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Inventory Glut Of Ultra Luxury Homes Hits Greenwich, Over 4 Years Of Supply
While the overall market may have taken a sharp move higher in the last
days of the quarter on what has been a vicious short covering rally, the bulk of hedge funds continue to underperform either the general
market or their respective benchmarks. And while funds will shower
their LPs with promises of outperformance, in some very prominent cases
performing outright fraud and fabricating trades, one of the better
indications of the performance of the levered beta chasers is the activity in the real
estate market in Greenwich, CT. It is there, that courtesy of Prudential's Mark Prunier, we find that sales of homes in the ultra-luxury $10+ million bracket are not doing that hot. In fact they are doing outright horrendous - the current inventory backlog in the most expensive real estate segment in this hedge fund playground is the biggest since 2004: at last check (June 2) there were 52 homes in this bracket, of which only 5 had been sold in 2011, and 1 was pending closing. And while it is difficult to correlate real estate sales and general net worth of Greenwich's hedge fund-based residents, it appears that there isn't much appetite for local housing purchases. On the other hand, that there is such an inventory glut also shows that nobody is too desperate to cut prices to sell at any cost. Following this trend over the next several months will likely provide additional clues into how hedge funds truly measure their own relative strength as we enter the second half of the year.
A bigger picture of Greenwich real estate shows that the of 596 homes for sales at any price, 353 have been sold in 2011 or are currently pending. And while housing demand in the $10MM+ bracket is relative weak, other segments are seeing renewed strength:
The $2,000,000 to 3,000,000 market continues to be the heart of the market in Greenwich with 112 homes on the market in this price category. We had 12 sales of properties in this price range and another 27 contracts pending for 13.3 months of supply and an estimated 10.6 months of supply when you add in the pending contracts.
t the end of 2011 we had over 3 years of supply in the $5,000,000 to $10,000,000 market for single family homes. In April we still had over 2 years supply, but in May we were down 3.4 months of supply to 21.9 months. When you add in the 13 pending contracts in this price range you drop to an estimated 17.6 months of supply. Historically, this category averages about a 12 month supply of inventory so we are getting back to normal in this price range too.
However, it is the ultra luxury space that is hurting the most:
The over $10MM is not good news with months of supply based on sales continuing to rise from where they were at year end 2010. With only 3 sales in the first four months, no sales in April and only 1 pending sale, months of supply are up over 6 years of supply. With 1 pending contract the calculations show this category at 72.9 months of supply, but given that we only have 50 listings in this category a few sales will significantly reduce these numbers.
Also as you can see from the 2004 to 2011 graph, the pre-recession months of supply for the over $10MM market is 27.5 months, so the market is slow, even by historic standards.
Full breakdown of the Greenwich market:
And monthly inventory by price bucket:
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Let the unwater hedgies beg JP Dimon for a mortgage freebie.
too bad prices won't come down to affordable levels....
Oh, but they will. Or, at least, they'll start to drop.
Over at the Dr. Housing Bubble site he's had a few different articles which showed that in SoCal (and, I'm sure, elsewhere)recent history has been that a total slowdown of sales is followed by a drop in prices. Sellers don't want to sell for less but finally resign themselves to the fact that they have to and prices plunge.
No one wants to buy when:
1. house prices will continue to plunge for 10-15 more years; and
2. renting is incredibly cheap.
Why buy a loser asset like a house now...when there is 100% it will be cheaper next year...and the next..and the next....
Even Wall Streeters understand we are in a 16-18 year Bear Market for RE...read history.,....it often repeats itself.
Renting is outrageous in major cities except Vegas and Phoenix. Don't be fooled by that metric.
If you think of a house as an asset, you will be forever at the mercy of a landlord. Land has intrinsic value, even if it doesn't provide a financial return. If you are locked into a low debt service, and also own real property and PMs, it just might be that you can clear the asset of all liens when the collapse happens.
I like that better than defending a cubicle in someone else's real property.
Just food for thought.
