Houses in the exclusive Connecticut suburb of Greenwich, long known as an enclave for hedge fund managers, are now selling for significantly less lately, with one recent colonial house forced to the auction block. The property, located on the iconic Round Hill Road, is being sold in what would normally be unthinkable fashion for Greenwich: it’s being auctioned. It’s price tag used to be $3.795 million, but now the four-bedroom property will be sold for its reserve price of just $1.8 million, according to the Wall Street Journal.
Its seller, Isaac Hakim, was faced with a grim buyer strike reality and said it was time to move on. “We are ready to sell and I don’t want it to drag on,” he told the WSJ. Where is Hakim rushing to? Why Florida of course.
While these types of luxury home auctions frequently happen in other parts of the country, it’s rarely seen in a market like Greenwich which used to be a beacon for top players on Wall Street and still remains one of the richest towns in the United States.
But Greenwich now faces new challenges, as New Yorkers opt to live in the city and even some, like Hakim, relocating to Florida in search of a favorable tax environment. The bonuses that were used to prop up the real estate market from bankers are also starting to run dry while SALT limitations make owning a luxury house increasingly prohibitive.
This has forced a sharp repricing of the local real estate market as sellers are starting to accept less and owners that paid top dollar for their homes in the 2000s are embracing the need to make concessions if they want to sell. There were 45 properties in Greenwich priced at more than $5 million that had their prices reduced by 10% or more in the 12 months between April 2018 and March 2019.
Attorney Frank J. Gilbride II said one of his clients recently sold his home for $11.18 million after buying it for $14.7 million in 2007. He said: "We’re finding that the larger back country homes have not been selling recently, because the new buyers don’t want to maintain 10 acres of grass. A lot of sellers are taking hair cuts of $1 million or more just to move on.”
Some sellers have even resorted to renting out their homes. Brian Amen, an agent at Houlihan Lawrence, said one of his clients tried to sell his $3.65 million home for about a year, then lowered the price, and then decided just to lease it out in hopes that the market would improve down the road. Other prominent owners have taken far less for their house than they paid.
Iconic music executive Tommy Mottola sold his house for $14.875 million, or 25% of its original asking price. And hedge fund executive Ara D. Cohen sold his property for $17.5 million - half of what he was looking to get in 2015. The auctioning off of homes is likely to not help sentiment for projects in the area. In 2016, Starwood CEO Barry Sternlicht called Greenwich the worst housing market in the country. “You can’t give away a house in Greenwich,” he said. In retrospect he may have been right.
The reaction to the comment infuriated locals. Jonathan Miller, a New York appraiser said "the brokerage community went ballistic. Now, imagine trying to tell them you’re introducing the auction concept.”
Robin Kencel, who works for the city's public relations campaign, has been trying to do damage control: “I don’t think it’s anything specific about Greenwich, it just speaks to that specific seller’s needs.”
Robin may want to take a look at these stats: the median price for a home in Greenwich dropped by an astounding 16.7% last year to $1.5 million in the fourth quarter of 2018. On the luxury end of the market, including the top 10% of sales, prices dropped even further by 18.8%. That trend has continued into the first quarter with estimates at median prices falling more than 25%.
The worst is yet to come, however, as the average time a luxury house sits on the market in Greenwich is 357 days from its most recent price adjustment, and as sellers become discourages, they will likely take even bigger discounts to sell their houses.
Somewhat surprisingly, the only segment of the market that’s performing well are smaller entry level homes that are close to the train station, which are being snapped up by a younger generation of buyers. Low price condos in the area now start at just $330,000.