Inventory Glut Of Ultra Luxury Homes Hits Greenwich, Over 4 Years Of Supply

Tyler Durden's picture

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:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
williambanzai7's picture

Let the unwater hedgies beg JP Dimon for a mortgage freebie.

Xibalba's picture

too bad prices won't come down to affordable levels....

Fred Hayek's picture

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.

PulauHantu29's picture

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.

max2205's picture

Renting is outrageous in major cities except Vegas and Phoenix. Don't be fooled by that metric.

mayhem_korner's picture

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.

sun tzu's picture

You're also tied to the land and have to pay RE taxes until you die then your heirs have to pay taxes

ToNYC's picture

 

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!

oldmanofthesee's picture

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'.

 

Fanakapan's picture

Yeah give it the old Smoot Hawley treatment, you never know it might work better this time than the last :)

sun tzu's picture

Is there any proof that Smoot-Hawley caused the Great Depression to worsen? Tariffs worked fine since the founding of the country

Fanakapan's picture

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 :) 

 

Careless Whisper's picture

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#ixzz1R9y6se6w
hbjork1's picture

The Helmsley is one to track.  Asking and final sales price may be very different.  $35 sounds much more attractive than $40+.

 

sun tzu's picture

I wonder if the realtor still gets 6% on that sale. They can retire after selling that one

Doyle Hargraves's picture

Strategic Default Bitchez!!!

Ripped Chunk's picture

That Doyle been drinkin' again and gettin' mean, Uh hu

Rainman's picture

The uber-rich silverheads better list now if they expect to be dead in 4 years.

buzzsaw99's picture

Calpers will buy them!

Mr Lennon Hendrix's picture

Japan's pension fund will buy them!

Yen Cross's picture

 KAMPO? I doubt that. JGB's are not the ticket.

buzzsaw99's picture

GOOG will buy them!

buzzsaw99's picture

Norway teacher's pension fund will buy them via gollum sachs!

Mr Lennon Hendrix's picture

Bernanke will buy them via Goldman Sachs!

Zero Govt's picture

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 

Oh regional Indian's picture

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/

lilimarlene1's picture

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.

mayhem_korner's picture

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.

Leo Kolivakis's picture

And wait till the next crisis, redemptions will hit hedgies hard and they won't be able to offload their McMansions fast enough...

ATG's picture

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/

RobotTrader's picture

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.

oldman's picture

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

High Plains Drifter's picture

or he could have used a dart board with stock names on it.

trav7777's picture

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.

snowball777's picture

If you're gonna squat....squat in style.

Incubus's picture

with a spotter...

 

....and high heels.

Yen Cross's picture

  You just gave me a {HERNIA}   I can't stop laughing. 777 led you into the "quote"

 

      He gets props as well.

JustACitizen's picture

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...

Downtoolong's picture

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.

Dre4dwolf's picture

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.

 

High Plains Drifter's picture

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..........

Seasmoke's picture

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

Bitch Tits's picture

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?