August was another 'tread water' month, neither fish nor fowl, up or down. Closed sales in the Sullivan MLS for the 3 months ending Aug. 31st were up slightly, to 114, from the 106 reported for the 3 months ending July 31st, continuing the modest upward sales trend we've seen since May. But with an annual sales rate of less than 500 single family homes in the Sullivan MLS, we're still in the "tepid to modest" range, far below the "hot and frenzied" levels of 2007.
On the price side, both the median and average sales prices are essentially flat with July's numbers. Year over year, the median is off 12% from August 2008, while the average has fallen more sharply, down 21%, largely due to the continuing softness in the upper end of the market. In 2008, for the 3 months ending Aug. 31st, there were 8 closed sales above $400,000; this year there were 2.
Single month data is less reliable than the larger 3 month samples, but can be helpful to indicate where we may be moving. For the 34 sales closed in August, the average sales price was $164,249 and the median was $153,500, both of which are up slightly from July, so we could be headed for a slight improvement in the 3 month numbers for the next couple of months.
For the 3 month period ending Aug. 31st, the average ratio of sales price to asking price was 88.2%, down slightly from 89% last month. The ratio of sales price to original asking price was 81%; however, this number is a bit high because it is only based on the current listing, and doesn't take into account properties that have been relisted or moved to another broker.
Foreclosure sales continued to account for a smaller percentage of total sales, with bank owned properties accounting for only 14 of 114 sales, of 12%, down from 15% last month and 24% in June. However, market watchers shouldn't take great solance in this, as there has been an increase in foreclosure filings by banks in the last couple of months (according to friends in the business who watch those numbers). While the filing of an NFS (notice of foreclosure sale) doesn't necessarily result in an actual foreclosure, an increase in NFS's could indicate more foreclosure inventory coming to market over the next year.
The Current Market
August was pretty active, from a shopping and looking perspective. Buyer interest has been steadily picking up over the past few months, particularly for good values in moderate price ranges. Demand has bordered on robust for 1) 3 bedroom charmers with good bones on a few acres in quiet country settings around $250,000; 2) lakefront cottages under $300,000; and 3) small cabin getaways in the woods around $150,000.
But that interest isn't necessarily translating into sales because the available inventory matches in those three popular segments are very limited. Buyers are often very surprised that there isn't a flood of inventory to see. After all, we're in a recession and a buyers' market, right? Buyers believe there should a large selection of great farmhouses or lake cottages available in the mid-$200's. But there aren't.
The buyers I'm seeing are very clearly deal driven, with price expectations sharply below a year ago. "Deal" houses, at whatever price point, are about the only properties that are motivating buyers. Of the 13 deals I've done so far this year, 10 have had some 'distress' element — short sales, houses being sold by children whose parents are ill and no longer using it, a relocation company moving inventory off their books, developers closing out their positions or sellers who need to convert an asset to cash. Almost every deal has had an element on the seller side of "We need to move this house now" which has resulted in some very good prices. As I scroll through the list of sales countywide, the vast majority of closed sales also seem to have a 'move it now' subtext.
Another commonality I'm seeing among houses that are moving is that they've been on the market a long time. Of my 13 deals, 9 were on the market for more than a year, and 3 of those have been for sale for more than 3 years (with initial asking prices about double their recent sales prices.) Overall, the average time on market for non-foreclosure sales over the past 3 months has been 270 days, but the actual number is likely somewhat higher due to the relisting of properties that have been on the market for a while.
To sum it up, the market activity is happening on a very small stage, between value hunting buyers and the tiny subset of sellers sho are super-motivated — either by personal or financial circumstances, or just plain fatigued at having their house on the market for a long time.
While sales are picking up, I'm not seeing much happen outside of that small arena. Buyers aren't in any rush whatsoever, and are content to wait for the 'next great deal' to come along. Most sellers are in the 'we can wait, we don't have to sell' camp. The result is listless stagnation, with buyers endlessly shopping for that perfect bargain and sellers waiting for the rea; estate Rapture that is just around the corner.
So where are the sweet spots? 3 bedroom country road charmers between $200,000 and $250,000 are moving well, and that sweet spot can stretch into the mid $300's with some special feature, like a killer view, larger acreage or a nice pond of stream. But $300,000+ houses without a special kick are just sitting. We've also been getting a lot of calls in the last month for lakefront houses in the $200,000 to $300,000 range (a price point with very, very little inventory) and very few inquiries for lakefront much above $300,000. There has also been considerable interest in little cabin getaways in the woods in the $150,000 range.
There are also some buyers tire kicking at higher price points, particularly $400,000 to $500,000. But at higher price points, buyers aren't just looking for good values or even deals. They're on the hunt for super deals. There have only been 8 single family sales above $400,000 since January 1st, and most of those have fallen into the 'incredible deal' category. And of the two houses I have in deals in the $400,00 to $500,000 range and expected to close within the next 30 days, both came to market more than two years ago at more than twice their current selling price.
