We seem to have reached a new equilibrium, at least for the time being, in terms of sales volume and prices. For the 3 months ending Oct. 31st, single family sales reported in the Sullivan MLS held steady from the previous month at 122. The median sales price of $137,375 was almost equal to the previous month, and in looking ahead to November's numbers, it looks like it will just about hold steady next month as well. The average sales price showed a modest uptick to $160,673 from the previous month.
Year over year, sales volume is down 16%, with the median sales price off 13% and the average off 8.3%. Overall, prices are down about 30-35% from their 2007 peak.
Two factors seem to be influencing the current price picture. First, bank-owned foreclosure sales were 12.1% of total sales for the three months ending Oct. 31. With an average sales price of $96,993, these sales — whiile far from dominating the market like in many other parts of the country — do pull the median and average sales prices down. Second, there continues to be softness in the upper end of the market. Over the latest 3 month period, for example, there was only one closed sale above $500,000.
A further indication that we are in a buyer's market is the declining "bid to ask" ratio. For the latest 3 month period, the typical single family home sold at 87.5% of the last asking price, down from 91% just a few months ago. Comparing sales price to the original asking price, the ratio drops to 79.5%.
The Current Market
October is traditionally a busy month here, but seemed much quieter this year. While visits to this website (and MLS property searches) were only down slightly, actual appointments for me and my two colleagues at CBA were down markedly from the summer. The "quality" of those appointments, however, seems higher. The clients we are working with seem quite serious about shopping for a house — most are on repeat visits rather than first time shopping. And when they find a property they like at what they consider a good value, they're making offers.
While buyers may have more intent, they remain very focussed on price and value. They're looking for very good values, and will only consider houses they perceive as very well priced. Every buyer we've worked with in the past few months has had a firm price range in mind. When they make an offer on a house, they have a target price and if they can't get it for that price, they'll wait for another house.
Most buyers we're dealing with are also looking in the more affordable to moderate range, e.g. little cabins in the woods under $150,000, modest farmhouses or vacation 'chalet' styles under $250,000 and lakefront under $350,000 to $400,000. I haven't shown any $500,000+ lakefront homes in a couple of months.
The softness in the upper end could be a function as much of demographics as the economy. One notable commonality among second home buyers we've seen lately is age. Most have been in their 30's, not their 40's or 50's, working profesional couples from the city often with young children. This is a demographic that isn't as focussed on retirement savings, or more specifically, losses in their retirement accounts. If they're renters (and many are), they haven't taken a 'paper loss' on the value of their primary home. With lower prices and lower mortgage rates, this group sees an opportunity to enhance their lifestyle that they couldn't necessarily afford two or three years ago.
That group is focussed on more moderate rather than upper end property. Upper end properties have generally been purchased by buyers who are somewhat older and more financially established. (There were exceptions to this during the peak, with bonus-laden Wall Streeters in their 30's sweeping up million dollar country homes, but that has largely abated.) Those 45 to 60 year olds, who are traditionally the buyers of pricier properties, seem to be largely absent.
Sellers, Asking Prices and the Inventory Picture
Inventory continues pretty steady. There were 1,117 single family homes listed in the Sullivan MLS at the end of October, down a bit from the 1,159 single family homes listed at the beginning of the month. The median asking price slid a hair to $209,000 from $212,000 at the beginning of the month, while the average asking price climbed sharply from $265,397 $278,712. That rise in the average, however, may be largely a function of Chapin Sotheby's Realty joining the MLS on Oct. 1 and posting 8 homes for sale with an average asking price of $2,048,000.
Regardless of Chapin's impact, the fact remains that there continues to be a wide gap between sellers and buyers over price. There have not been significant widespread price reductions over the past few months and, in fact, the median and average asking prices have been creeping up slightly (even adjusting for Chapin.) The spread between the overall average asking price and sales price has been stubbornly holding between 1.65 and 1.7 since June.
I talk with listing agents all the time about pricing on various properties, and hear the same thing over and over — that the owners don't have to sell and are willing to wait. My question is "Wait for what?" There seems to be some magical belief that the market will pick up, prices will rise and if they hold on, they'll get their price. But nothing points to that. While we may have passed the bottom of the market, the most optimistic projections only point to a 4 to 5% price increase nationally in 2010. If a seller expects $400,000 for their house and the likely clearing price on it today is $320,000, in a year, using a more optimistic projection, it might only pull $336,000. That $16,000 is likely less than their carrying costs (including the cost of money) to hold out for a year.
Given that inventory is relatively high (there have been over 1,000 single family homes on the market steadily since June), readers may be surprised that there are pockets of shortages. For example, there are almost no moderate priced farmhouses or "vacation chalet" style houses under $300,000 on the market. Good houses with lake rights, ponds or views in a moderate price range are also in short supply. Same thing with little cabins in the woods at a lower price point. In a lot of cases, my colleagues and I have had a tough time finding good houses for our clients. And it's not like there's a flood of inventory in these categories at slightly higher prices that just need a price adjustment. They're just not on the market. Given the dearth of some inventory, I suspect many potential sellers are taking a "wait and see" approach, not putting their houses on the market if they don't have to sell.
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. Offers that are based on sales comps — even if well below a seller's expectations — have more persuasive power than ones that are simply based on "what you want to pay."
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.
Houses here sell, on average, at about 87% of asking price. Less than 10% of houses sold for 25% or more off of their asking price. While the occasional property may sell for 40% or 50% off of asking price, that's by far the exception rather than the rule. There's one camp of buyers who want to look at houses in a certain price range and float low ball offers in hopes of hitting an elusive deal. But the statistics argue against that as a successful strategy. In general, if a house is priced more than 20% above its "market value range", or the price target you want to pay, it's highly unlikely the seller is prepared to do a deal at a reasonable price.
There is no "one size fits all" offer strategy. The single offer, take it or leave it, approach has been popular among buyers recently, but it's only appropriate in limited situations. Offer strategies should be tailored for each specific situation, taking into account comparable sales, time on market, the seller's situation (if known) and competing houses on the market.
Be cautious about "too good to be true" bargains. Lately there's been considerable 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 you 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 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 perfect 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.