You're also tied to the land and have to pay RE taxes until you die then your heirs have to pay taxes
Thanks for the heads-up, gypsy joker. Apres moi, more death, taxes, and death. Try and put a little life in that there sun tzoo too!
Lookout Below !!!!
Not to be disagreeable, but the bear market in real estate occurs every 18 years. It doesn't necessarily last 18. That being said, I think we face a long, slow climb from this economic abyss.
Many of the lost jobs are never coming back, 'cause we didn't need a lot of those bullshit people who don't produce anything. Best solution is isolationism. Big tariffs on all imports, and rebuild the manufacturing sector. Just sayin'.
Yeah give it the old Smoot Hawley treatment, you never know it might work better this time than the last :)
Is there any proof that Smoot-Hawley caused the Great Depression to worsen? Tariffs worked fine since the founding of the country
Up until 1860 ish and your Civil War, tariffs would have served the USA ill, still being a mainly pastorial nation, the USA had to import a goodly percentage of durable goods ? As for Smoot Hawley, it probably did precisely nothing much, apart that is, from preventing Americans from spending the money they did not have on imported goods. and its as well to remember that the economic picture in the US stayed persistantly Bad right up to the time that Herr Hitler kicked off, improving dramatically as America became the Arsenal of Democracy :)
Flip that mansion? NOT
NEW YORK -- A Greenwich mansion once owned by the late hotel and real estate magnates Harry and Leona Helmsley has been put up for sale by its current owner, who is asking $42.9 million for the 40-acre estate less than a year after buying it for $35 million.
http://www.greenwichtime.com/news/article/Former-Helmsley-mansion-in-Greenwich-back-on-1433445.php#ixzz1R9y6se6wThe Helmsley is one to track. Asking and final sales price may be very different. $35 sounds much more attractive than $40+.
I wonder if the realtor still gets 6% on that sale. They can retire after selling that one
Strategic Default Bitchez!!!
That Doyle been drinkin' again and gettin' mean, Uh hu
that was beautiful
The uber-rich silverheads better list now if they expect to be dead in 4 years.
Calpers will buy them!
Japan's pension fund will buy them!
KAMPO? I doubt that. JGB's are not the ticket.
GOOG will buy them!
China will buy them!
Norway teacher's pension fund will buy them via gollum sachs!
Bernanke will buy them via Goldman Sachs!
heard last year US Banks were keeping all $1m plus homes on their books, under 2% were being released back onto the market for sale, it's a mad, mad, mad world this property lark!!
Presumably this is stop the top end glut from compressing prices in price ranges below. But how long can this (un-reality) continue? If it's for accountancy gimicks to keep asset values high on balance sheets then it's a false God, and un-lived in homes despreciate even faster without use
it's how it always begins.
The rot is visible at the top and bottom first.
Think baldness and limpness! ;-)
ORI
http://aadivaahan.wordpress.com/2011/07/04/a-year-and-a-day-later/
You are very smart. So smart, I don't think I can handle it. Each paragraph on aadivaahan is a compression of so many ideas, it's a headache. A good headache. Like when you are reading Shakespeare and then suddenly it's not just inky kerned words on a page but ideas and rhythym and poetry.
At the end of 2011 we had over 3 years of supply in the $5,000,000 to $10,000,000 market for single family homes.
A pipe dream in print...none of the homes in this range will be in that range in 3 years. What you really have is a cut-throat, 3-6 month window to offload that inventory to the Bigger Fool before the floor drops out.
An interesting phenomenon to watch in these uber-expensive real estate "markets" is what happens to the tax assessments. It's like the paper-physical PM in reverse. The (paper)assessments keep rising against falling real values. It's one of the last "bag holders" of the real estate bubble.
And wait till the next crisis, redemptions will hit hedgies hard and they won't be able to offload their McMansions fast enough...
Maybe they're moving to buy at Martis Camp, with 60 lots sold at an average of $850 K and custom homes built for $1.7 M and up...
http://www.martiscamp.com/
Most hedge funds have way underperformed the S & P 500 because too many have tried to short stocks on every piece of bad news.
