I have an Accepted Offer, What Could Go Wrong?

 

by Mark Pruner

As a realtor, my primary job is to get the seller or buyer to an accepted offer and then send that to the attorneys for them to transform the terms of the offer into a contract that can be signed by both parties.

The whole thing starts with the buyer and seller negotiating back and forth to an accepted offer including inclusions and exclusions of personal property and fixtures attached to the property. The parties then send their attorneys the accepted offer. Back in the 90’s when I was a practicing real estate attorney, the attorneys generally drafted a contract at this point with an inspection contingency and a mortgage contingency, if the buyer was using bank financing. This quick contracting had the effect of transferring control of the deal to the buyer. The buyers could decide whether they wanted to exercise the inspection contingency and either walk away, ask for repairs or a price adjustment.

Now days, the seller’s attorney usually wait for the inspection results before drafting the contract. This keeps control with the seller, as the rule in Greenwich is that there is no deal until the contract is signed. As a result, sellers can accept offers from other buyers and if they do the first buyer may find themselves in a bidding war or just be out of luck. If the first buyer had already done their inspection, the polite thing for the seller is pay the first buyer the cost of the inspection, but the seller may or may not do that.

Let’s assume that another buyer doesn’t come in the picture and the buyer does an inspection to verify the house is in good shape. The inspector always finds a bunch of issues, but unless they significantly change the value proposition, the deal often goes forward “as is”. If there are major issues or if the buyer wants to get a better price, they can renegotiate the original deal.

Once the inspection issues are resolved, the seller’s attorney drafts the contract and sends it to the buyer’s attorney. The contract will almost always be the standard Fairfield County Bar Association contract which the attorneys revise from time to time as laws change. (Several year ago, I was on a contract revision committee and one of the great things about Greenwich real estate attorneys was that there really was an effort to be fair to both buyers and sellers, when considering the needed revision.)

Each seller’s real estate attorney has their own tweaks to the FCBA contract, but they are usually more in the way of clarifications or that cover unusual situations that firm encountered in the past. The seller’s attorney then sends the proposed contract incorporating the offer terms to the buyer’s attorney. The buyer’s attorney attaches a rider to the contract with various representations and other pro-buyer provisions. This is when the attorney’s negotiation really begin, but eventually the sales contract is negotiated to a final contract.

The buyers then sign the final contract and attach a downpayment check usually for 10% of the purchase prices. The sellers then sign the contract and there is a binding contract (which may have contingencies). The downpayment check is deposited into the seller’s attorney’s escrow account until closing. At this point any other buyers can only be a backup offer, as the buyer has a contractual right to buy the property.

The “binding” contract may have a mortgage or other contingency. Mortgage contingencies are usually 30 – 45 days while the buyer gets approved for a mortgage. Once approved the mortgage contingency is waived by the buyer. If the buyer is making good progress, but has not gotten final approval by the contingency date, the seller has the option to extend the contingency date, but if there is a higher backup offer, they may decide not to grant an extension of the mortgage contingency. Things can get pretty exciting for all parties when this is about to happen.

Between the contract signing and the closing, the seller is required to continue to maintain the property and fix any appliances that break. The seller has to deliver the premises “broom clean” and empty of all their personal property (i.e. anything movable). Ideally, the seller moves into to their new place in the week before closing, so the seller’s cleaning people have a day to clean the property, before the buyer’s final walk through.

All fixtures, such as chandeliers and wall sconces affixed to the real property stay unless the seller specifically excluded them in the contract. All personal property must be removed unless included in the contract.

Over my many decades as either a real estate attorney or real estate agent, the large majority of disputes at closing have been over inclusions and exclusions. The buyer does the final walkthrough and there is a hole in the dining room ceiling. At closing you hear, “The buyer should have known that the seller was going to take the dining room chandelier.” Alternatively, you hear buyers say, “The seller “should have known that they had to remove all those old paint cans and tiles”, since the buyer didn’t need them for touch-ups. It’s really important to cover each of these items that are exceptions to the rule that fixtures stay and personal property goes in the contract.

In the contract will be a closing date, when title passes to the buyer. At closing the seller’s attorney gives the buyer’s attorney the deed and the seller delivers all the keys, garage door openers, security codes, appliance manuals etc. Buyers are often surprised that the sellers are not at the closing, but the seller’s work is basically to sign the deed and a title affidavit and those are usually signed before and held in escrow by the seller’s attorney.

These days, and particularly, if it is an all-cash deal the buyer may not be at closing either. I always go to closing in case there are last minute issues. I have arrived at the appointed time at the seller’s attorney’s office only to find that the buyer’s attorney arrived 10 minutes early and everything is all done on an all cash deal.

Sometimes the seller will hold over after the closing with the buyer’s permission, because for example their new place isn’t ready yet. There will usually be a separate agreement if the seller holds over with provisions for payments, liability and damages. Conversely, sometimes the buyer will move in before closing and the title actually transfer to the buyer. Most attorneys prefer not to do these agreements as the situations create all sorts of legal difficulties should a problem arise.

