While the number of sales continues to be down about 20% over the previous year, the sales picture is improving from the 30% year over year drop we saw earlier in the year. Price performance, even in light of lower sales, continues to be strong, with the median price for the 3 month period ending April 30th up 18% over the same period a year earlier. The average sales price, which is a more volatile measure of market trends, rose 6.2%.
However, these sales price numbers should be taken with a grain of salt. In terms of current market performance, it is far more instructive to look at price movements over the past 8 months, since August 2006. During spring and early summer, 2006, there was a sharp price run up (clearly visible in the graph at left.) Most of the 18% year-over-year rise in the median sales price we're seeing can be attributed to sales activity prior to last August. Over the last 8 months, the trend lines for both median and average sales prices have flattened considerably, and the median sales price (which is a more stable measure of market trends than the average) has been moving in a very narrow range within 3% of $192,000.
The good news overall is that we haven't seen price drop in our market, and prices in fact are showing considerable stability. But sellers especially need to be cautious when reading that there's been an 18% yeaar-over-year increase in the median sales price and mistakenly conclude that prices are continuing to increase at that rate. Overall, I think we're seeing a downshift in the rate of price appreciation into a range of 3% to 6% in the short to mid term. When you look carefully at the data, most houses today are selling at about where they would have sold last summer.
The Current Market
April was a very busy month here, continuing the sharp upturn in buyer interest that started in late January, particularly in the second home market. There seems to be a renewed confidence among buyers after all the predictions of real estate doom and gloom last summer and fall that didn't come to pass here — or in our real estate Mothership, New York City.
Sullivan County's strong relative performance, however, can likely be partially attributed to those doom and gloom predictions. New York City and its suburbs is a huge population center that generates tremendous second home demand. Even though the NYC regional real estate market has continued to be quite strong, there are still lurking concerns about a real estate slowdown. That's led buyers to be more conservative, or at least less willing to leverage themselves to the teeth to buy anything with a foundation, four walls and a roof. Sullivan County, I believe, is benefitting from that conservative shift. Buyers looking for a second home are shopping for value, and Sullivan County continues to offer the most for your money within 2 to 2 1/2 hours of NYC. We're also one of the only areas within a reasonable weekend commute of NYC where middle class second home buyers can still afford a country getaway.
Among upper-middle class buyers, Sullivan also offers the best value proposition. Even wealthier people are watching their real estate dollars, and are very aware that those dollars go further here.
One significant trend in the second home market is that we're seeing much younger buyers. I would venture that my average client recently is in their early to mid 30's, with the occasional second home buyer dipping into their uper 20's. I hear over and over from buyers I talk with that, in their peer groups, the Catskills are very hip. The interesting thing about this is that its been a while since the last high profile articles on Sullivan County and the Catskills, which means there has to be a lot of word of mouth traction.
What second home buyers are looking for continues to be pretty consistent. The sweet spot of the market is roughly around $300,000, for a modest place with some acreage and privacy. There's also been increasing interest in better properties with appealing settings in the $500,000 to $600,000 range. There's also been a surge of interest in lakefront properties, a spike we often see with summer approaching — but the inventory of lakefront property continues to be in very short supply. The upper end of the market, above $600,000, continues to be sluggish, which is consistent with a conservative downshifting among buyers.
While Sullivan County's relative affordability may be our saving grace, it can also be our curse. Many buyers I talk with are often unfamiliar with Sullivan County and frequently have unrealistically low price expectations — often shaped by internet house shopping. Yes, we have lots of cheap houses in Sullivan County (almost 40% of our single family home inventory is listed under $200,000), but we don't have a lot of cheap houses with the features or in the locations most second home buyers are looking for. Searching the MLS, you'll find quite a few "quaint and charming" houses under $200,000 — but they may be on a busier main road, have some "deal killer" feature like 6 or 7 foot ceilings, or need major structural work. That isn't to say that buyers with a moderate budget can't find a nice getaway here. But it probably won't be a charming old farmhouse on a few acres with privacy on a quiet country road.
The Inventory Picture
As hard as it is to believe, with all the "real estate downturn" stories in the national media, a shortage of good inventory here remains a real drag on this market. In key market segments, there is very little inventory available. These segments include the $175,000 to $200,000 segment where buyers are looking for a modest 2 bedroom cottage or ranch with some charm on a couple of acres on a quiet country road; the $300,000 segment, with buyers looking for 4 to 6 acres with some privacy and a 3 bedroom house with something 'interesting about it', whether its a charming older house or a newer contemporary with cathedral ceilings; and the $500,000 farmhouse or modest lakefront sector.
