It starting to look like the worst may have passed, although in terms of both sales and prices, we're still well below the peaks of 2007. For the 3 month period ending April 30th, there were 73 closed single family sales reported in the Sullivan MLS, off 25% from the same period a year earlier. While sales volume remains low, it is trending up — the 31 sales closed during the single month of April were sharply up from the 23 closed in March and 19 closed in February.
The median sales price ticked up slightly to $138,000, from last month's $132,200. The median, while off just 8% from the same period a year earlier, is still down 31% from its peak in June, 2007. The average sale price — $173,388 for the 3 months ending April 30th — continues to trend downward, and is off 14% from a year earlier (and 30% below its June 2007 peak).
A factor contributing to the steeper drop in the average is continuing softness at the upper end of the market. For the latest 3 month period, only 11% of the closed sales were above $300,000, compared with 16% for the same period a year earlier. Foreclosure sales, which tend to be at lower price points, accounted for 25% of closed sales during the current period, about the same rate we've seen since the beginning of the year.
The ratio of closed sales price to asking price was 90%.
Looking at single month data for March and April, as well as pending sales (in contract but not yet closed), prices look to be relatively stable to slightly down over the near term, with the median likely to settle into a range of $132,000 to $138,000 and the average hovering between $160,000 and $170,000. I don't see anything on the horizon leading to a significant drop off or run up in prices.
The Current Market
The listless malaise and bleak outlook hovering over the real estate market here starting last October and continuing through the winter seems to be lifting some. Second home buyers, who seemed on the verge of extinction in January, are ever-so-cautiously sticking their heads out of the foxhole and starting to look again. Just a few months ago, there was a widespread sense that buying any real estate that wasn't a super-bargain foreclosure was a sign of economic insanity and certain to lead to financial suicide. That economic Armagedoon outlook has subsided somewhat.
But that's not to say, by any stretch, that we're returning to the free spending frenzy and irrational exhuberence of two or three years ago. If that period was like a big party, today is more like a temperence meeting. Buyers are singing out of the hymnal of moderation. While they're not necessarily looking for dirt cheap bargains, they are looking for solid, sensible values that are affordable within their means (stretching is out) and have minimal downside risk. Glitzy Jimmy Choos have been replaced by sensible Rockports in their real estate wardrobes.
These real estate recessionistas are redefining the 'hot spots' of the market. Over the past month or so, the greatest demand I've been seeing among second home buyers is for moderate to affordable range getaways in the $150,000 to $250,000 range. They're looking for something interesting or charming, in a nice setting with a few acres on a quiet country road. While a few are willing to look at houses with asking prices into the low $300's, I'm not seeing much interest above that. I haen't been out with anyone in the past few months searching for a $500,000+ farmhouse.
I've been getting a lot of lakefront inquiries, but it's the most challenging category because of the wide price gap between buyers and sellers. A lot of buyers have been asking about lakefront houses under $300,000, a price point with almost no inventory, and what is available tends to be very small cottages. In the "sweet spot" of lakefront, 3+ bedroom, 2 bath houses with direct (not split lakefront), sellers are well above $500,000 while buyers are well under $400,000. It's a gap that, for the time being at least, is almost unbridgeable.
One interesting shift in the current market is buyer willingness to consider less perfect houses that involve some compromises. For months I've been commenting about an often unrealistic pursuit of perfection, particularly among new shoppers at the start of their search. They're often disappointed that they aren't finding their ideal within their price range.
The three deals I've put together in the last month challenge that notion. All involve houses that have some great assets or features, but also involve some significant compromise that would have turned off a perfection-seeking buyer. The common element among all 3 is that they're very well priced, and the buyers are willing to overlook some of the warts because they're getting a great deal. Two other clients I'm working with are close to deciding on houses and making offers, and much to my surprise, the houses they've shortlisted are lower priced ones with potential rather than higher priced ones with perfection.
It all keeps coming back to value. Buyers want a lot of value for their money. The longer they look, the more educated they become about value and trade offs. I often get requests now from buyers to come back and take a second look at a house they rejected just a couple of months ago.
Another less direct factor may also be contributing to the focus on moderate priced, good value properties. Buyers today are looking for reassurance that they're not making a mistake; that they're not overpaying for the property they're buying and they're not assuming a huge downside risk. Monthly outlay as a percentage of income is, of course, a key factor in what one decides to spend — and buyers are much more conservative in this area today. But sectors of the market with more interest and sales generate more confidence in prices and values. That $200,000 to $300,000 second home range is active enough that I have more confidence giving guidance on price for a particular type of house in a certain setting or location. But ask me to provide guidance on a 3 bedroom house on a 5 acre lakefront lot listed at $749,000, and I'm at a loss. With no similar sales in the past six months, what is the market value? Is there a viable market at $650,000, $550,000? Until some of those properties start moving again, it's really impossible to determine. And that adds a level of risk most buyers are unwilling to take, even if they can afford the house. One of the reasons I'm convinced that Chuck Petersheim at Catskill Farms has remained successful through this downturn isn't just that his houses are adorable cute with features that buyers want, but that he's demonstrated consistent demand for his product in the $240,000 to $320,000 range, and that demand minimizes buyer risk.
