimum of four, and add a family room. This house is ideal for a couple; most buyers in Old Greenwich have a passel of kids.
Grammar Police
A reader has taken it upon himself to monitor my spelling and grammar in this blog, which I appreciate. I no longer have a copy editor and, while I sometimes had amusing arguments with them (for instance, convincing an earnest young lady from Kansas that, yes, I knew that "au pair" wasn't really an anagram for "over-priced french baby sitter")as I claimed in The New Millionaire's Handbook , I did enjoy having them save me from my worst mistakes. So if somebody (or is it someone-I'll await a decision from my reader) wants to take on that task, for free, it's just fine with me.
A reader has taken it upon himself to monitor my spelling and grammar in this blog, which I appreciate. I no longer have a copy editor and, while I sometimes had amusing arguments with them (for instance, convincing an earnest young lady from Kansas that, yes, I knew that "au pair" wasn't really an anagram for "over-priced french baby sitter")as I claimed in The New Millionaire's Handbook , I did enjoy having them save me from my worst mistakes. So if somebody (or is it someone-I'll await a decision from my reader) wants to take on that task, for free, it's just fine with me.
Waiting for the other shoe to drop
Nothing coming out of the banking industry is good news recently, so buyers are understandably nervous and reluctant to buy. I can't give you advice on whether your job at UBS is threatened (well, according to some people I know, I can - don't plan any expensive vacations soon) but I did learn an interesting tidbit from Mark Hawkins, my colleague at William Raveis's mortgage banking division. According to Mark, a house's price must drop 10% to make up the difference of a 1% increase on a 30 year fixed rate. Interest rates are definitely going up, so waiting to commit on a house may end up costing, rather than saving you money.
On the other hand, do you have enough cash to buy a new house? The days of 20% (or, better yet, 10%) down are gone, at least for mortgages exceeding $2,000,000, which, in Greenwich, is a lot of the market. $2M mortgages require 30% down and it only gets worse from there. Greenwich real estate has performed no worse than the Dow (down about 14%) but certainly no better. Which will fare worse in the next year? Your guess is as good (probably better) than mine, but my guess says, as Wall Street goes, so goes the Greenwich market. Ya pays your money, ya take your chances. If you need a house now, though, and you've got some stocks you want to dump or a large pile of cash doing nothing, you can probably take advantage of a seller who is as nervous as you.
Nothing coming out of the banking industry is good news recently, so buyers are understandably nervous and reluctant to buy. I can't give you advice on whether your job at UBS is threatened (well, according to some people I know, I can - don't plan any expensive vacations soon) but I did learn an interesting tidbit from Mark Hawkins, my colleague at William Raveis's mortgage banking division. According to Mark, a house's price must drop 10% to make up the difference of a 1% increase on a 30 year fixed rate. Interest rates are definitely going up, so waiting to commit on a house may end up costing, rather than saving you money.
On the other hand, do you have enough cash to buy a new house? The days of 20% (or, better yet, 10%) down are gone, at least for mortgages exceeding $2,000,000, which, in Greenwich, is a lot of the market. $2M mortgages require 30% down and it only gets worse from there. Greenwich real estate has performed no worse than the Dow (down about 14%) but certainly no better. Which will fare worse in the next year? Your guess is as good (probably better) than mine, but my guess says, as Wall Street goes, so goes the Greenwich market. Ya pays your money, ya take your chances. If you need a house now, though, and you've got some stocks you want to dump or a large pile of cash doing nothing, you can probably take advantage of a seller who is as nervous as you.
Monday, July 14, 2008
Richmond Hill Drive
This street, way off in Greenwich's northwestern corner by John Street, saw a spurt of building projects a few years ago. I can't tell what happened to a couple of the most expensive of them - they were deleted from our listings. Did they eventually sell privately? Only their agent knows.
56 Richmond sold in February,2008 for $4.2 million, but it was originally listed at $5.695 million in January 2007. Ouch. Similarly, 95 Richmond, listed May 2007 at $8.895, sold this past April for $7.450. Ouch again.
Of the six active listings, 71 Richmond failed to sell in 2003 for $4.050 and was returned to the market today for $3.795. There's no mention of any changes to this house except that it's now four years older, so I assume that the sellers hope that their desired price has caught up with the market. I suspect that 2003 prices were stronger than today's, and if it didn't sell at $4.0 then ... we'll see.
25 Richmond, a building lot, seems to be priced fairly at $2.095 but it's been on the market for the past year so what seems fair to me is obviously wrong. Keep cutting.
