State of Real Estate

Young Affluent Buyers and Other Pack Leaders of the Spring Market

The sound of hammers were everywhere in Westport last year. In 2013, a total of 106 houses was demolished and 103 new houses went up in their place. The new reality is clear: If you don’t keep up that home, some builder is going come knocking on the door. “Last year we had the most housing starts in history,” says Lisa Passavant, manager of Coldwell Banker’s Riverside office.

The numbers tell the story. In 2013, the average sales price in Westport was $1,533,045, which is a whopping gain of $123,000 over 2012.

That number might have been fortified by some of the bigger transactions, topped by the $14.4 million sale of the Don Imus mansion on Beachside Avenue. “The market has gotten very strong,” says Julie Haroun of Westport Residential. “The market came back stronger than ever. The $1.9 million house is now the $2.9 million [house]. And there are a lot of buyers looking for new construction in the $3 million range. It’s unbelievable.”

She adds, “There’s definitely a discount for anything that’s not new. You have either a new home or a builder who wants it to knock down.”

Julie would know. Her husband Robert Haroun is one of these very busy builders. “We’re talking about those summer homes built in the ’50s and ’60s—the I Love Lucy era. These capes have lived out their existence and now it’s time to put up something with proper insulation and windows.”

All this construction has meant a gradual transformation of certain blocks and neighborhoods. The Reichert Circle-Dover Road area now has ten new houses. Rayfield Road is chock-full of new houses. Indeed, the Long Lots school district is, Julie thinks, getting pretty hot.

Having gauged this new reality, builders (many of whom had to sit out the years 2008–2010) are snatching up any available $1 million Cape and replacing it with $3 million worth of new. (Question: How will Westporters respond when the last Eisenhower-era split-level in Westport faces demolition?)


The Players

Two groups of players have made their presence felt in the suddenly very active market. The first is the Empty Nester, or Downsizer, who wants to sell the big house but also stick around the neighborhood—not an easy task with small houses at a premium. “A big piece of our market is the Downsizer,” says Michelle Genovesi of Michelle&Company in Westport. “Or divorced people who need a smaller house but want to stay near their children.”

As the Downsizers sell, they rub their hands together and hope for the appearance of the other big group to dominate the scene: the Young Buyer. If the Downsizer’s house should be, uh, homey (i.e., perhaps a bit old-fashioned), that’s not good. The Young Buyers only want new.

“The younger couple typically doesn’t want to do projects,” says Charles Zylstra, sales associate of Nicholas Fingelly Real Estate. If they’re paying Westport prices, they’re working insane hours and thus not likely to choose new wallpaper or figure out who to call for a new kitchen.

“If they have the ability to buy a $3 million house,” explains Melanie Smith of Berkshire Hathaway New England Properties, “they probably work in the financial market, they work long hours and they’re busy. I had a buyer the other day say to me, ‘I love the antique houses but I know I’d be painting it all the time.’ ”

The Young Buyers also seem to be broad-minded about design. “Never before in my career have I seen people wanting eclectic, wanting a contemporary feel or an open floor plan,” says Julie Vanderblue of the Higgins Group. “I think it’s just the trends of youth.”

The Young Buyer is also completely wired. “The Internet has really helped buyers become more educated on their purchases,” notes Michelle Genovesi. Her firm, William Raveis, for example, provides an app for smartphones that allows users to easily canvass neighborhoods for all the prices and details. Just stand on a Westport street and watch the details pour forth on your phone’s screen.

Another fresh wave of buyers, notes Genovesi, are the Weekend Retreat people. “Westport is becoming popular because traffic is easier to manage here than it is in the Hamptons.”    


The Financials

Manhattan’s insane prices have, of course, done their share to push people out this way. And the one advantage Westport has always had over its neighbors is New Yorkers have just heard of Westport. Once they look around, they realize that Westport has (unlike Fairfield, let’s say) kept a lid on its property taxes.  

Interest rates? That’s another matter. No one knows what the new Fed chair Janet Yellen is going to do, but some soothsayers are already predicting a steady rise in interest rates. Lawrence Yun, chief economist of the National Association of Realtors, thinks that 5.5% is possible by the end of the year. This rate still might sound enviable to people who paid off houses at 9% or higher (i.e., twenty-some years ago). But the numbers naturally incur panic in number-obsessives who have been accustomed to the essentially free money of the Ben Bernanke years. Result? Folks who work in the financial markets are rushing to get locked in now.

So while pickings might be ripe for the young hedge-funder with a meaty January bonus, what about those who occupy a slightly less-exalted stratosphere? The real news here, besides the new prices, is the new reality of getting a loan. Get set for a grilling.

The Dodd-Frank Act finally swung into motion and brought with it a lot of new, tougher mortgage restrictions. Suddenly we’re hearing the initials “QM,” as in Qualified Mortgage. Borrowers are in for a new, heavier scrutiny. A borrower who has changed businesses or simply reorganized it will be asked to provide rafts of documents and income statements.

“They’re basing loans now on income, not assets,” says Bette Gigliotti of Raveis. “In the past, they said, ‘Oh, you have a have a huge Charles Schwab fund.’ But I don’t think they take that into consideration anymore.”

The banks are flush with cash, says Michael Daversa of Atlantic Residential Mortgage, and very willing to make loans. Some loans, though, Daversa observes, are trickier. A freshly divorced person dependent on alimony, for instance, will have to collect a year’s worth of alimony payments before getting a mortgage. “Self-employed people will have a tougher time. And I can’t name a bank today that’s doing a no-income loan,” Daversa says.

The jumbo rates of four-and-a-quarter percent are up a half point in the last eight months. “People are furious,” he says, “Are you kidding? That’s still a tremendous rate.”

While the stiff new QM regulations have put the kibosh on the “creative” loans of the previous decade, Daversa still sees some ingenious innovations. One is the “blended mortgage,” which some people are using in lieu of a jumbo loan. “You get a $600,000 mortgage plus a $200,000 second mortgage as a home-equity credit line. The second mortgage is usually an interest-only loan, so it’s cheaper. Are you paying off principal? No. So you have to be financially stable and knowledgeable to handle them. But once you figure out how to do a blended mortgage, you get a better rate.”

So the deals are out there, and people are ready to take them. The market will always be hostage to current events. The government shutdown last year also caused, say a number of brokers, a house-sales shutdown. But then we escaped Armageddon and things resumed.

“The difference in how I felt last January and this January is markedly different,” says Coldwell Banker’s Lisa Passavant. “Two or three years ago it was anybody’s guess as to which way the country was going. Last year at this time people felt a little paralyzed. But not now. We’ve always gone through a cycle of growth periods followed by corrections. It appears now we are at the start of a new growth period.”

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