The State of Real Estate in Greenwich
What’s influencing the market? Where’s the big money? Have we finally bounced back? We explore ten hot questions that are impacting your property values right now.
The Greenwich real estate market closed with quite the noisy bang in 2012. Right up until Monday night, December 31, offices were alive with the sounds of pens scratching on contracts. Knowledgeable hands had to wonder whether this flurry of transactions was just the result of folks trying to beat the new year’s changing tax rules, or was it a sign that glory days had returned? As the season inched toward spring, it became clear that the market had indeed grown healthy again.
Were there worries? Oh, sure. Every fiscal-cliff stand-off in Congress sends shivers through the financial sectors. And when Wall Street gets a runny nose, local real estate comes down with the flu. Then there is the new capital-gains tax and that looming 3.8 percent net investment income tax (NIIT) that applies to certain income-producing properties. Who’s gonna buy?
Well, as the national economy slowly gathers strength, the real estate sector actually shows real signs of acquiring muscle, thanks in part to being goosed along by the Federal Reserve and, thanks as well, to pent-up demand. After the bank scandals of 2008, loan requirements have tightened up considerably, thus limiting the number of actors in play. But for those who can get in the game, mortgage rates are beguilingly low. According to some informed estimates, today’s borrower can get 50 percent more house than the folks who bought in the early ’90s. Such talk is music to the ears of the Greenwich market.
There are few real estate markets quite like Greenwich. Sotheby’s International Realty’s Joseph Barbieri jokes that moving to Greenwich is like joining a great country club: You pay a little more to join, but then you get to enjoy the tremendous amenities of being part of it.
Adding to that allure is the cold fact that Greenwich simply attracts diverse money streams. If hedge funds are momentarily down, entertainment and communications will certainly be up. And if all three are listless, you can be sure a fresh wave of arrivals from the international business community wants to park their rubles, yen, renminbi, reais or euros in the relative safety of well-situated American real estate.
The luxury real estate market has swelled upward over the last year. Jumbo loans, reports the Wall Street Journal, are up 23 percent nationally. But of all the gaudy estate-sale reports from Miami to Malibu, nothing in the world has exploded like the Manhattan world of super-luxe co-ops, particularly those along Central Park where recent $90 million sales have sent impressive price ripples along this vaunted skyline.
Does this affect the Greenwich market? To a degree it does. Just as all that feverish activity attracts other big money, it also pushes somebody out. When it costs $50 million to get a penthouse with a view of Park Avenue, somebody, somewhere, might start thinking that $14 million for a Greenwich layout sounds pretty reasonable, whether it’s for the big view of the Sound or a Georgian mansion on ten acres in Conyers Farm.
Still, the property sales keep happening. “We’re feeling very enthusiastic,” says David Ogilvy, who maintains a boutique agency allied with Christie’s International. “We have a lot of people looking. And I’ve been involved in a bidding war,” he says, laughing. “Imagine, a bidding war! I had a house in the mid-twos and it seemed to be a safe bid, but then somebody came in and bid right on top of them. The deal was done in two days.”
To get a fuller portrait of the home-buying scene, and to find out where things are headed, we talked to a number of the top Realtors. After all, these people do the listening, and they have a strong idea what buyers and sellers are thinking.
The Basics: Are Houses Selling?
It’s clear that the frenzied bidding wars of 2007 are long gone. But are we really seeing any improvement? “We had forty-six homes go to contract in December, the best results since 2006,” reports Doug Stevens, managing partner of Greenwich Fine Properties. “This is an extremely positive sign of good things for 2013.”
“The market has increased a lot,” says Barbara Zaccagnini of Coldwell Banker. “If people see a home and contemplate too long, it’s possible that it won’t be there much longer.”
