Sullivan County Real Estate

Acreage The New Luxury Buy

5 or 6 years ago, when I started selling real estate here, mid-market houses in the country often came with 10 or 20 acres or even more. As land has become more valuable, that number has shrunk. Today, in what I consider to be the mid-market second home space ($250,000 to $325,000), a house will typically come with about 5 acres. To get more acres, buyers have to move up to a higher price point.

What happened? Did parcels magically shrink, like Dannon reducing the size of its yogurt containers from 8 ounces to 6 ounces? Not exactly. Some owners have been splitting their property before selling to increase their return. For example, someone with a house on 15 acres may subdivide the property into the house on 5 acres and a 10 acre parcel of vacant land. Some investors have bought large parcels, say 50 or 100 acres, to develop and subdivided off the existing house on a few acres to sell separately. And then there's simply the phenomenon of more people looking for houses with more acreage, which has pushed those properties into higher price ranges.

Land, at least within a few hours of NYC, is becoming the new luxury item. Sullivan County is no longer the great frontier of cheap land, which has come as something of a surprise to some buyers. Sullivan is still a great value, though, compared to adjacent counties or anywhere within a couple of hours of NYC.

As Sullivan County continues to grow in popularity, houses with larger acreage will likely become scarcer ... and more valuable relative to other properties. Today, the "Wow" factor comes into play when someone has 50 or more acres, as in "Wow, you have 50 acres!" That "Wow" threshold level is likely to drop, so that in a few years people will likely say "Wow, you have 20 acres!"

As a buyer, you may be faced with the choice between a perfect house on 5 acres, or a not-so-perfect but workable house on 20 acres. In most cases you can increase the size of the house, but usually can't increase the size of the land. Over the long term, I think people who own more land are going to be very happy that they do.

Concord Revamp Moves Forward. 5 Star Hotel in Plan

Westchester developer Louis Capelli has owned the now-shuttered Concord Hotel in Kiamesha Lake for 7 years now. Plans for the renovation of the famed resort have been tossed around like a ping pong ball on the ocean, battered about first by the events 9/11 and then by the on and off plans for casino gambling. Last January, Capelli — who's projects include the Trump condos and planned Ritz Carlton and new Roc City in New Rochelle, flew up in his helicopter to announce that he would definitely break ground by June 30th on a 120 room luxury hotel on the Concord property.

Well, June 30th came and went, and no shovels went into the ground. Another deadline not met. (Maybe we should just legislate that Alan Gerry handle all development in Sullivan County. He's about the only person here who seems to be able to get something done on time. He promised to have Bethel Woods open on Juky 1st, and, by golly, he did!)

But the Concord revamp is far from dead. Capelli's company has been quietly laying the groundwork for the redevelopment of the property. They submitted an environmental impact study to the Town of Thompson on Aug. 5th., and other steps are being undertaken as part of the review and approval process.

The current plan calls for a complete redevelopment of the property, with a new club house, a five star "hotel spa", 3,000 new homes and renovations to the golf courses. The projected total project cost is $1.5 billion, with the first phase, which could be finished by spring 2008, running about $100 million.

Its been a long time in coming. But maybe, just maybe, this will be the hotel project that actually gets off the ground.

Is a Real Estate Dust Bowl in the Making?

Yesterday's existing home sales figures seemed to send a shock through the real estate industry, but they certainly weren't unexpected. They only came as a shock because of NAR's market calming rhetoric over the past year, using terms like "easing" and "soft landing" and "still at historic levels."

The tone of many of yesterday's TV news reports was practically panicked, which was as misleading as NAR's public relations pablum. Last evening I was chatting about all of this with a friend who's on the faculty of the real estate program at the Columbia B-school, and an industry honcho in his own right. He had a very interesting perspective.

Basically, my friend was saying that real estate markets are less likely to crash than other markets, barring a more macro economic catastrophe like a recession or, heaven forbid, a depression. The reason? In residential real estate, only a small proportion of sellers must sell; most sellers are actually discretionary sellers. In the "must sell" category, for example, are people who are being transferred to another city, heirs selling a property from an estate, or a couple that needs to liquidate a property in a divorce.

