Home sales revive in Greenwich, Connecticut, favourite of bankers
Greenwich, Connecticut, home to Wall Street bankers and money managers hit hard by the financial crisis, experiences revival in sales
For Mari Nuzum, who spent three years searching, it's the best time to buy a home in Greenwich, Connecticut. She and her husband, Richard, bought a six-bedroom Colonial revival in the back-country neighbourhood for US$3.85 million. A year ago it was listed for US$4.75 million.
"I had in my mind exactly what I wanted for our family," said Nuzum, who moved in July with her husband, president of investments at Mercer Global Investments, and their four children to be closer to school and within commuting distance of New York, about 64 kilometres to the south. "My husband said, 'Just wait, the prices will keep going down.'"
The sale of the almost 929 square metres property illustrates the shifting fortunes of real estate in Greenwich, home to some of the world's top bankers and money managers. Five years after the collapse of Lehman Brothers, which led to thousands of job cuts on Wall Street, smaller bonuses and a paralysed housing market, the town is experiencing a revival in home transactions as sellers reduce prices and buyers set their sights lower, forgoing the US$10 million-plus properties that helped define the boom years.
Median home prices in Greenwich, known as the hedge fund capital of the world, rose 3 per cent to US$1.64 million in the first eight months of this year and the number of sales jumped 17 per cent, according to brokerage Shore & Country Properties. That followed a 3 per cent price drop last year.
Homes between US$750,000 and US$5 million are driving the rebound. Of 514 sales in the first eight months of the year, just one cost more than US$10 million, according to Shore & Country. In 2007, there were 21 transactions of more than US$10 million.
"People are just being a lot more conservative with how they spend their money," Russell Pruner, owner of Shore & Country, said of Greenwich. "They want to bank more money in the long run so that if there is a further downturn in the financial sector, they will have money available to them instead of living bonus to bonus."
About US$900 million was spent on Greenwich properties priced at more than US$10 million in the four years prior to the crash, as hedge funds doubled to manage US$1.9 trillion, banks posted record profits and UBS and Royal Bank of Scotland Group established the world's two largest bank trading floors in nearby Stamford, Connecticut.
Mansions and multimillion dollar renovations attracted the attention of Vanity Fair with a 2006 article titled "Greenwich's Outrageous Fortune". The piece described Paul Tudor Jones' home overlooking Long Island Sound - with its 25-car parking garage - and Steven Cohen's 32,000 square foot mansion that includes an ice-skating rink.
As the financial crisis unfolded, profiles of long-time resident Richard Fuld, former chief executive officer of Lehman, featured his indoor squash court.
The collapse of Fuld's bank helped trigger a global credit crisis that plunged the US into the worst recession since the Great Depression with overall home prices in the US dropping 35 per cent from the peak. In Greenwich, values fell 24 per cent, according to data compiled by Shore & Country. While the decline was less severe than the country's, Greenwich's recovery has trailed the rest of America amid sweeping changes to the finance industry and years of mediocre hedge-fund returns.
In addition to thousands of job losses, banks have changed their pay structures, limiting cash bonuses and granting more stock and deferred compensation packages.
Lower bonuses, an emphasis on delayed compensation, and the possibility that banks could claw back pay in the future means some finance professionals have set their sights lower in Greenwich, according to David Haffenreffer, a real estate broker at Houlihan Lawrence, a Westchester, New York-based firm that opened a Greenwich branch this month.
"Instead of that 6 million, 7 million or 8 million-dollar home, they're buying a 3, 4 or 5 million-dollar house," Haffenreffer said.
Sellers have also had to lower expectations to entice buyers. Many homes for sale in Greenwich the past few years were overpriced, as owners who could afford to stay put refused to sell at a discount, according to Mark Pruner, a broker at Berkshire Hathaway HomeServices New England Properties.
"That's a real psychological barrier, the idea of losing money on your house," said Pruner, adding that in the past few months owners who have reduced their asking price have had better luck securing offers. "Owners have to look at the prices and market to decide what the appropriate price is."
The Nuzums' new property was initially listed at US$5.7 million in June 2007. After failing to sell, it was relisted at US$4.75 million in April 2012.
The sudden interest in luxury properties is in part because buyers are looking for an alternative investment to bonds, which they fear may decrease in value as interest rates rise, as well as concerns that New York's next mayor could raise taxes for high-income earners, Pruner said.
Buyers are increasingly taking advantage of low borrowing costs. The number of properties financed using jumbo mortgages, or those too big for government programmes, rose 18 per cent in the second quarter to the highest since 2007, according to Warren Group, a New England real estate tracker.
Wall Street is also showing signs of recovery. While bonuses are still below their 2006 peak, they rose 8 per cent last year, according to DiNapoli's report.
For Mari Nuzum, an uptick in Greenwich real estate couldn't be better timed.
"We are so happy we moved when we did," she said. "Hopefully now we'll be able to sell our old house."