34 Richmond has been sitting, unsold, since November '06. The sellers have reduced the price from $6.975 to $6.450 but I don't think that's going to do the trick.
37 Richmond was bought in August 2003 for $3.6 million and is now back on the market asking $7.450. Again no mention of improvements, so this seems, er, aggressive.
This street, way off in Greenwich's northwestern corner by John Street, saw a spurt of building projects a few years ago. I can't tell what happened to a couple of the most expensive of them - they were deleted from our listings. Did they eventually sell privately? Only their agent knows.
56 Richmond sold in February,2008 for $4.2 million, but it was originally listed at $5.695 million in January 2007. Ouch. Similarly, 95 Richmond, listed May 2007 at $8.895, sold this past April for $7.450. Ouch again.
Of the six active listings, 71 Richmond failed to sell in 2003 for $4.050 and was returned to the market today for $3.795. There's no mention of any changes to this house except that it's now four years older, so I assume that the sellers hope that their desired price has caught up with the market. I suspect that 2003 prices were stronger than today's, and if it didn't sell at $4.0 then ... we'll see.
25 Richmond, a building lot, seems to be priced fairly at $2.095 but it's been on the market for the past year so what seems fair to me is obviously wrong. Keep cutting.
34 Richmond has been sitting, unsold, since November '06. The sellers have reduced the price from $6.975 to $6.450 but I don't think that's going to do the trick.
37 Richmond was bought in August 2003 for $3.6 million and is now back on the market asking $7.450. Again no mention of improvements, so this seems, er, aggressive.
The Mortgage Mess
Yesterday saw the Feds promise to bail out Fannie Mae and her siblings with you and me footing the bill. No surprise here - the Wall Street Journal has been predicting exactly this outcome for at least a decade - indeed, as the result of very bad political policies, this outcome was inevitable. But I don't see an alternative, now that Fannie is the only entity providing liquidity to the home lending market; while it (she, he, whatever) holds or guarantees 1/2 of existing mortgage loans, its share of new loans has soared to 70% - no one else wants to participate in the market. It took twenty years to dig this hole; let's hope it doesn't take twenty more years to climb out. I'm posting this before Wall Street has had a day to digest the news but I'm curious to see what its reaction will be to today's Fannie Mae auction of $3 billion in bonds. Hold onto your hats, and here we go.
Yesterday saw the Feds promise to bail out Fannie Mae and her siblings with you and me footing the bill. No surprise here - the Wall Street Journal has been predicting exactly this outcome for at least a decade - indeed, as the result of very bad political policies, this outcome was inevitable. But I don't see an alternative, now that Fannie is the only entity providing liquidity to the home lending market; while it (she, he, whatever) holds or guarantees 1/2 of existing mortgage loans, its share of new loans has soared to 70% - no one else wants to participate in the market. It took twenty years to dig this hole; let's hope it doesn't take twenty more years to climb out. I'm posting this before Wall Street has had a day to digest the news but I'm curious to see what its reaction will be to today's Fannie Mae auction of $3 billion in bonds. Hold onto your hats, and here we go.
Saturday, July 12, 2008
Mega Mansions begin their decline?
The New York Times reports (and a large ad in yesterday's Greenwich Time announced) that a huge (the Times claims 26,000 sq. ft but that may not include the basement or, as such things are called at this price range, the "lower level) mansion on Taconic Road is on the auction block for $19,000,000, a sharp reduction from its original asking price of $31,000,000. I believe I wrote about this place when it came on a year ago. If memory serves, I thought it was too big for practical living and certainly that's what its owners think now. I once wondered in print what would become of these monstrosities when tastes changed and an older reader from the Back Country relied, "the joke in my peer group is that there will be no shortage of nursing homes when we need them".
There are still buyers for these things, of course, but fewer of them and I would think that even a multi-millionaire might question the wisdom of heating 20,000 sq.ft. with $5.00 per gallon fuel oil. Judge Judy is completing an enormous house for herself on lower Round Hill Road but aside from that (and it's rumored that she's paid $1,000,000 per episode, 50 weeks a year) I'm not seeing a lot of activity. Another article in the Times today focuses on the trouble investment bankers are having getting past co-op boards in Manhattan. It seems that the boards, like the bankers themselves, are just discovering that humongous annual bonuses don't necessarily appear every year. Plus, lenders no longer will count the bonuses as income and are demanding much larger down payments, so buying power is down. Jesus weeps, but if the bonus babies disappear, our Greenwich market will suffer alongside NYC. I think we're in for an interesting year.