Most sellers, even though they may perceive they're "must sell" sellers are actually discretionary sellers. For example, a family expecting their third child may feel they need to upgrade to a 4 bedroom house, but in fact, don't actually have to. If they can get $400,000 for their house, they'll trade up. But if they can get only, say, $325,000, they may decide to stay right where they are and put on an addition or finish off the basement to get more space. So if they put their house on the market at $425,000, hoping for $400,000, and only get offers in the $325,000 or even $350,000 range, they may just take their house off the market.

In the Sullivan County second home market, many houses on the market are 'discretionary' sales. A seller here may want to sell their house for $400,000 and take the profit to buy a condo in Florida, for example. But if they can't make a tidy profit on their place here, they may be just fine with keeping it and using it.

We saw a pretty big run up in inventory here over the last year --- about a 50% increase in single family homes on the market, from under 800 to over 1,200. Since Aug. 1, however, the inventory of available houses has only edged up, from 1240 to 1266, a net increase of 26 houses in just under a month. That's still a lot of houses in a county that sees roughly 700 to 800 sales a year. And there hasn't been a noticebaly decline — yet — in the average and median asking price.

I anticipate 2 things happening over the next two or three months. First, I think we'll see a drop in available inventory, as some discretionary sellers smell the roses and realize they're not likely to get anywhere near their inflated asking prices and pull their houses off the market. Second, the average and median asking price will drop, as the "must sell" sellers have to bring their asking prices in line with market realities to move their properties, and the more motivated discretionary sellers follow suit. I wouldn't be surprised at all if we posted a drop in the average asking price from the mid $290's back into the $270's or even the $260's.

However, I don't expect to see a direct correlation on the actual sales price side of the equation. I think most of the drama is going to be on the realignment of inventory and asking prices, to bring it more in line with buyer expectations. Buyers have been pretty clear now for a couple of months now what they're willing to pay and I don't see that dropping in any major way.

I just don't see a 'Dust Bowl' collapse on the sales side. As discretionary sellers pull their houses off the market, supply is going to realign with demand, and prices will likely stabilize. The panicked Dust Bowl scenario is more about sellers' unrealized paper profits than the drying up in demand. There's one house, for example, that the current owners bought in March, 2005 for $200,000 and just put back on the market for $355,000 — an expectation of a 77% increase in 18 months. Sorry, folks, that kind of return just isn't going to happen.

National Existing Sales Plummet - Wake Up Call to Sellers

The National Association of Realtors (NAR) released the July existing home sales data today, and the drop off was much sharper than most industry watchers expected. Nationally, sales of existing homes dropped 11.2% from July, 2005; in the Northeast, the drop was higher at 13.3%. Overall, the median price squeaked out an increase over July, 2005, posting a .9% rise nationally and .4% in the Northeast, saving NAR from having to make the devastating pronouncement that prices are falling. But here in the Northeast, the average sales price declined 1% from July 2005, and was down 2.9% from the June, 2006 peak.

The latest housing sales data has been getting a LOT of media play today (it was the lead story on the national news on all 3 networks). While many in the industry may lament all the coverage of 'bad' news, I think its good. Sellers may finally get the message that the market has changed. Sales aren't off 11.2% because of a lack of demand. Far from it. I get plenty of calls from buyers looking for houses. And you can't blame it all on mortgage rates; they've been steadily falling again (although are higher than their lowest levels of 2005.)

No, the lion's share of the blame rests with sellers, and their stubbornly high price expectations. True, buyers are a little on the low side in terms of what they're willing to pay, but no where near as far as sellers are to the high side in terms of their price expectations.

In the last 2 weeks, I've seen some dramatic price cuts in the Sullivan MLS --- some houses have dropped as much as 20% to 25%. (Note: those cuts were on some particularly overpriced houses. I'm not suggesting that overall asking prices need to drop 25% before they get into market range.) All the media coverage today will lead to many sellers rethinking their positions, and I expect we'll see an acceleration of cuts in asking prices over the next week or two.