At the closing, the buyer’s attorney gets the deed signed by the seller, the seller’s check for the Connecticut and town conveyance taxes, the conveyance tax form and a title affidavit saying that the seller hasn’t recently done and work on the property that would entitle the workmen to a mechanic’s lien on the property. The seller’s attorney gets a certified check for the balance of the purchase or the funds may be wired directly into her account.

Usually, the buyer’s attorney goes to the town clerk’s office from the closing table to verify that there are no new liens on the property and to record the deed and new mortgage if the buyers used bank financing. In the good old days, banks would send the seller’s mortgage release to the seller’s attorney to be held in escrow pending receipt of the money by the seller’s attorney. Now days, banks are a lot less trusting and won’t send out the release of the seller’s mortgage until they get the payoff money. So often the last thing that is done is the recording of the release of the sellers’ mortgage which can be weeks later.

The process can seem complicated, but each step is there for a reason and if you have two good attorneys that know the process in Greenwich, it can be relatively painless, but these days it usually isn’t. Having a good attorney can be a big help, when problems arise.

 

What’s Your Greenwich Home is Worth in 2019?

How Real Estate Prices are Changing in Greenwich – Over $5M and under $1M

The most common question I get asked by homeowners in Greenwich is, “How’s the market doing?” People are very curious as to what’s selling and not selling, but as you would expect people are even more interested in how their house is doing? Has it gone up or down in price recently? Until the Great Recession, the question was not up or down, but how much up prices had gone, because year after year prices went up in Greenwich and in most of the United States.

If you want to see what prices are doing from one year to next, the best way is by looking at multiple metrics. The average, and even the median, is significantly affected by the mix of what’s selling. You can easily see why this is so when you compare average and median sales prices for 2018 and  2019 year-to-date sales.

May-18 May-19 % change
SALES PRICE
Average Price  $  2,530,970  $  2,387,636 -5.7%
Median Price  $  1,837,500  $  1,950,000 6.1%

Our median sales price as of the end of May is up 6.1% compared to sales through May of 2018. That sounds pretty good, but when you look at the average sales price it is down 5.7%. So what is it; are price up or down? The answer to that question is “Yes, they are.” Both answers are mathematically correct. If you are a glad-handing broker you use the median, if you are some reporters at Bloomberg or the Wall Street Journal looking to bash Greenwich you use the average.

What is causing the difference in these two values is the drop in sales in the $600,000 to $1,000,000 range. Last year we had 41 sales in this price range. This year we had 21 sales. As a result, you have to go higher in price to get 50% median price and so the median price is up.

At the same time, we had fewer sales over $5 million. We went from 20 sales last year to 9 sales through the end of May this year. Because Greenwich has such a long tale of high-end sales the change of only a few sales at the top, either way, dramatically affects the average sales price. If high-end sales drop the average price drops much more dramatically, than if low end sales drop.  As a result, the change in the average and median sales prices may not be a good indicator of how the value of your house is doing since they are both driven by the mix of what is selling. Luckily, these aren’t the only metrics that we have. Let’s look at what two other metrics are saying about today’s Greenwich real estate market.

May-18 May-19 % change
SALES PRICE
Average Price  $  2,530,970  $  2,387,636 -5.7%
Median Price  $  1,837,500  $  1,950,000 6.1%
PRICE/SF
Average $/sf  $              575  $              544 -5.4%
Median $/sf  $              529  $              502 -5.0%
ASSESSMENT RATIO
Average SP/Assmt                 1.65 1.62 -1.4%
Median SP/Assmt                 1.52 1.47 -3.3%

One metric you can look at is price/square foot. This metric looks at the whole market and for 2019 is down around 5% for both the median and the average. You’d expect the median and the average to be closer together as the mix of what’s selling has less effect. That’s not say it has no effect as we are seeing fewer very large houses selling so year to year its not an apples to apples comparison.

The next metric, and the one I like, is the ratio of the sales price to the assessment. Every 5 years the Greenwich assessor revalues all of the properties at 70% of what her department thinks is fair market value. If a house sells for exactly it’s assessed value the sales price to assessed value ratio will 1.42, the reciprocal of 70%.

Once nice thing about the average and median assessment ratios is that it can tell you something about the new construction and renovation market. If the average assessment ratio is higher than the median it means more new construction is being done. Assessment go up the most when a new house replaces a tear down and even more so when a new house is built on vacant lot. Our average assessment ratio 1.62 while our median ratio 1.47, so we are still seeing a significant amount of new construction and major renovations being added to our housing stock.

When you compare the 2018 and 2019 assessment ratios, our average is down 1.4% and our median is down 3.3%. If you want just one number to look at, the median assessment ratio of 1.47 is probably the best indicator.

For 2019, our median assessment ration is 1.47 which is only 3% higher than the aforementioned 1.42 ratio which indicates no price change between sales price and assessment. The 2019 1.47 median assessment ratio is up 3% from our last revaluation on October 1, 2015. It, however, is down from 1.52 last year. The result of all this is yes prices are down this year and if you need just one number, they are down 3.3% this year compared to last year.

That one number doesn’t tell you the whole story about today’s market. You can also look at overall supply and demand using the numbers for sales, inventory, days on market, months of supply and the sales price to original list price ratio.

