February, from the standpoint of closed sales, turned out to be better than I expected. But in looking at new activity, it was worse than I had hoped for. For the 3 months ending February 29th, 102 closed single family sales were reported in the Sullivan Multiple Listing Service, down 14% from the same period a year earlier. The year over year drop off has been steadily improving since the 'same period' declines in the 25% range we saw in the late fall.
On the price front, February's 3 month median sales price of $164,000, has been holding roughly steady since November, while the average ($187,864) slid 3.7% from the prevous month. The drop in the average supports the view I've held for a few months now buyers continue to downshift to lower price points. The value range of the market seems quite strong (under $200,000), while the mid-upper range ($350,000 to $500,000) seems soft. At the upper end (above $500,000), there were only 2 sales reported for the 3 months ending Feb. 29, 2008, compared with 5 sales in this range a year earlier.
The Current Market
Quiet, cautious, value focussed and tentative are all adjectives that could apply to the current real estate market. In a recent blog post, I used a less genteel descriptor. But I think February will go down as a challenging month.
Overall, for me at least, February was very slow. Appointments, calls and email inquiries were less than half of a year earlier. (In contrast, visits to this website and Google searches on terms related to Sullivan County real estate, which are indicators of interest that don't require contact, were only off by 10-15%.) A lot of other agents in the county that I talked to seemed to validate that perception. One agent commented, "Its like one day the phone just stopped ringing." I don't think that's quite true, but when you're used to being very busy and now you're much less busy, it can seem that way.
I'm seeing shoppers splitting into two groups. The first larger, and more casual, group I would label "price driven." In last last month, I've gotten quite a few inquiries from people who call or email about very inexpensive properties they find on the internet — in the range of $50,000 to $100,000. Even at higher price points, up to say, $200,000, these shoppers are focusing on the lowest priced property in a category — for example, a small ranch on 10 acres listed for $150,000. Usually, the lowest priced house in a given category is compromised in some significant way — handyman condition requiring total rehab, are in a less than attractive location or setting or have some other significant issue, like water damage or mold. They're cheap for a reason. When I explain the compromises, the buyers generally aren't interested, but want something with similar specs for the same price without the compromises. (Click here to see the houses I got the most inquiries about in Feb. All are among the least expensive for their 'specs' - acreage, house size, style, etc. But they're generally the least expensive for a reason, like condition, location or setting.)
Some of these buyers have real financial constraints, and I can feel their disappointment that $85,000 (or $125,000 or whatever) isn't likely going to get them the country getaway they've been dreaming about. But others are just looking for bargains, as if Sullivan County was an overbuilt, speculator driven suburb of Phoenix or Las Vegas with houses to be picked up for a song from desperate sellers on the edge of foreclosure.
The other sector of the market, which comprises the bulk of what's actually selling, is what I'd label "value focussed". They're serious and pretty realistic, with a primary objective of finding a home, not just a "too good to be true" bargain. The profile of these buyers, particularly for second homes, is not that different than what we saw during the boom, with three differences. They're very focussed on value, and after a few trips to look at houses, develop a keen sense of it. They're looking at more modest houses and overall their price point has dropped by about 20%. Lastly, even though they really want to buy a house so they can enjoy it, they're not in a big rush.
One noticeable commonality among the 'mid market' buyers in this group is the consistency of their price range. They're looking around $250,000, with a ceiling of $300,000. (This range is down about $50,000 from a year ago.) And that ceiling is firm. There are some houses that definitely fit what they're looking for between $350,000 and $400,000, but most of the buyers I talk to in the mid-market range won't even consider them.
This motivated but value focussed buyer isn't defined solely by price range, but more by how realistic their expectations are. My colleague, Kathy Rieser, is working with come clients looking in the low $100's range, and they also fit in this group because their expectations are reasonably realistic for what's possible in that range.
The part of the market that seems very lackluster (that seems to be a gentler term than 'dead' or 'moribund') is the non-waterfront, $350,000 plus range. There are a lot of good houses on the market between $399,000 and $499,000 that just aren't getting much action. I'm just not seeing buyers in that range. The hot number for non-lakefront second homes seems to be about $250,000.
While the upper mid range may be soft, the upper end, moving in to the 'trophy house' range, is surprisingly robust. Three pretty spectacular homes priced above $1 million have deals on them, and there is pent up demand for better waterfront houses with privacy in the $750,000 to $1,250,000 range.
Sellers, Asking Prices and the Inventory Picture
Inventory continues to be a real challenge in the market segments with active, serious buyers — attractive, mid range second homes in the $250,000 range, good lakefront houses in the $750,000 to $1 million range, and modest little houses on a couple of acres aroiund $175,000.