Sellers, Asking Prices and the Inventory Picture
Inventory rose slightly in April to 980 single family homes listed in the Sullivan MLS at the end of the month compared to 933 at the beginning. This seems to be in line with the normal seasonal fluctuations we see here, as houses start trickling back on the market as spring sets in. The average asking price dropped less than 1% to $273,965, while the median asking price rose for the second month in a row to $215,000.
These market basket numbers, though, don't quite paint an accurate picture of what's happening on the seller side. Inventory seems to be split between sellers are very motivated and are pricing their houses aggressively to move (a small minority) and sellers who are far less motivated and less aggressive in their pricing (the vast majority.) Of this latter group, there are some that are just moderately out of touch and will probably 'get with the program' over the next few months, and those that are just out in la-la land (and probably won't.)
So while we have 980 houses on the market, I would venture that less than a third fall into that "motivated seller, priced to sell" category. When you realize those 300 or so listings cover every category and style, there are often only a handful of houses in any given category that are "deal capable". So, for example, while there are currently 75 lakefront houses listed in the Sullivan MLS, I probably consider less than 20 as "great values" given what buyers are looking for and what they're willing to pay.
What I'm noticing, both in the deals I've made lately as well as the houses I'm seeing come through in the sold list on the MLS, is that most share one factor — Wow Pricing. Almost all of the recently closed sales had reductions in their asking prices from their original asking prices, and over half had asking price reductions of more than 20%. When selecting houses to see, buyers aren't just looking at price, but also at indications of seller motivation, in terms of time on market and interim price reductions. They have little to no interest in houses priced for last year's market.
I talk with listing agents regularly, who often express frustration with sellers and their price expectations. They try to provide guidance on setting an asking price likely to generate interest, only to be met by a response like, "Well, that's all well and good, But this is what I need to move on." And that "move on" price is often well above what the market will bear. In contrast, the houses that are selling are generally those where the seller has already "moved on" psychologically or geographically.
A common misconception is that motivated sellers are motivated by financial distress. In the second home sector, I think that's true only in a small minority of cases. The vast majority of motivated "move on" sellers could continue to carry the house, but have had a life circumstance change — geographic relocation, illness or divorce being the most common — where they aren't using the house, and the hassle and headache of maintaining it trumps price. Discretionary sellers — those who say "This is the price I need to move on" — are ultimately competing for buyers against these more motivated sellers who's attitude is "We've moed on. What's the price to sell our house?"
What Does This Mean for You as a Buyer?
For the first time in quite a while, I'm feeling pretty bearish for buyers — for the right house in the right situation at the right price. I'm finding that more sellers (but far from all) are more flexible and it's possible to strike a very good deal.
I think we may have seen the bottom in our rearview mirror, at least in some property categories. For example, prices for 3 bedroom getaways on a few wooded acres dropping into the mid $200's have brought buyers back into the market and firmed up confidence in pricing in this market segment. It doesn't appear that category will continue a freefall into the upper $100's. There is enough of a market in this range that it may be a "safe zone" for buyers. In the primary home category, there's been a market returning in newer 2 story colonials on an acre of two in the under $250,000 range that's rebuilding pricing confidence in that sector as well.
Buyers need to be cautious in market segments with much thinner demand. Determining lakefront house values at the moment can be very challenging, for example, because of the dearth of sales in this category. In a low volume category, a house almost has to be "super-wow" priced to mitigate potential downside risk. Or there could be no downside risk for something not "super wow" priced if the market picks up. There's just no information.
Offers should be based on a determination of fair value, not a pre-set notion of a "pecentage off the asking price." If a house is very well priced, the deal price may be 90% or 95% of the seller's asking price, not 65% or 70%.
If you're planning to finance rather than pay cash, talk to a lender about what you can afford, before you start looking. Lately, I've talked with a number of buyers who are restarting to look after taking a hiatus. They may have been preapproved for a certain loan amount last summer, and are working under those assumptions. Particularly if this is going to be a second home purchase (even if you rent an apartment in the city as your primary residence, this will be a second home for qualification purposes). Online mortgage calculators and preapprovals will likely not give you an accurate picture. Also, keep in mind that while it is possible to buy with less than 20%, particularly in the second home market it is far more difficult.
Don't be blinded by low price alone. A lot of folks recently have been zeroing in on the lowest priced houses when internet house shopping. I spend hours every week emailing comments back to shoppers asking about "too good to be true" deals they found on the internet. — houses on main roads or in less-than-wonderful locations, houses with major problems like freeze damage, crumbling foundations or wood rot, or double-wide mobiles masquerading as "ranches." No ifs, ands or buts — something on a few acres under $100,000 is probably going to have something you won't like or want. And a $125,000 house that needs tons of work can be a much worse value than a $175,000 house that doesn't.
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.