Unfortunately, they underestimated the power of the first "buy and hold" market in 15 years.
I myself have fallen prey to this phenomenon, if I had only bought a huge basket of stocks and held without doing any trading, I would have done much better.
But I'm not complaining, I'm still way up over where my account was 2 years ago.
Way too many hedgies have gotten destroyed by shorting because they are paying too much attention to fundamentals.
Yeah, you're right, RT.
RT,
Buy and hold is the old do-nothing game
you are probably one of the few 'traders' I have ever read admit that doing-nothing was one way of getting something done.
It has been the experience of many traders including this oldman
thanks
or he could have used a dart board with stock names on it.
buying the most bankrupt stocks since mar 09 has produced the greatest returns. The worse the shape, the more the hype, the closer to being tits up, the bigger the gains.
test
icles.
:) chuckle
If you're gonna squat....squat in style.
with a spotter...
....and high heels.
You just gave me a {HERNIA} I can't stop laughing. 777 led you into the "quote"
He gets props as well.
Nothing says America like 16,000 square feet of future property tax liability that you bought to demonstrate what an outstanding financial mind you possess...
Yep. I read a similar article recently about foreclosures of high end homes like these. Most were previously owned by celebrities, sports stars and real estate brokers (go figure). I wouldn’t be surprised to see more financial types eventually joining the group. Historically, top end homes have been abysmal investments for their owners. They often have a “white elephant” character and a tendency to fall down before they trickle down. But wouldn’t you know it, every time you open the real estate section of the newspaper they’re showcasing one of these for the average Joe to dream of owning one day.
Rich people selling their homes and moving out of the country.
No one buying because of deflation in the housing market that will set home prices to pre-2001 levels.
What else is new?
Wait 4 years and buy these homes dirt cheap when the new currency is pushed in.
When one buys these homes at cheap prices, are the property taxes refective of these lower home prices? If I ever bought another house, it would have to be my personal property , free from any liens by the state or any property taxes. Otherwise forget it..........
no the corrupt local governments tell you , you cant base it on short sales or foreclosure purchases, only on comparable full priced home sales (which are hard to find to even compare) so the whole property tax scam continues onward
Interestingly enough, "full-priced" home sales in Florida are going for about the same money as short sales or foreclosures. Reality is that you have to beat the competition if you want to sell.
Having said that, our property taxes have increased every year, with the exception being 2009, when we got a (very) small break - as a concession due to the economy?
High Plains drifter, you have the right idea. Being a house debtor is like being a sitting duck for government thieves.
I might just have to move the Greenwich. Does anyone know if it would be ok if I brought my MAC 10 and silencer can with me?
Fine with me. Make sure you visit New Haven. I have heard everyone there loves the sound of gunfire.
i live in Greenwich. there are alot of marginal folks in town.
everything is great when you are gainfully employed or your entrepeneural activities are paying off.
meanwhile, the rental market is very strong. always a silver lining somewhere. :)
Well, let's see...there are about 3,000 people with even remote potential to be "in the market" for $10-12 million dollar homes, because there's no financing...so uh...
I dunno. Maybe I'll move up there and squat.
Price is important, but can you afford it is the question everybody should be asking. If you cannot keep up with maintanance, mortgage payments, property taxes , heating bills etc. than "Ownership is Tyranny" .
Amerika has become a Tyrannical Ownership Society run by Elitist Bankers and Currupt Politicians
Is this Greenwich, England.
scrub that, actually read the article instead of just the strap.
Was reading the weekend edition of the FT, a double Top in London Re prices and numerous ads for new European developments jumped off the page. (FT has a weekend insert dedicated to Housing for contrarian confirmation). UK is in deep.
Even a grinning DSK on the front page! what a circus. The financial ctr RE mkts in Ct, the Uk or Nyc appear ready to crack.
