Tag Archives: KMS Partners

New Home Construction: Piggy Bank Or Used Car?

The other day, an “06880” reader e-mailed me in an agitated state. She complained that because home buyers these days want only new houses, realtors only take clients to see those properties. As a result, they sell for premium prices.

She cited a new 5,000-square foot home with a $3+ million price tag. A “pre-existing” house of the same size, style and quality fetches “only” $2.2-$2.4 million.

The e-mailer said that everyone wins: builders for obvious reasons; realtors because of higher commissions; the town because of higher taxes.

Except, of course, the seller. She described a new home that sold for $5.4 million in 2010. It went on the market this year for $4.295 million. That’s down more than $1 million — and it was first built and sold in the middle of the financial crisis.

This new home in the Compo Beach area is 4,569 square feet, on 0.52 acres. It's on the market for $4.975 million.

This new home in the Compo Beach area is 4,569 square feet, on 0.52 acres. It’s on the market for $4.975 million.

I could have an opinion on this. But it wouldn’t be based on anything close to actual knowledge or insight.

So I called 2 of Westport’s most experienced and respected realtors: KMS Partners at Coldwell Banker’s Karen Scott and Mary Ellen Gallagher. (Full disclosure: They are also good friends. And I coached their sons as Staples High School soccer players.)

The women said: Yeah. The e-mailer is right about the prices. Realtors often talk about this very subject.

However, they said, there’s more to this than meets the eye.

The phenomenon is not the fault of realtors, they said. It’s driven by buyers.

When prospective home-buyers start looking at existing homes, they may not find every amenity they expect. Existing homes may have smaller rooms, or lack the open floor plan of new homes.

Once they see new construction, every “older” home — even relatively new ones — pales by comparison.

Buyers start yearning for a totally new home. Newness becomes more important than anything else — even a busy street, or small lot.

The reality, Karen and Mary Ellen said, is that most buyers today understand they will pay a premium for new construction than a lower price for an already-lived-in home — even one that’s been lovingly maintained.

This Green's Farms area house was built in 2006 -- 10 years ago. It's 3,993 square feet, sits on 0.51 acres, and lists for $1.799 million.

This Green’s Farms area house was built in 2006 — 10 years ago. It’s 3,993 square feet, sits on 0.51 acres, and lists for $1.799 million.

But here’s the catch: New homes are not the “piggy banks” home buyers believe they should be. Homes are a commodity. Their market value is driven by various economic factors and market conditions — for example, supply and demand.

Think about a new car. The moment you drive it off the lot, it starts to depreciate.

It’s the same with new construction. The moment the first owners move in, it’s no longer “new.”

Unfortunately, Karen and Mary Ellen noted, some owners of new homes don’t realize that fact until they put their no-longer-new home on the market.

Realtors are in a tough spot. They may try to explain the reality of new-vs.-older construction. But many buyers — bedazzled by new homes — don’t want to hear it.

They figure they’ll enjoy their new home, and deal with the resale price many years down the road.

And, Karen and Mary Ellen admitted, builders would not be building at the rate they are if buyers were not buying.

So the next time you see a perfectly good “old” house torn down, and a brand-new home going up in its place, understand the reason: There’s a demand for that new construction.

Until it’s time to sell.

 

“Suddenly, A Teardown Doesn’t Sound So Bad”

When it comes to real estate agents, the glass is never half, or even completely, full. It’s always overflowing.

A walk-in closet becomes a “unique home office.” The train tracks in your backyard are transformed into “walk to the station!” I actually saw an Old Hill Road property that touted “beach access.” Sure — buy your sticker, like everyone else.

But a recent mailing from KMS Partners caught my eye. The principals — experienced professionals all, and longtime Westport residents — did what realtors seldom do: They addressed a continuing land-use debate head on.

Impressed by their willingness to confront the issue of teardowns, I asked if I could reprint their message on “06880.” I warned them that our commenters can be a frothy bunch, and there might be some criticism.

Go ahead, KMS said. We welcome the discussion. So read what they had to say — and feel free to add comments at the end. Real names, please!

In any town in Fairfield County, the topic of new construction homes creates a lively discussion. At KMS Partners, we have found you either love it or hate it. But no matter what your opinion is, new construction is the hottest market niche in the majority of towns across Fairfield County.

Many buyers want new homes, like this one.

Many buyers want new homes, like this one.

What makes new construction so popular? Buyers’ behaviors, plain and simple. Today’s buyer wants ease of transition: the latest trends in amenities, the most efficient systems, design teams to help select decor and finishes, top-of-the-line appliances, builders’ warranties, smart home technology, low maintenance, fresh paint and gleaming finished floors — for starters.

What happened to the “fixer-upper buyers”? They are the minority these days.

With all this demand for new homes, across various price points, builders naturally search out properties to meet the demands of their clients. The result is increased competition for land. That drives up land values, to the point where land is sometimes more valuable than the house the land sits on.

