Home Prices Fall in Rich New York Suburbs Once Immune to Slump http://www.bloomberg.com/apps/news?pid=20601109&sid=aHBopkXhEA24&refer=home By Bob Ivry May 9 (Bloomberg) -- The U.S. housing slump has hit New York City's richest suburbs. The average price in Westport, Connecticut, home of chief executive officers Herbert Allison of TIAA-CREF and Jeffrey Kindler of Pfizer Inc., and actor Paul Newman, fell 8.2 percent to $1.56 million in the first four months of 2007 from the same period last year, according to multiple listing service data. In Chappaqua, New York, where Bill and Hillary Clinton live, properties sit on the market an average of seven months before they sell, up from five months a year ago. Wealth and excellent credit have until now spared bedroom communities in New Jersey, Connecticut and New York's Westchester County from declines in home prices. Now the tightening of credit in response to rising subprime defaults has disrupted the real estate food chain, bringing the national housing slump to Manhattan's doorstep. Prices fell as much as 18.8 percent this year in 15 of the 24 areas in which data was collected. ``People who may have bought their first home may not be able to do so now, and that stops some of the movement,'' said Doug Werner, a broker at William Pitt Sotheby's International Real Estate in Darien, Connecticut. ``Whales eat plankton. If the plankton disappears, what will happen to the whales?'' Data on home prices and time on the market for Jan. 1 to April 30 were obtained from listing services in New York, New Jersey and Connecticut. Realtors report sales to the listing services and the listing services then share those numbers with the Washington-based National Association of Realtors. The realtors group will release its data for April on May 25. California Suburbs Home prices continue to climb in the wealthiest California suburbs, at a much slower pace. Since 1998, values in the Silicon Valley counties of San Mateo and Santa Clara increased 110 percent and 129 percent, respectively. That growth slowed to an average of 3 percent in the two counties in the first quarter of 2007 compared with the year-earlier period, said Jim Harrison, chief executive officer of RE InfoLink in Campbell, California, which provides multiple listing services for the area. Prices for the first quarter rose in Los Altos (2.5 percent) and Los Gatos (6.5 percent), and days that homes spent on the market before they sold increased in both towns. In Atherton, which Forbes magazine called the wealthiest ZIP code in the country, prices increased 6.2 percent to $3.25 million, while days on the market fell to 82 from 104. ``Silicon Valley is the reason the market is stable,'' Harrison said. ``The software businesses are hiring a lot of people still these days.'' Prices declined by 18.2 percent in Los Altos Hills, where homes spent a month longer on the sale block, and by 11 percent in Woodside, where homes spent two more months on the market than they did a year ago. Bad News While million-dollar homes aren't typically financed with subprime mortgages, which are given to borrowers with bad or incomplete credit histories, buyers in all price ranges have been scared off by the drumbeat of bad news about defaults by subprime borrowers, said Ara Hovnanian, CEO of Red Bank, New Jersey-based Hovnanian Enterprises Inc., the state's largest homebuilder. ``In these markets, there aren't going to be buyers concerned about subprime mortgages, but psychologically it's one more bit of news that's negative and it causes hesitation on the part of buyers,'' Hovnanian said. The portion of subprime loans more than 60 days delinquent or in foreclosure rose to a seven-year high at the end of 2006, according to data compiled by Friedman Billings Ramsey Group Inc. of Arlington, Virginia. Nationally, the 2007 median price for an existing home probably will decline 0.7 percent to $220,300, the first year- over-year drop since the National Association of Realtors began keeping records in 1968. It may be the first drop since the Great Depression, said Lawrence Yun, an economist with the organization. `Trade-Up Purchases' First-time home buyers are more likely to be subprime borrowers. Every purchase of an existing house by a first-time buyer triggers four other sales in the housing market, said Jeffrey Otteau, president of Otteau Valuation Group in East Brunswick, New Jersey. ``They are largely trade-up purchases,'' Otteau said. ``The buyer of the $300,000 house enables the seller of that home to buy a $450,000 house, and up the line until you get to a luxury home. None of that can happen unless the first-time buyer makes the purchase.'' The number of homes in Bergen, Passaic, Morris, Essex and Union counties of New Jersey that sold for less than $400,000 in the first quarter of 2007 fell 27 percent from the same period