Lots of us in the real estate business here have been holding our breath awaiting the November sales numbers. Because of the time lag between purchase offers and actual closings, November is the first month really reflecting sales activity since the onset of the economic 'crisis' is mid-September.
For the 3 month period ending Nov. 30th, there were 138 single family sales reported in the Sullivan MLS, down just 16% from the same period a year earlier. Many of you who read this Market Conditions Report regularly know that I focus on a 3 month period rather than individual months due to small individual month sample sizes that can skew the data. But this month, I also looked at November alone. This past month there were 41 single family sales, down from 62 in November, 2007. While that is a 34% drop in single month sales year over year, it translates into an annual sales rate of about 500 houses a year. That isn't significantly off the annual range of 500 to 500 homes we've seen for the last 6 months, and an improvement over the 400 rate we saw in April and May of this year. A 500 annual sale run rate, however, is 35% to 40% below the peak we saw here in late 2005.
You may think I'm playing loose with statistics here, and pulling at straws in an attempt to paint a rosy picture. I'm not. What I was looking for is an indication whether the market totally tanked in November or not. That's been the big fear, that sales would come to a grinding halt. They didn't. The market is clearly not robust, but it's not dead, either, and actually more active than this past spring.
On the price front, the median sales price of $154,250 for the 3 months ending Nov. 30th was down 6.5% from last month's measure, while the average sales price of $174,658 was down 1.9%. On a year-over-year basis, the average sales price was off 15.4% from $206,404 in November, 2007. The sharper drop in the average sales price is consistent with continuing softness in the upper end of the market (although there were 2 sales between $500,000 and $1M reported in November.)
Market Breakdown
A growing factor in the market is foreclosure sales. For the 3 months ending Nov. 30th, 22 of the 138 single family sales were bank-owned properties, or 16% of the total. This is up from 11% of the total for the 3 month period ending just a month earlier. Foreclosure sales are primarily at the lower end of the market, and with an average sales price of $80,668, are exerting a downward pull on the overall average.
A particularly interesting statistic is the growing percentage of all-cash buyers. For the 3 months ending Nov. 30, 2008, 38% of single family homes were purchased with cash, compared with 26% a year earlier. While the vast majority of foreclosure sales are all-cash investor purchases, that increase in foreclosure sales alone doesn't account for the steep rise in all-cash purchases. But it could be an indication that folks with cash are looking at real estate as a place to stash it. Two of the three sales between $500,000 and $1M were all cash.
On the bid/ask front, buyers during the latest 3 month period paid, on average, 90.7% of asking price, a bid/ask spread that's been pretty consistent for the last 6 months. This flies in the face of the perception among some potential buyers that most houses are trading at 70% or less of asking price. (It also indicates to sellers that houses aren't getting deals until their asking price is within striking distance of what buyers are willing to pay.) Does cash give buyers a huge negotiating advantage? Some, but not as much as much as cash buyers might think. All-cash purchases went down at 87.7% of asking price, while sales involving financing were at 92.5% of asking price.
Second homes seem to be comprising a smaller percentage of the overall sales picture. While there's no way within the scope of my resources to calculate a definitive percentage of second home to total home purchases, there are some indirect measures. For example, for the 3 months ending Nov. 30th, there were only 7 houses sold categoried as lakefront, or 5% of the total. A year earlier, lakefront sales comprised 11% of sales. Of the 7 "lakefront" houses sold in the past 3 months, only 2 were direct lakefront; the others were split lakefront or included a small non0adjacent lakefront access parcel, which accounts partially for the very low average and median sales prices in the chart at left. Notably, of the entire 7, the highest price was only $286,000. We've gone three months without a lakefront home sale above $300,000!
The Current Market
I think the activity picture has actually improved a bit since October. I've fielded considerably more property inquiries and had a few promising appointments in November. The lion's share of property inquiries coming from the Multiple Listing search on my website have been for very low priced properties — building lots priced under $10,000 and houses priced under $75,000. Some of these buyers are investors trolling for bargains, but many are looking for personal use, either as an inexpensive primary or second home. These aren't market segments I handle, so I don't have a lot of insight into buyer expectations and follow-through.
The second home market, which is more my focus, has been slow but showing some signs of life. Quite a few buyers who I'd worked with over the summer (but dropped off the map in mid-September) got back in touch to remind me that they're still interested and ask if anything new and interesting (and a good value) had come on the market. A few called to ask whether there had been any price movement on houses they'd seen and liked. Almost everyone reminded me that they're in no rush, and are waiting for the economy to settle down — but definitely keep them in mind if something great comes on the market.