             2,018              2,019 % change
HOUSE SALES                  208                  165 -20.7%
INVENTORY                  687                  738 7.4%
DAYS ON MARKET                  180                  158 -12.2%
MONTHS OF SUPPLY                 16.7                    22.4 34.1%
SP/OLP RATIO
Average SP/OLP 90.2% 88.4% -1.9%
Median SP/OLP 91.0% 89.0% -2.2%

What you see when you do that is a 21% drop in sales year to year and a 7% rise in inventory. Our months of supply is up 34% to 22 months of supply and our median sales price to original list price has slipped 2% to 89%. On the good news side our days on market has gone down by 12% showing that houses priced to today’s market are selling faster than last year.

Overall, it’s a weak market with only the $2 – 3 million market doing better than last year and much of the increased sales in that price category are concentrated in Old Greenwich, Riverside and Cos Cob. Our sales were up on in May over prior months this year, but so far sales in June seem to be returning to a weaker 2019 pattern. Let’s hope June repeats what we saw in May with most sales for the month concentrated in the last 10 days of the month.

So what about your house, is the price up or down this year and how much? The odds are it’s down a little bit, but value and convenience are what is driving today’s buyer. Today’s buyers aren’t depending on prices going up while they own their home and are working very hard to get the best deal that they can on purchasing the home. They also want to do as little work as they can before moving in as often we have two very busy adults who don’t feel they have the time to take on a large construction project. This results in them missing out on one of the best ways to generate value and that is the fixer-upper.

I have a great example of that at 108 Pecksland; it’s a classic house that needs work to be adapted for today’s market. We recently reduced the price from $1.99 million to $1.65 million. At that price it is getting a lot of showing, but most buyers, particularly, the under 40 set, who have been the primary lookers are concerned about the amount of work needed to create today’s popular open floor plan, walk-in closets and very large master bath.

Most of the buyers are focusing on the cost and their time needed to get the house modernized. What they are missing is that in this case the cost is not an expense, but an investment. Replacing a roof or putting in a new hot water tank are expenses; they don’t add much value to a house but solving a house’s problems does. The costs in this case significantly increase the value of the house now and going forward. Making improvements that the market wants and is the quickest way to add value to a house. Working with a realtor that knows contractors, the market and ways to solve problems can make for a nice return on your investment even in today’s market.

New York Times and Hartford Courant quote Mark Pruner this week

New York Times logoThe New York Times has an excellent, and to their credit, a balanced article about backcountry Greenwich. Lisa Prevost wrote this excellent article entitled “Living in Backcountry Greenwich“ with Jane Beiles adding some beautiful pictures that do a good job of capturing the spirit of backcountry Greenwich.  I got quoted on how sales were this year and last year in backcountry. (They are even better since the story came out as you can see below.) My listing at 633 Round Hill Road is also featured with a photo by Jane. That listing has been getting a lot of attention. It’s in excellent shape, has a beautiful pool, waterfall and hot tub and at $1.69M is on for less than $300/s.f. about 60% of the average list price per square foot. We are seeing more activity in backcountry with sales up 69% from last year as it’s seen as the value place to buy.

Hartford CourantNeal Vigdor wrote an article for the Hartford Courant entitled “Mansion tax draws the ire of the wealthy, real estate industry”. The article is a political analysis of how the law got passed and the reaction in the real estate community, which as you might imagine is not good. I got quoted on the number of sales statewide and prepared a map that got used in the story showing that the sales are concentrated in the Gold Coast towns of Greenwich, Darien, New Canaan, Westport and also Fairfield. He also quotes me about the big spike in sales in June 2011 the month before the last conveyance tax increase on July 1, 2011. You can read more of my comments on the new conveyance tax in my May market report and see the 2011 sales spike in the graph that was featured in the print version of my Greenwich Sentinel column.

I’d also like to thank Neal Vigdor for his many years of covering Greenwich at the Greenwich Time and Connecticut politics for the Hartford Courant. He was a reporter you could trust to present the story fairly including lots of information in a concise writing style. He got a great offer to covering breaking news for the New York Times, who recognized his excellent reporting. Connecticut will miss his insightful reporting.

May 2019 Greenwich Real Estate Report – Sales are Up

A good average month and a new conveyance tax

by Mark Pruner

Many years ago, I took taekwondo classes. When we would spar, my instructor had a tactic where he would feint three quick kicks to my head and pull them back. Each time my arm would go up to block the kick and then come down to be ready for his next move. The fourth time the kick would start out looking just the same, and I again raised my arm to my head to block the kick, but this time he’d go for my now exposed ribs and connect every time. It didn’t matter how many times he did it I’d get kicked in the ribs every time because my instincts told me that fourth kick was also headed for my head.

This is kind of like the May market. We had three down months and the first two-thirds of May looked to be just the same and then sales picked up. We closed the month of May with 56 sales and 24 of those sales were in the last 10 days of the month. Those 56 sales were 2 more than last year and just one less than our 10-year average. So, all in all an average month, which looks pretty good after 3 down months.

