June was a disappointment, from a closed sales standpoint, with the 135 closed sales for the 3 month period ending 6/30/2007 off 28% from the same 3 month period a year earlier. 2007 started out with year over year sales declines in the 25% range, but that had been steadily improving, with May recording only a 16% year over year drop. Sales continue to dribble in to the MLS for a few weeks after the close of a month, but even if we pick up an additional 10 sales, we'll still be down about 23%.
Prices, though, continue to be holding. The median single family home sales price for the 3 months ending June 30th was $198,000, the same as the previous month and up 10% from the June, 2006 median of $180,000. But a year-over-year price comparison can be a bit deceiving. If you look at the chart at the left, you'll see that the Median Sales Price has been relatively flat since August, 2006. With the exception of a couple of monthly dips, the Median has been trading in a very narrow range between $190,000 and $198,000.
We may, however, be heading for a price pullback. If I look at the data for the 2 most recent months, May and June, rather than the more statistically reliable 3 month running average, the median sales price for those 2 months is $184,000, which is about a 7% drop from the current $198,000 median. I'm always very cautious to look at anything less than 3 month data because the smaller monthly sample sizes can skew the results, but the trend indicates we may be looking at a some pullback in prices. This is consistent with what I've been saying for months, that I expect prices to settle out at about their summer 2006 levels, and during the 3rd quarter of 2006 (July through September) the median sales price was trending between $180,000 and $190,000.
The average sales price for the 3 months ending June 30th was $252,696, up 10% from the same period a year earlier. But the average is a much less reliable indicator of price trends, because it can be skewed by just a handful of large sales.
The Current Market
June was decidedly slower than the previous few months, from my perspective, in terms of "in county" activity — visits and offers. A year ago at this time, I typically had 3 to 4 appointments every weekend. This year, its 2 to 3. But more casual buyer activity — visits to this website, use of the MLS Search and Google searches on key terms related to Sullivan County real estate — have not shown any drop off, indicating that buyer interest remains high. But translation of that interest into closed sales is likely being tempered by a combination of buyer hesitency (in the wake of interest rate hikes and more general concerns about real estate) as well as a shortage of inventory in many property classes here.
In the second home sector, which is my main focus, the buyer interest I'm seeing is largely centered on 3 property categories — houses with privacy and 'vacation home' appeal in the $300,000 range, and anything lakefront, from small cottages on more modest parcels in the $400,000 range to houses on larger 5 acre lake parcels with more privacy in the $600,000 to $800,000 range. There has also been considerable interest in the affordable range cabin and cottage segment under $200,000.
A third segment that has done quite well over the past couple of months, in terms of closed sales and properties in contract, has been the non-lakefront "better property" category, from $450,000 to $600,000. (These sales would have reflected buyer activity earlier in the year.) In the last month, though, I've noticed a marked drop off in inquiries in this price range.
The very upper end, above $600K for non-lakefront and $700K for lakefront, seems soft. I've fielded a number of casual inquiries in this range over the past month, but there's been little follow up from buyers. I've also gotten very few calls about Chapin Estate, which in my mind tends to be a bellweather indicator of upper end interest.
Interestingly, I've been getting fewer and fewer requests for farmhouses, which a few years ago was a bread and butter category among second home buyers. The decrease in the popularity of farmhouses may be a function of the decreasing age of buyers I'm seeing. Over the past year I've commented a number of times that I'm seeing a lot more 30-something, and even the occasional 20-something, buyers. Their style is much more "Dwell" than "Country Living", and if they're drawn to a nostalgic vernacular, it tends to be more "Arts and Crafts" and Craftsman than farmhouse. Post-and-beam and renovated barns are also popular, and in the more modest price ranges, the 80's "vacation chalet" styles with their cathedral ceilings and lofts are finding new fans. Brady Bunch era ranches, splits and bi-levels, though plentiful and affordable, are tough sells with this group. With this group, at every price point, a place has to be either "cool" or "authentic" to generate much interest.
Affordability in the face of rising interest rates is a growing concern, particularly in the moderate price range and below. I'm finding that moderate range second home buyers, looking between $275,000 and $325,000, for example are holding firm to their budgets. While the inventory of attractive houses around $300,000 has been quite limited, with much more available in the $350,000 to $400,000 range, for the most part I am not seeing a willingness among these moderate range buyers to stretch into that price range.
