How Not to Buy a House in a Hot Greenwich Market
Our spring market is moving along with growing inventory, growing contracts and growing sales, just like it is supposed to do in April and May. Sellers are listing and buyers are making offers, sometimes many offers. The market, however, reminds me of my wife’s windowsill herb garden. Yes, we have sage, oregano, thyme, rosemary, et cetera, but all these herbs are miniatures with wee, little leaves. To flavor even a small recipe, you’d wipe out the entire garden. The market is like that. The curves look right, it’s just they are wee little curves with inventory only 21% of where it should be. As a result, our contracts and sales are down.
This week, we have only 151 single family home listings, when for the same week in 2019, before Covid, we had 705 listings. What’s remarkable is that we have 117 contracts compared to 108 contracts at the end of May 2019.
However, 2019 was not a good year for the Greenwich market, particularly in backcountry and mid-country, where buyers were less interested in large houses on large lots away from downtown Greenwich. Then came Covid and we saw the two biggest sales years ever in 2020 and 2021. In 2022 sales dropped back to a more normal level, as we had sold all the affordable shadow inventory.
Last year, in 2023, the downward trend continued in inventory and hence in sales. In fact, with the exception of February to April 2023, when we had a few weeks that matched the same weekly inventory in 2022, we have been on a five-year decline in inventory. Yes, our inventory has gone up in the first and second quarters, but we have not matched the prior years’ inventory in those same quarters. We may match last year’s anemic inventory in the next couple of weeks, but that is saying very little.
When you look at the distribution of inventory within Greenwich, it appears to be pretty even with backcountry having a similar inventory density as Old Greenwich, Riverside and Byram. The problem is that backcountry is a 4-acre zone, and our front country neighborhoods have much smaller lots. This means that backcountry has proportionately more inventory available.
Some of that is due to less demand at higher prices and some is due to a return to work and a desire to live closer to town. When you look at the inventory by price you see that our inventory over $6.5 million is actually up this year, the only price range that is. Many of our houses in that price range are in north Greenwich, so it is not surprising that we have proportionately more inventory back there.
When you look at sales, front country is doing well with good sales in Old Greenwich, Riverside, Cos Cob, Central Greenwich and Byram and Glenville. Mid-country is doing OK, particularly, the east side of mid-country.
We will see more sales in backcountry as we have contracts waiting to close and the same in mid-country. The interesting thing is the shrinkage of the number of contingent contracts. Pre-Covid and pre-our inventory shortage, most Greenwich buyers used a mortgage to buy a house and had a mortgage contingency in their contract; today, not so much.
This week we have 117 contracts, but only 13 of them are contingent contracts. The interesting thing is that these contingent contracts are concentrated in our most affordable areas and in our most expensive areas. In Byram and the parts of OG and Riverside north of the Post Road, these contingencies are mortgage contingencies. In backcountry, transactions can be more complicated, and contingencies there often have to do with title or zoning issues.
Curiously, very few contingent contracts don’t close as buyers, their bankers, attorneys and agents usually work out any mortgage issues and the contract does become non-contingent (or “pending” as our North Dakota based MLS software supplier insists on calling a non-contingent contract.)
Also don’t think that only 13 out of 117 sales contracts were non-contingent. Of the 104 contracts that are presently “pending”, 27 of them were contingent at one time. This means a total of 40 of our present contracts or about a third of our contracts actually had contingencies and most of those were mortgage contingencies. This ratio is the reverse of pre-Covid days, when about two-thirds of our contracts had contingencies.
Through May 15th, we have had 18 houses sales this month. This means we have a long way to go to get to an average May or even to match last May’s sales. Our 10-year, pre-Covid May sales was 60 sales and last May we had 50 sales. Our contracts are moving up sharply, as they should be at this time of year, so let’s hope we finish with a bang in May.
Then again some of the drop in reported sales may not be as much as it looks like. We are seeing more off-market sales. So far, this year 42% of our sales over $5 million were off-market sales. Many of these private sales do show up on the MLS with the notation, “For Reporting Purposes Only”. If you think something sold privately in your neighborhood, give me or your agent a call.