in 2005, Otteau said. Some of that decline can be pinned on rising home prices. Still, it provides evidence that fewer first-time buyers are entering the market, Otteau said. Connecticut Market In Connecticut, Stamford's price decline of 0.8 percent to $825,049 comes after 12 consecutive annual increases in home values from 1994 to 2005, said John Clapp, professor of real estate at the University of Connecticut in Storrs. Norwalk prices gained 1 percent to $704,302, but the time houses sit on the market there has increased to 100 days from 87. ``It doesn't take reduction in demand from many buyers to ripple through the market,'' Clapp said. In Greenwich, where Starwood Capital Group LLC CEO Barry Sternlicht lives, the average home price dropped 1.3 percent to $2.33 million while time on the market climbed to more than seven months from less than five last year. ``Inventory is quite high,'' said Cheryl Scott-Daniels, chairwoman of the board of Consolidated Multiple Listing Service in Westport. ``The homes that are selling are selling because they're very well priced.'' Buyer's Market? David Smith just sold his 11,000-square-foot Westport home on two acres for $5.9 million -- about $600,000 less than originally listed. He said he took a loss. ``It's a buyer's market now,'' said Smith, an investor based in London. ``There's so much to choose from, you don't get them to focus. Their attitude is, the longer I wait, the less I have to pay.'' Darien prices are virtually unchanged while values increased in New Canaan (22 percent) and Fairfield (1.3 percent). The biggest price declines are along the Metro-North Railroad line in Westchester County, New York, just north of New York City. Prices fell in eight of the 11 areas in which data was collected. In some towns, the number of homes sold was too small to draw conclusions. Larchmont and Mamaroneck experienced a drop of 18.8 percent to $1.08 million. In Armonk, prices declined 17.3 percent to $1.39 million. In Bronxville, the slide was 12.4 percent to $1.34 million. Prices also fell in New Rochelle (4.3 percent), Scarsdale (6 percent) and the Jefferson Valley-Shrub Oak- Yorktown-Yorktown Heights area (6.9 percent). Middle Market In Yonkers, the average home price dropped 1.7 percent to $485,987. ``The effect is the greatest in the middle-market communities -- New Rochelle, Yonkers, White Plains -- where home buyers are financing,'' said Chris Meyers, chief operating officer of Houlihan Lawrence Real Estate in Bronxville. Even in towns where prices rose, homes spent more time on the market. In Bedford, which had a 24 percent gain, the average property sold spent 218 days on the market this year, up from 155 days in the same period last year. Prices rose in White Plains by 8 percent while days on the market increased to 168 from 139. Only the Rye-Harrison-Rye Brook area experienced an increase in average home price (11.5 percent) and an unchanged number of days houses stayed on the market. Meyers said Westchester sales picked up in November after Wall Street firms announced record employee bonuses totaling $36 billion. `Mortals in the Realm' ``They propped up the housing market in the area and put all of us mortals in the realm where it's hard to compete with those kinds of income levels,'' Meyers said. They also helped cushion New York City's suburbs from what the Federal Reserve, in its regional survey known as the Beige Book, last month called continuing weakness in the U.S. market. The exception was New York City, where homes were ``selling well,'' the Fed's Beige Book survey said. Manhattan's median apartment price climbed 1.2 percent to $835,000 in the first quarter from a year earlier, said Jonathan Miller, president of New York residential appraiser Miller Samuel Inc. Along the New Jersey Transit rail tracks in the northern part of the state, where housing prices rose 230 percent from 1992 to 2005, price declines are narrower than in Westchester or Fairfield counties, according to Otteau of the Otteau Valuation Group. In Montclair, the average price fell 6 percent to $623,000. To the south, in Millburn and Short Hills, the average sale price declined 2.5 percent to $1.19 million. In Fair Lawn, where first-time buyers might find a starter home, the average price fell 4 percent to $450,000. Months of Inventory Otteau said his favorite statistic is months of inventory, or the length of time required to sell off all the homes that are currently for sale. At the peak of the northern New Jersey real estate boom in 2005, the inventory was between one and three months, meaning that the ratio of buyers to sellers was about one to one, Otteau said. A year ago, inventory had swelled to 5.6 months of homes, and now it's 7.3 months. ``Some sellers took their homes off the market,'' Otteau said. ``That's made the picture look brighter than it actually may be.''