“The market has become steadily more active in the last few years,” maintains Robert Bland, vice president of Sotheby’s International Realty. “We had 482 sales in 2010 and that went up to 526 in 2011. This year we had a 10 percent increase in overall transactions in single family to 579. We’re doing very well. We’re very positive. Average price is down close to 2 percent in the last year. And if you look at it historically that price is down somewhere close to where we were in 2004.”
With all the activity, the inventory sheet has grown shorter. “In 2010, there were 516 houses on the market at the end of the year,” Bland continues. “In 2011, there were 472. Now it’s 396—the first time in years that it’s been under 400.”
As new houses are being built, they will probably not even make it to the inventory sheet. These days, everybody wants new construction, and, as Susan Calabrese of Coldwell Banker points out, folks are vying to buy a property before the first shovel hits the dirt.
“But we are seeing builders come out of the woodwork again,” says Susan happily. “Several homes are being torn down now—all you have to do is drive down Bramble, Druid, Lockwood, and you’ll see these houses being torn down and spec houses being put up. Some of them will be bought before they’re completed.”
Still, wise veterans of the game are looking at all the signs. While Greenwich continues to draw shoppers from Westchester, burnt out from their property-tax bill, Connecticut citizens are not exempt from worries about the national tax picture. “Taxes are always incrementally increasing,” points out Robert Bland. “Then the Obama [health care] tax, it just pushed people over. People started saying, ‘You know what, I have to start thinking of taxes now.’ It’s an accumulation. Couple that with they’re not making as much as they used to make, that bonuses aren’t as big, and all of a sudden it’s becoming very important.”
“Many financial analysts that I talk to in town are talking about a big group of people here in town taking retirement and moving, probably to Florida for tax purposes,” says Susan Calabrese. “They’re tired of these last storms and are thinking, ‘Why am I here when I’m facing these taxes and these storms?’ That will be interesting to watch. That’s been the prediction of several money managers that I’ve talked to.
“They’re planning on living a long life and they’re looking at where Connecticut is going in the tax structure,” Susan continues. “I think they’re at a point in their life where they want to have some good times and don’t want to worry about this stuff.”
What’s Happening Where the Big Money Is?
It’s hard to talk about the “average” house price in a town where the occasional monster sale can knock everything for a loop. That happened in 2011 when two houses sold for close to $40 million. Nothing close to that sold last year, but there was much movement in the $7.5–$10 million range, which was up 160 percent.
One of the more dramatic properties to appear again is the Old Mill home that Mel Gibson sold in 2010 for $24 million. The new owner put some refurb into the 1926 Tudor and is now asking $33 million. It would be possible to divide the seventy-five acre spread, which rests on the northern side of the Merritt Parkway.
One of the more astonishing sales of the last year was $14 million for a waterfront home on Indian Drive in Old Greenwich. It’s a lovely house with big windows providing constant and astonishing views. The price presents a sevenfold increase in value over twenty years, indicating that the grandest amenity one can offer these days is a grand view of the water.
The super high-end market ($10 million and up) enjoyed “its best year since 2007,” says Doug Stevens. “Of the fourteen transactions, eight were of ‘once every generation’ quality waterfront sales.”
What Are the Hot Trends in Houses?
“The trend is really family-oriented and that’s been happening since 9/11,” says Coldwell Banker’s Susan Calabrese. “People are looking for a place for their kids to play; they want yards, family rooms. They love electronic equipment. They want to be able to walk in and wirelessly connect all of their equipment. That’s very important to a lot of new buyers.”
Exterior design remains its provincial old Connecticut self, of course, but change could be coming. In the conventional business sector, formal Victorian interior design is still de rigueur; but among hedge funds, for instance, it’s all sleek, contemporary design.
In houses, says David Ogilvy, whose eponymous firm specializes in the highest of the high end, “Contemporary is beginning to sneak back in, but it’s in the interiors and the furniture.”
The one precinct where modern structures have great favor is along the waterfront. If you’re paying a fortune for that water view, it’s modern design that provides the windows.
Among other amenities in the world of the super-luxe houses, there are always things appearing like heated floors and pet spas. Don’t be too surprised if people want their own spas. “We’re seeing more massage rooms in the high end,” notes Susan. “Places to go to and unwind.”
What’s really hot, says Ogilvy, is the steam shower for the bathroom. Whirlpool and ultra bathtubs are also a big draw.
“We’re also seeing the need for the grandparents’ room,” says Susan Calabrese, “or for people to come stay for a long period of time, not necessarily live with them. I’m seeing a resurgence of extended family living. Along with that is a need for a lot of storage space, whether for papers or kids’ toys.”
The walk-in closet has been popular for years, but the latest wrinkle is the “boutique closet” that arranges your clothes as if it were a primo corner at Richards.
Perhaps the one service that has become most in demand at businesses and in homes is the added back-up power supply. Especially now that a lot of people maintain home offices, Superstorm Sandy’s eleven-day power outage triggered big interest in generators.
To run all this efficiently, the latest movement is toward “the smart home,” one that you can run remotely from your smartphone while you speed toward your destination.
Are Foreclosures And Short Sales Still An Issue?
One factor contributing to increased home sales around the country has been the action taken by investors scooping up empty houses for a later day. In Phoenix, for example, whole blocks of empty quality homes found their way to the address books of holding companies.
“In California and Arizona, there were a lot of distressed properties,” says Tamar Lurie of Coldwell Banker. “Investors were buying them in bulk. But that doesn’t happen here.”
There are a couple of pages of foreclosed properties on the current Greenwich listings, but it’s not a scandalous amount.
“To me Greenwich is not a market characterized by foreclosures and short sales,” says Eric Bjork, vice president and director of sales at Prudential Connecticut. “But I think there are much greater numbers elsewhere in the state. We have a joke that short sales are a misnomer; they’re really long sales because they can take forever. Especially if two lenders are involved.”
The great unknowable in the local market would be the risk of continued flood damage. Opinion is mixed. How often are we going to get storms-of-the-century, anyway? On the other hand, we have had two in a row. Thus there has been a brisk business in the raising of waterfront properties. But it’s nothing to create a slew of price drops. Recent sale prices only indicate the opposite.
Still, as a few agents pointed out, FEMA is really looking over our flood plain and asking serious questions. “Now they’re saying, ‘OK, what are we doing here, how are we going to redraw these lines?’” observes one Realtor. “And what’s going to happen to insurance once these lines are redrawn? This might yet affect the coastline.”
Are There Any Deals to Be Had in Greenwich?
If you’re feeling lonely, just put a house on the Greenwich market priced under $1 million. Phones will be ringing.
“One of the brightest developments of 2012 was the robust increase in the number of ‘affordable’ homes sold,” says Doug Stevens, who cited 209 transactions, or a third of all 2012 sales. “Further to this trend, closed properties below $2 million equaled 62 percent of the year’s sales.”
Looking for a neighborhood with a “potential for growth” in Greenwich is of course a challenge. Still, Realtors talk about the gradual trend of moving away from the north country down to blocks closer to town. Condominiums have become very attractive to people seeking a no-hassles lifestyle.
One thing many Realtors have heard from clients is the desire for an old-fashioned neighborhood. Beckie Hanley of William Raveis thinks that this has been behind the climbing numbers in Riverside and Old Greenwich over the past two years: “People began to desire neighborhoods like that, and being closer to town, with activities for their kids. A lot of people are aware of those neighborhoods now. Construction is happening there again and that’s always indicative of a good, strong market.”
What Are the Market's Big Idictators?
Tamar Lurie maintains a list of some of the grand houses, and she has been pleased to see the recent flurry of activity. Being a well-traveled woman of the world, she has an idea where this business is coming from.
“The reason we’re seeing more activity is that we’re seeing a serious influx of more foreign money,” Tamar says. “At the end of the day, the world knows that the American economy is still the bastion of strength versus the rest of the world.