6/1/2019 Inventory Contracts Last Mo. Solds Last Mo Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 5 4 1 5 6 10 4.2 3.3 5.0
$600-$800K 19 5 5 10 9 14 10.6 8.8 3.8
$800K-$1M 40 11 3 14 12 23 16.7 11.3 13.3
$1-$1.5M 74 17 11 28 33 50 11.2 9.6 6.7
$1.5-$2M 106 16 9 25 27 43 19.6 16.0 11.8
$2-$3M 165 24 16 40 42 66 19.6 16.3 10.3
$3-$4M 113 15 6 21 18 33 31.4 22.3 18.8
$4-$5M 74 6 4 10 9 15 41.1 32.1 18.5
$5-6.5M 54 4 1 5 3 7 90.0 50.1 54.0
$6.5-$10M 52 5 0 5 3 8 86.7 42.3
> $10M 36 1 0 1 3 4 60.0 58.5
TOTAL 738 108 56 164 165 273 22.4 17.6 13.2

The corollary of more closings is fewer contracts waiting to close. So, we are down 24 contracts from last year to 108 contracts this year, but I’ll take sales over contracts any day.

On the inventory side we are still up at record post-recession levels with 738 single family home listings, up 51 listings from last year. This extra inventory and slower sales from February to April means that for the whole market we are up 5.7 months of supply to 22.4 months compared to last year. This is high, but it’s lower than the 25.7 months of supply we had at the beginning of May.

Backcountry sales up

That the 5,000-foot view, but the situation is more nuanced as you get to treetop level. For the month of May, it’s the backcountry trees that are sticking up particularly high. Last year we only had 13 sales in backcountry at the end of May 2018 with 4 of those 13 backcountry sales in May. This year backcountry sales are up 70% with 22 sales and 10 of those sales were in May. (I have two listings in backcountry, and they are both getting a lot of activity.) Lisa Prevost at the New York Times also wrote an excellent article about “Living in Backcountry Greenwich“.

It’s not all rosy for backcountry as half of our inventory over $5 million is in backcountry. Townwide in that price range we had only one sale in the month of May out of 142 listings. June will be better as we have 10 contracts over $5 million waiting to close. The lack of sales in this price category is worrisome as so much of our total volume is in that section, but the legislature is working to increase sales there as you can read below.

Backcountry’s 22 sales do add up to $79 million in sales, second only to the mega-section, South of the Parkway, which has 40 sales totaling $106 million. In third place Old Greenwich has 30 sales, which total $75 million. Old Greenwich’s days on market is 150 days for sold properties versus 258 days for backcountry.

May sales up to average

When you look at the sales just in May it’s a mostly average month with two areas that stick out. One is the poor sales over $5 million, though inventory is lower there. The other is the jump in sale in the $2 – 3 million range where we are up 10 sales over last year 42 sales YTD. When you map these sales compared to last year, the 2019 increase in sales are mostly in the southeast in Old Greenwich, Riverside and Cos Cob.

This price segment also has the highest increase in inventory, up 18 listings from last year to 165 listings. This segment has the most inventory and the most sales and it equates to 19.6 months of supply, which is not great, but is still down from 21.0 months of supply last year and this includes our poor February to April sales. If you annualize the May $2 – 3 million sales, you come up with a pretty good 10.3 months of supply.

Our $1 – 2 million price range actually has more listings at 176, but this is traditionally broken down in to two segments above and below $1.5 million. It’s a good thing, because this year, as we often see, the $1.5 million price is a break point for demand changes. Below that price range we are looking at less than a year of supply, particularly when you add in contracts, which show where the market is going. Above that price range you have more than a year’s supply and above $4 million you are looking at more than 2 years supply.

The New Higher Connecticut Conveyance Tax

Our legislature is doing what they can to encourage sales above $2.5 million for the next thirteen months. They increased the conveyance tax for sales over $2.5 million by 1% to 2.25% starting on July 1, 2020. The last time the conveyance tax was raised was in July 2011. That month the conveyance tax was increased by only 0.25% all price ranges. The result was that, the prior month, June 2011, was our biggest sales month ever with 114 sales when we normally have 83 sales.

2011 Single family home sales in Greenwich showing sales spike in June 2011, the month before the Connecticut conveyance tax went up by 0.25%.

2011 Single family home sales in Greenwich showing sales spike in June 2011, the month before the Connecticut conveyance tax went up by 0.25%.

 

An unique, and possibly unconstitutional, feature of this new tax is that after 2023, the tax is refunded at the rate of one-third per year if you don’t move out of the state. You would need to stay for six years to get the full amount refunded. That kind of burden on interstate commerce will have a tough time getting past the U.S. Constitution’s commerce clause. (For more analysis of this tax increase check out Neal Vigdor’s article, “Mansion tax draws the ire of the wealthy, real estate industry” in the Hartford Courant.)

This tax is aimed squarely at the Gold Coast towns of Greenwich, Darien, New Canaan and Westport, and also Fairfield which has been quietly putting in a fair number of sales over $2 million to join the “golden” four. Of these towns, Greenwich has the majority of $2.5 million plus sales with 196 sales last year. In the rest of the state, there were less than two dozen sales over $2.5 million in 2018.

