New Construction in Greenwich

It’s Growing

by Mark Pruner

If you think there is a lot of new construction in Greenwich you are right. In areas like central Greenwich, Old Greenwich and Riverside it seems there is house under construction on every block. At the present time we have 52 houses on the market that have been constructed in 2014 or later. In that same 2.5-year period we have sold 69 new houses and have 7 presently under contract.

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New Construction post 1/1/14 – Green Active, Blue Sold, Yellow Under Contract

Now 127 new homes may sound like a lot, but in the same 2.5 years we have sold 1,668 single family homes so the new construction market represents only 7.6% of our sales. These are spec homes built by contractors rather than teardowns bought by individuals who then built a new home in most cases. (You do get the occasionally privately built home back on the market in a year or two if the individual is transferred or getting a divorce.)

These spec homes are also at the upper end of the market. Of the 75 sales and contracts of new homes the median price was $$3.3 million while the median for all home sales has been around $1.8. A quarter of the new construction sold for $5M or more with the highest priced spec home being 2 Wooddale Road which sold for $11,750,000 in April of 2014.

The highest priced currently listed new construction is 11 Round Hill Club Road which is listed at $17.95M and has been on for 265 days at the same price. The average sales price per square foot over the last 2.5 years has been $662/s.f. compared to $595/s.f. for sales so far in 2016.

New construction gets a premium and most builders push for as much premium that they can. As a result, even though there is a huge demand for new construction, the average new construction listing sits on the market for 193 days compared to 177 days for all sales in 2016.

Now part of this is that many builders list the property early in the construction process, sometimes even before ground has been broken. Houses are hard to sell when they are just big open spaces with plywood floors and a lattice work of 2×4’s. For most builders though holding out for that premium is worthwhile since the average sale price to original list price ratio is 92.7%, nearly identical to the 92.3% for all house sales in 2016.

During the Great Recession spec building nearly dried up. We only had 5 new houses sold in 2010 as builders found it nearly impossible to get bank financing. Only a few well financed and larger developers were able to start projects then. In 2014 we tripled 2010 sales with 16 sales of new houses. This doubled in 2015 to 32 sales. So far in 2016 we have had 20 new house sales and have 52 active listings.

One thing the Town of Greenwich should work on is encouraging more lower-priced, new construction. For me that would be construction under $1.5M. Of the 75 sales and contract over the last 2.5 years only 2 of them were sold for less than $1.5M. What we are getting is smaller houses being torn down and replaced by larger more expensive homes and that is changing the character of Greenwich. It also means that with less price diversity, the town is less resilient to market problems as housing becomes more homogenous.

It’s hard to find incentives for developers to build smaller and make less money. One thing that might work is a fast track for lower sales prices. Right now builders are reluctant to buy smaller properties, particularly where there are wetlands or zoning issues. I had a listing like that in Pemberwick and developers would look, but they wouldn’t buy even though there was an excellent profit potential if you didn’t count the cost of the regulatory process and didn’t discount for the uncertainty of the result.

Our expensive, time-consuming and uncertain outcomes regulatory process leads builders away from smaller projects so we end up with more larger houses and ever older housing stocks in the smaller zones. A fast track with greater certainty and lower costs just might get more of this housing built to protect the character of Greenwich.

June/First Half 2016 Greenwich Real Estate Report

By Mark Pruner

Douglas Elliman – Greenwich

mark.pruner@elliman.com – 203-969-7900

 

First Half 2016 Trends –  By far the biggest trend in 2016 has been a huge increase in single family homes on the market. As of July 1st we had 697 single family homes on the market or 105 more listings than at the same time last year. We actually peaked at 711 listings in the third week in June and then had an amazing 25 listings expire on June 30th to get us back under 700 listings (net of new listings coming on).

Sales are also down by 31 houses in the first half of 2016 compared to the first half of 2015. We had 296 sales last year and so far this year we’ve had 265. On the good news side contracts are up 16 units from last year. Uncertainty delays closings. This year it was Brexit in previous years it was a U.S. Government shut down. When you add contracts and sales together we are down only 15 house transaction. We went from 404 transactions in 2015 to 389 transactions in 2016.

Sales slowing at the high-end are not just a Greenwich problem. Slower high-end sales are problems throughout Connecticut, the NYC region and nationwide. At the same time record low interest rates are keeping the market humming along as monthly payments continue to drop. With flight capital pouring into US government bonds and pushing their interest rates down this trend may continue for a while.

Greenwich Inventory, Sales, Contracts and Months of Supply

As of 7/1/16 Inventory Contracts Last Mo. Solds Tot. Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 8 2 1 3 9 11 5.3 5.5 8.0
$600-$800K 28 8 4 12 21 29 8.0 7.2 7.0
$800K-$1M 28 5 10 15 24 29 7.0 7.2 2.8
$1-$1.5M 81 19 16 35 56 75 8.7 8.1 5.1
$1.5-$2M 78 30 15 45 48 78 9.8 7.5 5.2
$2-$3M 127 28 11 39 49 77 15.6 12.4 11.5
$3-$4M 97 17 5 22 26 43 22.4 16.9 19.4
$4-$5M 69 3 5 8 14 17 29.6 30.4 13.8
$5-6.5M 70 8 3 11 8 16 52.5 32.8 23.3
$6.5-$10M 66 4 3 7 7 11 56.6 45.0 22.0
> $10M 45 0 1 1 3 3 90.0 112.5 45.0
                   
TOTAL 697 124 74 198 265 389 15.8 13.4 9.4

The Good News for Sellers –  For years we have been supply constrained under $1,000,000. All the inventory coming on the market has made sales from $600,000 to $1,000,000 a bright spot for sellers with year-to-date sales up 12 sales to 45 sales so far. We have 56 houses in inventory for people to choose from. The brightest area is from $800K to $1M where our inventory is being absorbed faster than last year. Months of supply in this price range is down 2 months to a good 7 months of supply, but what is really impressive is if you take the 10 sales in June and annualize them we only have 2.8 months of supply.

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Contracts are up this year over last year with most of the increase focused in the price range from $1.5 – $4M. We are up 18 contracts in those price ranges. This is excellent since the contracts for the total market are up only 16 contracts as we are down in contracts between $4 and $5M.

Another bright spot is the ultra-high end where we are down 10 listings over $10M or a total of only 45 listings. We have 3 sales on the GMLS over $10M this year; the same as last year. The result of the lower inventory and the same sales is a big drop in months of supply, however, we still have a lot of good houses in this price range to choose from.

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The Good News for Buyers – Buyers have choices at just about every price range and in every part of town. I was just working with a developer who was looking for houses for gut renovations that are in good school districts and under $1M. We had 17 choices and we wouldn’t have had that last year. Between $1 and $1.5 million we have 40 more listings this year than last year.

Our months of supply for the overall market is up to 15.8 months compared to 12.0 months last year. Buyers are seeing more of a buyer’s market across a broad price range from $2M all the way up to $10M.

June 2016 vs. June 2015 Inventory Contracts Mo. Solds Tot. Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Mo. Annlzd
< $600K 4 1 1 2 -3 -2 3.33 3.15 #DIV/0!
$600-$800K 9 0 -2 -2 7 7 -0.14 0.76 3.83
$800K-$1M -1 0 3 3 5 5 -2.16 -1.82 -1.34
$1-$1.5M 40 2 -7 -5 -8 -6 4.83 4.30 3.28
$1.5-$2M 4 4 -6 -2 -9 -5 1.96 0.81 1.68
$2-$3M 10 9 -5 4 -6 3 2.79 0.51 4.23
$3-$4M -2 5 -10 -5 -6 -1 3.82 0.04 12.80
$4-$5M 19 -4 -3 -7 -3 -7 11.92 14.82 7.55
$5-7.5M -10 -3 -4 -7 -12 -15 28.50 13.46 11.90
$6.5/7.5-$10M 42 3 3 6 4 7 8.57 0.00 #DIV/0!
> $10M -10 -1 1 0 0 -1 -20.00 9.37 #DIV/0!
0 0 0 0 0 0 0.00 0.00 0.00
TOTAL 105 16 -29 -13 -31 -15 3.78 2.45 3.67
Pro-Buyer Pro-Seller

 Summary – While you run across the occasional chicken little this is not 2009. Sales are happening at all price levels. Of our 295 sales this year, 66, or almost a quarter of sales, went to contract in less than a month.

We also had 56 house go for list price or over list. These list-price-plus sales often happened right after the listing came on the market, but a bunch of the 56 listings had been on for as long as 56 days. What this usually means is that weeks after a listing two or more buyers found the property at the same time and bid the price up. So even if your price range has lots of inventory dawdling is rarely a good buying strategy as other buyers are out there.

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