How Not to Buy a House in Greenwich
We have 252 sales and contracts so far this year, but every week buyers, some experienced, most not, crash and burn in their efforts to buy a house, so let’s look at how these folks fail to get the house they want.
Be Unprepared – In Greenwich, you are going up against people who went to our best colleges, have MBA’s and law degrees, are former CEO’s and have decades of negotiation experience, and those are just the other buyer’s agent. Driving around at random going to open houses is not a strategy that works very often. Find a really good agent and have them set up a daily alerts for you.
Get your finances in order and get underwritten pre-approved if you are using a mortgage. If you are doing all cash talk to your stockbroker, banker, trust officer or whoever has your funds and work out the process for getting a big chunk of cash quickly. A signed contract is nice, but you need to accompany it with 10% down.
Low Balling the Opening Bid – Some people are sure that if they make enough lowball bids that eventually somebody will be desperate enough to actually accept their bid.
This clearly doesn’t work in a multiple offer situation, which covers more than half our market. Even when the house has been on the market for a while, a very low offer means that the seller is likely to not even respond to the buyer’s bid. This leaves the buyer with two bad choices; he can bid against himself and raise his bid or walk away from a house that had he opened with a more reasonable bid, he had a good chance of buying.
Looking for Lower-Priced, Brand New Houses – Another unsuccessful strategy is to focus only on brand-new houses. Of our 252 single-family home sales and contracts this year, none were completed this year and only 7 were completed in 2023. Of those 7new spec houses, the lowest priced new home was $2.35 million, next was $3.3 million and the other 5 were all over $6 million. It’s very unlikely you’re going to find a new house for under $2M in Greenwich. If you do want new for less than $2M or even less than $4M consider buying a teardown and building.
Taking a Vacation – Another surprising way that buyers end up not buying a house in Greenwich is by taking a vacation in the middle of negotiations. You would think if someone was going to be spending a lot of money on a house and they’re in serious negotiations that that’s not the ideal time to go camping. Almost every year, however, I get involved in a situation where we end up waiting for a client to get to somewhere in the wilderness or the ocean, where they can get a cell signal. I’ve emailed documents to cruise ships, tropical islands, and countries I have to Google to find out where they are.
Being out of town isn’t the deal killer that it was, but if you’re in a competitive bidding situation being unavailable during an entire afternoon visiting your recluse uncle or golfing at a club that doesn’t allow cell phones or expecting uninterrupted sleep in a time zone 12 hours ahead of Greenwich means there’s a good chance that you’ll lose the deal.
In Your Face Negotiating – We get buyers from all over the world and all types of businesses. Some are used to a rough-and-tumble style of negotiating. In your face negotiation usually fails in Greenwich. Unless the seller is also part of that world, the odds are that the seller will just take a pass on negotiating with you. (I did once see two NYC building contractors screaming at each other on a conference call even to the point of threatening to have each other’s building permits for NYC projects cancelled. They ultimately decided not to do the deal for the Greenwich house, but they still went out to dinner together with their wives, all of whom had been friends for years.)
Insulting the Seller – Nine out of 10 times insulting the seller is the kiss of death. I have seen sellers take substantially less just so they can keep that “jerk” from getting the house. And, it doesn’t have to be a direct insult, showing up late at meetings, not doing what you say you are going to do, inappropriate jokes, or even mispronouncing the owner’s name can hurt or kill a deal.
How to Buy a House in Greenwich – In reality all of these things come down to doing your own research, being prepared, focusing on areas with good prospects, and acting respectfully to the seller. Alternatively, you can have a good agent who will tell you what is likely to work and what will definitely not work. Also, there are times to break these rules. Just make sure you have cell service where you are going when you decide to break the rules.
Mark Pruner is a principal on the Greenwich Streets Team at Compass Connecticut. He can be reached at 203-817-2871 or mark.pruner@compass.com.
