Both sales and prices seem to be stabilizing, after dropping sharply over the winter. For the 3 month period ending May 31, 2008, 91 single family homes were recorded as sold in the Sullivan County MLS, down 43% from the same period a year earlier. That 91 sales count, though, is up from the mid-70's tally in March, and marks the second month that the sales number was back above 90. While the level of sales is way down from last year, the bright lining in this cloud is that it appears that the rate of sales decline may have stopped.
On the price front, the median sales price for the 3 months ending May 31st held at $150,000, while the average sales price slipped back under $200,000. On a year over year basis, the average was down 19.6%, while the median was off 24.3%. The median sales price, however, has held steady at $150,000 for 3 months in a row now. In looking at single month data, as well as properties in contract but not yet closed, it looks like the median sales price will hold at around $150,000 for the next few months. The average sales price, though, may take a further dip. In the past 3 months, there have been 2 sales above $1 million which has shored up the average, and as time moves those sales out of the data sample the average sales price could drop into the $180's.
One factor to consider in looking at year-over-year comparisons is that we the market here peaked, in terms of prices, in May and June of 2007 — so current numbers are being compared to the top of the market.
The Current Market
There's been a noticeable pick-up in activity since mid-April. For my colleagues and I at Catskills Buyer Agency, our appointment slots were almost fully booked for the weekends in May. A number of other real estate agents I know around the county have also remarked about an uptick, and one even commented "I think we're going to have a good summer."
The operative word is "good", not necessarily "great." I doubt the next few months will approach anything like the peak 2006-2007 selling seasons. But we may have turned the corner from the dreadful levels we saw this past winter, at least in certain market segments.
The activity pick up I'm seeing is mostly in the second home rather than primary home market. Of course, my perspective may be skewed, as this is the market that I focus on. But it seems consistent with recent sales and that the agents reporting more robust activity tend also to be more second-home oriented.
A number of the potential buyers I've spoken with recently are folks who were casually looking last summer and fall, but postponed their search. Today, I'm hearing comments like "We want to start looking again,", "We can't get the idea of a vacation getaway out of our heads," and "We think it might be a good time to buy." Very different psychologically than the alnmost terror buyers expressed over the winter.
While buyers may be more motivated, they're also more cautious. I've commented in this column over the years about the "hot spot" price point — the price range that seems to be a focal point for a large number of moderate-range second home buyers. That number has definitely fallen, from the low $300's in mid 2007 to about $250,000 today. Well-priced houses with attractive features in the $225,000 to $275,000 range have been moving very well, while houses in the $300,000 to $400,000 range — that would have sold quickly last summer — seem to be lagging. Over the past month I've been out with a number of clients on a first trip who saw something in that mid-$200's range that they liked. When they called a few weeks later to come back for a relook, the house they liked was already in a deal.
In addition to that "hot spot" range, there are 2 other segments that are seeing more activity. There are a number of buyers looking in the affordable second home range in the mid-$100's. However, in this range there is often a wider gap between expectations and reality. Its a tough segment, because many buyers in this range have similar expectations to buyers in the mid-$200s. The other segment seeing a pick-up is the moderate-upper range from $400,000 to $600,000, with a number of people looking for lake and riverfront houses, renovated farmhouses and good timber frame or lodge style houses in this range.
There are some common elements I'm seeing among buyers regardless of their price range. They're definitely very value focussed, and are only interested in houses in their price range they consider outstanding values relative to the competition. A buyer's perception that a house is overprced — whether that's true or not — is the kiss of death to making a short list. For the most part, they also don't want to do much, if any, work. Very well priced houses that need significant work just aren't making their short lists, even if they are good values. Finally, buyers are definitely taking their time making a decision. They're making multiple trips up, seeing lots of homes and revisiting ones under consideration two or three times.
Sellers, Asking Prices and the Inventory Picture
Surprisingly, given the pullback in the number of closed sales and prices, the average and median asking prices for the 1,100+ single family homes in the Sullivan MLS haven't shown much movement. The median asking price for the market basket of homes in the MLS has been stuck at $229,000 since January, with the average over the same period at about $290,000. While actual closed sales prices are down in the 20% to 25% range since their mid-2007 peak, the average and median asking prices for the market basket of single family homes in the Sullivan MLS is only down about 10% from last summer.
While the overall market basket hasn't shown much movement recently, there has been considerable adjustment on some individual listings. Some individual price cuts have been downright eye-opening, but its far from across the board. A number of new listings coming on the market have also been very attractively priced, and some of those houses have moved very quickly.
The overall inventory of 1,193 single family homes in the Sullivan MLS is just about on par with the same time last year. Compared to other parts of the country, there hasn't been a huge inventory surge here. In fact, there are still inventory shortages here in key demand segments — country charmers or attractive contemporaries in the mid-$200's, lakefront homes in the $400's, small cabins or cottages under $200K, and larger renovated farmhouses or lodge-style houses in the $500K range. Houses that hit these demand segments seem to be moving pretty well. Houses that would appeal to these different segments, but are priced outside of them, are having a much harder time.
