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.
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.