Sellers, Asking Prices and the Inventory Picture
Inventory remained pretty steady in August, with 1,168 single family homes listed in the Sullivan MLS at the end of the month compared with 1,150 at the beginning. The median and average asking prices held steady as well, at $202,400 and $263,368 respectively. The lack of any decline in asking prices in August was disappointing, indicating that sellers still haven't quite gotten with the program. Since I started tracking asking prices in October, 2004, the asking price 'market basket' has averaged out at 145% of the average sales price. During the peak of the market, it bottomed at 123%. Today, the asking price market basket is 168% of the average sales price. To reach that 145% ratio, the average asking price would have to drop 14% to $226,496.
I realize the above calculation involves fuzzy logic, and my college statistics teacher would have a coronary with me not controlling for other variables. But I think the general idea is sound, that overall asking prices are out of whack with what buyers are willing to pay. This, of course, doesn't mean that every seller is out of touch and every house overpriced. But I expect we'll experience market sluggishness until more sellers align their price expectations in line with buyers. Lakefront is a good case in point. Buyers are clearly telling us that want to pay under $275,000 for a 2 bedroom lakefront cottage, and less than $350,000 to $400,000 for a 3 or 4 bedroom lakefront house on a traditional (not acreage) sized lot. Even though there is virtually nothing available at those price points, buyers aren't raising their price ceilings. They're just not buying.
It is significant to note that the average ratio of selling price to asking price for the latest 3 month period is 88.2%. This is important to note for both buyers and sellers. For sellers, it supports the argument that buyers aren't biting unless the asking price is within striking distance of what they're willing to pay. And for buyers, the widely held view that properties are selling for 50% to 60% of the current asking price just isn't showing in the numbers.
What Does This Mean for You as a Buyer?
Don't assume that it's a wide open buyers' market in every property category. If you're looking for a farmhouse on a quiet country road for $250,000 or a 'cabin in the woods' at $175,000, you have a lot of company. And there isn't a lot of available inventory. So don't expect to come up and see a dozen great options with a seller just waiting for your offer. Push a little out of the popular buyer segments, and it can be another story.
Don't succumb to 'perfect house' syndrome. This is the time to find deals, not perfect dream houses. Almost all of my sales this year have been ' super deals', but almost none of them have been super houses — right now. The savvy buyers who picked them up had an eye for potential, and put their desire for perfection on the back burner. They're houses that have sat on the market a while because they're not quite perfect — a little too close to the road, not quite as private, a quirky layout, a dated interior. Passed over by perfection seekers, their owners became more and more anxious, resulting in some great opportunities for creative buyers. If you're looking for a 'perfect house', I can certainly show them to you, but they're less likely to also be super deals.
Be decisive. Particularly if you're shopping in a popular segment — charmers in the mid $200's, lakefront under $300,000, cabins in the woods or almost any foreclosure — you need to move on it if you find a good deal house you like. Those properties are moving pretty briskly. I've had a number of situations this summer where I've shown a house to some buyers who liked it, but didn't move on it. A few weeks later they called to come back for a relook, only to learn that it's gone. That isn't true in all categories, particularly at higher price points, but if you're shopping in a popular range, it can be.
Avoid 'take it or leave it' ultimatums. A lot of buyers have adopted the approach of putting one offer — usually a low one — on the table with a take it or leave it ultimatium to sellers. Some buyers think it's a savvy strategy, but it's not a strategy at all and it usually doesn't work. Sellers just get pissed off. It assumes a desperate seller, which is typically not the case, and stops negotiations cold.
Do your market homework. There have been 270 single family sales since the beginning of the year. Not a huge number, by any means, but enough to identify value ranges for many types of homes. If a buyer's price expectation is within that range, they have a good chance of striking a deal. If it's significantly under, they likely won't. And if a seller won't negotiate into that range, a buyer should probably walk. There are some categories, however, where it's very difficult to establish that value range because of a lack of sales — particularly the higher price ranges above $500,000. And in better lakefront, it's darn near impossible because there hasn't been a lakefront home sale here above $500,000 since January 30th (apart from the curious — and not MLS listed — sale of a 15,000 sq. ft. home at Chapin for $3.95M.)
The biggest question many buyers have is "Should we buy now or wait?" There isn't a single good answer to that. If you're looking in a popular price range and find something you like and is also well priced, you should probably make a go for it. Country charmers between $225,000 and $250,000 have probably hit their bottom and I don't think we'll see much of a drop from this point. The same thing with more suburban style "builder colonial" spec houses; that inventory has been clearing the market well between $200,000 and $250,000. Little cabin getaways are settling in around $150,000, and we're seeing some lakefront pricing confidence between $300,000 and $400,000. In less active segments, it may be prudent to wait. For example, there hasn't been a lakefront home sale so far this year on Swinging Bridge, so it's difficult to determine 'market value.' Is a modest 3 bedroom lakefront home there worth $450,000? $400,000? $500,000? $350,000?
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.