The New York Times reports (and a large ad in yesterday's Greenwich Time announced) that a huge (the Times claims 26,000 sq. ft but that may not include the basement or, as such things are called at this price range, the "lower level) mansion on Taconic Road is on the auction block for $19,000,000, a sharp reduction from its original asking price of $31,000,000. I believe I wrote about this place when it came on a year ago. If memory serves, I thought it was too big for practical living and certainly that's what its owners think now. I once wondered in print what would become of these monstrosities when tastes changed and an older reader from the Back Country relied, "the joke in my peer group is that there will be no shortage of nursing homes when we need them".
There are still buyers for these things, of course, but fewer of them and I would think that even a multi-millionaire might question the wisdom of heating 20,000 sq.ft. with $5.00 per gallon fuel oil. Judge Judy is completing an enormous house for herself on lower Round Hill Road but aside from that (and it's rumored that she's paid $1,000,000 per episode, 50 weeks a year) I'm not seeing a lot of activity. Another article in the Times today focuses on the trouble investment bankers are having getting past co-op boards in Manhattan. It seems that the boards, like the bankers themselves, are just discovering that humongous annual bonuses don't necessarily appear every year. Plus, lenders no longer will count the bonuses as income and are demanding much larger down payments, so buying power is down. Jesus weeps, but if the bonus babies disappear, our Greenwich market will suffer alongside NYC. I think we're in for an interesting year.
Who Knew?
A reader has corrected my spelling of "just deserts" which, contrary to what I thought I knew, has nothing to do with a sweet tooth and therefore deserves just one s, and not two. Check the link below for a full explanation of this phrase's origins and correct spelling. Learn something new every day.
A reader has corrected my spelling of "just deserts" which, contrary to what I thought I knew, has nothing to do with a sweet tooth and therefore deserves just one s, and not two. Check the link below for a full explanation of this phrase's origins and correct spelling. Learn something new every day.
Friday, July 11, 2008
Death Watch
I've been keeping an eye on a listing on Ridgebrook Road (near Greenwich Academy) which came on in April for the surprising price of $6,950,000. Surprising because, while it's a nicely renovated house in a close-to-town location, it didn't seem - to me - to compare favorably with other houses in that price range. I'll give the sellers this much: realizing their mistake, they've sent the place plunging through the price strata and today it dropped again, to $3,995,000. Is that its final resting place? I bet not, but I'll report back.
I've been keeping an eye on a listing on Ridgebrook Road (near Greenwich Academy) which came on in April for the surprising price of $6,950,000. Surprising because, while it's a nicely renovated house in a close-to-town location, it didn't seem - to me - to compare favorably with other houses in that price range. I'll give the sellers this much: realizing their mistake, they've sent the place plunging through the price strata and today it dropped again, to $3,995,000. Is that its final resting place? I bet not, but I'll report back.
No wonder hedge funds are in trouble - the managers are stupid!
Reuters reports (see link, below) that hedge fund managers are donating huge amounts of money to Obama's campaign. The "news" service claims that this is a break from the past but I want to research that a bit - its my memory that the Street's gone Democratic for years. But if the managers of this failing and flailing industry are really supporting a candidate who promises to tax the hell out of the middle class, impose a disastrous national health plan on the country, curtail fossil fuel production and walk away from the Middle East, it's hardly surprising that they're also making dumb bets on complicated things like CDOs. Just desserts, says I - remind me to wipe a tear next time another one of them goes belly up.
UPDATE: desserts (which one eats) have two "s's", sandy spots just one. I plead guilty on the other error, now corrected.
Reuters reports (see link, below) that hedge fund managers are donating huge amounts of money to Obama's campaign. The "news" service claims that this is a break from the past but I want to research that a bit - its my memory that the Street's gone Democratic for years. But if the managers of this failing and flailing industry are really supporting a candidate who promises to tax the hell out of the middle class, impose a disastrous national health plan on the country, curtail fossil fuel production and walk away from the Middle East, it's hardly surprising that they're also making dumb bets on complicated things like CDOs. Just desserts, says I - remind me to wipe a tear next time another one of them goes belly up.
UPDATE: desserts (which one eats) have two "s's", sandy spots just one. I plead guilty on the other error, now corrected.
Boys just wanna have fun
The wiffleball controversy continues and, while yesterday I expressed a certain ambivalence while judging the rights of homeowners to enjoy peace and quiet (as though that exists in crowded Riverside), I was dismayed to read in today's Greenwich Time that the Boy's Club has offered to step up to the plate and organize a wiffleball tournament in some other, more suitable location. Yeah, that's what we need, yet another program structured and run by adults. God forbid we let kids figure out what they want to do on their own.
