Bryan Roddy says it seemed like a smart investment in April 2007 when he and his partners bought a US$1.2 million home in Greenwich, Connecticut, added two bedrooms and baths and priced it at US$2.9 million to lure Manhattan buyers. They listed the Havemeyer Place property in October 2008, a month after Lehman Brothers Holdings went bankrupt and sent markets tumbling. The house is still for sale.
The so-called move-up market in Greenwich, known as the hedge-fund capital of the US, has dried up as the lingering effects of the financial crisis strand potential buyers in their current homes. ‘There was no one in that price range looking,’ said Mr Roddy, 48, a principal of Roddy Construction, a residential building and renovation firm in Norwalk, Connecticut.
Greenwich home sales from US$2 million to US$2.99 million fell 45 per cent last year, more than any other price category and the most since broker Russell Pruner began tracking the data in 1976. Fifty-two such properties in town changed hands, compared with 94 in 2008.
‘That’s in many cases a trade-up, or entry level,’ said Mr Pruner, also the owner of Shore & Country Properties in Riverside, Connecticut. Move-up sales are largely driven by locals looking for bigger homes and New York apartment owners seeking their first place in the suburbs, he said.
Buyers who can afford to pay US$2 million to US$3 million still rely on mortgage financing, said Alan Rosenbaum, principal of GuardHill Financial Corp, a New York-based mortgage brokerage with Greenwich clients. Lenders have curbed financing at that level to between 50 per cent and 70 per cent of the purchase price, he said.
At the same time, declining real estate prices mean people who need to sell their existing homes before buying another may have less cash for the purchase. ‘In the past, when you sold one home to buy another, you normally reaped a nice profit and you used that profit as a downpayment for your new home,’ Mr Rosenbaum said. ‘Many people who are trading up from the smaller home don’t have enough equity.’
Manhattan apartment prices fell 21 per cent from their market peak in 2008, according to data from New York appraiser Miller Samuel Inc and broker Prudential Douglas Elliman Real Estate. The median price of cooperatives and condominiums slid 10 per cent to US$810,000 in the fourth quarter from a year earlier, the companies said in a Jan 5 report. The median price hit US$1.03 million at the top of the Manhattan market in the second quarter of 2008.
Wall Street firms paid about US$20 billion in bonuses in 2009, down about a third from 2007, New York State Comptroller Thomas DiNapoli said on Feb 23. The average industry bonus was US$123,000, excluding stock options or other deferred pay. The financial industry cut 26,300 jobs in New York last year, contributing to the decline in the Connecticut real estate market. The median price of a single-family home in Greenwich, which lies about 30 miles north-east of midtown Manhattan, dropped a record 18 per cent to US$1.6 million, according to Mr Pruner. Sales fell 20 per cent to 370, with declines in all price ranges of more than US$1 million.
Of 514 homes for sale in town at the beginning of February, 20 per cent were priced between US$2 million and US$3 million, according to Shore & Country. Of 98 new listings between Jan 10 and Feb 10, more than half had previously failed to attract a buyer, according to data compiled by Jeanne Howell, a broker for Greenwich Fine Properties.
Gary Disher, a co-investor with Mr Roddy on the Havemeyer Place home, was unable to sell it last year after reducing the price to US$2.5 million, so he took it off the market in December. He relisted the residence in January for US$3 million in a bid to grab attention from buyers in a different price bracket, he said. ‘We wanted to make sure that we weren’t missing people that would be potential buyers in the US$3 million to US$4 million category,’ he said. On Feb 18, he dropped the price to US$2.49 million.
Source: Business Times, 9 Mar 2010