Once upon a time, a nonexistent income tax (Connecticut became the last state in the US to adopt an income tax in the early 1990s) and low property taxes - not to mention the gold coast tableau of beautiful beaches and lush greenery - made Greenwich, CT - just over the state line from Westchester - a haven for hedge fund bazillionaires and other wealthy finance types.
But since the financial crisis, sales of megamansions and other high-end homes in the city have tapered off as taxes have inexorably risen and trends have shifted to favor urban environments. As we reported back in June, there were only five sales of homes for $10 million or more in 2015 and 2016, less than half the historical average.
At the time, there were 38 properties listed for $10 million in and around Greenwich, meaning it would take at least seven years to sell them all.
And of course, the state’s looming fiscal crisis - and the prospect of still more tax hikes on top of the two that lame-duck Democratic Gov. Dannel Malloy has pushed through in recent years - isn’t doing the real estate market any favors.
Amid the market washout, owners of many of the luxury homes mentioned above are finally throwing in the towel, as Bloomberg reports. Listings of luxury homes in the Connecticut town plunged more than 31% from a year earlier.
Luxury-home listings in the Connecticut town plunged 31 percent from a year earlier, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That’s largely because sellers who failed to get their hoped-for price quit trying to find buyers and took their properties off the market to wait for a better day.
“Inventory is declining but sales aren’t rising,” Jonathan Miller, president of Miller Samuel, said in an interview. “It’s mostly listings being pulled off the market."
To be sure, part of the drop off in sales of mansions and other large, out-of-the-way homes is due to a shift in preferences. Buyers today are favoring smaller homes closer to the center of town - where they can easily catch a the New Haven line train for the 50 minute ride into Grand Central Terminal.
As one broker put it: “Small is the new big."
...kind of like how 30 is the new 20.
Tastes are changing in Greenwich, home to many Wall Street executives who take the 50-minute train ride to Manhattan. Lavish mansions on several acres have languished, while smaller homes closer to downtown get scooped up. In the third quarter, sales of luxury homes - the top 10 percent of deals by price - fell 13 percent from a year earlier to 21, the firms said. Condo purchases, meanwhile, jumped 35 percent to 58 transactions, the most for a quarter in data going back to 1999.
“Small is the new big,” said Scott Durkin, chief operating officer of Douglas Elliman. “Millennial buyers, they want to be in town, they want to be close to services, they don’t need 5,000 to 10,000 square feet -- they’re OK with 1,600 to 2,200.
“We really don’t have enough of those listings to sell,” he said. “We need more."
The closer that homes are to Greenwich’s commercial district or waterfront, the faster they’re selling. At the current pace of deals, it would take 7.8 months to sell all the listed properties south of Post Road, an area that includes the train station and tony shops of Greenwich Avenue, Miller Samuel and Douglas Elliman said. In the Back Country section - north of the Merritt Parkway, featuring oversized estates set back from winding, two-lane roads - it would take more than three years to clear the listed inventory.
The owners of one property located on Greenwich’s iconic Old Mill Road agreed to three price cuts in the two years the 11,000 square foot property has been on the market. The property, on 5.3 acres that include a 2,329-square-foot guest house, was first listed in May 2015 for $17.35 million, and eventually lowered to $11.45 million. But was eventually pulled off the market in September, before brokers tried a different tactic: relisting it under a different address - 781 Lake Ave. - at the low, low price of $10.95 million.
Heavy discounts helped encourage a pickup in sales earlier this year. And with more sellers pulling homes off the market, brokers are hoping the drop in listings revives a “sense of urgency” that’s been missing from the market for years.
High-end sales had picked up earlier this year, largely because of price cuts, helping to clear some of the backlog. Sellers were still discounting this quarter, offering an average of 6.7 percent off the last listed price. The reductions drew in buyers for some costlier homes, pushing the median sale price in the luxury category up 34 percent to $6.5 million, Miller Samuel and Douglas Elliman said. That’s the upside to having so many fatigued sellers giving up, according to Durkin. It clears the distractions and boosts confidence for those who want to commit to a high-end purchase in town.
“When there’s too much to choose from it takes off the intensity of the buying process,” Durkin said. “It doesn’t give you any sense of urgency and it doesn’t get you off the fence."
Brokerage Houlihan Lawrence, in its own Greenwich report, said that luxury sales did best at the top, with homes priced at $5 million and above. There were 18 such deals in the quarter, compared with 11 a year earlier. Two were for more than $10 million.
Given the state’s fiscal dysfunction, we’d be surprised if sales saw a meaningful acceleration any time soon.