State of Real Estate 2014
We explore the biggest market trends, where the key indicators say we’re headed and how to maximize your investment
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7. The Pitfalls: What to Avoid
There are two big pitfalls arrayed before people in the real-estate market. One is to actually believe the numbers you read on the aggregator realty sites spread across the Internet. “If you go to the major players like Zillow, Trulia, AOL Homes and so forth” notes Russ Pruner, “the information they have can be way off. Because the diversity of housing in Greenwich, where you can have an inexpensive house next to a very expensive house, it throws off their analytic programs quite a bit.”
The second pitfall is the natural human assumption that one’s house is worth, oh, a couple hundred thousand more than it ought to be. “It’s human nature,” says Lynch. “No one was prepared for what happened in 2009 and it’s been a difficult couple years for a number of people. The values of all these properties have unfortunately decreased over the last five years. It’s a very hard moment for people to realize that their house’s price is not what they hoped for and for all the work they’ve put into it.” But, she says, once they get real on today’s prices, the house sells.
8. Commercial: What’s Happening on the Avenue
It was clear to everyone here how hard downtown was hit by the recession. The pains were probably felt all the way to Hartford. Because people like to shop in Greenwich, whether for mattresses or Maseratis, the state collects about a half-billion in sales tax from us.
“In 2009, the world shut down,” notes James Ritman, managing director at Newmark Grubb Knight Frank. “Everything dried up. Before 2008 nobody cared what the rent was—it was a rounding error. Then from 2009 to 2011, everybody was suddenly cost-conscious and wanted value. Last year was the first sign that activity was up and people were willing to pay bigger numbers. The deals that were done last year were very, very positive.”
“In 2014 we’re already seeing some activity coming from Manhattan. The political scene is making a few groups of people nervous where New York will go in the next three or four years.”
The, ahem, de Blasio Effect?
“Yes. We’re already hearing that on tours.”
But that sword cuts both ways. While Ritman could readily name an investment group that was motivated by the tax situation to move to Greenwich last year, he also knows of other companies saying goodbye. “You do have one group that moved to Florida” over taxes, Ritman says, “and we do know of another Greenwich-based group that’s thinking of doing the same thing.”
It’s not enough, in brief, for us to count on our beauty and our tax rates. “The town,” Ritman says, “could make it easier for businesses to move here.”
As far as commercial rentals go, the situation is much improved over the 2009 cratering, when retail business came down by a factor of 30 percent, estimates Thomas Torelli with Allied Property Group. “We saw a lot of leasing on Greenwich Avenue. It took one year to get rid of the excess inventory that took three years to build.”
Around the country, mid-price retailers have suffered the general shift to box stores and the Internet. But Greenwich is not Main Street USA. And Torelli was happy to see the arrival of boutiques like Vince, Joe, Marmot, Sandro, Maje, and rag & bone. He just brokered a big lease for Shreve, Crump & Low, the high-end Boston jewelers, for a store in town. “Our customers want to touch and feel, and want service,” notes Torelli. In brief, forget Amazon, let’s get down to Greenwich Avenue.
9. Capital Improvements: What’s Worth It?
One of the hallmarks of the current banking scene is the amount of the rewards piled on to young traders. As these people enter the housing market, one thing is very clear: They only want new. The prospect of fixing up a house is anathema to them. “Today’s buyers aren’t interested in projects anymore,” says Beckie Hanley of Raveis.
The worst thing a house seller can do in this market is offer something with a patina of age. Old paint can be rectified quickly. But what about redoing the kitchen and master bath? There is no rule of thumb to cover every scenario, but two areas are critical.
And if you really want to sell that house, that kitchen should be as big as a ballroom. Make that “the great room.”
“The kitchen has to open up to the big family room,” says Hanley. “When you walk into an older style kitchen now, you wonder which wall you can take down to make the kitchen and great room more appealing to today’s lifestyle. That’s how people live now.”
If preparing for a sale, says Barbara Zaccagnini, “you need to show it in its best light. You need to clean it and stage it so the perception is that it’s a prime property.” Professional staging these days will cover everything from the driveway to the lightbulbs. You’ll know when they arrive with the video cameras if that comfy ol’ kitchen passes muster.
10. Looking Ahead: More Transitions
While inventory seems to be hollowing out in the $3 million-and-less range, Barbara Zaccagnini wonders if this is about to change. “I think there’s a bunch of foreclosure houses that banks are sitting on,” she says, “and they’ll be coming to market in the next year or so. The layman thinks that short sales have gone. But banks have been releasing inventory this way to help build demand.”
In other towns along the Gold Coast, notably Westport and Southport, there has been a brisk business in tearing down the 1950s-era houses and replacing them with the shiny new stuff demanded by the younger market. Though Greenwich does not have a lot of Capes and split-levels to lose, builders are still knocking on doors.
As builders move into middle-income areas, says Russ Pruner, neighborhood transitions happen.
“You’re seeing the whole demographic change. They’re buying the million-dollar house, or million-five, owned by somebody who’s lived in the house for fifteen years and maintained it well, but it doesn’t have all the bells and whistles that people are looking for today. It’s very much happening in Riverside. If you go down Bramble Lane, Druid and Hearthstone, there are probably ten homes that have been built in the past two years, trading in old houses for new construction around $3 or $4 million.”
Tom Torelli sees other possibilities for the old neighborhoods. “When Bridgewater, the largest hedge fund in the world, moves from Westport to Stamford in 2016,” he says, “it will definitely have an effect on Riverside and Old Greenwich.”
Indeed. Money keeps moving here. “There is a lot of money out there,” says torelli. “And the money that’s there is deep. It’s not leveraged.”
And the money keeps buying houses.