Meanwhile, I see that the town has just finished erecting a cyclone fence on the corner of the Post Road and Carey Road in Riverside, thus effectively blocking (for now) access to the rope swing over the Mianus. For years (certainly dating back to my childhood in the 60's and probably long before that) local kids would hang a rope off a big tree on the bank of the river, close to the dam, and everyone in town under 18 would find their way there to swing into the river, scramble atop the dam and, in general, cool off and have fun. The cops would show up occasionally to cut down the swing and chase us off the roof of the pump house on the other side of the river (great jumping spot) but a replacement would be found, always.
Now they've gone and fenced off the path to the swing. I'm sure resourceful kids don't need my help but I may just drop off a huge pair of bolt (and fence) cutters that remain from my own misspent youth.
The wiffleball controversy continues and, while yesterday I expressed a certain ambivalence while judging the rights of homeowners to enjoy peace and quiet (as though that exists in crowded Riverside), I was dismayed to read in today's Greenwich Time that the Boy's Club has offered to step up to the plate and organize a wiffleball tournament in some other, more suitable location. Yeah, that's what we need, yet another program structured and run by adults. God forbid we let kids figure out what they want to do on their own.
Meanwhile, I see that the town has just finished erecting a cyclone fence on the corner of the Post Road and Carey Road in Riverside, thus effectively blocking (for now) access to the rope swing over the Mianus. For years (certainly dating back to my childhood in the 60's and probably long before that) local kids would hang a rope off a big tree on the bank of the river, close to the dam, and everyone in town under 18 would find their way there to swing into the river, scramble atop the dam and, in general, cool off and have fun. The cops would show up occasionally to cut down the swing and chase us off the roof of the pump house on the other side of the river (great jumping spot) but a replacement would be found, always.
Now they've gone and fenced off the path to the swing. I'm sure resourceful kids don't need my help but I may just drop off a huge pair of bolt (and fence) cutters that remain from my own misspent youth.
Thursday, July 10, 2008
Barbarians on the field!
Our little town has achieved front page status in the New York Times (check link - I think it's working) via an article by my friend, Peter Applebaum. Peter wrote a fair and balanced story covering the issue but I tend to side with our town's chief of police who is quoted in the Greenwich Time this morning as disapproving the kids' argument that it's a choice between whiffleball and heroin. Reminds of that idiotic ad campaign in the 60's (or maybe early 70's) showing an unattended car with its key in the ignition and the tag line, "don't help a good boy go bad". I was very much not good boy during that period, but even I could appreciate that good boys wouldn't be tempted to do evil by the sight of an easily-boosted car.
I sympathize with both sides here. The kids were bored, and Greenwich is truly boring for kids of that age, so they did something about it in an enterprising way. The neighbors want peace and quiet, however, and that's being ruined by the noisy games. It will take a wiser man than I to decide this one fairly - in the meantime, the neighbors could pray for rain.
UPDATE
One commentator below expressed disappointment that I don't side more strongly take the kids' side - I was focusing more on the dumb threat one of the kids made that, if they weren't allowed wiffleball they'd just turn to drugs, but the merits of the case itself probably fall in favor of the kids. Heck, we had a pretty-much non-stop baseball game going on in my backyard in Riverside long ago, with an ever-changing lineup as local kids showed up, played a few innings and went on to other things (drugs and alcohol? I think we were too young) and were replaced by the next player. I'm sure our games made a lot of noise but somehow the adult neighbors survived and amazingly (this was 40 years ago, in another era) never complained. For that matter, and again to demonstrate how different is the world we live in today, we had at least two broken arms from bat-body collissions, another couple of broken arms from kids falling out of the big tree in the outfield, and not one of the parents brought suit. Imagine that.
Our little town has achieved front page status in the New York Times (check link - I think it's working) via an article by my friend, Peter Applebaum. Peter wrote a fair and balanced story covering the issue but I tend to side with our town's chief of police who is quoted in the Greenwich Time this morning as disapproving the kids' argument that it's a choice between whiffleball and heroin. Reminds of that idiotic ad campaign in the 60's (or maybe early 70's) showing an unattended car with its key in the ignition and the tag line, "don't help a good boy go bad". I was very much not good boy during that period, but even I could appreciate that good boys wouldn't be tempted to do evil by the sight of an easily-boosted car.
I sympathize with both sides here. The kids were bored, and Greenwich is truly boring for kids of that age, so they did something about it in an enterprising way. The neighbors want peace and quiet, however, and that's being ruined by the noisy games. It will take a wiser man than I to decide this one fairly - in the meantime, the neighbors could pray for rain.