Overall, inventory is very flat, with fewer than 1,000 single family homes listed in the Sullivan County MLS. The inventory of homes in the categories I mentioned above is a much smaller subset of that. The general belief is that in a buyer's market, inventory will shoot up, but that just isn't happening here. There are a few explanations. In March, 2007 we were still in (although at the tail end of) a rising market. Back then there were likely a number of sellers who put their homes on the market at a high price with the thought that "Let's take advantage of this booming market and make a profit." They didn't need to sell, but if they could make a good profit, they would. In many cases, as the market turned, those houses were taken off the market. I'm also not seeing a lot of new, casual sellers listing their houses to 'test the market', and as some listings are expiring their not being immediately renewed. In all of these scenarios, sellers don't have to sell, and that's contributing to tighter inventory.
Sellers who want to sell are just starting to get the message that they have to bring their prices in line with what buyers are willing to pay. The average asking price has been steadily, is slowly, moving down since June 2007 (when it peakled at $310,378), and now sits at $284,820. (The median asking price has dropped from $249,000 to $229,900.) I'm hearing that more and more agents are having 'tough love' talks with sellers about pricing. I've even gotten calls from sellers who admit that their asking price is too high, and wanting to know what I think it will take to sell their house.
Sellers aren't all quite there yet, but as a group they're moving in the right direction. It may take a little longer here, where we have a lot of second homes, because a second home sale, like a second home purchase, if often discretionary. There is also the magical thinking about seasons, that spring and summer will be great.
Buyers aren't boycotting the market, but are only buying houses they perceive as good values. Some houses are lagging on the market for months or even years, while others — even in this environment — are being snapped up in weeks. Fast movers are generally moderately priced to appeal to the budget or mid range buyer, but more importantly, are seen as great values relative to their competition. They're not just simply dirt cheap houses. (Click here to see 4 houses that got interest very quickly, and are either in a deal or in negotiation.) Its very important for sellers to understand when pricing their houses that buyers have to both fall in love with a house and perceive it as a great value to buy it.
What Does This Mean for You as a Buyer?
Even though the market may be trending downward, be realistic about price and expectations. That's probably the biggest hurdle for many buyers in finding a house — that their expectations are waaaaaay out of line with what might be realistically possible. Understanding the market value range for the type of property you're interested in and then setting your target towards the bottom of that range is realistic; having a price expectation 25% or 50% below the bottom of that range isn't.
Be suspiscious of "too good to be true" bargains on the web. If something you find is priced way under other 'similar' properties, there's probably a reason why. Nope, the listing didn't probably mention that there is a crematorium next door.
As hard as it may be to believe, in some property categories there is more demand than supply. Case in point are nice getaways in the $250,000 range or small houses on a couple of acres around $150,000. Good houses priced in a handful of key target ranges can sell pretty quickly.
If you have a budget range, and aren't finding quite what you want in that range (particularly if its a more popular category), consider looking in the next range up. If you have a $300,000 ceiling, for example, and there are houses at $349,000 to $399,000 that might be overpriced but fit what you're searching, take a look. Some sellers may be reluctant to lower their asking price (or aren't necessarily getting good price guidance from their agent), but may take a hard look at your offer if the house has been on the market for a while. Remember, sellers are reading the same news articles you are and aren't immune from a shift in psychology. You might not get that $379,000 or $399,000 house for $300,000, but $325,000 might not be out of the question. Overall, it could be a better value if it gets you more of what you want and requires less work.
Do your homework. Don't just pick an offer price out of thin air. If a house is overpriced relative to the market and you want to put in what the seller is likely to perceive as a 'low ball' bid, support it. If an offer price can be justified and supported by comps, it can change a seller's opinion and is far more effective than generalities like "the market is slow" or "the house has been on the market for a year." (This is one of the benefits of using a buyer agent — we work with you to craft and offer and then provide the market support for it.)
There's an unexplained pack mentality about the price ranges buyers are looking at. Its like a weird invisible hand or psychic phenomenon. Person after person looking for a similar type of property will quote me the same range. Right now, those ranges are under $100,000 (this is the bargain shopping range), $150,000 to $200,000 (small ranch on a couple of acres) and $250,000 to $275,000 range ($300,000 tops) for a mid market second home. It can pay to move slightly above those ranges. For example, there are far fewer buyers in the $300,000 to $350,000 range than in the $250,000 to $275,000 range.
Know your financial qualifications. Lenders have significantly tightened their requirements, and qualified borrowers are like gold. If a deal falls apart here, in the past few months its most likely been due to something related to financing. (A year or two ago, if a deal fell apart it was typically because of inspection or title issues.) Get prequalified by a lender, know your FICO score and the percentage you're looking to put down. If someone calls me, and in the course of our first conversation says "We've already been prequalified, our FICO score is 740 and we're looking to put 20% down, so I don't think we'll have any trouble with financing," they move WAY up on my list as a serious buyer.
Be patient. The house you want may not be on the market now, but once I have a good understanding of what you're looking for, I can give you a good idea of how likely I think it is that it will come on the market at a price you want to pay. But if I think its highly unlikely that what you're looking for at a price you want to pay is likely, I'll tell you that, too.
If you're considering buying a home here in Sullivan County,
please give me a call or drop me an email. I'd be happy to talk
with you
about finding and buying a home here.
