The big surprise in September was the sharp drop in the median sales price, down 10% to $136,250 for the 3 month period ending Sept 30th for single family sales reported in the Sullivan MLS from the previous 3 month period ending August 31st. Sales volume, at 120, and the average sales price of $154,465, held pretty steady.
I wish I could point to a single factor for the drop in the median price, like a slew of bank owned foreclosure sales in September. Foreclosure sales only accounted for 13% of total sales, about right in line with what we've seen over the past few months. Overall, though, there seems to be a run on cheap houses. 32 of the 120 sales were closed at $80,000 or less, with 6 less than $30,000. The houses in this range are a mixed bag of handyman fixers and modest in-towners in Monticello, Liberty and Fallsburg. 28 of the 32 were bought with cash, rather than mortgage financing, indicating a bent toward investor purchases rather than owner-occupier buys driven by the first time home buyer tax credit.
The picture changes somewhat in the affordable range just above that, between $80,000 and $140,000. Here the $8,000 first time home buyer tax credit appears to be stimulating the market. 16 of the 41 September sales were in this range, with 75% of those using conventional or FHA financing. The first time home buyer tax credfit is scheduled to expire on Dec. 1st.
Contributing to the overall downward price pressure is continuing softness in the upper reaches of the second home market. For the 3 month period ending Sept. 30th, there were no closed sales above $500,000, and only two in the $400's. While there has certainly been strengthening interest among second home buyers over the past few months, it has generally been at much lower price points. And for those looking at higher price points, appraisal shortfalls and financing issues continue to be problems.
The Current Market
From my perspective, buyer activity in September was more muted than I was expecting. August had been quite busy, and September is also typically an active month in the second home market. While I fielded quite a few email and phone requests, I had few actual appointments with new clients.
Among the ongoing clients I'm working with, most have settled in for the long haul, waiting for that great house at a great deal price. The most common phrase I hear from buyers is "We're not in a rush. We can wait for the right house." I have a couple of clients who've seen one or two houses they really like, but aren't moving on them. A common Realtor question, to better understand where a buyer is relative to a house, is "What would it take for you to buy this house?" For a house a buyer likes, the reply is often price related, i.e. "If we could get it for $X ...", and sometimes it's property-specific, e.g. if it had a bigger view or a larger kitchen. Lately, the response is often "Nothing really. We like this one a lot. We just want to look some more." I'm not pointing this out to illustrate Realtor frustration, but rather to highlight the ambivalence of many buyers. They want to be wowed by a house and wowed by a deal.
A somewhat surprising turn I sensed in September was a drop in buyer price expectations. I've been writing for the past couple of months that prices in some segments seemed to be stabilizing, and buyers were raising their price ceilings a bit. But it doesn't seem to be playing out that way. Moderate range farmhouse buyers, for example, don't seem to be moving up from $250,000 to $300,000, but rather moving in the other direction down towards $200,000. And among lakefront shoppers — usually a good barometer of buyer sentiment — I've been fielding a $250,000 to $300,000 price ceiling for a modest lake cottage and $350,000 to $400,000 for a larger lakefront home.
There is almost shocking consistency among buyers in what they're willing to pay, and what they perceive as good value in the affordable to moderate ranges into the $300's. Very few houses hit those price targets. One factor stalling the market, in my opinion, is the wide gap between buyer and seller price expectations.
The other demand segment I'm seeing is in very inexpensive houses, in the $75,000 to $125,000 range. Last month, I fielded a lot of inquiries about properties listed in this range from the MLS search on my website. Unfortunately, in this range, buyer expectations can be quite out of line with the property realities. A $99,000 house may look great on the web, with it's carefully cropped photos, but condition, setting or location may greatly limit its appeal to a second home buyer looking for a little country getaway.
The one segment where I'm seeing little to no action is the upper end. Apart from a couple of calls about Chapin Estate, I didn't field any inquiries in September from buyers looking in the $500,000+ range.