UPDATE
One commentator below expressed disappointment that I don't side more strongly take the kids' side - I was focusing more on the dumb threat one of the kids made that, if they weren't allowed wiffleball they'd just turn to drugs, but the merits of the case itself probably fall in favor of the kids. Heck, we had a pretty-much non-stop baseball game going on in my backyard in Riverside long ago, with an ever-changing lineup as local kids showed up, played a few innings and went on to other things (drugs and alcohol? I think we were too young) and were replaced by the next player. I'm sure our games made a lot of noise but somehow the adult neighbors survived and amazingly (this was 40 years ago, in another era) never complained. For that matter, and again to demonstrate how different is the world we live in today, we had at least two broken arms from bat-body collissions, another couple of broken arms from kids falling out of the big tree in the outfield, and not one of the parents brought suit. Imagine that.
Apples to Apples?
It's often difficult to calculate price increases in the market because so many older houses are bought at one price, completely renovated and then placed back on the market. If they sell for a higher price, how much can be attributed to shiny new kitchen appliances, master baths and granite counters versus the general upswing of the market itself? So it's nice to find an untouched house and see what's going on. One such example is 228 Stanwich Road, an older house in need of renovation that sold for $1,700,000 (from an original asking price of $2,125,000) on August 30,2007. The new owners did nothing to it and changed their mind about holding on to it so today it was returned to the market at $1,895,000. Has the property really increased $200,000 in value? I personally doubt it, but I'll watch what happens and let you know.
196 Bible Street sold on June 14,2007, for $4,050,000 and after being re listed in November for $4,555,000, untouched, was dropped today to $3,850,000. There's an owner who has some grasp of current market conditions, I think.
Then there's 23 West End Avenue, new construction right next to the Old Greenwich sewage pumping station. The seller originally asked $1,895,000 and the house sat unsold, despite its description as "abutting town land" (might have worked for noseless, blind buyers). It remains unsold, three years later and today was listed for $1,649,000. The builder owner is getting there, but now he's selling a three-year-old house. Tough to get new construction pricing under that circumstance.
It's often difficult to calculate price increases in the market because so many older houses are bought at one price, completely renovated and then placed back on the market. If they sell for a higher price, how much can be attributed to shiny new kitchen appliances, master baths and granite counters versus the general upswing of the market itself? So it's nice to find an untouched house and see what's going on. One such example is 228 Stanwich Road, an older house in need of renovation that sold for $1,700,000 (from an original asking price of $2,125,000) on August 30,2007. The new owners did nothing to it and changed their mind about holding on to it so today it was returned to the market at $1,895,000. Has the property really increased $200,000 in value? I personally doubt it, but I'll watch what happens and let you know.
196 Bible Street sold on June 14,2007, for $4,050,000 and after being re listed in November for $4,555,000, untouched, was dropped today to $3,850,000. There's an owner who has some grasp of current market conditions, I think.
Then there's 23 West End Avenue, new construction right next to the Old Greenwich sewage pumping station. The seller originally asked $1,895,000 and the house sat unsold, despite its description as "abutting town land" (might have worked for noseless, blind buyers). It remains unsold, three years later and today was listed for $1,649,000. The builder owner is getting there, but now he's selling a three-year-old house. Tough to get new construction pricing under that circumstance.
Mortgages in Greenwich?
A reader expresses surprise that we have such things - "I thought everyone paid in cash?" Hardly. First, if the median price for a house in town is around $2,000,000, that leaves plenty of houses for sale in the $450,000 - $2,000,000 range to be purchased by folks who, if they lived in Zimbabwe, might be considered wildly rich but here in Greenwich are probably just struggling to get buy. No college scholarships for most of these people, but lots of taxes and more on their way - someone has to pay for Obama's largess. Second, even wealthy people don't like sticking a huge sum of cash into a relatively illiquid "investment". I know many instances where buyers of multi-million dollar mansions took out 80% mortgages. either because their stock holdings were restricted or they just didn't want to part with their cash. I've got a call in to a couple of my mortgage broker friends but I'd bet at least 80% of all house sales in town involve a mortgage, even though the current tax law disallows any interest deduction after the first million (at least, I think that's still the law - not being in quite that category myself, I haven't checked recently).
A reader expresses surprise that we have such things - "I thought everyone paid in cash?" Hardly. First, if the median price for a house in town is around $2,000,000, that leaves plenty of houses for sale in the $450,000 - $2,000,000 range to be purchased by folks who, if they lived in Zimbabwe, might be considered wildly rich but here in Greenwich are probably just struggling to get buy. No college scholarships for most of these people, but lots of taxes and more on their way - someone has to pay for Obama's largess. Second, even wealthy people don't like sticking a huge sum of cash into a relatively illiquid "investment". I know many instances where buyers of multi-million dollar mansions took out 80% mortgages. either because their stock holdings were restricted or they just didn't want to part with their cash. I've got a call in to a couple of my mortgage broker friends but I'd bet at least 80% of all house sales in town involve a mortgage, even though the current tax law disallows any interest deduction after the first million (at least, I think that's still the law - not being in quite that category myself, I haven't checked recently).
Wednesday, July 09, 2008
Here's a price reduction for you
45 Baldwin Farms South was brought to market in January for $9,750,000. Very nice house but an inadequate yard, in my opinion, for that price range, and stuck on a flag lot (long narrow driveway that runs forever before finally reaching the lot itself). Today it was reduced 30% to $6,995,000, or nearly $3,000,000. Not necessarily a sign that the market is collapsing, because, as I said, I never liked its original price, but that's a heck of a whack. For you price per square foot fans, it's a drop from $1,000 a foot to $715. I still wouldn't call it a bargain, but its builder is obviously eager to sell.
45 Baldwin Farms South was brought to market in January for $9,750,000. Very nice house but an inadequate yard, in my opinion, for that price range, and stuck on a flag lot (long narrow driveway that runs forever before finally reaching the lot itself). Today it was reduced 30% to $6,995,000, or nearly $3,000,000. Not necessarily a sign that the market is collapsing, because, as I said, I never liked its original price, but that's a heck of a whack. For you price per square foot fans, it's a drop from $1,000 a foot to $715. I still wouldn't call it a bargain, but its builder is obviously eager to sell.
Market Timing
One reader points out that, if prices are likely to continue falling for the next year or two so it's better to sell now, than then. Another asks the entirely sensible question, so is this not the time to buy? The best answer I can give is, "who the hell knows?". If you want to sell your existing house and buy another, you might as well do it now. If you don't have a house to sell, waiting a year could yield some financial benefits. But people go broke trying to time their Wall Street investments and you could hurt yourself trying the same thing in real estate. What I've always suggested to my clients is that they look at a house as a place to raise a family and find shelter from the storm. If you want or need a new house and find one you like go ahead and buy it now. Prices have dropped and most (many, anyway) sellers are realistically flexible. If you don't need a new house right now, you might want to wait to see what happens over the next year. One caveat: the home lending market seems to be falling apart and, a year from now, you might find it much harder to obtain a mortgage.
One reader points out that, if prices are likely to continue falling for the next year or two so it's better to sell now, than then. Another asks the entirely sensible question, so is this not the time to buy? The best answer I can give is, "who the hell knows?". If you want to sell your existing house and buy another, you might as well do it now. If you don't have a house to sell, waiting a year could yield some financial benefits. But people go broke trying to time their Wall Street investments and you could hurt yourself trying the same thing in real estate. What I've always suggested to my clients is that they look at a house as a place to raise a family and find shelter from the storm. If you want or need a new house and find one you like go ahead and buy it now. Prices have dropped and most (many, anyway) sellers are realistically flexible. If you don't need a new house right now, you might want to wait to see what happens over the next year. One caveat: the home lending market seems to be falling apart and, a year from now, you might find it much harder to obtain a mortgage.
Tuesday, July 08, 2008
Daily Rant
I heard a perfectly rational-sounding fellow on Connecticut NPR yesterday discussing all the wonderful new energy sources that will power our state and, by extension (pun intended) our country. Wind, solar, electric cars, you name it, it will all be along soon to keep us warm and scurrying about. In the meantime, of course, there must be no new production of energy sources from "old" technology, such as coal, oil or natural gas. I look forward to the day when we can tell our Arab friends to pound sand but experts like the one on NPR never address one basic question: how is all this great stuff going to be delivered to our state and who will tolerate (and pay for) the necessary infrastructure?
Connecticut has fought, and defeated,mostly, every effort to bring more energy here. We don't want gas pipelines running across our fields or Long Island Sound; no new transmission lines, anywhere, no liquid gas barges six miles out and, of course, no nukes! So okay: somewhere in Texas, they're planning a million acre plus solar energy installation. Good for Texas, but that leaves us in the dark. Plug-in electrical cars would be wonderful, but where is the electricity to charge them?
