Photographer: Daniel Acker/Bloomberg

What Good Is a $20 Million Mansion if You Can’t Walk to Dinner?

Home prices in the hedge fund capital of the U.S. are down 8 percent. What’s the matter, too far from the train?

For decades, Greenwich, Conn., has enjoyed a reputation as a bastion of wealth just 30 miles northeast of New York, known for its concentration of hedge funds, horse farms, and waterfront estates.

Lately, the home to more than 60,000 residents has come to be known for something else: lousy property investments.

The most recent assailant of the town’s real estate virtue is Barry Sternlicht, the founder of Starwood Capital Group, a locally based real estate investment firm with $51 billion in assets under management. Sternlicht said yesterday, at the CNBC Institutional Investor Delivering Alpha Conference, that the town's housing market may be the worst in the country

“You can’t give away a house in Greenwich,” he said.

This is an overstatement, of course—the median home value is $1.4 million, according to Zillow. It’s also not quite news to local sellers, who have been complaining about a soft market for at least five years. Lower pay on Wall Street has left the market short of buyers willing to pay millions for a home in the U.S. hedge fund capital, even as the national economy has emerged from the recession.

Still, recent months have brought more bad news for the local market. The average sales price for a single-family home was $2.2 million in the second quarter, down more than 7 percent from a year earlier, according to a report from appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The number of sales that closed was down 18 percent. 

Why?

Lower Wall Street compensation is one part of the puzzle. Sternlicht, who said he moved to Florida this summer, blamed the local housing market doldrums on taxes. (Affluent home owners have a long reputation of threatening to move across state lines in pursuit of lower taxes, but less of a record of actually moving.) A third factor is sellers who haven’t come to grips with these changes and are seeking prices as if it’s still 2007.

“If you have A-1 location and price correctly, you can sell,” said David Ogilvy, president of David Ogilvy & Associates, a Greenwich-based affiliate of Christie’s International Real Estate, noting a 7,000-square-foot waterfront manse for $8.9 million that sold for its full asking price 10 days after it listed. “There are houses that haven’t sold,” he added, “which is very disappointing for the sellers.”

There’s still another factor, said Jonathan Miller, chief executive officer of appraisal firm Miller Samuel Inc. Sales are far more sluggish farther from downtown, where the homes are bigger and more expensive and the commute to Manhattan can take 20 minutes longer. Given the current pace of sales, it would take 33 months to sell through the inventory of homes in “back-country” Greenwich, according to Miller. That compares to 15 months for the inventory in “mid-country” Greenwich.

That trend may be the result of higher prices for the larger estates farther from the center of town, but it also mirrors home-buyer demand in neighborhoods close to shops, restaurants, and public transit.

“There’s too much product that’s anchored to pre-financial crisis pricing levels, and Wall Street’s not doing what it was back in 2007,” said Miller. “Beyond that, you’re seeing the same thing as in lesser-priced markets, where people want to live close to the train station.”

Walkability. It matters in horse country, too.

(Updates with name of investor conference in third paragraph.)

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