“Russian money has been coming into New York for quite a while,” Tamar continues. “Now we’re seeing Chinese money coming into Greenwich. I’m talking from experience. I see the buyers that are coming to my twenty listings. They are Russian, Chinese, Brazilian and, of course, European. And even Californians are coming. They understand that if they don’t buy, the same property that they liked is not going to be around for that much longer, or as long as it was through the past few years.”
Sotheby’s Robert Bland refers to his new high-end customers as “BRICS”—people from Brazil, Russia, India and China.
“They look at us as a safe haven for their real-estate dollars,” says Bland. “If you had to choose anywhere in the world, metropolitan New York is one of the safest places. I don’t think people are looking for capital appreciation the way they used to, but rather capital preservation. It’s a dangerous world and if you want to get some money out and diversify, putting it in the New York area is a safe bet.”
What Are the Unseen Forces At Work On the Market?
Civilization is always being buffeted by shifts in generations. Most of these shifts pass quietly and gradually unless, of course, it is the infamous baby boomers about to do something. What the first wave of boomers are doing right now is thinking about retirement.
In real estate there are the three D’s—death, divorce and diapers. Add another D to that equation: downsizing, as in smaller homes for folks who’ve sent their kids out into the world and are now contemplating something with less maintenance and closer to town.
“Boomers are going to retire differently than anyone else,” says Susan Calabrese. “They’re going to have second and third jobs afterward just because they like to stay busy, and a lot of that is going to be from their home.”
Hence, the growing popularity of that room known as “the home office.”
Housing tastes will likely change in other ways. “People are not as willing to stretch their budget the way they used to be,” says Susan. “The younger generation likes to travel and they’re not as willing to give up a lot of stuff for a house. The older generation used to give up a lot and just buy the house; they were more committed to their home. The younger generation still wants to have that lifestyle where they can go out and enjoy themselves, and they’re not willing to commit themselves to the point of feeling uncomfortable.”
Robert Bland agrees with that. “In Greenwich, it’s pretty clear that the upper range of the boomers have been selling their backcountry properties and moving to central Greenwich,” he says. “I know that’s been a trend for the past three or four years. And frankly I think there are two things going on. There is a general mood—people are just not buying big, big places like they did twenty years ago.
“People want a simpler life in general. I just think that lives are too busy. They want to travel more or have a house in Palm Beach or maybe an apartment in New York. They don’t want to have a house on twenty-five acres with maintenance people there all the time.”
Asked if the younger generation still has any interest in big houses, Tamar Lurie can only report what she sees. “I have some of the most high-end properties in Greenwich and I have young couples coming to look at them. And seriously consider them. They know that if they wait, the high-end properties would not sit around. In December we had a $10 million property and we had three bids on it. There is activity, for sure.”
What Are the Biggest Mistakes Sellers Make?
In the boom years, when frantic bidding wars were common, a seller could be somewhat casual about prepping the house for sale. Today, that would be a big mistake.
“If you want to sell your house,” warns Barbara Zaccagnini, “it’s very important to put it in its best light. A few years ago, it didn’t matter, little things might be wrong. But now it’s important from the very beginning that the landscaping, the presentation, the staging, all those things that you can do, help you sell it and get the most money for it.”
Younger buyers, especially, have little desire for home repair.
“The appetite for renovation has changed,” says Prudential’s Eric Bjork. “Years ago buyers used to love to move in and work on a house. Now, they’d really prefer that it’s already done. They don’t know who to turn to, the architects, builders and so on, and it’s time-consuming. The closer you can get your house ready for moving in, the better your chances are of selling it.”
If there is a perennial problem for home sellers, it is the persistence of unreasonably high hopes. No matter what price point information agents provide, sellers usually think, “Let’s put it on at a higher price and wait to see what happens.”