2018 Connecticut sales over $2.5 million showing concentration of sales in Fairfield County Gold Coast

This tax won’t raise a lot of money in the just passed $43 billion budget. Last year we had 196 sales that sold for $2.5 million or higher. These sales totaled $870 million, when you subtract the $2.5 million base and apply the additional 1 percent you get an additional $3.87 million of conveyance tax from Greenwich.

2018 Sales over $2.5 million showing sales in Greenwich, Darien, New Canaan, Westport and Fairfield. Data is from the SmartMLS and only shows about half of the over $2.5 million sales in Greenwich which are shown on the Greenwich MLS.

So why would the legislature pass a tax that will only raise a tiny fraction of a percent of the $43 billion needed for the budget? It all goes back to Hartford tradeoffs. Senator Looney and others wanted to raise the capital gains tax, the top income tax bracket and other changes that would impact lots of Greenwich residents every year and not just when they sold their house. This would have had much more impact on the housing market, so given the choice between a higher conveyance tax and higher income and capital gains tax, I’ll take the conveyance tax. What I can tell you is that June 2020 will be a really good month for high end sales.

April 2019 Neighborhood Report

and, a little bit of May info

by Mark Pruner

                May Update

This week we are going to look at how each neighborhood in Greenwich is doing, but first let’s see how the market is doing so far in May. On the inventory side we are seeing an increase in inventory with 731 single family home listings. This is up 6.4% from last year’s 687 listings on June 2, 2018, the closest 2018 date I have data for. Our inventory is also up 38 listings from the end of last month.

On the sales and contracts side, we continue to be slower than last year. So far in May we have had 36 sales compared to 53 sales last year and our 10-year average of May sales is 57 houses. Let’s hope we finish with a spurt of sales in the rest of May. Unfortunately, this isn’t likely to happen as we have 110 contracts, which is up 9 contracts from the beginning of the month, but down from the 132 contracts we had at the end of May 2018.

The accumulation of slower sales each month starting in February does have a cumulative effect. Through May 21 we have 145 sales. As of June 2nd last year we had 206. If we add in 10 more sales for the remainder of May we will be at 155 which would be down 51 sales or 25% from last year’s sales.

April 2019 Greenwich Neighborhoods Report

So where are the sales differences by neighborhood for the months we have completed so far. First the good news, Old Greenwich seems to be humming along. We are up 4 sales over last year with 23 sales for a total value of $58 million and an average of 160 days on market. Usually, Old Greenwich and Riverside track pretty closely, for much of the post-recession years, Old Greenwich, particularly south of the village was the hottest area, then the last couple of years Riverside’s numbers have been a little better, but not this year.

Section

Inventory Sum of List Prices  DOM Number sold Mos of Supply Sum of Sold Prices DOM
Byram 12 $34,425,400    250 3      16.0 $1,789,000      77
Pemberwick 6 $5,582,000    163 0  –
Glenville 26 $45,167,000    196 5      20.8 $4,681,000    264
North Mianus 5 $7,437,999    114 2      10.0 $1,655,000      53
North Parkway 109 $554,608,882    387 11      39.6 $50,037,350    211
South Parkway 240 $1,040,994,821    269 28      34.3 $78,595,038    305
So. of Post Rd 69 $413,459,000    177 14      19.7 $39,087,600    294
Old Greenwich 86 $221,475,500    173 23      15.0 $58,061,160    160
Cos Cob 53 $84,635,999    158 11      19.3 $16,124,850    211
Riverside 83 $246,944,090    189 11      30.2 $22,687,822    186
Grand Total 693 $2,660,963,691    243 108      25.7 $272,718,820    228

Inventory in Riverside is up a little from 78 listings last year to 83 listings this year. At the same time sales are down from 24 sales YTD in 2018 to 11 sales this year. The result is that we were looking at 30 months of supply in Riverside, a surprising number for what has been our hottest market the last couple of years.

This is where the law of small numbers kicks in, which says if you have a small number of data items, it doesn’t take many more data points to make your calculations take a big jump. So if you are a Riverside resident who gets this article emailed to him by an Old Greenwich resident enjoying a little schadenfreude at your expense, you can reply that Riverside has had 8 more sales so far in May and the month isn’t over yet, while Old Greenwich has only had 5 sales so far in May.

Besides Riverside, most of our increase in inventory so far this year is in the central area of Greenwich. South of the Parkway is up 29 listings to 240 houses. Just south of that, South of the Post Road is up 15 listings to 69 listings. Sandwiched between those two areas and Riverside, Cos Cob is up 11 listings to 53 sales.