A charming 50-year-old colonial, lovingly lived in yet in need of updates,will not attract an end-user buyer as much as a builder (assuming the land is suitable for a new construction home). Yep, your house could be worth more as a teardown.

Some houses -- like this at the beach -- are worth more as a teardown.

Some houses — like this at the beach — are worth more as a teardown.

While these are broad statements, it is best to consult an experienced agent to ascertain the full potential of your property.

For those who loathe another “teardown of the day,” consider this scenario. An agent or builder approaches a homeowner with a legitimate offer to purchase the property. Cash, “as is” or with minimal contingencies, closing at your convenience and an attractive purchase price for the property.

The house is tired, in need of repairs and not appealing to buyers today. This is your nest egg. You are ready to move on to the next chapter of your life. It’s an easy sale. Suddenly a “teardown” doesn’t sound so bad.

But what about the character of our towns? And who will be able to afford to live here? There must be some balance to this phenomenon.

The oldest home in Westport -- located on Long Lots Road -- took years to restore. (Photo by Larry Untermeyer)

The oldest home in Westport — located on Long Lots Road — took years to restore. (Photo by Larry Untermeyer)

We agree. We work with clients who have strong opinions on all these points. For our sellers, we honestly advise how they can maximize the potential of their property. Not every “resale house” is a teardown. To the surprise of many of our resale clients, their homes are attractive to today’s buyers.

For our buyer clients who do want new construction, we are always in search of land and will navigate them through this process. When builders ask our opinions, we are not shy to express them.

We love our towns and the characteristics unique to them. We encourage builders to strike the balance of new and New England when creating their projects. We also encourage our new construction buyers to do the same. We would love to hear your opinion on this topic.

The Buzz About Real Estate

There’s a buzz in the Westport real estate market. It’s both real (the sound of new construction) and metaphorical (a swarm of buyers).

My anecdotal observation of the market — watching what’s going on around town, scanning sales numbers and prices — was confirmed by Karen Scott.

Karen — of KMS Partners at Coldwell Banker — is one of Westport’s savviest, energetic and experienced realtors. (Full disclosure: She’s also a friend. I have coached her 2 sons on the Staples soccer team, and am a huge fan of the entire Scott family.)

Karen says there’s a reason the local real estate market shows life for the first time since the tumble crash of 2007-08.

Interest rates are low, and should remain so for a while.

Some buyers are tired of renting. Others are tired of searching, and willing to commit.

Even the weather helps. Our North Carolina-ish winter has not only encouraged people to go outside and be active; it’s also kept them away from the ski slopes, giving them time search homes on the internet, then drive around to actually see them.

This Nantucket Shingle-stylel residence "captures water views from nearly every room." It's listed at $8,850,000.

In past years, the “spring market” — often the most active of the year — has taken place in May and June. This year, Karen says, it’s already begun.

Agents, mortgage lenders, buyers and sellers — all sense an increased level of activity” since New Year’s. “People are negotiating and making offers,” Karen says. “They’re no longer sitting on the fence.”

New construction is hot, particularly in the $2 million range.

“Westport has a love/hate relationship with new construction,” Karen says. “But for a while, there was no construction at all. It’s back, but with smaller homes and on smaller pieces of property” — 5,000 to 6,000 square feet, finished on 3 to 4 floors. The footprint is smaller than before, and there’s more interest in energy efficiency.

Westport remains attractive to New Yorkers and transferees from other parts of the country, Karen notes. We continue to attract global clients, with Chinese buyers new to the mix.

Like other buyers, they come for the schools, the proximity to New York and places like Yale, and the amenities.

Looking to enjoy the "Compo Beach lifestyle"? This house can be yours for $1,849,000.

“People love Compo and Longshore, the arts, the sports, everything for kids,” she says. Among the hot areas: the beach, and neighborhoods like Evergreen and Imperial Avenue that are close to town.

Saugatuck — with its new restaurants and other construction — is also drawing attention from buyers.

Tax rates too are very favorable — particularly in comparison with Westchester.

Sellers include empty nesters and homeowners downsizing, as well as the converse: young, growing families looking for bigger digs.

Westport has some foreclosures — though, Karen says, not on the scale of other places.

Prices have been fairly stable. Karen characterizes less-than-$1 million homes as “very hot.” The $1 million to $1.5 million range is “competitive.” Those between $2 million and $3 million are “tough sales.” The upper end — $5 million and up — has seen good recent action.

This "exquisitve Victorian farmhouse" recently sold for $2,495,000.

Despite the renewed interest, Karen is realistic. “Buying and selling in Westport is still a big financial transaction. People are cautious. They’re doing their due diligence more thoroughly than ever before.” Some good news: From a lending standpoint, Westport is considered a stable market.

Real estate is one of Westport’s favorite games. For several years, we’ve been on the losing end of that game.

Finally, it seems, buyers and sellers are playing ball again.