Single family sales in the Sullivan County MLS in June showed an improvement over May on 3 key measures — number of houses sold, the median sales price, and the "bid/ask" ratio. For the 3 months ending June 30th, there were 108 single family home sales reported in the Sullivan County MLS compared with 98 sales for the 3 months ending May 31st. The June sales tally, though, was still 27% below the same period a year earlier.
On the price front, the average sales price of $199,677 for the 3 months ending June 30th was just about on par with the $198,550 recorded at the end of June. The median sales price of $162,675 did show an uptick in June, climbing 7.9% from May's number. For the past 3 months, the ratio of sales price to asking price (essentially the bid/ask) was 91%, up slightly from the low of 89% in April.
One year ago, June 2007, was the market peak, with June 2008 sales prices showing about a 20% drop off (21% in the average and 19% in the median) from year ago levels. Its important to remember that doesn't mean that every house is worth 20% less than a year ago — some properties in more in-demand market sectors have held value better than other sectors. I've kept monthly data for 7 years, and the current closed sales prices are just about on par with the levels of the summer of 2005. The real estate market took 2 years to climb 20% from the $160K median/ $200K average level in the summer of 2005 to its peak, and then dropped back 20% in the past 12 months to its current level.
On the price front, I expect a jump in the median over the next few months due heavily to a shift in the "market basket" of houses that are selling. June's single month median sales price was $212,500, and the May-June 2 month median was $183,500, so we could see July close out with a 3 month median tally close to $200,000. )The average, however, isn't rising substantially, so we may see a convergence in the median and average over the next couple of months, the first time that's happened since I've been keeping sales records.
The Current Market
There has clearly been a pick up in buyer interest since the mid-winter doldrums when the phone just wasn't ringing. During June, I had at least two appointments every weekend, not remarkable but respectable. Emails and phone calls inquiring about property have been steady. I think, though, that the tenor is much more "shopping" than "buying." A lot of people I'm talking to or going out with are exploring options and getting a feel for the lay of the land. A number of folks have commented that their time framework for making a purchase is a year.
I'm seeing a number of common factors among many buyers. One is that that they are very, very choosy. They just aren't interested in houses — regardless of how well priced they are — that involve significant compromises or require substantial work. A year or two ago, in the second home market (which is the market segment I'm most familiar with), a house could have one or two major negatives and still find a buyer. Today, even one significant negative factor like low ceiling heights, busier road location, further distance from the city, vinyl siding or a quirky layout, will keep a house from being shortlisted. I've remarked to a number of colleagues that buyers today are looking for a reason — any reason — not to buy a house. They want to look, because that's fun and doesn't require a commitment. But if they find a house they love, with few or no compromises, at a price they want to pay, then they're forced to make a decision about whether they really want to buy it.
Second, there is a noticeable pull back in price points. Last year's $350,000 to $400,000 farmhouse buyer is more likely looking in the $250,000 to $300,000 range. I'm seeing very discernible price range expectations evolving. Small, 2 bedroom lakefront cottage buyers seem to be around $300,000; larger 3 or 4 bedroom lakefront buyers are hoviering in the upper $400's. Buyers looking for something cute and charming on a few acres on a quiet country road are in the low to mid $200's. Those expectations, interestingly, are right around 2005/2006 levels. The problem, of course, is that many sellers have price expectations far above these ranges.
A final noticeable change is in the profile of buyers I'm seeing. A year or two ago, a substantial portion of my client base worked in the financial services industry. Today, virtually none work in financial services. Well-compensated financial services workers were a significant factor in the strength of the upper end market here, and their pull back is certainly contributing to the softness in the market for more expensive second homes.
Sellers, Asking Prices and the Inventory Picture
Inventory rose modestly in June, to 1,243 single family homes on the market (up from 1,178 at the beginning of the month.) The rise, though, is consistent with the traditional seasonal rise in inventory through the summer months here. The actual inventory count could be somewhat higher, given that there are 110 single family homes in "Temporarily Off Market" status — often because a seller has chosen to rent a property on a short term basis — not reflected in these numbers.
