May was pretty flat on all measures — both units sold and prices — compared with April. While there has been a noticeable uptick in activity in terms of buyer inquiries, showing and offers, that won't work it's way through to closed sales figures for a month or two.
For the 3 months ending May 31, there were 80 closed single family sales reported in the Sullivan MLS, 21% below the same period a year earlier. The median sales price of $134,400 was 11.4% below May, 2008, while the average sales price of $166,513 was down 15% from a year earlier. The median sales price, which tends to be a more stable indicator of pricing trends than the average (which can be impacted by a handful of particularly high or low priced sales), has been moving in a very narrow range between $132K and $138K since February — neither confirming the doomsayer predictions of a further drop into the $100K to $120K range, nor the bulls hoping for a climb back above $150K.
In looking at April and May's single month data, however, there may be a slight move up in the next month or two into the $140's. However, it looks like that pick up in the median will be tempered by a further slide in the average into the $150's, about the levels we were at in mid 2004. This is consistent with what I've been reporting since the beginning of the year — a trend among buyers to the affordable and moderate ends of the market, and a continuing softness in the upper end. Fewer upper end sales depress the average.
Any analysis of sales data, however, needs to factor in the impact of foreclosure sales. For the 3 month period ending May 31st, 29 of the 80 closed sales, or 36%, were foreclosure sales. That's sharply up from 26% of sales for the 3 months ending March 31st. The average sales price for these bank-owned properties was $103,004, comapred to $199,912 for the non-banked owned "market rate" sales. Buyers should be cautious in jumping to the conclusion that bank-owned properties sell at 52% of the price of non-foreclosure properties, because the properties themselves tend to be different animals. Likewise, sellers should avoid thinking that the drop in the median and average can solely be attributed to foreclosure sales, and that prices for "market rate" properties haven't taken a tumble. The peak in the average sales price was $252,000 in June 2007. Assume for a moment that there was minimal foreclosure impact on that number. Today's non-foreclosure average of $199,912 is down 21% from that number and will likely drop further in the next month or two based on the most recent sales.
For the most recent 3 month period, the average ratio of sales price to asking price was 89.8%, about where it's been hovering for the past few months. The ratio of sales price to original asking price was 77.4%.
The Current Market
There's been a sharp pick up in buyer interest since mid April. ("Sharp", though, is a relative term, since the 1st quarter, January through March, seemed dead as a doornail.) Website visits and property searches on my site have been at levels I haven't seen in more than a year. Myself and my two colleagues at Catskills Buyer Agency were fully booked with buyer visits on most weekends in May. (This is not to say that we returned to the frantic showing schedules of a few years ago. We weren't juggling two or three appointments a day.)
A lot of the folks we've been taking out are new buyers, just starting out shopping and familiarizing themselves with the market. However, in May over 50% of our appointments were with returning shoppers, which is very positive.
Being busy is not the same thing, though, as making sales. Common among buyers I'm in contact with are very high expectations. They're looking for the ideal house at a deal price, and will keep shopping until they find it. Part of the problem is that here in Sullivan County we don't have that many "ideal" houses that get 95% of the way to what a buyer ideally wants. When there is something approaching that, the price expectation between buyer and seller are often far apart.
Searching for that ideal — and eliminating from consideration anything that doesn't reach it — is the flip side of a buyer attitude that's been pervasive for months, namely that there is no pressure to buy now. Buyers believe that they're in the driver's seat, and that either a better house will come on the market, or that a seller will lower their price on a house they might consider. They don't perceive that there is any downside to waiting.
In terms of what buyers are looking for, we're getting a lot of requests for smaller houses at moderate price ranges. The most typical request recently is for a smaller farmhouse or other "charmer", under 1,500 sq. ft., with a few acres and privacy around $200,000. Add view or water, or a particularly nice house or setting, and that might stretch into the mid $200's, but that low $200's range seems to be the hot spot right now. Houses that appeal to second home buyers in this range are moving quite well.
My colleagues and I are working with a few clients looking above this range, including a handful looking for more trophy lakefront or farmhouse property above $500K. But much above $300,000, buyers are pretty thin on the ground.
An interesting category right now is lakefront, not from the perspective of activity, but rather the lack of it. Since Jan. 1, there have only been 3 lakefront sales in the MLS, and two of those were only "quasi lakefront" — one had a separate lakefront access parcel down the road, and the other is really on what is a large pond. It's almost like the lakefront market has evaporated. To put it in perspective, for the full year of 2007 there were 52 lakefront sales reported in the MLS. Five months into 2009, and we just have 3 so far this year.
The biggest reason for the sharp drop off in lakefront activity is likely price. The second home buyers I'm seeing tend to be in their 30's. They haven't accumulated the wealth of buyers 10 years older than them, and so are looking at the more affordable and moderate ranges of the market (generally topping out in the $200's). The traditional lakefront buyer, on the other hand, tends to be a little older and wealthier (with the exception of the younger Wall Street buyers of the past few years). A second home buyer in their 40's or 50's is more focussed on retirement savings than one in their 30's, and has likely taken a bigger hit in their 401(k)s. That's also the age range with kids heading to college, as well as the ones more likely to have tapped equity in their primary homes to help pay for college and buy a second home.