It's demographics. Watch for significant declines. 70 million baby boomers are getting ready to retire in the next twenty years. They all expect to sell their McMansions for millions, move to a Florida condo and end out their days on the fairway. It's not going to happen. There's no-one to sell to. The next generation neither has the numbers, the money, nor the inclination to buy mansions. The next generation is more urban, into metro lifestyles, doesn't like mowing lawns, and does not want to be tied down. All the Greewich inhaitants are headed for Miami and Key Biscayne. Octogenarians like warm climates for achey joints.
My suggestion ... turn the McMansions into small rest homes for 6-8 seniors.
There are a lot of nice homes available in Maryland, as the esteemed Guvs soak the rich Millionaire Tax has driven a third of the Millionaires (and their businesses) out of the state in it's first year. What a sux-cess! They was thinking they would get an extra 100 mil in tax revs, but instead it seems they ended up losing 260 mil give or taken, for the year. Luckily, this program continues, and we be seeing lots more them millionaires moving on out. It is happening quick-like. They just had the mail delivered to the other homes, and have their Maryland homes up for sale. Bank of Americrap is saying' we be loosin' 1 billion Bernanke Bucks a year from this program.
article_ Millionaires Go Missing at the WSJ
http://online.wsj.com/article/SB124329282377252471.html
Money for a mansion is no object when you get to play Greenwich polo, mounting two-legged fillies and swinging your BSD. "I think it's just grand, don't you?"
http://www.youtube.com/watch?v=z1LKsJBHkWU
(Thanks to Careless Whisper for that link.)
How do so many Wall Street executives, AIG big shots, and bankstas get away with living in Greenwich when the Greenwich Public Works Department defines "trash" as “a worthless material to be disposed of as in refuse and rubbish”. The answer, according to the Greenwich Public Works Department, is "In Greenwich, we Recycle many things that you might think are trash." I suppose this Wall Street trash even gets a State and Federal tax breaks by claiming they are "recycled trash".
http://www.greenwichct.org/PublicWorks/dpw_Trash.asp
Next, I can't wait to do some flipping in the Hamptons!!
God Bless.
http://wisdomandword.blogspot.com/
I live in town north of Greenwich which has many McMansions for sale and projected decline in demographics for next decade due to aging population moving out not replaced by newer population and limited land availability for new home development. Nevertheless , local town politicians have grandiose plans for new Town hall, firehouse, library and other facilities that will drive taxes higher without regard for reality. The same problem exists at State, County and National level wherby spending cuts are difficult to contemplate and living within projected revenues not easy to accomplish. Certainly seems America is on an unsustainable coarse at all levels. And yet we know if we do not reach out for growth there will be a collapse of a system highly leveraged. Only question is when we face the music---now or later when we are debt leveraged even more.
Oh, but ironically, the jobs will come back once we regain our global competitiveness.
We do not need isolationism; we need free markets without government subsidies and intervention.
When the debt ponzi pops and we have the great reset, there will be less parasites to feed and it will be cheaper to employ people domestically.
Vegas/Phoenix/SoCal/Florida, BITCHEZ!
My real estate economics teacher agrees with that NYT article a few months ago that says there is over a 9 year supply of houses nationwide.
That jives with what i see on the street also and funny thing is builders are still banging these quicky-boxes out and the FHA is still handing out almost zero down loans.
RE will not be an investment in my lifetime....we rare looking at 18-26 years of a Bear RE market....that may become a Global Bear RE market soon as China and Australia RE Bubbles crash.
GL!
Maybe you should check out expat housing prices and days of supply data in the far east, Greenwhich is the wrong indicator of the bonuses of your favorite hedgies. Yankee land is where they plunder and where they install their latest HFT machines and puppets like those buffoons in DC. Don't think they are stupid enough to stay around and wait for the guillotin to drop. When the chaos arrive, you will be slashing each other while they join Faber and Rogers, far away from the impending hurricane.
See where we stand against the elite in The Pyramid of Capitalist System
This poster hangs in the office of a Nobel Prize winning economist.
http://lonerangersilver.wordpress.com/?s=pyramid+of+the+capitalist+system
The over supply precedes the fall in price.
solution - supply will decline if mcmansions are burned down.