Overall, affordability concerns along with all the media coverage of a national housing downturn, is leading to a growing conservatism among buyers. I'm finding, over all, that they're much less willing to take a risk. They want houses with attractive features, in good condition, that don't need work and that are solid values within their budgets. And more than anything, they're not impulsive. I'm hearing again and again, "We're willing to wait for the right house to come on the market." This also translates into a reluctance to consider houses that need work. I'm finding more and more buyers rejecting houses that need even minor reconfigurations or renovation to make them more contemporary.
The Inventory Picture
Inventory is continuing to rise at a modest pace, reaching 1,281 single family homes listed in the Sullivan County Multiple Listing Service at the beginning of July. That's about 8% ahead of the same time last year, and up about 50% from the very tight inventory situation in 2004/2005. But even though overall inventory is up, that doesn't mean that the inventory of good houses that are well priced with attractive features is also up. In fact, is some popular property categories I work with, there are real shortages. (See my July 2nd blog post, Where Have All the Houses Gone?)
My biggest challenge right now is inventory, or rather the lack thereof. In one of the most popular second home categories — houses with a 'second home' feel on 5 or so acres with privacy in the $275,000 to $325,000 range — there's hardly any inventory to show. Even areas where I could reliably count on a few vacation chalet-style or saltbox contemporaries to always be on the market — York Lake, Black Forest Colony, North Branch Commons and Pine Ayre — there's nothing. Other popular categories are similar. Right now there are almost no renovated farmhouses on 10 to 20 acres for around $600,000, houses with view or large ponds around $500,000, non-lakefront houses at Wolf or Wanaksink under $300,000, or even a good year round Smallwood 'classic'. And for the first time that I can remember in years, there isn't a modest non-lakefront house at Edgewood Lakes.
A number of new construction 'spec' houses that were on the market for over a year are also sold. Catskill Farms has sold out of its inventory of spec houses (with the exception of one more expensive house at $880,000 in Chapin) and is now selling from plans. Two other spec houses that were always reliable shows, one on Buck Brook and one on Bowers Road west of Roscoe, are gone, as are a number of others scattered throughout the county. A common element among these spec houses is that they all had "second home appeal" features — 5 acre+ lots, privacy, wood exteriors and prices under $500,000. Spec houses in a more "primary home" style — two story colonial styles with vinyl siding on smaller lots — have not fared as well, indicating that second home, and not primary home, buyers are driving the market here right now.
Common sense economics would indicate that inventory shortages combined with high demand would lead to higher prices. But that isn't necessarily so. There are a number of houses on the market in the $400,000 range that would have great appeal to those $300,000 buyers that I can't find places for. You'd think a new moderate price point would be evolving around $350,000, but I'm not seeing that happening. The $300,000 buyers aren't stretching into the upper $300's, and the $400,000 sellers aren't willing to move into the lower $300's.
I think we are heading into an attitude adjustment period from the seller's standpoint. Over the past couple of months, there has been a modest pullback in the median asking price from $249,000 to $239,900. Sellers often perceive that the summer months (June, July and August) are the peak sales months here, and many that have "optimistically priced" their houses may harbor the hope that they'll be swept up in the summer surge. But as the summer progresses, and overpriced houses stagnate without showings, offers or deals, we may see some significant price adjustments down into market value range. Note that I'm not predicting here a major drop in actual closed sales prices, but sellers bringing their price expectations in line with what buyers are willing to pay.
Right now, Sullivan County seems to be a victim of our own success. There is definitely demand among second home buyers from the city who want to be here. But we just don't have a lot of inventory with the features they want at a price they want to pay. This isn't to say that you should throw in the towel and not look. But just be aware that if you're looking in a popular category that there may not be a lot of inventory available at any given time.
What Does This Mean for You as a Buyer?
Buyers looking here should really ignore all the media talk about the shift to a buyer's market, and pay close attention to the local dynamics of the submarket that they're in. If you're looking in a popular and active segment of the market here, like moderate priced houses with privacy, or private lakefront, you should approach the market with a "sellers' market" mentality. But if you're looking in less active segments, like less popular house styles or areas with less demand like Emerald Green, you can often don a "buyers' market" hat.