That just won’t work now, says Raveis’ Beckie Hanley, “because there is a lot of activity on houses that are priced right for the market. Sellers should note that price is very, very important in catching the right buyer at the right time. They need to be realistic. When they go to buy something else, they wouldn’t expect to buy an overpriced property, and they shouldn’t expect buyers to, either.
“If you’re getting showings but no offers, it means your house is being used to comp out another property that’s priced better.”
Result: Your house falls to the bottom of the list. Excitement goes elsewhere. Your house acquires that “old list” smell.
Keeping it fresh is also a matter of paint and new decoration. “If you have a house that was built in the ’70s,” notes David Ogilvy, “and it’s still decorated as if it’s the ’70s, people walk in and go, ‘Nooo.’ But if you bring it up to date and put in a super kitchen and bathroom, then you’ve got something that’s special.”
The final mistake made by sellers is to stay stubbornly in love with its great “personality.” You don’t want to over-charm it. If too much of you is in the house, says Beckie, “the buyer can’t imagine themselves in the house. We have to create it so that buyers can envision themselves living there. That means putting away your personal pictures and decluttering.”
How is Technology Impacting the Market?
Selling a house? Here’s your first rule: Make sure your house has a good Web presence. Get the best photographs you can and add as many living details as you can. Realtors have been dutiful about counting the clicks on their websites and they know what gets attention—and the calls. Properties that list a lot of details about schools and local restaurants get a lot more searches.
Buyers have been arming themselves with information gained on the Internet for years, but now they’re getting the goods right on their smartphones. Beckie Hanley just sold a $4 million house on North Street to a couple that walked into the office and asked for a tour. And where did they learn about this house? From their smartphone.
“If you have an iPhone, you can download a free Raveis app,” Beckie explains. “Since Greenwich doesn’t allow ‘for sale’ signs, you would be able to go down a street and know which houses are on the market, which houses have sold. All you have to do is draw a circle around an area and everything in that circle will pop up for you. The mobile technology has been a game changer.”
Have We Bounced Back? What Does the Future Hold?
The current market presents two faces: 1) It is harder to get a mortgage now than it was ten or so years ago; and 2) low interest rates translate into a lot more buying power.
First, don’t even think about getting a house with 10 percent down anymore. “Twenty percent is your gold standard for a jumbo loan now,” says Jamie Tyndall of Mortgage Master which, working with a number of banks, oversaw a record $7.3 billion in loans last year. Down payments can move up to 30 and 40 percent as the loan amount climbs into the stratosphere, but Jamie finds that in many cases people voluntarily put down that much.
The market appears especially good if one puts it, for instance, in a twenty-year perspective. Today’s buyer simply has close to twice the buying power. Jamie is happy to run the numbers: In the 1990s, when interest rates averaged around 8 percent, a $1 million loan worked out to a monthly payment of $7,737. The same loan at today’s 3.75 percent (fixed) rate translates to payments of $4,631.
But what if you were still willing to make payments at that ’90’s amount of nearly $8,000? Then please step up to a $1.75 million loan. “Couple that with the fact that prices have fallen to 2004 levels,” notes Jamie, “and many see this as a fantastic opportunity to buy.”
The buying tastes of the next generation will remain the great unknown for a while longer. It might be assumed that young people raised in the big houses built in the past twenty years will continue to feel comfortable in big houses. Or there might be a return to condos and crash pads. This is just part of the American story playing out.
Whatever happens, this increasingly urban corner of Connecticut will retain its attractiveness.
David Ogilvy notes: “I had a couple last year who had lived in Beverly Hills for years, retired at a young age and moved to Colorado. And while they loved to ski in Colorado, for the rest of the year there was not much intellectual stimulus. They moved up the coastline in Connecticut and found the same thing—it was really fun but for only two months a year. So they’re back down here. They’re able to zip in and out of New York, have lunches with interesting people, join the clubs here.
There’s activity, there’s action around here.”