The sales volume in April was somewhat disappointing for the third month in a row, with just 71 single family closed sales reported in the Sullivan MLS for the 3 month period ending April 30th — a drop of 9% from the previous month, and 11% lower than the same period a year earlier. At the same time, prices have actually strengthened a bit, with the median sales price edgeing above $140,000 for the first time since August 2009. The average sales price showed a 10% jump over the previous year. However, that jump can be largely attributed to a single $1.35M sale that had a significant skewing effect. Excluding that sale the average clocked in at $165,511, the same as a year earlier.
The sales data right now is a very mixed picture. The price uptick reflects a bit more strength in the mid range, but still just 30% of sales closed above $200,000 (compared with 22.5% a year ago). The troubling aspect, though, is the low sales volume. The latest data could reflect a seasonal shift in buying that started last year, where the winter was dead but followed by a pick up in volume as the year wore on.
There was definitely a pick up in buyer activity in April, likely related to the very mild weather. And when I'm calling about showing houses, particularly in the affordable to moderate range, I'm often being told that they have a deal on them. It will be interesting to see if that translates into improved sales volume over the next two or three months.
Wrapping up with a few more stats, bank owned foreclosures accounted for 20% of closed sales for the latest 3 month period, roughly the same percentage we've seen since the beginning of the year. The average sales price for these bank owned homes was $76,826.
The ratio of closed sales price to asking price rose a bit to hair to 90.9%. The ratio of closed sales price to original asking price was 81.6%.
The Current Market
My 2 colleagues and I at CBA were quite busy in April, with back to back appointments on some weekends. We were busier than we've been since last fall, and we put together 3 deals.
Most buyers we're talking with are looking in the affordable to moderate ranges, with a top price target of $200,000 which is considerably lower than even just last fall. We hardly have anybody looking at $275,000 to $300,000 or above, apart from some lakefront shoppers. The irony is that as moderate range getaway buyers have dropped their price expectations from the mid $200's to under $200,000, some of the most appealing houses that were stuck in the $300's have now fallen to within striking distance of $250,000 to $275,000.
A good indicator of what buyers are thinking about is what properties they most frequently inquire about from the MLS Search on my website. There are 6 houses that buyers inquire about over and over — priced between $119K and $159K. What's notable about these 6 houses is that they're generally the cheapest for their specs on the market. However, that doesn't mean that the houses are best suited to their needs, or even the best values in their categories. The expectation from these inquiries is that buyers can find that cute country farmhouse on some acreage or a lakefront cottage for $150,000.
Overall, we're finding most buyers very price focussed with firm but not always realistic budgets. This may well be a reflection of the fact that many are new second home shoppers, just starting out to get a feel for the options in different areas at different price points. New shoppers tend to have an ideal in mind and understandably focus on the least expensive properties that, at first blush from the internet, seem to fit what they're looking for. I've commented in this column and on my blog a number of times that it takes buyers starting out about six to twelve months to explore different areas and form a realistic "mind map" of property values. So the fact that we're seeing a number of new buyers entering the market and tire kicking now may bear fruit later in the year.
An interesting side development is the number of buyers I'm seeing that are looking for larger acreage (30+ acres) properties, either raw land or with a house. I've shown more large acreage property in the last month than I've shown in the last year. Surprisingly, not all of these buyers are hunters looking for recreational property, but are just looking for nice secluded property to build a home.
What we're not seeing, though, are many buyers looking for mid range and higher properties. I'm getting very few inquiries about properties priced above $300,000. Of the 85 single family homes currently showing as "In Contract" in the Sullivan MLS, only 5 have asking prices above $300,000. Of those. one is lakefront, and three are homes on large acreage (50+ acres). Notably there have been very few inquiries recently about lakefront homes, which is typically one of our most popular second home categories given the number of lakes here in Sullivan County. This largely may be a functio of price. The median asking price for lakefront homes currently is $439,000, well above the price range where many second home buyers are looking. While we're not seeing a lot of lake front shoppers, we are getting a lot of inquiries for houses with lake rights priced under $200,000.
One thing I'm picking up widely from buyers is a sentiment that the market may have bottomed out and now might be a good time to buy property. While they may be shopping at lower price points and on the lookout for great deals, they don't seem to be harboring the fear — so prevalent a year ago — that prices may continue to fall.