Overall, in reading through my take on the market, you may question whether I actually have any clue as to what's going on, given my comments that seem all over the map. To tell the truth, I'm somewhat flummozed. To take a phrase from Jaws, "Just when you think i's safe to go back in the water ..." For the past few months, I was seeing some positive trends — sales and prices have been inching back up and buyer interest and activity was moving in a positive direction. But September threw a curve ball, and has left me scratching my head. It may take another couple of months to see where we settle.
Sellers, Asking Prices and the Inventory Picture
Inventory continues pretty steady. There were 1,159 single family homes listed in the Sullivan MLS at the end of September, about on par with the 1,168 single family homes listed at the beginning of the month. The median asking price climbed somewhat, to $212,000 from $202,000, while the average asking price and average asking prices ticked up just slightly to $265,397 from $263,368. The fact that we're not seeing any downward movement in overall asking prices, and that sellers seem to be moving in the opposite direction is very disappointing. It seems that many of these sellers inhabit a different planet.
A lot of sellers seem to be setting their asking prices based on what their house might have sold for two years ago at the peak of the market, not what a buyer might be willling to pay for it today. I hear over and over from listing agents that a house is "now very well priced." My response is usually "Based on what?" If a house was listed at $569,000 and the price was reduced to $539,000, it doesn't really make it much better priced. Move it to $449,000, and maybe you can make that claim.
Likewise, I often here a version of "The owner paid X$ for the house in 2006" as a justification for the asking price. The sad reality is that the seller is likely going to take a loss. The question becomes how big of a loss, and how long will it take them to accept that fact.
I do see price reductions posted every day in the MLS, sometimes a couple of dozen or more. But most of the price reductions are relatively small, almost token. Very few cause me to perk up with "Wow, now that's a deal!" And that "deal wow" is what it takes to get a buyer interested in a property. I get at least two or three calls a week from frustrated sellers asking what it will take to move their house. They're often shocked and upset when I say they need to reduce their asking price by 20% or 30% to even get in the game.
It is significant to note that the average ratio of selling price to asking price for the latest 3 month period was 87.7%. 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?
Buyers today, more than ever, need to have a good grasp of the market. There have been enough sales over the past few months in most property categories (apart from the upper end) to sketch out a market value range for a property a buyer is looking for or considering.
Buyers should keep these market value ranges in mind when setting their price and property expectations. For example, there is a fairly stable constellation of factors that define a $250,000 range farmhouse. It will likely me on the smaller side, 3 or so bedrooms with 1 or 1 1/2 baths, on 3 to 8 acres and not located on a main road. Drop to under $200,000 and you'll likely be on a busier road or find a house in a more 'challenged' condition. And you may need to wait for that $250,000 farmhouse, because there aren't a lot on the market. But if you really want a larger 4 or 5 bedroom "Love, Valour and Compassion" farmhouse, one with more acreage, a barn or big view, that's very unlikely to happen at $250,000 even if you "wait for it to come along." While houses with those features may be overpriced with asking prices of $500,000 to $700,000, they're unlikely to drop much below $400,000. There is a small market of upper end buyers who will jump on them when they get into "Wow, what a deal" range. SImilar comparisons can be made in other property categories, from $150,000 cabins to $750,000 lake houses.
Be cautious about "too good to be true" bargains. Lately I've seen a lot of interest in "super cheapies", but often houses are really cheap because they aren't worth any more and they often aren't very good values. Can yoi buy a house here for less than $60,000? Yup, you can even occasionally pick one up for less than half that. But a super cheapie in a location or setting you don't really like isn't much of a bargain, and can end up sucking you dry.
'Buy now or wait'? is more a matter of personal preference than economic drivers. I'm not seeing anything likely to push actual sales prices sharply down over the next 6 to 12 months, nor do I see anything likely to push a huge amount of new, attractive inventory to market. I expect we'll continue on a sales and inventory course very similar to the last few months. Keep in mind I wrote "push actual sales prices down". I expect we'll see some dramatic drops in asking prices and seller price expectations in some thin market segments, particularly at the upper end.
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.
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.
