WestportNow Survey: Bubble Theory Deflated, Here Anyway

By James Lomuscio

While there’s plenty of talk about a real estate bubble nationally, those who know the Westport real estate market best don’t give it much credence, according to a WestportNow survey.
Westport housing boom: experts say there’s no bubble here. (CLICK TO ENLARGE) WN photo

“When you talk about a bubble bursting it’s just not going to happen, especially in Westport, Connecticut, because it’s always going to be a desirable place to live,” said Stephen Apgar, publisher of the Westport-based Mortgage Journal.

With all due respect to Alan Greenspan, if not Newtonian physics, Apgar said escalating housing prices don’t necessarily foreshadow a precipitous drop, particularly here.

“A bubble bursting is when you have IBM stock at $120 and it drops to $60,” he said. “That simply can’t happen to real estate in this area.”

He added, “A correction may be a more accurate term than a bubble.”
Stephen Apgar: bubble “just not going to happen” in Westport.”

Stephen Habetz, owner of Threshold Mortgage Co. in Westport, agreed. Even during the recession-triggered real estate price dip between 1988 and 1991, Westport’s housing prices “didn’t even come close to dropping 10 percent,” he said.

Then the worst case scenario in Fairfield County happened in Bridgeport where housing prices dropped as much as 30 percent. But that was due to other factors: sky high taxes, rising crime and municipal bankruptcy.

The region as whole, however, held strong mainly due to its proximity to New York City coupled with a high quality of life. Today, Fairfield County real estate fortunes have been turbo charged by long-term, fixed interest rates below 6 percent.

“They have decreased because mortgage investors have such faith we will not have inflation,” he stressed, “and that’s because investors know the government is keeping inflation in check.”
Michael Dimshaw: interest rates are key.

Michael Dinshaw of Prudential Connecticut Realty in Westport, citing Multiple Listing Service statistics, said the average sales price in Westport for 2004 was $1.3 million, a 17 percent increase from $1.13 million the year before. Fairfield County prices jumped 19 percent from $660,000 to $783,00.

“The bottom line is interest rates are having a major impact on the buoyancy on the market, and until they go up rapidly, I don’t see there being a major impact on the market,” Dinshaw said.

Since Jan. 1 to June 10, 158 homes in Westport have sold, Dinshaw said. There are 380 active and pending listings for single- and multifamily homes, condominiums and land. Prices span a low of $419,000 to $15 million, with the average list price at $2.18 million.

While not an Achilles heel for Westport, houses built for speculation, especially those in the $2 million plus range, are increasing inventory, according to real estate agents. This causes houses to remain on the market longer, which in turn forces sellers to be more competitive and ultimately affects the price.

“What we’re seeing is a lot of new construction and increased inventory over $2 million, and only about 25 percent of them are selling,” said Michele Genovesi, owner of Michele & Company at William Raveis in Westport.
Michelle Genovesi: “going to see some adjustments.”

“It’s supply and demand. It’s what Business 101 tells us, and we’re going to see some adjustments down the line.

“And there’s a lot of inventory down the line, and a lot of our customers are New York commuters,” she added, “so they work their way up to us.”

The increase in $2 to $3, even $5 million spec houses, she said, can be attributed to escalating land prices in Westport, or in many cases here, a lot with a home to be razed, the seemingly ubiquitous teardown.

If a builder is spending close to $1 million for the lot, to make a decent profit after construction, prices often have to exceed $3 million.

“That’s because builders don’t see a profit unless they can sell at a price three times what they paid for the lot,” Genovesi said.
Karen Scott: “more choices now.”

Not just spec houses, but huge equity gains, too, are adding to the town’s inventory as homeowners, especially those nearing retirement, opt to cash in on the market, said Karen Scott of KMS Partners LLC in Westport.

“There are more choices now,” said Scott. “Green’s Farms is an area where houses would rarely be for sale. Now, we’re seeing a lot more of those houses on the market. People have more choices than just the spec house.”

Scott added that despite a growing inventory that has given buyers an upper hand, “One area that appears to be hot across the market is the beach.”

“Houses near the beach, on the water or with deep water docks always sell,” she said.
Bunny Mostad: “everybody wants to live here.”

Bunny Mostad of Westport’s ReMax added that while an over supply of spec houses has slowed the $2 to $3 million market, “houses in the $700,000, $800,000 and $900,000 range will keep on selling.”

“There’s a good market for them,” she said. “Everybody wants to live here.”

Perhaps the fact people are at least concerned about a potential bubble or correction is a reality check in an era reminiscent of the 1990s irrational exuberance. Still, even with such caveats, agents, buyers and sellers, can’t deny the fact the real estate market is the best it has been.

“At the same time I’m having the best year ever,” said Genovesi, “and I would definitely put my money in real estate than in the stock market.”

Apgar put it this way: “Unlike that IBM stock you can live in your house.”

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