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: