Greenwich Homeowners Push $40,000 Rentals in Worst Sales Market

Discussion in 'Economics' started by S2007S, Sep 3, 2009.

  1. S2007S


    I love how surprised Cheryl MacCluskey is.

    How much of an idiot is she to believe that "breaking ground" on a $4 million dollar property in 2008 would actually sell so quick in 2009 to make her a profit, the really funny and amusing thing about it is that she actually thinks that after pulling it off the market at $4.4 million in June that she thinks she can put it back on the market in March 2010 for $4,900,000.

    I truly think she needs to wake the F$ck up and realize that no way is she going to get $4.9M. She will be lucky to get something over $3.5.

    Greenwich Homeowners Push $40,000 Rentals in Worst Sales Market

    By Oshrat Carmiel

    Sept. 3 (Bloomberg) -- Cheryl MacCluskey broke ground on a five-bedroom luxury home in Greenwich, Connecticut, last year, hoping it would sell by June. Then reality set in.

    After cutting the price 13 percent to $4.4 million failed to lure buyers, she rented it this week for $13,000 a month.

    “I’d never have put it on for rent before,” MacCluskey, president of M&M Development, said of the 7,800 square-foot house. “In this down market, you don’t really have a choice.”

    Greenwich homeowners, saddled with the worst sales climate in 30 years, are turning to the rental market. The number of single-family properties for rent in this suburb an hour outside Manhattan climbed more than six-fold this year as sales fell by almost half. More than 525 houses were rented or listed for lease through August, according to Eric Bjork, vice president and sales director for Prudential Connecticut Realty in Greenwich, home to more than 100 hedge funds.

    “Never in the market history have I ever seen anything like this where you have a whole group of the normal buyers in Greenwich renting luxury homes instead of buying them,” said Jeanne Howell, a broker for Greenwich Fine Properties.

    That’s a departure for a town synonymous with high finance. In 2008, hedge funds occupied about 80 percent of the commercial property in town, according to data from Los Angeles-based broker CB Richard Ellis Group Inc. Billionaire Edward Lampert’s ESL Investments Inc. is based there.

    Home Sales Sink

    Home values and income in Greenwich have jumped. Median home prices climbed 32 percent from 2003 through 2004, then another 13 percent in 2005, according to data compiled by Russell Pruner, broker and owner with Shore & Country Properties.

    The town’s median household income was about $118,000 in 2007, more than twice the national average, according to the U.S. Census Bureau. Annual taxes on a home with a $4 million market value could run as much as $24,500, said Roland Gieger, Greenwich’s budget director.

    Single-family sales in Greenwich declined 48 percent to 167 this year through July, according to Shore & Country. That puts the town on course for its worst sales decline since records began in 1977.

    The number of homes for sale climbed 24 percent from a year ago to 692 as of Aug. 31, and the median price dropped 21 percent in the 12 months through July to $1.55 million, according to John Cooke, a broker who compiles data for Prudential.

    High Expenses

    The house MacCluskey built on less than 1 acre near the town’s central business district costs more than $15,000 each month to carry, including taxes and the mortgage. It has four fireplaces, a library and six bathrooms. She plans to put it back on the market in March for $4.9 million.

    About 50 single-family Greenwich homes were listed for rent of $15,000 or more last month, according to Howell. More than half were also available for sale. Speculative homes, those built without a buyer lined up, accounted for 20 of the 50 high- end rentals, Howell said.

    Julianne C. Ward, a Prudential broker who advises builders on marketing such homes, raced to show one last month when a Manhattan-based client called to ask if a newly completed $11.75 million estate on French Road might be available for rent.

    Seeking Price Cut

    Her client arrived at the seven-bedroom, 13,000-square foot home in a New York City taxi cab, which waited in the drive as its passenger toured the antique brick and limestone house.

    Built to mimic a century-old estate, the property is surrounded by mature trees, while the house has modern amenities including a 1,600-bottle wine cellar, four-car garage and an exercise room with a rubber mat floor.

    Ward’s client countered the builder’s $30,000 a month asking rent with an offer “in the 20’s” Ward said. The owner declined.

    “He decided he’d rather sell it new,” Ward said.

    The family that leased a speculative home on Lake Avenue for $20,000 a month last year decided to buy it for $6.5 million in July, Bjork said.

    Renting is “a way to test drive the house,” said Joseph Barbieri, a broker with Sotheby’s International Realty in Greenwich, who rented four properties for more than $20,000 a month in the past six months. “The question is when these leases expire next summer, what will the real estate inventory be like then?”

    Delaying Inevitable

    The most expensive year-round rental in Greenwich is $42,000 a month. It’s a 14,800 square-foot, six-bedroom built in 1994 on Conyers Farm Drive, part of a gated neighborhood, Barbieri said. It sits on almost 13 acres, has a pool, a guest house and annual taxes of $45,000, according to data on the Greenwich Multiple Listing Service. It’s also for sale.

    It has been for rent since February.

    Renting may not be wise for owners who eventually want to sell, said Mark Hanson, president of M. Hanson Advisors, a housing and mortgage research company in Menlo Park, California.

    “It’s really doing nothing but delaying the inevitable,” Hanson said. “These houses are not going to double in price.”
  2. Where's the link?

    I want to send this link to a friend in Connecticut.

  3. nitrene


  4. Whenever you see annual rent/home price yields of 30, 40 or 50 on residential real estate then you know that either the rent is too low or the home price is too high.

    With a $13,000 rent I assume the sale price of $4.4m could be cut by another 30-35%+ before buying this house makes any financial sense whatsoever.

    If you can rent for $13k, why buy for $4.4m? That'd be ridiculous.