If you're just starting out shopping for a second home, you've likely conjured up an ideal. A cute farmhouse with a wraparound porch ala Norman Rockwell, a cozy Arts and Crafts cottage with a big stone fireplace nestled in the woods, a post and beam house with expansive spaces, a house in the "Dwell modern" style, or a charming lake cottage ala "On Golden Pond." If any of these are your ideal, keep in mind that you're not alone — and these types of houses are in very short supply, and when they are available, tend to be higher priced than comparable houses in less popular styles because of demand.
The best values by far are in "Ugly Duckling" houses in less popular styles, like split levels, bi-levels and ranches. If you're on a budget, develop a new relationship with vinyl siding and paneling — they're your friends. Vinyl siding and paneling limit appeal and can keep prices in check. Likewise, if you're on a budget, consider a less popular development style. Take Emerald Green and Wolf Lake, for example, both near Rock Hill. Wolf Lake is adorably charming, with a pristine non-motorboat lake, gravel roads and mostly "On Golden Pond" style houses. Wolf Lake was mostly buitd out in the 40's and 40's. Nearby Emerald Green, in contrast, was developed in the 70's and 80's, and has a more "California suburban" style, with paved streets, street lights, and a variety of house styles, including some with dreaded vinyl siding. On a per square foot basis, Wolf Lake is about 50% more expensive than Emerald Green. Is Wolf Lake more appealing? In my opinion, yes. But Emerald Green, because the style is currently less in vogue, is a better value. In fact, I think Emerald Green is a very savvy buy. Inventory there is relatively high, because many of the houses have reached their 20 to 30 year 'turnover' point from the original owners, and I think there will be a decided shift in the makeup of the community to younger buyers with families. A similar lake community that trades at a discount because of its less popular, more suburban 'style' is Lake Joseph — which offers tremendous value on a very beautiful lake.
Unless you're flush with cash, be prepared to do some work. Many clients I work with want something that is either cool, hip and renovated, or adorably cute, authentic and charming. There isn't that much of either, at least for us mortals without very deep pockets. A fact of second home markets like Sullivan County is that there is a predictable cycle. Second homes turn over roughly once a generation, or about every 20 to 30 years. So what was popular in the 70's and 80's — like paneling, Formica and drop ceilings — isn't popular now. In the 80's, sliding doors were the thing. Now, they're just dated. Yes, lots of houses have been stunningly renovated in a cool, contemporary style here in the last 5 to 10 years — but for the most part, unless there's been a divorce or someone's been transferred, they're not on the resale market yet. They haven't reached their turnover point. For the most part, if you want something with cool contemporary styling — whether Dwell, Country Living or Adirondack Lodge— you have to build it, renovate it, or, when it comes on the market, pay top dollar for it.
Be wary of succumbing to the "Montana Syndrome." Among urbanites, privacy and seclusion are big factors. Many new shoppers come to Sullivan County with expectations of total privacy, seclusion and quiet. Its what I tend to call the "Montana Syndrome." The reality is that we're two hours from the largest city in the U.S., and that convenience comes with some tradeoffs. You can find pretty nice country settings here, with plenty of elbow room. But unless you have deep pockets, you'll have some neighbors. Two to fIve acres might seem like the Ponderosa if you live in a studio or one bedroom on the lower east side, but you may still hear or see a neighbor or two. When it comes to anything waterfront, on lakes or rivers, privacy is very pricey.
Sullivan County continues to be the best second home value within 2 to 2 1/2 hours of Manhattan, but that's not the same thing as 'cheap'. Yes, there are some parts of Sullivan that are less desirable, and still qualify as 'cheap' --- but they're not probably what you're thinking of when you conjure up a cute country town or idyllic rural getaway. Its probably useful to think of Sullivan County as the rural equivilent of Inwood or Hudson Heights (if you're familiar with New York City real estate.) A few years ago these neighborhoods were dirt cheap, with one bedrooms selling for as little as $100,000 or $150,000. Today, a good one bedroom in Inwood can cost $300,000 or more — still a great value relative to anything else in Manhattan, but outside the bounds of cheap. To find cheap, you need to push further up into the Bronx. The same goes here. Sullivan is still a great relative value, but truth be told, we've been discovered — and prices reflect that. To get 'cheap' you probably need to travel a little further north into Delaware County beyond the 3 hour circle from NYC.
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.