Section Min of Sold Price Max of Sold Price Average of Sold Price Average of List Price/SF Average of Sold Price/SF Average of SP/ASMT Average of SP/OLP
Byram $535,000 $699,000 $596,333 $409 $408 2.053 98.67%
Pemberwick
Glenville $750,000 $1,180,000 $936,200 $446 $397 1.392 80.80%
North Mianus $580,000 $1,075,000 $827,500 $381 $379 1.390 100.00%
North Parkway $1,345,350 $14,875,000 $4,548,850 $676 $634 1.435 88.18%
South Parkway $550,000 $6,850,000 $2,806,966 $551 $519 1.567 86.21%
So. of Post Rd $550,000 $9,400,000 $2,791,971 $740 $704 2.081 90.64%
Old Greenwich $830,000 $11,000,000 $2,524,398 $658 $615 1.585 89.30%
Cos Cob $790,000 $3,400,000 $1,465,895 $453 $416 1.597 84.36%
Riverside $900,000 $3,900,000 $2,062,529 $566 $549 1.745 89.45%
Grand Total $535,000 $14,875,000 $2,525,174 $590 $555 1.640 88.14%

Folks in backcountry have actually seen listings drop this year as they have 109 listings down 4 from last year. To make things even a little better for us folks north of the Parkway, we have 11 sales compared to 10 last year. Part of this is that our listings over $6.5 million, half of which are in backcountry, are actually a little down from last year. The result of this is that backcountry is looking at 39.6 months of supply, still the most in Greenwich, south of the parkway is second at 34.3 month, and Riverside, which traditionally has one of our lowest months of supply,  comes in at third at 30.2 months of supply.

Purely anecdotally, I had two open houses in backcountry last week with 10 groups at one and 7 at the other, while I only had two groups at an open house I did in Riverside. I’m not worried about Riverside, but it’s an interesting turn around from last year for the moment.

Overall, we are also seeing a drop in the sales price/square foot in most areas, which you would expect to see with somewhat more inventory and reduced sales. Our sales price to original list price ratio is also down with Glenville and Cos Cob seeing the biggest drop in this indicator of supply and demand.

These market changes have now been going on for three months, it is not just a curious blip, it’s a matter for concern as it is affecting most areas of the town and most price points. This is at a time where the economy, the stock market and employment are doing well. Some of this change is probably due to the change in the SALT tax deductible at the federal level. However, the SALT deduction benefitted us last year as our sales were up as New Yorkers with high property taxes elected to relocate to Greenwich.

Sales are slow in Westchester, but why are sales slow in Greenwich? This seems to be a Connecticut problem and it needs to be solved by our legislators in Hartford, doing so would strengthen our housing market and would be good for everyone.

 

 

APRIL 2019 GREENWICH MARKET REPORT – $40M Sale Second Highest Ever

by Mark Pruner

This month is time for some slanted reporting, but it’s only fair to balance some of the Greenwich bashing reporting. In April,  we had 34 sales that totaled $102,340,772. Based on a population of 62,000 people this works out to be amazing $1,650 sales for every man, woman and child in Greenwich in just one month.

4/30/19 Inventory Contracts Last Mo. Solds Last Mo Solds+ Contracts  YTD Solds  YTD+ Contracts Mos Supply Mos w/ Contracts Last Mo. Annlzd
< $600K 7 1 2 3 5 6 5.6 6.4 3.5
$600-$800K 14 5 0 5 4 9 14.0 8.6
$800K-$1M 33 8 1 9 9 17 14.7 10.7 33.0
$1-$1.5M 68 15 3 18 22 37 12.4 10.1 22.7
$1.5-$2M 102 19 8 27 18 37 22.7 15.2 12.8
$2-$3M 148 32 11 43 25 57 23.7 14.3 13.5
$3-$4M 104 13 3 16 12 25 34.7 22.9 34.7
$4-$5M 74 3 3 6 5 8 59.2 50.9 24.7
$5-6.5M 59 2 0 2 2 4 118.0 81.1
$6.5-$10M 52 3 2 5 3 6 69.3 47.7 26.0
> $10M 32 0 1 1 3 3 42.7 58.7 32.0
                   
TOTAL 693 101 34 135 108 209 25.7 18.2 20.4

Our average sales price in April was $3,010,023. This is up a huge 25.6% from our average sales price for all of 2018 which was $2,396,448. In 2018 median price, the price where half of the sales were above and half were below, was an enviable $1,765,000. In April of 2019, our median sales price was up even more to $2,302,000. This is a 30.4% increase in the median sales price in only 4 months.

We also had three sales over $5 million in April. The highest sales price was 33 John Street selling for $14,875,000. This property was purchased in July of 2010 for $2,875,00. The sales price represents a 517% increase in the value of the property in less than 9 years of ownership.

It also shows that value of the land purchased was only 19% of the ultimate sales price, much less than the rule of thumb of land price being a third of the sales price for new development; thus, illustrating the amazing bargains to be had in backcountry land purchases.

Of the other two sales, 24 Windrose Way sold for $9,400,000 in a private sale, a clear sign of a hot market where property are being sold even before they can be listed. The other sale over $5 million was 35 Winding Lane, which sold for $6,850,000 after being bought for $6,000,000 less than 3 years ago or an increase of 14.2% in only 35 months.

Our 34 sales in April are up 36%  from the 25 sales that we had in March of this year. May sales are expected to continue to climb as we have over 100 contracts waiting to close. The market segment from $2 – 3 million dollars is doing particularly well with 25 sales so far this year with 11 of those sales being just in April an increase of 3 sales from April 2018. In addition, we have an amazing 32 contracts pending in that price range up 10 contracts from last year.

