While August's closed sales weren't spectacular, they marked the 3rd month of slow but steady improvement in sales and prices. For the 3 months ending August 31, there were 116 closed single family sales in the Sullivan MLS, up slightly from July's 110 count. Both the average and median sales prices also crept up, to $199,795 and $172,500 respectively.
These numbers are substantially off from a year ago. The number of sales down 34% from the year earlier period, with the average sales price off 14% and the median down 10.2%. But the sales count is up from the low of 90 closed sales for the 3 months ending March 31, 2008, and the median sales price is up 15% from its low of $150,000 in late spring. The average sales price — which tends to be pushed up by higher end sales — continues to flounder in the $190's, indicating that the upper end of the market continues to be sluggish.
While the sales pickup over the last few months is encouraging, we are still well below the peak sales rate of 2005/2006. During the peak of the market (the 2nd half of 2005) the rate of sales per 3 month period ranged from 210 to 230, more than twice the rate we're seeing now.
Its interesting to look at where we are, price wise, in relationship to the past few years. (See 2nd graph, left) The peak of the market, in terms of price, was the summer of 2007, with prices declining from that point to a bottom in spring of this year. Right now, prices appear to be about on par with late summer / early fall 2005.
The Current Market
August was quite busy, in terms of home shopping, with a steady flow of inquiries and appointments. Shopping, however, isn't necessarily translating into buying, with the same lack of urgency to buy we've seen much of the year. I'm hearing the same thing from quite a few agents that I talk with regularly — that they're busy doing a lot of showing, but not a lot of selling.
That perception, however, may be a bit skewed by the fact that buyers are taking a lot more time and looking at a lot more houses before making a decision. Also a lot of offers are not resulting in deals, and some of those deals — because of difficulties with appraisals — aren't resulting in closed sales. So added all up, there's a lot more time and effort invested in every closed sale.
The good news is that buyers are looking, making offers and buying houses at a much higher rate than six months ago. The increase in activity, though, is focussed on "good value"
houses in very specific market segments.
The strongest part of the market right now appears to be the affordable to moderate range second home segment — from about $175,000 to $275,000. A number of houses that have come on the market in the low to mid $200's with features that appeal to second home buyers have been snapped up very quickly. Buyers tend to be very surprised when a house they're interested in gets a deal on while they hem and haw, because they tend to look at the overall inventory (1,200+ houses in a market currently selling about 40 a month), rather than the inventory in their particular submarket.
Currently I would say the hotspots of the market are sub-$275K houses on 5+ acres with privacy in the western and northern parts of Sullivan and sub-$150K primary homes being bought by investors or moderate income owner occupiers in the central and eastern parts of Sullivan. Other market segments are more sluggish, particularly upper end second homes ($500K+) and larger suburban style 'development' homes. Over the past 3 months, there have only been two closed sales above $500,000, both lakefront. (There are currently 106 houses on the market above $500,000).
Value overall continues to be a driving factor. Buyers in every market segment and price range are keenly aware of value, and only seem to be jumping on a house if they perceive it to be an outstanding value relative to its competition
Even then, in the second home market (which is the sector I tend to focus on), houses that involve compromises aren't selling. I've actually been surprised that a number of properties that I consider pretty well priced and have 'country charm' haven't sold — because they're a little too close to a road or neighbors, pick up a little road noise, have a quirky layout or need a little work. I'm not talking about handyman fixers on Route 52 in Loch Sheldrake, but lovely little houses on secondary roads in Fremont or Delaware or Callicoon townships.
Another factor in the current market is the number of houses buyers are looking at. I'm finding that many buyers, if they're serious and not just tire kicking, are making multiple trips and looking at dozens of houses. Even if they see something that comes close, they often want to keep looking to find something that comes even closer. Many buyers today have a much longer time horizon, and indicate that they're happy waiting for 6 months or more for the right house.
Sellers, Asking Prices and the Inventory Picture
Inventory continues to be pretty stable, with 1,257 single family homes listed in the Sullivan MLS at the beginning of September, only about 5% more than a year ago. There has not been a surge in inventory here like in many other parts of the country. Given that we're selling at an annual 'run rate' of about 440 houses per year, the current inventory equals almost a 3 year supply.
However, its useful to split the inventory into two categories — those that are reasonable saleable, and those that, for any number of factors, aren't. Sullivan County has a lot of houses that never seem to sell, that come on and off the market, or stay on the market for years, without finding buyers — kind of like the Flying Dutchman, cursed to sail the seas forever.
The actual inventory of marketable properties — appropriately priced with attributes that appeal to buyers in active market segments — is far smaller. In fact, I would venture that only about 1/3 of listed properties are "in play" with another 1/3 that could be "in play" with appropriate pricing. So I see us as closer to having 12 months of workable inventory, not the 34 months that the data suggest.
Asking prices remain a significant obstacle to kick starting the market. There has not been any signficiant drop in the overall average and median asking prices here since January. The average asking price has been flutuating between $284,000 and $291,000 since then, a range of less than 3%, while the median has ranged between $225,000 and $229,000. Of course, there are well priced houses coming on the market, and other houses that have seen significant price reductions. But clearly, these instances are countered by other new listings at inflated, unrealistic prices, or the hundreds of unsold houses that remain on the market with no price reductions. And for many houses with price reductions, those reductions are nominal at best.
The Appraisal and Financing Picture
The financing picture is finally starting to improve. The government 'takeover' of Fannie Mae and Freddie Mac seems to have brought some stability to the lending arena, and already translated into about a 40 basis point drop in rates for conventional conforming 30 year fixed rate mortgages, bringing them back under 6% for the first time since May. Hopefully the move will also bring some stability to underwriting guidelines, which have been a moving target for months.
Rates aside, the appraisal and underwriting process continues to pose a significant challenge in a low density, low sales rural area like Sullivan County. Almost all national lenders are now requiring all appraisal comps to be within the past 6 months (down from the traditional 12 months), and have been resistant to expanding georgraphic 'neighborhood' definitions to encompass sufficient comparable sales for appraisal. Lately, I've suggested that clients work with local lenders rather than the big nationals, because I have less and less confidence that the big national lenders will actually close the loan.
What Does This Mean for You as a Buyer?
Current indications are that closed sales prices aren't heading further down from where they are now — in market segments with reasonable buyer demand (like moderately priced second homes or affordable-range primary homes.) So the rationale to delay a purchase to wait for further price declines may not hold the water it did at the beginning of the year.
Buyers would be wise to think in terms of "submarkets" rather than the Sullivan County market as a whole. Both inventory and buyer demand can vary significantly by submarket, and that may significantly affect your purchasing and negotiating strategy. Some buyers, for example, are floating lowball offers on houses that are pretty well priced to begin with, in market segments with reasonable demand — and then are surprised or angry when someone else gets the house.
When making an offer, think like an appraiser. Understand the comps for the house you're bidding on, and why this house may be worth more or less. Its fine to make some adjustments for intangibles that are valuable to you, like privacy or a big open family kitchen. But ultimately, you're making a case for your offer.
Keep your emotions in check. In this market, buyers need discipline, and emotion is the nemesis of discipline. The fact is that the most well-crafted offer supported by indisputable comps won't necessarily convince an owner to sell you their house at a price you want to pay. Sometimes you just have to walk away.
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.
