The High End Market in Greenwich – A Historical Analysis

by Mark Pruner and Cesar Rabellino

In 2017 and YTD in 2018 the high-end market in Greenwich has recovered amazing well. Last year we had 65 sales over $5 million compared to 36 sales in 2016. That increase of 80% is remarkable and the trend has continued in the first few weeks of 2018. The turn around from 2016 is truly remarkable, but the year-over-year comparisons are somewhat misleading since 2016 sales were really poor.

In 2016 we had our worst sales over $5 million in many years. Even at our low point of 2009 and 2010 we had 43 sales over $5 million. So in the depth of the great recession, we had more high-end sales than we had in 2016, which results in 2017 looking really good.

Looked at from a post-recession viewpoint 2017 was still a good year. We had 65 sales over $5 million compared to 71 sales in 2014 and 70 sales in 2012. What was particularly impressive was that we had sales volume of $506 million in our over $5 million market. This compares to $296 million in the horrible year of 2016 and $411 million the year before that in 2015. The 2017 volume is about the same as we had in 2012 when we had $511 million of high-end sales. Now 2014 was even better, but only because Copper Beach Farm sold that year for $120 million. Take that sale out and 2017 was nearly a tie with our best post-recession sales year.

Pre-recession and post-recession are clearly two different worlds. Our high-end sales peaked in 2007 with an amazing 113 sales over $5 million for a total volume of $836 million or $330 million dollars more than last year.

In hindsight though, that year was not a good year for Greenwich real estate. It was followed by a major crash in the real estate market as the financial markets tanked. Ever since pundits have been comparing our high-end market to that peak bubble market and talking about how badly we are down from period that made little sense at the time and is not something to be emulated. That however is little comfort to those 113 people who bought a high end home in 2007.

In fact in some ways, 2017 is a little worrisome in that we set a new record for dollars/sq.ft for our sales over $10 million at $1,781/sq.ft. This price is in excess of the prices per square foot that we saw in the bubble year of 2007 when the price per square foot was only $1,461/sq.ft. Fortunately, this kind of analysis is somewhat silly in that last year we are basing the price/sq.ft. for sales over $10 million on 8 sales compared to 21 sales over $10 million dollars in 2007. Also 5 of those 8 sales were over $19 million while in 2007 only 1 sale was over $19 million. Exceptional high-priced properties lead to exceptionally high prices per square foot.

The other thing that exceptionally high-priced sales are derived from is even more exceptionally high-priced list prices. In fact, the higher the list price, the lower will be the percentage of the sale price to the original list price. High-end properties are unique and at the very top end the list price can be very aspirational.

Post-recession we have had 413 houses sold that listed for more than $5 million. Of those 413 sales 104 or about a quarter have sold for less than 80 percent of their original list price. When you look at the market over $10 million, the story appears to be about the same with 27% of the house sales being for less than 20% of the original list price. At the high-end house take longer to sell and they always have. In the hot market of 2007, it still took an average 6 months to sell a house over $5 million.

Now the idea that people are losing their shirts on these sales is not true if you look at the purchase price compared to the sales price. Of the high-end houses sold last year the average house was held for 10 years and sold for $1.2 million more than it was purchased for. This obviously doesn’t include the cost of additions, but a few houses selling well below there purchase price does not actually make a trend.

What we do see is these houses go on and off the market. It is very difficult to determine is the total days on market, because if you take a listing off the GMLS for over 90 days the days on market resets to zero. My co-author Cesar Raballino looked at the history for all 65 houses that sold for over $5 million last year and found that the average house had been listed twice and some had been listed 9 times since they were originally purchased. When you compared the initial list price of that first listing to the sales price the ratio is 76%. This compares to 86% if you only look at the sales price to original list price of the listing that finally sold.

The bottomline is that even for the very high-end if you price a high-end house closer to market value it is likely to seller sooner and for closer to list price just like a condo in downtown will. The good news is there hasn’t been any great deterioration in the ratio of sales price to list price. The higher price the greater the sales discount. You also see a greater sales discount in a weaker market like 2009 and 2016, but that was not the case in 2017. There most of the lower discount can be attributed to the higher sales prices where there is naturally a bigger discount.

 

The other thing we see is that days on market goes up in both in a poor market and in a strengthening market. In a poor market sales take looker. In a strengthening market, houses that have been sitting for months and years finally sell and bring the average up. Looking only at days on market can be deceptive if you don’t also look at how the number of sales is trending.

So where does the high-end market stand. Sales are up dramatically over a bad 2016 and the supply is down. From $5 – 10 million we are at the post-recession normal of about 2 years of supply and a sales price to list price ratio of 87%. Our dollars per square foot is strengthening and overall we have a positive market.

Over $10 million, is a separate market and to just lump it in as part of the high-end market misses a lot of the nuances. Over $10 million we had 8 sales down from 15 sales as recently as 2014, however, 5 of those 8 sales were over $19 million dollars. This is double any prior year. Here also our inventory is down and this has led to a dramatic drop in months of supply. This market is hard to predict, because even in a good years its only a dozen or so sales. If we get some folks relocating from Westchester  County and few folks moving money out of the stock market, 2018 could be a very good year for the very high-end.

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