In South Africa, gold mines are shut down, bakeries are closed, schools are operating in the dark because of periodic, daily blackouts that come and go at unpredictable times. The country's leader admits that there have been warnings of exactly this happening for the past 11 years, but the country found other uses for its limited funds. Now those funds are even more limited, because gold mining was a huge source of income.
The folks in charge of predicting the Washington D.C. - Baltimore region's energy needs - not mouthpieces for the energy industry but honest-to-God citizens - said last week that in less than 3 years the region can expect the same sort of blackouts now afflicting South Africa because no one will even begin to consider a permitting process to bring in more electricity from the west. We're not talking about the actual location of such transmission lines-that's whole'nother fight - just the concept itself-a beginning of a discussion. I can only hope that Washington goes dark and its politicians go home but the howling from down there will certainly reach us here in Connecticut, especially because our own TVs and radios will have shut down,I-95 will be traffic free, and we'll all be living in blissful buccolic quiet.
Go have a talk with a Green and ask them how they propose to power the country. They'll tell you of the wonder of wind farms, ignoring the fact that the wind don't always blow and Teddy Kennedy and his ilk won't let them be located anywhere nearby. They like the idea of hydrogen cells and ignore the sad fact that to make hydrogen you'll need some form of energy, perhaps from those non-existant wind farms. They're happy to tell you what they don't want: no more oil drilling, either offshore or onshore, no Canadian oil from the oil sands and again, no coal, no nukes, no gas - it only encourages Big Oil and encourages them to keep up their evil ways. Biofuel is turning into an embarrassing mess (as predicted in this column repeatedly over the years)but something is bound to turn up, just in time - wait and see (I actually heard a caller complain yesterday that Detroit has sat on a super-secret engine that yields 120 mpg for 30 years, just to force Detroit's customers to pay more for gas. That same rumor has been around all of my life and, according to my mother, at least since 1930, so I guess it must be true). Greens believe in pixie dust and fairy magic and what's scary is that they seem to be prevailing. I don't much care that 53%of Americans believe that the US government attacked the World Trade Center on 9/11 and a larger percentage think Elvis is alive but when that same horde shuts down our economy's engines, there will be hell to pay and we're all going to be forced to make that payment.
I heard a perfectly rational-sounding fellow on Connecticut NPR yesterday discussing all the wonderful new energy sources that will power our state and, by extension (pun intended) our country. Wind, solar, electric cars, you name it, it will all be along soon to keep us warm and scurrying about. In the meantime, of course, there must be no new production of energy sources from "old" technology, such as coal, oil or natural gas. I look forward to the day when we can tell our Arab friends to pound sand but experts like the one on NPR never address one basic question: how is all this great stuff going to be delivered to our state and who will tolerate (and pay for) the necessary infrastructure?
Connecticut has fought, and defeated,mostly, every effort to bring more energy here. We don't want gas pipelines running across our fields or Long Island Sound; no new transmission lines, anywhere, no liquid gas barges six miles out and, of course, no nukes! So okay: somewhere in Texas, they're planning a million acre plus solar energy installation. Good for Texas, but that leaves us in the dark. Plug-in electrical cars would be wonderful, but where is the electricity to charge them?
In South Africa, gold mines are shut down, bakeries are closed, schools are operating in the dark because of periodic, daily blackouts that come and go at unpredictable times. The country's leader admits that there have been warnings of exactly this happening for the past 11 years, but the country found other uses for its limited funds. Now those funds are even more limited, because gold mining was a huge source of income.
The folks in charge of predicting the Washington D.C. - Baltimore region's energy needs - not mouthpieces for the energy industry but honest-to-God citizens - said last week that in less than 3 years the region can expect the same sort of blackouts now afflicting South Africa because no one will even begin to consider a permitting process to bring in more electricity from the west. We're not talking about the actual location of such transmission lines-that's whole'nother fight - just the concept itself-a beginning of a discussion. I can only hope that Washington goes dark and its politicians go home but the howling from down there will certainly reach us here in Connecticut, especially because our own TVs and radios will have shut down,I-95 will be traffic free, and we'll all be living in blissful buccolic quiet.