Overall, when we look at sales prices, they seem to have rolled back to mid-2005 to mid-2006 levels. (Its hard to pinpoint the rollback comparison because of differences between the average and median sales prices, as well some shifts in the types of homes that are selling.) Houses that are priced relative to 2006 levels are being perceived by buyers as good values and are selling well. Houses that are priced at 2007(or higher) levels aren't. That's probably one of the biggest problems were seeing in the market right now. Take modest 2 bedroom lakefront houses as an example. In 2006, a modest 1,000 sq. ft. 2 bedroom lakefront home on one of our motorboat lakes would have likely sold for about $280,000 to $320,000. Today, there are 3 that fit that bill on the market, ranging in price from the upper $300's to the mid $400's — well above their likely 2006 selling range. If any of them were priced in the low $300's, they'd probably be perceived as a very good value and would sell pretty quickly. Given what the owners paid for the houses (between 2000 and 2005), any of them would still turn a profit if they sold in the low $300's — but their price expectations are much higher. I don't mean to single out these particular houses or sellers, which is why I've been sketchy in identifying information. But it illustrates the gap were facing between buyers who see value spelled "2-0-0-6" and sellers who still cling to 2007 expectations.
One thing we're starting to confront here is sellers who may be facing a loss, particularly when they factor in sales expenses, if they were to sell at what the market is willing to pay. Its one thing to accept a smaller profit than you expected, quite another if you're actually going to take a loss. Its interesting to me that people sell stocks all the time at a loss, without the same emotional hand wringing that accompanies selling a house at a loss. We're often not talking pre-foreclosure short sales here, but rather sellers who may have bought a home in the last couple of years, possibly over-renovated it and now can't quite get back out what they put in.
The Appraisal and Financing Picture
The chaos in mortgage financing seems to be settling, although financing and appraisals continue to be a challenge. Underwriting standards — for both the financial qualification of the borrowers as well as the value determination for the house — are much tougher than a year ago. In the second home market, where buyers are often well qualified financially, the challenge is more on the value determination (or appraisal) side. With fewer sales, there are fewer available comps (the comparable closed sales that appraisers use to support their determination of value.) The volatility in real estate prices around the country has led many lenders to require more recent comps than in the past. For example, they may accept only comp sales within the last 6 months rather than the 12 month window they'd accept previously. Appraisal adjustments — for square footage, acreage, house style or geographic proximity — which are so necessary in low density rural areas like Sullivan County, are coming under increased scrutiny by underwriters. Put all of this together, and its increasingly difficult to get a house here financed, particularly if its unique.
When you get a group of Realtors together today, the conversation is most likely to be about financing challenges, and everybody's encountering them. The tightening is understandable for a lending industry sturggling to rein in the abuses of the past. But it can be very furstrating when a house won't appraise when you know in oyur gut the value is there, and the sale dies because of technical appraisal and underwriting issues.
What Does This Mean for You as a Buyer?
You have to make your own call as to whether this is a good time to buy or not. I can't make a statement like "This is a good time to buy" because I don't have a crystal ball. But I have presented the latest statistics so you can form your own opinion.
If you're looking in one of the key price ranges, don't become complacent that you're the only buyer. If you're in one of those ranges, and you see a house you like that's well priced with attractive features, you probably need to move on it sooner rather than later.
Do your homework so you understand the market value range for what you're looking for — and make sure you compare apples to apples. A 3 bedroom vacation chalet style house up near Walton in Delaware County may be priced at $199,000, but that's 3+ hours from NYC. Here in Sullivan, 2 hours from NYC, the right price for that same house may be $299,000. At $299,000, the house in Sullivan may not be overpriced. Yes, its more expensive than a similiar house around Walton, but its also closer to the city.
Avoid equating "good value" with "percent off of the asking price." Some houses, believe it or not, are good values at or close to their asking price. Others would still be value dogs if an offer of 35% less than the asking price was accepted.
Don't expect a huge inventory surge that will flood the market with perfect houses. There are fewer than a couple of hundred nicely renovated farmhouses, for example, in the whole county and in a single year probably less than a dozen come up for resale. A lot of buyers lately have said, "We can wait for the right house", but its important to keep in mind that most houses here involve some type of compromise.
Don't assume that in all property categories, its a buyer's market. Some buyers I've been working with have that across-the-board assumption and it can work against them. Sure, if you want to buy a vinyl-sided bi-level on a main road or a 2 story builders colonial on a couple of acres in a new development, it probably is a buyer's market. But if you're looking for a cute farmhouse on a quiet country road, or a lakefront house with privacy, its not such a clearcut buyer's market. And don't make the mistake of assuming that all houses are wildly overpriced. Some are, but many aren'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.