Looking back at 2019 so far in the ultra-high end, over $10 million, we have the same sales as last year, but one sale this year wasn’t reported on the GMLS. In February 110 Field Point Circle sold for $48 million also in a private sale. Were this reported on the GMLS it would be the second highest sale ever. The $48 million sale of Victor Borge’s old estate, is even more impressive, when you realize the purchase price was $17.5 million in 2009 in the heart of the Great Recession. Buying when everyone else is selling and waiting can be an excellent strategy. Taking a great property and making it even better also can lead to excellent returns. This is one of the premier properties in the U.S. and the buyer agreed.

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So that’s the slanted version and everything I wrote above is accurate, but it actually makes me a little queasy to write it, because it’s not a fair representation of today’s market.

For the whole market, April was better than March, but still not that good. (April is almost always better than March as we get into the heart of the spring sales market.) Our inventory was up 61 units or 10% to 693 single family home listings at the end of the month and is now 707 listings.

Our sales YTD are 108 or down 29% from last year. On the getting better side contracts are 101 contracts which is down only 13% compared to being down 37% at the end of March.

Our years of supply is still high at 26 months, which is up 10 months from the end of April 2018. When you factor in the contracts outstanding, we are 18.2 months of supply, still higher than last year, but by only 5.7 months.

As to changes in the average and median prices, we are seeing a greater drop in sales from $600,000 to $2 million. So, when sales are down below our average price the average goes up and sometimes, as in April, both the average and median go up a lot. Unfortunately, the sales above $3 million are also down just not as much as in the higher price ranges. The one exception to this is the $6.5 – 10 million price range where we had 2 sales in April compared to none in April 2018. For the year, however we have 3 sales in this high-end category, the same as last year.

Overall, it’s a buyer’s market, but things are headed in the right direction, at least for the month of April, I just wish they’d get there a lot faster.

The Devolution of News and the Bashing of Greenwich

My column in this week’s Greenwich Sentinel was about the media’s need to sensationalize bad news about the Greenwich real estate market and the selective fact selection the authors use to support their premise. You can read the article below with links to the Wall Street Journal and ZeroHedge articles mentioned. The Sentinel posted it on their website here. They also wrote an excellent editorial on what I called day-glo journalism and the history of yellow journalism

If you want to hear what is really going on in the Greenwich real estate market, Carolyn Anderson, Paul Pugliese and I are talking about the north Greenwich market at the Round Hill Association annual meeting on Wednesday May 1st starting at 6:30 for the reception and probably around 7:00 for the presentation.

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[Article as it appeared in the Greenwich Sentinel plus links]

The Devolution of News and the Bashing of Greenwich

Last week the Wall Street Journal ran a story entitled: Wealthy Greenwich Home Sellers Give In to Market Realities. It had a lot of inflammatory comments and “facts” all woven together to leave the impression, as one financial website dubbed their paraphrase of the article, that The Greenwich Housing Market Is Imploding.

Let’s take a look at exactly how yellow journalism’s modern incantation, what I call “day-glo” journalism, works. 

The idea behind day-glo journalism is to take an overstated idea (such as, in the case of the WSJ article: a single real estate auction is an indication of the “never-ending slump” in Greenwich real estate) and create a story from it that will get a lot of clicks and shares and re-tweets, which are the new standards for a career advancing  article.

Day-glo journalism hijacks this story right from the opening sentence: “After four years on the market, and three price cuts, a stately Colonial-style home on Greenwich, Conn.’s tony Round Hill Road is being sold in a way that was once unthinkable in one of the country’s most affluent communities: It is getting auctioned off.”

To day-glo the news in an article you need to normalize the extreme, so it begins by making four years seem like the norm. Four years on the market is a long time; it’s 1,460 days. Nowhere in the article does it indicate that this number of days on market would mean it was the 8th longest house listing on the GMLS out of 669 listings. Our median days on market is only 172. 

Next, the article says auctions were once unthinkable in one of the country’s most affluent suburbs, but that idea is not attributed to anyone. What has happened in Greenwich is that a number of companies have tried to get into the business of auctioning houses, but in general, these auctions have not resulted in money in the owner’s pockets and there have only been a handful of them attempted. 

It is not that they are unthinkable but rather that they are simply ineffective. To my way of thinking, we don’t see more auctions here because they don’t work well in Greenwich, since bidders don’t tend to show up. We did have one “successful” auction where a house listed for $7.25 million sold for $4.48 million, but that hasn’t encouraged many sellers to try auctions.

In day-glo journalism unsubstantiated statements are taken as fact, such as this one, “Many wealthy New Yorkers are opting to live in the city, rather than in the suburbs.” Really? How many is “many” and from what source are they getting this information? How do they know that? The simple answer is they don’t know. 

In a clever sleight of hand, the article throws in: “The seemingly never-ending slump is leading some sellers to accept less—sometimes a lot less. Owners who paid top dollar for their homes in the Fairfield County town in the mid- to late-2000s are routinely selling for less than they paid.”

There was a bubble that peaked around 2007, but to refer what has happened since as a “never-ending slump” is simply inaccurate. Many houses on the waterfront and in other areas are actually up in value, particularly those bought in 2009, but that sort of distinction would slow the narrative and ruin the day-glo. Also, our sales were up in 2018 over 2017, but that is also not mentioned in the story. 