The average asking price rose slightly, to $294,985 from $289,675 last month, with the median holding at $229,000. While actual selling prices have been dropping since the beginning of the year, the average and median asking prices have been surprisingly holding steady. In my mind, this reflects a widespread denial among sellers about the change in the market. The average and median asking price has dropped only 9% since its peak last summer, in comparison to the 20% fall off in actual selling prices.
About the only properties selling right now are those that are perceived by buyers as very well priced for what they offer. Real estate guru Barbara Corcoran, on the Today Show a couple of weeks ago, counseled sellers to cut asking prices by 15% — that the key to making a sale is being perceived as the best value in a price range. That's not the only factor to making a sale, but it sure is the beginning ante. If you're not priced right, you're not even in the game. An agent's plea to show a house that's overpriced and "make an offer" in the era of $4+ gas just isn't cutting it.
Only a small percentage of houses on the market are hitting the desired green box in the upper left of the graphic below. And even then, a house has to be in a market sector with active buyers. For example, in the last couple of months I haven't talked to one larger acreage (30+) better farmhouse buyer — a buyer that was fairly common a year ago and typically looking in the $650,000+ range. So if you have a house in that category, I don't know if it really matters that much if you price it at $800,000 or $700,000 if there aren't buyers in that range. In contrast, there are quite a few shoppers looking for something with some charm in a nice setting on a quiet country road in the $250,000 range.
No Compromises
Well Priced
Compromises
Well Priced
No Compromises
Overpriced
Compromises
Overpriced
The Appraisal and Financing Picture
The financing and appraisal picture is certainly better than at the beginning of the year, but is still difficult. Qualified borrowers are able to find money and rates are pretty attractive for what are known as "conventional qualifying" loans up to $417,000. The picture changes substantially for "jumbo" loans above $417,000. Jumbos are much harder to get now and typically carry substantially higher interest rates — factors that may be having an impact on the upper end of the market (above $521,000 — the point at which 80% financing would exceed the $417,000 conventional conforming cap.)
Appraisals, though, post the greatest challenge. Lenders use appraisers to support the value of a house for the purpose of making the loan. Appraisers use comparable sales over the recent past to do this. With the drop off in the number of sales, its been harder for appraisers to find responsive comps in many situations. Many banks also will now only permit comps for sales within the last 6 months rather than the more traditional 12 month window. Even if a house is very well priced for its market segment, it can still have difficulty appraising if there haven't been other similar sales to support it.
On the other hand, however, tighter lending standards have brought some discipline to the market. There is nothing more sobering to an unrealistic seller than an appraisal coming in short on their house and the deal falling through. While some deals do fall apart with an appraisal shortfall, more and more sellers seem willing to renegotiate price after getting a dose of "tough love."
What Does This Mean for You as a Buyer?
I don't think its possible to make a blanket statement like "Its a good time (or bad time) to buy." Its very much on a case by case basis, dependent on the type of property and the motivation of the seller. There are some houses that are well priced with realistic sellers that you can make a good deal on. There are other houses that, no matter how much you love them, you need to take the stance of "See you in a year when you're more realistic."
For most houses, you can determine a reasonable "market value range" based on other recent sales, as well as similar houses that haven't sold. (A big part of my job as a buyer agent is estimating the market value range for homes my clients are interested in buying.) If you can't do a deal within that range, you should seriously consider walking. But on the other hand, don't walk if you find a house you love and can't make the deal at the bottom of or under the market value range. For example, consider 3 or 4 bedroom lakefront houses on 'standard' lakefront lots (60 to 100 ft. wide, rather than larger lakefront acreage parcels.) Recent sales point to a market value range for these houses from about $475,000 to $550,000. The low to mid $400's is below the range, while the upper $500's into the $600's is likely above it. Of course, there are factors specific to every property that impact likely market value, like whether a house can be expanded or if its extensively renovated. But I'm very cautious when a house is priced well above a demonstrated market value range and often ask the listing agent to support the price discrepency.
Avoid shoot-from-the-hip emotion, and support your arguments with facts. Low ball offers from buyers are often as emotional — and unsupported by data — as sellers holding to unrealistically high price expectations. Be prepared to make the case for your offer.
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 unfairly penalize sellers because they've 'right priced' their houses.
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.
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.