Sellers, Asking Prices and the Inventory Picture
We're seeing the traditional spring pick up in inventory. 1,127 single family homes were listed for sale in the Sullivan MLS at the beginning of May, up from 1,053 at the beginning of March. The average asking price dropped another 1% to $273,904, while the median asking price held at $199,900. The average asking price is exactly where it was a year ago, while the median has only dropped a modest 7% over the past 12 months — and has held steady between $199,000 and $199,900 since December! While there have been some minor ups and downs in the average asking price over the past 6 months, the overall picture is that asking prices haven't really budged.
But that isn't to say that prices on individual properties aren't dropping. There have been a number of very appealing price cuts in the last month on some very attractive properties. These motivated sellers are still in the minority, but there are some very good deals to be had. Big cuts on a handful of houses every month, though, are having very little impact on the overall market basket average because they're offset by the new listings coming to market, which are often very "optimistically" priced.
In some segments of the market, there has been enough sales activity to determine a "market clearing price". Modest farmhouses and vacation chalets, for example, seem to have an established market in the $200,000 to $225,000 range. Likewise, there's been solid activity on builder closeouts in the $240,000 range, and modest in-towners under $150,000. A seller with a house in one of these categories has a pretty clear road map about where they need to be price wise.
The situation is more difficult for sellers in market segments with little recent sales activity. The quandry is determining whether there is buyer demand, and the issue is price. Or whether there is simply little to no buyer demand. Right now, for example, there are some particularly nice renovated farmhouses on smaller acreage in the $600,000 plus range. But there isn't much buyer demand for these larger "Love, Valour, Compassion" farmhouses that were so popular just a few years ago. Buyers seem to want "smaller" and "cheaper", with great settings trumping great houses. The conundrum facing these sellers, along with sellers in other "buyer thin" segments, is whether price cuts can stimulate demand.
The situation is a bit different in the more active affordable range. There is considerable buyer interest under $200,000, and the trick in this segment is to price a home so it's perceived as the best overall deal in its segment. But that generally involves price tweaking rather than wholesale price slashing.
Overall, I think the next six months are going to be very telling from an inventory and price standpoint. I'm not surprised that houses are returning to market with the same asking prices as last year, or that the average and median asking prices haven't moved since December. Sellers may be holding to an optimism about a summer season with robust buyer demand. But if that doesn't pan out, we may well see some aggressive price cutting come fall, as sellers face holding a home over another winter.
What Does This Mean for You as a Buyer?
Buyers just starting to look should be cautious about setting their price expectations solely from internet house shopping. The lowest priced houses in any given category tend to be priced low for a reason. A super low price doesn't necessarily equal the best value.
If you're shopping for a great deal, be flexible in your expectations. Perfect houses are seldom the best deals. Houses that need updating, a second bath or an addition to make them more liveable may have been overlooked by "perfect house" shoppers, and the seller may be getting just desperate enough to cut you a great deal. Remember, paneling is your friend — if you're looking for a great deal. Be cautious, though, about compromising on factors that aren't fixable and can have a long term impact on value, like low first floor ceiling heights in old farmhouses (you can often raise the roof on a second floor to get more second floor headroom) or location on a busy main road.
Be patient. Some of the best deals are "short sales" (where the owner owes more to the bank than the house is selling for, and the lender is asked to write off some of the amount owed.) But short sales can take 3 to 6 months to close, and even then, there is no assurance at the outset that the bank will approve the short sale deal.
Don't be shy about making offers. I've changed my tune on this over the past few months. Offers, particularly on houses that seem overpriced, are crucial feedback for sellers about how buyers value their property. But keep in mind that low offers below 80% of asking price are seldom successful, so don't get emotionally attached. It's important to remember that the average sale price here in Sullivan County is 90% of asking price, and few sellers have a bottom line of less than 85% of their asking price. So that $400,000 house you love? You may get it for $350,000, but less likely at $300,000. If a seller is willing to accept a $300,000 price, they would probably cut the listing price to $350,000 or less.
If you really like a house and it works for you, and you want to get it, be realistic with an offer and be able to support it with solid market data. In certain market segments, particularly in the low to moderate ranges, there have been enough sales and sufficient price stability, to determine a supportable price range. A strong case to support your offer can go a long way to softening a seller's resolve. But if your offer price is just a shot in the dark, with no basis apart from you wanting a deal, it can have the opposite effect, and harden a seller.
Achived Sullivan County Real Estate Market Conditions Reports