Go have a talk with a Green and ask them how they propose to power the country. They'll tell you of the wonder of wind farms, ignoring the fact that the wind don't always blow and Teddy Kennedy and his ilk won't let them be located anywhere nearby. They like the idea of hydrogen cells and ignore the sad fact that to make hydrogen you'll need some form of energy, perhaps from those non-existant wind farms. They're happy to tell you what they don't want: no more oil drilling, either offshore or onshore, no Canadian oil from the oil sands and again, no coal, no nukes, no gas - it only encourages Big Oil and encourages them to keep up their evil ways. Biofuel is turning into an embarrassing mess (as predicted in this column repeatedly over the years)but something is bound to turn up, just in time - wait and see (I actually heard a caller complain yesterday that Detroit has sat on a super-secret engine that yields 120 mpg for 30 years, just to force Detroit's customers to pay more for gas. That same rumor has been around all of my life and, according to my mother, at least since 1930, so I guess it must be true). Greens believe in pixie dust and fairy magic and what's scary is that they seem to be prevailing. I don't much care that 53%of Americans believe that the US government attacked the World Trade Center on 9/11 and a larger percentage think Elvis is alive but when that same horde shuts down our economy's engines, there will be hell to pay and we're all going to be forced to make that payment.
More on pricing per square foot
A reader asks (see comments) "So land is not a variable in the square foot method? Where does it fit it, or is it added as a premium to the overall price?" Not quite, but when I'm using the method as a rough tool for measuring value, I just lump the land value into the total asking price and see what turns up. Again, though, you have to be sure you're comparing apples to apples. For instance, a building lot in Havemeyer that would support a 4,000 sq.ft. house might sell for $750,000 (sad news for Havemeyer residents who a few years ago might have expected as much as $900-$950K, but that's what's happening). A similar lot in Riverside, south of the Post Road on a decent street might sell for $1,350,000. That's a land cost of $187.50 per sq. ft. for the former, $337.50 psf for the latter. Assuming (dreaming, perhaps) that you could sell that Havemeyer new construction for $2,000,000, total cost for a 4,000 sq.ft. house would be $500 per sq. ft., including the land value and a $2,750,000 house of the same size in Riverside (ignoring the fact that buyers of new construction in Riverside prefer 5,000 sq.ft. and up) would cost $687 per sq.ft. for what I am assuming is the identically-constructed and finished house. So land value does play a role, but if you're comparing two new houses in Havemeyer or two new houses in Riverside, you can (sort of) ignore the land value.
But builders don't.I've seen houses in Havemeyer priced at $950,000 being pitched as ideal building sites. The math won't work for a builder. Figure $200 per square foot construction costs and $100,000 soft costs - interest, lawyers fees even, God bless them, real estate commissions - that's $900,000. Add $950,000 in land cost and the builder's up to $1,850,000 before he even tries to sell his project for that hypothetical $2,000,000. Consider the likelihood that he'll have to sell for less than he's asking in this market, and he's risking a huge sum for a small gain. So, not surprisingly, land values are dropping. Not to nothing,but dropping all the same. My advice for now is, if you aren't in a rush to sell, postpone.
A reader asks (see comments) "So land is not a variable in the square foot method? Where does it fit it, or is it added as a premium to the overall price?" Not quite, but when I'm using the method as a rough tool for measuring value, I just lump the land value into the total asking price and see what turns up. Again, though, you have to be sure you're comparing apples to apples. For instance, a building lot in Havemeyer that would support a 4,000 sq.ft. house might sell for $750,000 (sad news for Havemeyer residents who a few years ago might have expected as much as $900-$950K, but that's what's happening). A similar lot in Riverside, south of the Post Road on a decent street might sell for $1,350,000. That's a land cost of $187.50 per sq. ft. for the former, $337.50 psf for the latter. Assuming (dreaming, perhaps) that you could sell that Havemeyer new construction for $2,000,000, total cost for a 4,000 sq.ft. house would be $500 per sq. ft., including the land value and a $2,750,000 house of the same size in Riverside (ignoring the fact that buyers of new construction in Riverside prefer 5,000 sq.ft. and up) would cost $687 per sq.ft. for what I am assuming is the identically-constructed and finished house. So land value does play a role, but if you're comparing two new houses in Havemeyer or two new houses in Riverside, you can (sort of) ignore the land value.
But builders don't.I've seen houses in Havemeyer priced at $950,000 being pitched as ideal building sites. The math won't work for a builder. Figure $200 per square foot construction costs and $100,000 soft costs - interest, lawyers fees even, God bless them, real estate commissions - that's $900,000. Add $950,000 in land cost and the builder's up to $1,850,000 before he even tries to sell his project for that hypothetical $2,000,000. Consider the likelihood that he'll have to sell for less than he's asking in this market, and he's risking a huge sum for a small gain. So, not surprisingly, land values are dropping. Not to nothing,but dropping all the same. My advice for now is, if you aren't in a rush to sell, postpone.
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