By Mark Pruner
Douglas Elliman – Greenwich
firstname.lastname@example.org – 203-969-7900
In Greenwich the average list price for a single family home is $4.5 million dollar and even the median home price is a pricey $3.4 million. These multi-million homes sit on beautiful multiple acre lots with rolling lawns, pools, tennis courts and often views of Long Island Sound. This is the image that much of the U.S. outside of Greenwich has of our residential market. But, there is another Greenwich where houses sell for under $1 million and even under $500,000, these houses are mostly located in the R-6 and R-7 zones of Greenwich.
The R-6 and the R-7 zones actually have the same minimum lot size, 7,500 s.f. with the principal difference being that R-6 zone allows for multi-family. So if you want a single family home in a single family zone the place to look is the R-7 zone and if you want Eastern Middle School and the associated elementary schools then you are looking at the four R-7 zones on the east side of town on both sides of the Post Road.
The shape of these zones make little logical sense without a lot of history and are even hard to see in jumble of different zone types so here is a map of where houses in this zone have sold since our last tax reevaluation on 10/1/10.
In the map the blue squares are properties that have sold since 10/1/10 when our last revaluation was done. The green squares are actives and the yellow squares are non-contingent contracts. The three Old Greenwich R-7 zones are (1) Havemeyer Park (aka “have a baby park”) which is just north of the Post Road and west of the Stamford town line, (2) an area south of the Post Road and west of Laddins Rock and (3) an area just north of the OG railroad station. The other R-7 zone is in Riverside just north of the Post Road from the Mianus River over to Old Greenwich. (BTW: Ignore the blue area and its borders, it’s simply a search artifact needed to exclude listings where the agent miscoded a listing as being in the R=7 zone).
The overall area is not big, but it is a highly popular area particularly with young families looking to move into Greenwich, DINKs (Dual Income No Kids) and also some downsizers looking to escape Westchester County’s high taxes. Investors also like this area for the nice rental returns and, as we shall see, appreciation. These investors include not only deep pocketed locals, but also homeowners that have retired down south and are holding on to their old homes for the income, appreciation and portfolio diversification just like the more common image of the “investor”.
Lastly this area is popular with spec builders as anything new sells quickly. It would be more popular with builders were it not for the FAR limitation. The FAR in the R-7 zone is 0.35 and the minimal conforming lot is 7,500 sf meaning that largest house allowed on a conforming lot is 2,625 s.f. Most lots however are not 7,500 as you might see in a new cookie cutter development. This area is one of the oldest settled parts of town and many lots predate zoning and are under 0.172 acres. As a result, houses on these lots have even smaller size limits.
When you throw in setbacks, height limitations, wetlands, green area requirements, building envelopes and non-rectangular lot shapes what can be built can be much less than 2,600 s.f. From a builder’s viewpoint, whether for a homeowner buyer or for a spec built house this zone does not offer the high profit return that the larger zones do.
While these undersized and difficult to develop lots may be bad news for a home builder it can be very good news for the buyer on a budget. From 2011 to 2015 the lowest priced home for the year varied from $$325,000 to $455,000. So far in 2016 our lowest sale has been $550,000 and lowest active listing price is $670,000.
As mentioned, many of the lots in the OG/RV R-7 precede zoning and a bunch are larger than .17 acres especially in Havemeyer Park. On a half-acre lot in the R-7 zone you can build a 7,600 sf house so the top prices in the R-7 zone have been over $2,000,000. Last year a house sold for $2,400,000 in the OG/RV R-7 zone. This year we have a sale for $1,855,000 and a listing for $2,890,000. These higher prices are supported not only by more square footage, but all attractive features of the area; near to shopping and transportation, smaller/lower maintenance cost properties, a sense of community, excellent schools and all the public utilities.
From 2011 to 2015 the average sales price in the OG/RV R-7 zone has gone up from $843,744 to $1,112,623. This is an increase of 32% in four years or about 7% per year when you take in to account compounding. This is a nice return when you consider that the inflation rate for the CPI has been around 1% for the last three years.
In that same period of time the average house size in this zone has gone from 1,988 sf to 2,297 sf or an increase of about 15% so part of the increase may be due to larger houses from new construction and additions, but average house size in this zone jumps around depending on the houses that are sold each year. For example, so far this year the average house based on the 14 sales in the OG/RV R-7 zone is only 1,980 s.f. or essentially no change from 2011. (Anytime a figures goes up one year and down the next it is usually not a significant factor and clearly shows little of the “trend”.)
|2011||40||$ 2,000,000||$325,000||$843,744||1.34||-6%||$ 409||91.0%||123||1,988|
|2012||47||$ 2,025,000||$450,000||$827,769||1.48||4%||$ 433||91.0%||125||1,969|
|2013||61||$ 2,375,000||$410,000||$965,465||1.57||10%||$ 443||93.9%||122||2,143|
|2014||41||$ 2,325,000||$450,000||$942,446||1.68||18%||$ 484||93.9%||72||1,994|
|2015||51||$ 2,400,000||$455,000||$1,112,623||1.81||27%||$ 498||93.6%||114||2,297|
|2016 Annlzd||34||$ 1,855,000||$550,000||$900,464||1.57||10%||$ 474||93.1%||108||1,980|
OG+Riv R-7 zone – Stats 2011-2016
To factor out some of the chatter from the changing annual mix of house sales you can look at the change in price per square foot in the area. There we have gone from $409/sf in 2011 to $498/sf in 2015 or an appreciation of 27% or a compounded 6.2% for that four-year period. This number has shown a steady trend upward.
An even better way to my mind is to compare the sales price to the Tax Assessor’s 2010 assessment value. This ratio doesn’t depend on the size of the house, acreage or what’s selling. The Tax Assessor’s assessment ratio is 70% of the FMV, so no change in value should show a ratio of 1.42 (1/70%). In 2011 this ratio actually went down to 1.34 or a 6% decline indicating this R-7 zone was either seeing falling prices or that it was slightly over-assessed in 2010 revaluation. After the initial 2011 assessment ratio decline that the ratio has steadily risen and now stands at 27% higher than the October 1, 2010 assessment date. This works out to a compounded 4.9% rate for that five-year period.
Bottom line prices in this area are up significantly in the last few years and well in excess of inflation. This may explain another slight anomaly which is that our sales have shrunk slightly in the OG/RV R-7 zone from a high of 61 sales in 2013 to 41 in 2014 before rebounding to 51 sales last year. Once again some of this is just standard variability, but some people may be holding on to their houses longer as this is one of the few solid investments around these days.
All of the numbers also show another issue which is an apparent slowdown in sales and appreciation so far in 2016. This seems to match the overall market as higher priced houses have been slower to sales and sales have been taking longer to close resulting in a buildup of contracts. The OG/RV R-7 zone is still hotter than the rest of the market. The sales to list price ratio is 93.1% versus 90.6% so sellers are getting closer to list price in this R-7 zone. Houses also sell faster 108 days versus an average of 164 days for the rest of the Greenwich market. The demand is there and sales are primarily controlled by limited supply.
What the rest of the year will be has yet to be seen, but given the demand for affordable housing in a friendly community with good schools this area will continue to do well.