In day-glo journalism, many inconvenient numbers that don’t support the more salacious narrative of a “never-ending slump” won’t appear in the article. This happens in part because most reporters in today’s 24-hour news cycle and shrinking print circulation are under immense pressure to get the story and move on to the next story. When I have called reporters about articles (although I have not had a chance to talk to the reporter of this particular story), they often say they weren’t aware of the other numbers. Once I called a Vanity Fair writer who had grossly overstated the unsold inventory in Greenwich and her defense was that the “gist” of the story was correct. Unfortunately, the advent of high-pressure “online journalism” allows for just about anything to be posted and for contradictory information (information that doesn’t support the narrative) to just get ignored.

Another favorite ploy is reporting statistical changes without context. For example, “The median price for a home in Greenwich dropped by 16.7% last year to $1.5 million in the fourth quarter of 2018, according to a recent report by brokerage Douglas Elliman.” 

While this statistic is mathematically correct, these changes in the median price are often used to demonstrate that all houses in Greenwich dropped in value, and that’s not accurate. A more thorough investigation of the numbers shows clearly that the change in the median price was due to 1) a big jump in sales of lower priced home sales combined with 2) a small decline in higher priced home sales. Sales of homes from $800,000 to $1,000,000 jumped 60% while sales from $5 – 10 million saw a small decline. Therefore, higher sales below the median price and lower sales above the median caused the median to decrease, but not because there was a general drop in Greenwich house values. 

But why Greenwich? You don’t see Darien or New Canaan getting this kind of attention. Greenwich is well known and articles about Greenwich get lots of clicks. Several years ago, I put up a blog post about a drop in high-end sales, which got picked up by the WSJ real estate blog, then by a Bloomberg reporter and then by Bloomberg TV. The Bloomberg reporter told me that the print story was the number two story world-wide on the Bloomberg terminals that month. The only other story that got more attention, according to her, was a story about a Berlin hedge fund that gave their top people a weekend at a German brothel (where prostitution is legal).

I was told this over a very nice lunch at L’Escale, paid for by Bloomberg. The reporter said her editor would welcome more stories about Greenwich. The negative stories got attention, while the good news stories were mostly concentrated on who were the purchasers and sellers of $10M+ houses in Greenwich. 

People just can’t seem to get enough stories about wealthy people getting their comeuppance. Writers who want to move up in this world of blogs and instantly measured click-throughs have a much easier job of it if they write a negative article, keep the narrative simple, and are willing to ignore contradictory facts. 

When a major publication does this, lots of folks want to jump on the bandwagon. Other bloggers will paraphrase the story and often amplify the negative aspects of the article. This is what happened on the popular ZeroHedge website, where the post about the Wall Street Journal article was made even more negative and was retitled, The Greenwich Housing Market Is Imploding As Prices Tumble As Much As 25%. 

The title, while dramatic, comes from a relatively common situation when selling very high-end houses, which are often listed at 25% more than their final sales price. High-end houses are unique, hard to price, and often come with the high-end owner’s overconfidence. As a result, the original list price is frequently much higher than the sales price. Reporters and bloggers love to talk about the huge discounts that sellers must take to sell their houses, as if this is a sign of major market weakness. While having to take big reductions in price ranges under $5 million is a sign of market weakness, it’s not so much in the high-end market where the sales price (SP) to original list price (OLP) ratio will always be lower. In 2018, our overall SP/OLP percentage was 92%, but over $10 million it was 81.5% and over $15 million the two houses sold at 56% of the original list price. Is this a sign of market weakness or simply owners who select brokers willing to list a house at the highest initial price, regardless of whether the price comports with today’s market?

The short answer is, you really can’t tell.  But we do know that reporters love to quote this price drop as a major sign of high-end market weakness. The other thing that happens with these follow-on articles is their narrative is often more strident and less carefully worded. 

The lead paragraph of the Wall Street Journal’s article reads: Once asking $3.795 million, the four-bedroom property will be sold May 18 with Paramount Realty USA for a reserve price of just $1.8 million.

The ZeroHedge post reads: It’s price tag used to be $3.795 million, but now the four-bedroom property will be sold for its reserve price of just $1.8 million, according to the Wall Street Journal.

So, the story goes from an article about an auction with a low reserve to a story about a house that had a $3.8 million list price and now “will be sold” for its $1.8 million reserve price. 

I could go on, but I’m already well over my word limit, so suffice it to say there are lots more examples of articles bashing Greenwich real estate in a biased manner. The problem is that enough of these articles have accumulated that they are doing real damage to our real estate market. Having a paper like this one, which is more interested in accuracy than in day-glo stories, is essential to presenting a more factual picture of what’s actually going on in the market. 

I am not pushing for rosy stories about the Greenwich market. I am advocating for balanced reporting that takes in the ups as well as the downs. We had a poor first quarter in 2019, which came after a 2018 that had more sales than the previous year. We need both reported. 

Mark Pruner is an award-winning real estate agent with Berkshire Hathaway. He can be reached at 203-969-7900 and mark@bhhsne.com.