Posted by Leonard Steinberg on May 30th, 2011

Bloomberg reports that homes priced at $10 million and above are accumulating on the market in Greenwich, Connecticut, a town about 30 miles (48 kilometers) north of Manhattan that’s known as the U.S. hedge fund capital. They’re moving so slowly that it would take more than four years to sell them all, the biggest backlog since at least 2004, according to Mark Pruner, an agent with Prudential Connecticut Realty. Wall Street’s greater emphasis on deferred compensation, in which a portion of an annual bonus will be paid in the future, has stifled demand, he said. I think that’s only part of the problem.

“Our market moves very closely with the financial markets,” Pruner, based in Greenwich, said in an interview. “Deferred compensation has totally hammered the over-$10 million market because people just aren’t getting large amounts of cash, and that market has traditionally been a cash market.”

Fifty-two houses in that price range were listed for sale as of May 19, according to Pruner. Four have sold this year and two are in contract. At that pace, it would take 52 months to sell the inventory, he said. If that backlog remains through the end of the year, it would be the biggest in his data going back to 2004.

I think another component thats driving this market trend is the large number of wealthy homeowners in Greenwich moving back to Manhattan: Now there is definitely a shortage of large apartments in Manhattan, with many developers scrambling to cater to this need. Many who moved out to Greenwich to escape New York are learning that a good volume of business still remains focused in Manhattan, requiring lengthy, time-consuming commutes. Owners of super-large homes (lets face it, if you want to look rich in Greenwich, you need a 10,000sf+ home!) are finding many rooms un-used, and the cost and aggravation of maintaining them more than they had bargained for. Couple that with the fact that most of these homeowners usually own a second or third home. We constantly hear Greenwich homeowners looking in Manhattan griping about:

1) SUBURBAN BOREDOM….they miss the stimulation and variety of options for entertainment and socializing in the City.

2) LENGTHY COMMUTES/CAR CULTURE…..there is something infinitely appealing to take an elevator ride down to the street to buy  pint of Ice Cream, walk 2 blocks to your favorite restaurant, or take a 5 minute cab ride to see a movie or a play. All these activities require at least a 20-30 minute drive.

3) SUBURBAN CULTURE….Social living in Greenwich is different: not better or worse, but certainly more insular. The peace and tranquility of suburban life can be achieved at a weekend home in the Hampton’s or Upstate, combined with the stimulation of big city living during the week.

4) EMPTY NESTERS…..a huge garden and lots of rooms is wonderful with kids and their friends using them. Not so wonderful when they move on to college.

5) ENVIRONMENTAL RESPONSIBILITY….we all have to share in our efforts to conserve energy and cut back on needless energy consumption. A large house in Greenwich leaves an enormous carbon footprint in its wake. City living is significantly less damaging to this planet, even in very large apartments or townhouses.

6) CONVENIENCE: Owning a large home presents large maintenance issues. Living in a condo in the City requires a call to the Super to get those pesky lightbulbs changed: That $ 100 tip is a bargain next to the cost and aggravation of full time maintenance staffing.

7) SIMPLIFICATION: There is a large trend right now towards efficiencies. More compacted, efficient and engineered spaces are just easier to live with. A well designed 4,000sf apartment can deliver most of the needs of a 10,000sf house.

8) COST: The suburbs really aren’t that much cheaper. Yes, you get lots more house for your money, and it looks more impressive when your peers drive by. Now throw in the cost of 2 or more cars, yard, pool and house maintenance/staffing, additional energy costs, infrastructure re-building (eg roof, facade, windows, etc). Yes, all these items are required for a swell City existence, but many of these costs are shared. One roof shared by 50 owners….

Financial-Industry Buyers

“Previously, if you got a $10 million bonus, buying a $5 million house wasn’t that big a deal” said Pruner, who estimates that about half of all homebuyers in Greenwich work in the financial industry.

“If you get $20 million — $3 million in cash and 17 in deferred compensation — are you going to borrow another $2 million in cash to buy a house? I don’t think so,” he said.

Cash bonuses on Wall Street declined 8 percent last year as financial firms raised base salaries and deferred some earnings, New York State Comptroller Thomas DiNapoli said on Feb. 23. Companies disbursed $20.8 billion in 2010, down from $22.5 billion a year earlier.

The average Wall Street employee took home a cash bonus of $128,530 in 2010, a drop of 9 percent that was greater than the total decline because the pool was shared among more workers, DiNapoli’s office calculated in a report based on personal income-tax collections.

Less Liquidity

The smaller payouts reflect changes adopted by the industry after the credit crisis, in response to criticism that soaring incentives pushed traders to disregard risk. About 56 percent of financial firms incorporated risk management into performance measures for top executives by the end of 2010, and 37 percent have also done so for lower-level staff, according to a February study by Deloitte Touche Tohmatsu Ltd.

“Pay for performance and incorporating risk measures is making its way through more and more of the ranks of Wall Street, and that is going to have an impact because people have less liquidity at bonus time than they used to,” said Constance Melrose, managing director ofeFinancialCareers North America, a network of websites for finance industry professionals.

A smaller cash component of bonuses may translate to fewer high-dollar property sales in Greenwich, where the median household income was about $122,000 in 2009, more than twice the national average, according to the U.S. Census Bureau. The town is home to about 90hedge funds, data compiled by Bloomberg show.