I also started working with a few new clients in November, who are just starting out their search for a second home. A crucial factor among these folks that gives me hope is that they all decided after the mid-September meltdown to look for a vacation home. Notably, they're all in businesses other than financial services and so may not be feeling the same job pressure. They're all definitely value focussed and are looking at moderate price points.
Probably the most common element among everyone I talk to is that they feel no pressure to buy anything right now, and are willing to wait for the right house at the right price. In fact, I think for most buyers who don't need to do something right now, they actually see an upside to waiting. The general feeling is that prices are more likely to go down than go up, the recent trend in mortgage rates is down, and in three or six months we may have a better handle on how and when the economy is going to stabilize.
A lot of Realtors have been commenting lately that the buyers they're going out with are just bargain hunting, and not serious buyers. I disagree a bit. I think many buyers are seriously interested in buying a house. But there is tremendous inertia against making any major purchase decision. Buyers have to be bowled overy by the price or the house or both to overcome that inertia, and even then, they'd rather wait. Unfortunately, there just aren't many 'too good to pass up' deals.
Sellers, Asking Prices and the Inventory Picture
The biggest surprise this month is that the average and median asking price for single family homes on the market actually rose slightly from last month — to a $286,550 (average) and $212,500 (median) While this single month rise probably doesn't portend an upward trend, given the current market, it does indicate that most sellers still aren't singing out of the same hymnbook as buyers. In fact, what is striking is that the average asking price for a single family home in the Sullivan MLS really hasn't moved down all year and today is almost exactly where it was in February, while the median asking price has dropped only 8.4%.
Sales prices and asking prices both peaked here in June 2007. While the average sales price has fallen 31% since then, the average asking price has only slipped 7.7%. While some of the 31% drop in sales price can be attributed to buyers downshifting to less expensive property types, there is a widening gap between buyers and sellers on price. Sellers just aren't lowering their price expectations as quickly or as aggressively as buyers.
While foreclosures are a significant portion of actual sales, they are a far smaller proportion of available inventory. Of the 1,038 single family homes currently on the market, only 26, or 2.5%, are listed as bank-owned.
Homes on the market fall into roughly two broad categories — those that owners must sell, and those that owners don't have to sell. The "must sell" houses — foreclosures, short sales, estates. relocating owners and developers needing to reduce inventory — are only a small portion of overall inventory; probably less than 20%. Owners of the remaining inventory just aren't under pressure to sell, and many are taking the same 'wait and see' attitude as buyers. They're not motivated to reduce their asking prices, and some are even taking their houses off the market for the winter, hoping that the spring selling season will be better.
What Does This Mean for You as a Buyer?
Believe it or not, I think this is a very good time for some buyers. If you're looking for a good value, there are some very interesting opportunities in the "must sell" category of properties. However, selection is more limited among "must sell" houses. (See my blog post, "Marshall's Versus Macy's".)
Keep in mind that a property "priced to move" is probably going to be priced about 15% to 20% below its competition, not 50%. For example, most 2 bedroom lakefront cottages on the market are listed in the low to mid $300's. So something "priced to move"might be listed in the mid to upper $200's to catch attention, but would unlikely be priced under $200K. Even bank owned properties tend to be priced about 80% to 85% of market, so be cautious if something is just "too good to be true." There's a perfect price for most houses on the tipping point between "Wow, what a great deal" and "Why is this so cheap? There has to be something wrong."
If you're serious about finding a good deal, you've got to stick in the market. When great deals do pop up, they tend to attract attention and sell pretty quickly — even in this market. So if you want a Realtor to keep an eye out for a deal for you, you need to rise above the tide of casual window shoppers and one-off inquirers. Do your research, make a reconnaissance trip to look at property options, and then stay in touch with your Realtor, whether it's me or someone else. A lot of summer shoppers have pulled out of the market, so if you're still in, its important to say so. Calling the person you're working with every couple of weeks wouldn't be a bad idea.
Don't rely just on automated systems, like Multiple Listing automated searches, to keep you informed of deals. Reach out and make a connection with a Realtor. There's a lot of "back story" behind quite a few listings right now. There are a number of sellers who have indicated to their agent that they are "very motivated" and to put the word out that they are willing to deal, but don't want to reduce their asking price.
Be realistic about what's likely in your market segment. For example, lots of second home buyers ask me about foreclosure properties, but foreclosures are much less likely among the types of houses that have strong second home appeal. I have yet to see a lakefront or renovated farmhouse come through as a foreclosure sale, although that could certainly change. But someone looking for a more suburban style house on an acre within the commuting circle in the SE part of Sullivan may want to hold out for a foreclosure property or a builder's closeout.
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.
