Sales are picking up from their mid-winter lows, with 97 closed single family sales reported in the Sullivan MLS for the 3 month period ending June 30th, up from 86 during the 3 month period ending May 31st. The sales tally is down 15% from a year earlier, and 48% below the 2nd quarter peak of 187 closed sales in 2006. Overall, looking at single month data as well as houses pending or in contract, the trend is moving up rather than down.
On the price front, however, it's a more mixed picture. The median sales price of $143,100 for the 3 months ending June 30th was up 4.6% from May's 3 month median, while the average of $157,758 was 8% lower than the previous month. The drop in the average can be largely attributed to a single $1 million+ sale in early March "aging out" of the latest 3 month sample. With that sale excluded from the previous 3 month sample, the average would be relatively flat. That's the reason I tend to give less weight to the average in terms of trends because it can be so highly influenced by a single large sale.
The continuing drop in the average sales price, however, does point to continuing softness at the higher end of the market. For the latest 3 month period there were only 3 closed sales reported in the MLS above $400,000.
Since the beginning of the year, foreclosure sales have been a drag on prices. For the 3 month period ending May 31st, 36% of the closed sales were foreclosures. For the latest 3 month period ending June 30th, foreclosures dropped to 24% of total sales.
For the most recent 3 month period, the average ratio of sales price to asking price was 89%, about where it's been hovering for the past few months. The ratio of sales price to original asking price was 79%.
One question I'm often asked is how far are we down, price wise, from the market peak (which was about the 2nd quarter of 2007). Looking at the overall market, the average sales price is down about 38%, with the median off 26%. But those numbers can't be applied directly on a single property basis. For example, a house that sold for $400,000 during the 2nd quarter of 2007 isn't necessarily worth 38% less, or $248,000 today, or even 26% less, or $296,000 (applying the median drop) today. The property mix has changed since the peak — there are more foreclosure sales in the mid today, as well as a downshifting to more modest properties. (Pulling the foreclosures out of the current 3 month average brings the drop in the average from the peak down to 30%.) But overall, looking at recent sales and deal prices, it seems as though we're down about 25% on a comparable property basis from the peak, with some off a little more and some off a little less, depending on market demand.
The Current Market
In my June report, I mentioned a noticeable pick up in buyer activity starting in April. Since mid June, that's grown into a relative surge. I know some of you will think I'm smoking something, but potential buyers have been coming out of the woodwork. For the past 3 or 4 weekends, the three of us at Catskills Buyer Agency have been booked solid with appointments. And every day there are 3 or 4 calls or emails from new folks asking about buying second homes here.
Many of these folks are new shoppers, just starting out looking and getting a lay of the land. But some are quite serious, and during the first two weeks of July I wrote up three offers — two of which are above $400,000.
This is a bit of an anomaly, though, as the hotspot among second home buyers we're seeing is in the low to mid $200's. In fact, I don't think it would be a stretch to say that houses with features (charm, some acreage, quiet country road) that appeal to second home buyers from the city priced under $250,000 are practically flying off the shelves. There have been 7 or 8 houses that have been on my "favorites" short list in this range through the winter, and all but a couple are now in deals.
The profile among buyers we're working with is pretty consistent. 30-somethings, generally renters in the city looking for a moderate priced, affordable country getaway. I'm a bit surprised, because I expected this market segment would decrease with the pull back in sales prices in the city. I thought that as buying a city apartment became more "affordable", this group would shift their buying focus to a primary residence. But while it seems that prices are dropping in the city, they're still not quite "affordable" for many in this group, particularly because rents have also been falling.
There's another aspect to this dynamic. These 30-somethings are often starting their families. Whether they rent or buy in the city, their primary residence will still probably be an apartment, and unless they're in the big bucks realm, a relatively small apartment. They want space, for themselves and if they have children, for their children to play. The downturn in prices for country property along with the drop in rents in the city makes having a city place and a country place a very attractive combination.
While most of the activity I've seen lately has been in the sub-$250K range, I'm starting to see some pick up in interest in the mid-upper range, up to about $500,000. These are somewhat wealthier second home shoppers who are looking for particularly good deals. With the softness in this range over the past 8 or 10 months, they're correct. There are some very motivated sellers.I 'm currently negotiating on a couple of properties in the $400's that have been on the market for over a year. 12 or 18 months ago, the seller's price expectations on those properties were in the $600's.
