The upper end of the market here (which I define as $500,000+) has been notably soft this year. That’s not anecdotal, it’s in the numbers. In 2014, there were 15 single family homes sales above $500,000, including 4 above $1 million. So far this year (and we’re 2/3 of the way through), there have been 3, with none of those over $1M. There are another 5 or 6 that I know of in the deal or contract stage that will likely close before the end of the year. I expect we’ll close out 2015 with 9 or 10 sales above $500,000, or around 1/3 less than last year. This in a year where the overall volume is running about 25% higher than 2014.
Lack of sales in this range hasn’t been for lack of inventory. This year there’s been some stunning inventory in the upper range, particularly between $600,000 and $700,000. But there just aren’t many takers. While Sullivan County is this year’s darling among moderate range second home buyers from the city, we seem to have fallen off the radar of upper end buyers — with one exception, lakefront. Buyers who aren’t looking for lakefront houses can cast their nets over a wide area, from the Hudson Valley to the Berkshires to the northern Catskills, and find some pretty sweet houses (albeit at prices quite a bit higher than here in Sullivan). Lakefront buyers, though, have far fewer choices. No other county within a couple of hours of NYC has the number of lakes we do, so that gives us an edge among lake buyers. But even upper end lakefront this year has been tepid at best. I haven’t seen a lakefront home at the Chapin Estate come through the ‘solds’ in the MLS all year, and I don’t see any in contract at the moment. The lakefront deals I’ve seen have largely been sub-$750K.
Overall, Sullivan County is perceived as a value market, and our affordability compared to other upstate areas is our ace in the hole. 30-somethings from NYC without really deep pockets can afford to buy a getaway here, whereas the Hudson Valley might be out of reach. These buyers, looking in the $150-$350 range, have been driving the market all summer. Buyers looking above $500,000 tend to have a different profile — somewhat older and wealthier, with more price flexibility. The generally have less of a fixed budget, so while a farmhouse on 20 acres here for $600,000 may be a great value, they can often stretch to $800,000 for something similar in the Hudson Valley in a more ‘upscale’ area with more services and more convenient transportation.
Take a look at the numbers. There are currently 95 houses listed for sale in Sullivan County above $500,000 in the Sullivan MLS. (20 of these are above $1M.) Of those 95 houses, 42 are lakefront, 53 are non-lake. If roughly ten houses a year are selling in this range, that isn’t great odds for sellers. From talking with listing agents handling many of these properties, sellers are frustrated and tend to lay the blame on their agent. But there’s a limit to what a realtor can do. A good realtor can position a house well to appeal to a market, but they can’t create that market. You can tie the best flies in the world, but if there aren’t any fish in the river, you won’t catch anything. And right now there aren’t many $500,000+ fish in the river.
A big question is whether price reductions can stimulate this sector. Price reductions are most effective when they move a house into a range with active buyers. For example, the $300’s have been a very active range for lakefront buyers, the $400’s less so. There have been a number of lake houses that started out in the $400’s with no action, but ended up with deals when their asking prices dropped into the $300’s. But move up the price ladder, and there aren’t a lot more buyers in the $600’s than in the $700’s. Price reductions in this range won’t stimulate a market, but they can be good tools for a number of reasons. They help a property stand out from its competition, and indicate motivation on the part of the seller. But if you drop your price from, say, $799K to $699K and expect that to unleash a flood of new buyers, that probably isn’t going to happen.
A final thought for sellers of upper end properties. If a buyer is interested in your house, don’t blow it. In this range, it’s a buyer’s market. Don’t play hardball. True, you may be losing money on the house. And also true that you may have cut your asking price by 30%, but that doesn’t mean you’re giving the house away. Buyers really don’t care what the price of your house was two years ago; they care about how it compares to other houses selling now. Before you dig in your heels on some issue, look at the numbers. It might be a while before you have another interested buyer.