The $300,000 category is an interesting case in point. For the past year, there has been reasonably good selection of houses with second home appeal in the $275,000 to $325,000 range. Right now there's almost nothing. I could reliably count on a few areas like York Lake, Lake Devenoge, North Branch Commons, Pine Ayre and Edgewood Lakes, for example, to always have a good house or two in this price range to show to clients. Currently in these areas there are no houses available. What's been on the market has sold. (Actually, there are still 2 houses on the market at Pine Ayre, but in contrast to the more rustic vacation style houses that have appeal, the 2 houses left are vinyl sided and more suburban in style.) I can't remember a time, even during the frothy peak of the market, when there weren't at least a half dozen goos listings available in these areas.
Yes, it appears that there are more houses on the market than a year ago. 10% more in fact. But like cholesterol, with inventory its important to differentiate between "good" and "bad". Sullivan County has a lot of "bad" inventory, or at least houses without a lot of appeal that, to put it kindly, present a marketing challenge. In the second home market, buyers are looking for houses that feel like a getaway, in a nice setting in a quiet rural location. For the most part, they aren't interested in 1) suburban style houses, 2) with vinyl siding, 3) located on heavily traveled roads in 4) run down or trashy locations. If you pull these houses out, along with houses that are just plain overpriced, the remaining universe of houses is actually quite small.
One trend I'm noticing among recent buyers is that few are interested in houses that need "work", particularly houses with quirky layouts or 'aesthetically challenged' exteriors. A year or two ago, buyers who didn't quite find the house of their dreams would be willing to consider houses that could be reworked into something close. I'm finding much less willingness to consider functionally or aesthetically challenged properties, which is why overall inventory may be high while the investory is good, appealing houses is so low. Ugly ducking houses sit on the market month after month, while more appealing swans are being swept right up and taken to the ball.
A shortage of inventory in key segments would lead one to assume that actual sales prices for those houses would rise. That doesn't seem to be the case, though, because the buyer price ranges aren't moving up in tandem. That $300,000 buyer is holding close to that price point. If they don't find what they want, they aren't necessarily moving up to $350,000 ot $400,000. Instead, they seem to be deciding to wait or just not to buy. But some sellers have priced their properties well above the range for their likely target buyer. So in some property categories at some price points, buyers and sellers are in a stalemate.
What Does This Mean for You as a Buyer?
As a buyer, be aware of the submarket you're in, and whether it is active, with a lot of buyer activity, or less active. If you're in an active market segment, you need to adjust your behavior and expectations accordingly. If you're in an active market segment, there may not be a lot of selection at any given time, and when you find a house you like you may need to move quickly on it.
Don't pay a lot of attention to "days on market", and decide that a house on the market since last fall is a 'dog' with no buyer interest. Because of the very slow fall and sharp pickup over the past few months, "days on market" data isn't all that relevant. A house listed last October during the fall doldrums may now show over 200 days on the market, while one listed in February may only show 80 days — but both have almost the same effective market exposure, since the pick up in late January. Its more important to pay attention to the overall features relative to price.
If you're price conscious and looking for great value, get away from the pack and be prepared to do some work. There are dozens of people looking for cute, charming older houses on acreage with some privacy that can use some freshening. But there aren't a lot of second home buyers looking for vinyl sided ranches or bi-levels — houses that can be transformed with some creativity and money — or houses that may need more substantial structural renovation.
There are "magazine quality" houses here, but like anywhere, they're not cheap. Many buyers, particularly those new to second home shopping, come with "magazine quality" expectations. In my experience, "magazine quality" houses here range from $500,000 to $800,000 (more for estate-quality lakefront or large acreage homes), and do have beautiful kitchens, luxurious baths, expanses of glass and fine detailing. If you can't afford one of these homes, there are plenty of places here that can make great getaways at a more wallet-pleasing price point. They just may not be "Ready for my close-up, Mr. DeMille."
Be cautious about setting your price expectations based solely on internet house shopping! (See my blog post, The Pitfalls of Internet House Shopping.) Yes, you will find some "farmhouses" under $150,000, a "lakefront" cabin for $250,000, 5 acre parcels of land under $25,000, and scores of other "too good to be true" bargains. I have a lot of experience with second home buyers and what they're looking for. I also know the reasons why many of these properties are priced low. Trust me, there's no magic here — if the owner felt they could get more for the property, they would. Seldom do I see a listing that honestly describes a house's flaws. For example, a "too good to be true" farmhouse may have 6 1/2 or 7 foot ceilings, it could need major structural work, like lifting the house and repouring a foundation or the front door could be located 20 feet from a busy road. And I've never seen a listing photo taken to include the mobile home on the property right next door with four junk cars in the front yard.
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.