Sellers, Asking Prices and the Inventory Picture
Inventory continued to rise slightly in June to 1,099 single family homes listed in the Sullivan MLS at the end of the month compared to 1,021 at the beginning. This is generally in line with the seasonal rise in inventory we typically see in late spring and early summer. The average asking price dropped slightly to $268,676, while the median asking price fell a bit for the first time in 3 months, to $214,000 from $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 a number of 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 104 days for foreclosure sales compared to 347 days for non-foreclosure sales.)
Overall, though, I'm starting to see somewhat more realistic pricing. Recently, a 3 bedroom lakefront home on Swinging Bridge was relisted at $475,000, down from $549,000 when it was on the market last fall. This is the first sub-$500,000 3 bedroom house on that lake this year. (Another soon followed with a price reduction to $499,000). At Lake Devenoge, one of my favorite non-motorboat lakes, a 3 bedroom lakefront cottage on 1.5 acres came to market at $399,000, the least expensive asking price I've seen for a 3 bedroom direct lakefront on that lake in a couple of years. Those prices may not yet be quite appealing to stimulate the lakefront market (where sales have been tepid at best all year) but are definitely moving in the right direction. There will be a point at which attractive pricing will open the lakefront flood gates, in the same way that farmhouses that sat on the market with asking prices from $289,000 to $329,000 suddenly found a surge of interest when they dropped into the $229,000 to $259,000 range.
Inventory in that popular low to mid-$200K range for cute/charming/quiet second homes is actually pretty tight, with not a lot of new listings coming on to the market to replace the houses that have moved into deals, while inventory continues to accumulate at higher price points. Two other categories with a dearth of properties are 3+ bedroom houses with lake rights to one of our more 'rustic' lakes like Wolf, York or Devenoge in the $200,000 to $250,000 range, and small lakefront cottages priced under $300,000.
What Does This Mean for You as a Buyer?
Second home buyers looking in the sub-$250,000 range should be aware that it's not quite the "buyer's market" they may be expecting. In fact, the demand for good houses in that range is outstripping supply and the selection is limited. Over the past month or two, myself and my colleagues at CBA have shown properties in this range to a number of people who've called a few weeks later to come back up for a relook, to be shocked that the house they liked is gone. As implausible as it may seem, if you find a house in this range that you like and is well priced, you probably need to move quickly on it.
The picture is very different for buyers looking above $300,000. Buyer demand thins out dramatically as you move into higher price points. A buyer looking around $250K to $275K who can move up into the mid-$300's (and away from the mid $200's pack) may be able to nab a lot more for their money than the price difference would suggest.
The most interesting part of the market, from a negotiation and deal standpoint, is probably above $500,000. You practically have the field to yourself. While it's unlikely you'll pick up a house listed for $799,000 for $550,000, this is the realm where there may be a lot more negotiating room.
If you want to play hardball in a thin market segment, it pays to keep overall relative value in mind. At upper price points, you don't generally find a lot of distressed sellers who need to move their properties. In fact, you may encounter a lot of stubbornness. You need to be calm and present a rational justification for your offer price. While it may be a buyer's market in some segments, you still should be prepared to defend your offer price and ask the other side to support their counter offer or bottom line.
Avoid the temptation to think that every seller is in trouble, desperately needs to sell and should be thankful to you as a savior for your low ball offer. For the most part, it's just not true, particularly for the types of properties most of the second home buyers I work with are looking for. Keep in mind that the average sales price here is 89% of the current asking price. Some houses, of course, sell for less than 89% of asking price and a lot of factors go into the final price of the house. But buyers who believe across the board that every $250,000 house should sell for $150,000 or even $175,000 will likely come up empty handed.
If you're an all-cash buyer, you may have some additional leverage — in some categories. The appeal of an all-cash purchase is two fold. First, all-cash purchases can close faster, an advantage is the seller needs a quick closing. But the greater appeal, in the new, tighter lending environment, is that the sale isn't subject to the loan underwriting and appraisal process. Now, in a category with a good number of recent sales, like those $250,000 farmhouses I keep mentioning, the appraisal and underwriting process is pretty risk free. We're accumulating a good set of recent comps that are providing pricing confidence in this sector, so there's less chance a house won't appraise. While all-cash is appealing to a seller in that moderate range, it doesn't reduce closing risk sufficiently to justify a big discount. At higher price points, though, an all-cash purchase has a lot more value to a seller. With fewer comps, there is a greater risk that a property won't appraise and the loan will fall through.
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.
