The volume of single family sales reported in the Sullivan MLS for the 3 months ending June 30th edged up a bit, to 96 single family homes, from the 88 reported for the 3 months ending May 30th. But the sales volume still remains very lackluster, and clocked in at 7% less than the same period a year earlier.
On the price front, the 3 month average sales price measure plummeted 14% from the month earlier, but half of that drop can be attributed to a single $1.35M sale moving out of the 3 month average, illustrating the impact that a single large sale can have on the average. However, when that sale is factored out, the average sales price still took a 6% hit.
The median sales price, which tends to be a more stable trend indicator, held relatively steady at $139,450, about where we've been since March. The single month data points to continuing around this median price point for the near term, while there could be a continued dip in the average sales price — largely a function of continuing softness in the mid to upper end. (For the latest 3 month period, only 3 single family homes sold above $400,000.)
The average sales price to asking price was 90.4%, while the average sales price to original asking price was 81.4%. Both of these are spot on with the ratios we've seen consistently for the past year.
17.7% of the closed sales for the latest 3 month period were bank owned foreclosures, with an average sales price of $60,353.
The Current Market
Both myself and my two colleagues CBA were surprisngly busy in June, but that isn't necessarily translating into deals and sales. There's been a lot of shopping and tire kicking, with a noticeable pickup in interest in affordable to moderate priced lakefront. (A string of 100 degree days in the city can do that.)
Outside of lakefront, the price target among many home buyers (both primary and second) of about $200,000 or below. Quite a few second home buyers, mostly late 20's to early 30's, are looking for a little getaway in the sub-$150K range, and a smaller group pushing towards $300,000. Above $300,000, I'm seeing very little interest outside of lakefront.
Motivation to "buy" continues to be lackluster, with many shoppers quite content to continue looking until they find that perfect house or great deal. I"m not picking up a fear that prices will drop further, but rather that if they wait there will be something better around the corner.
Sellers, Asking Prices and the Inventory Picture
Inventory has been climbing, even more than might be expected during the traditional spring;summer uptick. At the beginning of July, there were 1,315 single family homes listed for sale in the Sullivan MLS, up from 1,233 at the beginning of June. This inventory is 12% higher than the same time last year, and slightly above the previous high of 1,292 home on the market (since I started tracking this in 2003) recorded in August 2007.
The average asking price fell another 1.7% to $261,953, down a total of 7.4% since January 1st. While this moderate drop in the average asking price indicates that sellers are starting to get with the program, it's not enough to kick start a market where buyers are largely only motivated by deals. Old hands in the business, who've been through ups and downs, have repeatedly told me that it takes 6 to 12 months when a market turns down for sellers to start adjusting. I think we're just starting to see that shift.
I don't think we're going to see a big dip in actual sales prices over the next six months, but rather will see more and larger reductions in asking prices that will bring more houses into the price ranges that buyers want to pay. There's been tremendous seller resistance to drop asking prices below certain price points, but if buyer demand continues tepid, those price expectations may fall like dominoes. For example, seller price expectations for 3 to 4 bedroom moderate lakefront houses have generally been in the mid $400's to the mid $500's. But buyers haven't been biting at those prices, and it may take price cuts into the $300's to pique buyer interest.
For sellers, the most important thing right now to attract finiky buyers is bold pricing. Modest $5,000 or $10,000 price cuts are largely ignored. Large price cuts that bring a property that generate "Wow, what a deal!" buzz are getting interest. Keeping your asking price high, but then encouraging your agent to "bring me an offer" is a dead in the water strategy. Before even considering your house, buyers want to see motivation in terms of attractive pricing.
What Does This Mean for You as a Buyer?
Prices are down, but that doesn't mean everything is "Loehman's priced." There is still a value relationship among different types of properties. Farmhouses with charm on a few acres on a quiet country road may have dropped from $325,000 to $250,000, but they haven't fallen to $150,000. A lot of buyers are disappointed because their price expectations are unrealistically low for the type of property they're dreaming about.
A key factor in getting a great deal is how long a property has been on the market. It can be very difficult to strike a deal on a new listing, Owners of newly listed properties often have unrealistically high price expectations, and don't yet realize how brutal the competition is for buyers. It can take a year or more for sellers to be really ready to deal. However, don't assume that every newly listed property is, by definition, overpriced. There have been a number of new listings that have come to market with very aggressive "move this house" pricing.
If you want a great deal, don't fall in love with a house and be prepared to walk. Once buyers have found a house they like, they want to do the deal quick. But sometimes it takes patience, putting an offer on the table, and waiting out the seller to get the best price. That strategy does carry the risk that you won't get the house, that another buyer will come along in the meantime.
Be polite and avoid ultimatums. Many sellers right now are just, well, upset. They thought their houses were worth much more than they actually are, and in some cases are taking real hard money losses to sell their houses. Low ball, "take it or leave it" one shot offers seldom work. Sellers hate 'em, and feel backed against the wall. If, after a few rounds of negotiation, you don't want to go increase your bid any further, don't get angry or put a time line on accepting your final offer. Leave it on the table, and check in every week to see if the seller has reconsidered.
If you're shopping for a great deal, be flexible in your expectations. Perfect houses are seldom the best deals. Houses that need updating, a second bath or an addition to make them more liveable may have been overlooked by "perfect house" shoppers, and the seller may be getting just desperate enough to cut you a great deal. Remember, paneling is your friend — if you're looking for a great deal. Be cautious, though, about compromising on factors that aren't fixable and can have a long term impact on value, like low first floor ceiling heights in old farmhouses (you can often raise the roof on a second floor to get more second floor headroom) or location on a busy main road.
Don't be shy about making offers. I've changed my tune on this over the past few months. Offers, particularly on houses that seem overpriced, are crucial feedback for sellers about how buyers value their property. But keep in mind that low offers below 80% of asking price are seldom successful, so don't get emotionally attached. It's important to remember that the average sale price here in Sullivan County is 90% of asking price, and few sellers have a bottom line of less than 85% of their asking price. So that $400,000 house you love? You may get it for $350,000, but less likely at $300,000. If a seller is willing to accept a $300,000 price, they would probably cut the listing price to $350,000 or less.
If you do make a low offer, don't be surprised if the seller "walks" it to she if he or she can get a better deal. It's an increasingly common practice, particularly if sellers feel they're giving their house away. Sometimes another buyer who's been on the fence may step up the plate with a competing offer.
If you really like a house and it works for you, and you want to get it, be realistic with an offer and be able to support it with solid market data. In certain market segments, particularly in the low to moderate ranges, there have been enough sales and sufficient price stability, to determine a supportable price range. A strong case to support your offer can go a long way to softening a seller's resolve. But if your offer price is just a shot in the dark, with no basis apart from you wanting a deal, it can have the opposite effect, and harden a seller.
Archived Sullivan County Real Estate Market Conditions Reports