"I don't think they have the wherewithal to put down down payments," he said. "They do have letters from banks that say they're qualified but that assumes substantial equity."
In Greenwich, the base for many of the world's largest hedge funds, the median home price fell 11 percent in the first seven months of the year to $1.55 million compared with the year-earlier period, according to data provided by John Cooke, an agent with Prudential Connecticut Realty. While sales were down 3 percent, they plunged 19 percent for properties above $2 million and climbed 10 percent for below that amount.
"What we're seeing is a change in the market mix," Pruner said. "The upper end of the market has been significantly slower. When you have a whole bunch of lower-end sales and fewer higher-end sales, the price has to drop."
'Bottom Feeders'
Some bankers are opting to rent because financial firms have raised base salaries and deferred earnings while shrinking cash bonuses.
William Jandrisits, who took a job in Canada in 2010, abandoned hopes of selling his $2.7 million house in Greenwich this summer. A year-long search for buyers garnered two serious offers and several from "bottom feeders," he said.
He offered the 4,000-square-foot (372-square-meter) house for rent, and a New York-based investment banker agreed two weeks later to take it for $11,000 a month.
"The market just wasn't there," Jandrisits, who worked at Starwood Capital Group LLC in Greenwich until 2010 when he became president and chief executive officer of MCan Mortgage Corp., a publicly traded mortgage-investment firm in Toronto. "The market was so much a buyer's market that you were getting twisted through consecutive negotiations to make more and more changes to the offer to the benefit of the buyer after you had agreed on a price."
Badly Damaged
Patrick Flaherty, an economist at the Connecticut Department of Labor, said the past year isn't a clear indicator of the market's health because the state's economy and real estate values haven't been as badly damaged as areas that are seeing the most home-price appreciation. While house prices in Connecticut have dropped 18 percent in the past 5 years, about the same as the U.S. decline, they have fallen 40 percent in California and 42 percent in Arizona, according to the FHFA.
Home sales rose 11 percent in Connecticut in the second quarter from a year earlier, Warren Group figures show. They increased just 1 percent in Fairfield County.