The 30-something buyers may want a lakefront house, but they're too expensive. For the most part, those buyers aren't looking to spend $400,000 or $500,000. (56% of lakefront houses have an asking price above $400,000. Only 15% have an asking price under $300,000, the upper end of the range for most 30-somethings, and most of those are very small or with less appealing lake settings.) While this 30-something demographic affects demand for all higher priced property, the impact is most pronounced in lakefront activity.
This demographic shift is likely a key factor in the continuing demand for the Catskill Farms new construction houses. Chuck Petersheim, the builder behind Catskill Farms, and delivers a product with the features they most want (charm, uniqueness and privacy) at a price they want to pay (under $300,000.)
Sellers, Asking Prices and the Inventory Picture
Inventory rose slightly in May to 1,021 single family homes listed in the Sullivan MLS at the end of the month compared to 980 at the beginning, in line with the seasonal rise in inventory we typically see at the end of spring. The average asking price dropped slightly to $270,441, while the median asking price rose for the third month in a row to $219,000.
These gross market basket averages, however, don't paint a complete picture. There has been a lot of re-pricing activity within a small subset of the inventory, among motivated sellers who've had their houses on the market for a while. The impact of these price reductions on the overall asking price average is being masked by new listings coming on the market at unrealistically high prices. While foreclosure sales have a marked impact on closed sales prices, they have less of an impact on inventory asking prices because they move in and out of inventory much more quickly. (Days on market from listing date to closing date is 121 days for foreclosure sales compared to 356 days for non-foreclosure sales.)
Overall, though, the inventory here continues to be bloated with overpriced listings, or listings that may seem well priced but are in market segments with little or no demand. In my opinion, probably less than a third of the current listings fall into the "motivated seller, priced to sell" category. Overlay that with the market segments and price points with active buyer demand, and the intersection results in a very small subset of houses likely to sell.
One important factor that many sellers aren't paying attention to is who's buying and what they're buying. Some market segments have very thin to virtually non-existent demand. For example, there are a number of large "executive" primary style homes on the market here priced between $500,000 and $800,000. We don't have a lot of new businesses importing executives creating demand for those houses, so cutting the price from, say, $750,000 to $650,000 probably won't do much. However, there are other market segments with active demand, like the 30-something second home buyers shopping in the moderate price range. If a seller has a home that would appeal to these buyers priced at $349,000, there may not be much demand at that price, but there might be a lot of interest at $275,000 to $300,000. Pricing the house to appeal to active buyers might not be that attractive to a seller, but it can get the house sold. Likewise, lakefront home sellers will have to adjust to the reality of who's buying today, not who may have been buying a year or two ago.
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.
Be aware if you're looking in a popular category. Right now, for second home buyers, that's between $150,000 and $250,000. There's definite demand for appealing houses in that range, and don't expect that if you find a house you like that it will stay on the market forever, or that you can expect a huge price reduction on a house that's priced to generate activity. I know of a number of situations in the last 4 to 6 weeks where one potential buyer has hed firm on an offer price of, say, 85% of asking, only to see the house go to a buyer willing to pay 95% of asking.
That isn't true of all ranges. When you're outside of a "hotspot" category, you have more negotiating leverage. Demand is markedly thinner in the $300's and $400's than in the $200's. That doesn't mean you'll get the house of your dreams at a bargain price, but they're probably room. However, keep in mind that on average houses here sell for about 90% of their listed asking price, so it's unlikely you can pick up a larger farmhouse with a wrap porch listed at $389,000 for $275,000. But if you can push into the $325,000 to $350,000 range, you might be able to get a lot more house for not a lot more money.
Don't be too focused on finding the absolute perfect house. They're tough to find, and even tougher if you want a deal. Lots of buyers, it seems, want something authentic, charming, with privacy, a view and pond or stream in great condition on a quiet country road at a great price. Frankly, finding that is as much a matter of luck as anything else, being in the right place at the right time, ready to move. Those houses you see in the pages of Country Living do exist, even here in Sullivan County, but they're expensive. If you have a $250,000 budget, you can certainly find a nice country getaway here, but it isn't going to be a $600,000 renovated showcase house set back from the road. Think of it like dating. If you can spend $600,000 in Sullivan County, you're one of the handsomest guys around, and can realistically look to date other beautiful people. But we're all not the handsomest guys around (even when I was younger, I never made the "A" list of head turners.) That doesn't mean there aren't plenty of folks for us "B-listers" to have a really good time with.
If you're a high cash buyer (meaning you can put more than 20% down), there may be some interesting opportunities for you. Mortgage lending has become very tight in the last six months. As a result, there are some houses that may have great difficulty qualifying for a mortgage, generally because the appaisal comps just aren't there as a result of the recent low sales volume. Often these are very small houses in very nice or special settings that just won't appraise out at a price that reflects their setting or potential. For a buyer in a position to pay cash or make up an appraisal gap with cash, it could be an interesting bet. (I'm not at all advnocating that buyers agree to make up an appraisal gap on most houses if they come in short. But there are some limited circumnstances where the technical requirements of the appraisal process don't take into account qualitative factors that increase appeal.)
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.
