November continued the activity trend we've seen for the past few months, with sales up slightly from month to month and prices essentially flat. For the 3 month period ending Nov. 30th, there were 133 single family sales reported in the Sullivan MLS, an increase of 7% from the 3 month period ending Oct. 31st, but down 8% from the same period a year earlier. The median sales price of $134,000 was down a couple of thousand from October, while the average was up by a few thousand, which is essentially a wash in my opinion.
The good news in all of this is that the sales volume is rising, if ever so slightly, and the median and average sales price has remained fairly stable for 3 months without the wild fluctuations and sharp drop offs we saw earlier in the year. The bad news, at least for sellers, is that price plateau, while stable, is 34% below the peak levels of mid-2007.
For the latest 3 month period, foreclosures accounted for 10.5% of single family sales, down slightly from 12.1% at the end of October.
On average, houses sold for 88.7% of their final asking price and 80.6% of their original asking price. Surprisingly, 38% of sales were all cash, without mortgage financing.
The Current Market
November, from a shopping and buying perspective, seemed very slow, even taking into consideration Thanksgiving. When I looked at measures of direct activity — appointments, business phone minutes and property inquiry emails — all were about 50% down from late summer / early fall. The seasonal drop in activity in November has typically, for me, been about 30%. In contrast, the less direct indicators of interest — website visits and online property searches — have remained fairly stable. This indicates to me that casual interest is there, but these armchair shoppers aren't moving right now to the next step.
Among those shoppers I am directly communicating with, I'm noticing a few common threads. Most are in the early stages of looking for a home and are just starting to put out feelers and get the lay of the land. Whether looking for a primary home or second home, they're not specifically focussed on Sullivan County, but more generally "upstate" or "within 2 (or 3) hours of New York City." More of my phone time in the last month has probably been spent discussing what areas might be the best fit for someone, rather than on actual properties.
A symptom among early stagers is a wide gap between their dream and what's actually possible at their price point. Early stagers commonly have a wish list that is often presented as "must haves" that aren't attainable at their price point. For example, the renovated "Norman Rockwell" farmhouse with a wrap porch set well back from the road, with a view and a pond, is in the $500,000 or $600,000 range (when it's even available), not $300,000.
The reason I'm focusing on these "early stagers" is to make a distinction between them and "deal shoppers", both of whom present relatively low price expectations for what they're looking for. Early stagers aren't necessarily deal shoppers. They may just lack the market experience to understand the trade offs and what they can get for their budget. Over time, they may adjust their price or property expectations. I view the interest among this group as very significant, even though it isn't likely to lead to immediate sales. First, they're considering a discretionary real estate purchase. The stigma of being out of your mind to buy real estate, which was rampant earlier in the year, is mostly absent. They generally believe that prices may have bottomed, or are at least unlikely to fall a lot further. And finally, while they certainly are value focussed, their primary intent is finding the right property, not just the killer deal. It remains to be seen how this shift in attitude plays out in actual sales next year, whether they'll push the market up a bit or dig their heels into deal shopper mode.
Current market activity, however, continues to be driven primarily by "deal shoppers". Every deal I've been able to make in the past 3 months has had a 'distress factor' — short sale, bank-owned, estate or illness necessitating a sale. My experience reinforces what I've been saying for months, that the key factor in motivating ambivalent buyers to get off the fence is a price that's too good to pass up. Without a great price, they're content to wait.
In terms of what potential buyers are asking about, I'm seeing a few strong segments — classic "charmers" or contemporaries in the $250,000 range, modest cabin getaways on a few private acres in the $100,000 to $125,000 range, and lake cottages in the $300,000 range. I'm seeing very little interest at higher price points or for more subatntial "trophy" properties.
Sellers, Asking Prices and the Inventory Picture
Inventory dipped a bit in November, to 1,079 single family homes listed in the Sullivan MLS at the end of November from 1,117 at the beginning of the month. That's a pretty traditional seasonal adjustment, as inventory typically drops from the end of fall through the winter. Some good news on the price front. The median asking price dropped $199,000, the first time we've seen the median asking price under $200,000 since March. The average asking price also moved downward, to $271,223 from $278,712 in October.
I'm finally starting to get the sense that sellers are getting with the program. Not all sellers by a long shot. But on a number of listings I watch regularly, I've seen some nice price cuts in the last month that have brought them into a very appealing range. I think it's starting to sink in that a house has to be well priced to move. Interesting, this seems to be just about in line with what old timers who have been through previous downturns have said — that sellers lag buyers by 6 to 12 months in adjusting their expectations.
It will be very interesting to see what happens with pricing in inventory-short categories. For example, we have a definite shortage of appealing 3 or 4 bedroom "charmers" (e.g. farmhouses, Craftsman bungalows, renovated schoolhouses) in pastoral country settings. Over the past 6 months, buyers looking for this type of property have generally set their sights in the $250,000 to $300,000 range, with limited success due to the limited inventory in that range. There have been a handful of houses in that style on the market in the $400,000 to $500,000 range, but not that many. So it will be interesting to watch where this "moderate range" second home segment will end up price wise. Will buyers who want the classic "Love, Valour, Compassion" farmhouse bite the bullet and up their budget? Will they migrate to other house styles or areas? Will owners of these houses drop their prices to grab a buyer, or will they bet that eventually a buyer will move to them?
The above is not the case in most property segments. In lakefront, there's quite a bit of inventory, but mostly priced well above what buyers want to pay. So in that category I think prices will have to come down to meet buyers, and ultimately we'll probably see houses currently listed in the $650,000 to $750,000 range trading closer to $500,000 and modest little lkae cottages, many of which are listed in the $350,000 range, pushing down into the $200's..
There's been a lot of inventory apparently held off the market this year. I've come across a lot of houses that the owner has taken off the market and decided to rent for the time being "until the market improves." For the most part, these owners are circumstantial landlords, and most likely don't want to remain landlords for the long haul. Often rents don't fully cover carrying costs. There are also owners who want to make a life move — maybe sell their place here to buy one in Florida, or find they're not using their house up here as much and would prefer to sell it rather than keep it. They haven't had to sell this year, but given their druthers would prefer to sell in the next year or two. In both cases — reluctant landlord or lifestyle changer — I expect a lot of that holdback inventory to flow back onto the market in 2010 once sellers accept that a miraculous upturn is unlikely in the near term.
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.
If you're looking for that great deal, don't be too picky. Almost all of the dozen or so deals I've done this year have been in the jaw dropping deal category, the kind of deals that elicit comments from colleagues like "I can't believe you sold that house at __________ (fill in the blank) for that price." Those deals happened because my clients who got them had one thing in common — flexibility (combined with a good dose of vision). The houses, for the most part, weren't "picture perfect." Some had dated interiors or layout quirks. They may not have had all the setting attributes the buyer had hoped for. Or they were short sales requiring the patience of Job. But all in all, these buyers were willing to accept some compromises in exchange for a great deal.
A question a lot of buyers have is whether to "buy now" or wait. We've reached the end of the 'season', and if there's a property that interests you and has been on the market through the summer and fall selling season without selling, it may be a good time to make a move. Some sellers, facing the prospect of holding until next spring, may be primed to make a great deal. This is probably a pretty good buying window if you fall into the "not too picky" deal shopper category. However, if you're looking for that perfect house, you may want to wait until next year, when I expect there will be more selection as this year's holdback inventory dribbles back to 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.