Sellers, there are buyers willing, ready and able to buy your house --- they just don't want to pay your price.

Shocking Admission by Seller's Agent in Today NY Times

Ok, gotcha. "Shocking Admission" is the kind of lead you expect to see in the Globe or National Enquirer while you wait in the checkout line at the supermarket. But I was blown away, that buried deep inside the lead article in this Sunday's NY Times Real Estate section, was an admission by a seller's agent that their customer paid $10,000 more than the seller was willing to accept for a property because they represented the seller rather than the buyer.

Its the dirty little secret of the real estate business that the vast majority of agents represent sellers, not buyers, and their fiduciary responsibility is to sellers — to get them the highest price and best terms. The whole article (or click here for the .pdf version) is a great lesson in real estate representation. In the article quote, Ms. LePore didn't do anything illegal or even unethical. In fact, she did exactly what she was supposed to do, and in fact, legally required to do — represent the interests of her client, the seller, not the interests of her customer, the buyer — to whom she had no fiduciary responsibility.

The Times did make one glaring error, or at least twist. They imply that the intermediary in a deal is always the seller's broker. That's not true. If you, the buyer, engage the services of a buyer broker, there is an intermediary in the transaction who represents you. Seller's agents are not the only form of broker. There are also buyer brokers, like me.

 

People often wonder  why I work as an exclusive buyer agent — and never take listings. I think this NY Times article is one of the best illustrations of "Why". Every potential real estate buyer should read it. And if you go out with a seller's agent to look at property, just remember you're looking at property with someone who has the same fiduciary responsiblity as Ms. LePore — and is legally bound to act in the same way.

Bungalow Colonies for This Generation

I was out with a client this past week looking at some of our lake communities. Mid 30's, a comfortable professional, married with a couple of small children. Like many mid 30's professionals I see, he found Chapin too grand and expensive, while many of our older lake developments were too cramped, too rundown or too 'suburban'.

His wife is working as a mother right now, raising the children, something I've been seeing quite a bit of in this 30's age group. The plan is to buy a place here in the Catskills, where the wife and children will spend the bulk of the summer and the husband come up from the city on weekends, holidays and for the occasional summer week. Sound familiar? That was the common scenario during the heydey of the summer bungalow and cottage colonies in the Catskills that was chronicled in the romantic comedy Walk on the Moon. One of the big draws of the colonies was the built in social network for the wives and children who spent the weekdays here. Moms could take their children to the lake, pond or pool to play while they visited with other adults. After the kids were in bed, they could saunter over to a neighbor's porch to sip a gin and tonic (or back then, more likely a frozen Daiquiri whipped up in the fancy new avocado-colored Waring blender!)

Hipsters may thumb their noses at the concept of bungalow colonies as hopelessly tacky. And architectural significance took a back seat to flimsy functionality. But those old bungalow colonies offered something we just don't have today, at least in a modern version — community and connectedness. Kids could play outside and there was always a neighbor keeping an eye on them. Yes, the bungalows were close to each other and didn't offer much privacy — but you could go next door for a cocktail and be within ear shot if you heard one of your children crying. There was always someone to talk to and someone to watch your kids if you had to run an errand.

You may say that I'm suffering a case of Ozzie and Harriet nostalgia for a world that doesn't exist anymore. I don't agree, because I do see that summer community cohesiveness in some of our older lake communities. But those older lake communities tend to be a little too run down or quirky and the cottages and cabins way too small for many of today's 30-something buyers.

So where are the 'bungalow colony' equivilents for today's young families? A development with cool, small houses, maybe clustered in a 'new urbanism comes to the country' plan, surrounded by protected conservation land. A development with gathering places — a great pool area with cascading waterfalls and waterslides and an adjoining bar and maybe cafe area, trails for hiking and mountain biking, a place to go kayaking or canoeing, and that all-important fitness center with good equipment for a workout on cold or rainy days.

Am I confident such a development would be a success? No. Because so many of the 30-something I talk with want 'privacy'. But then in the next sentence I often hear, "What I am going to do when I'm up here with the kids all summer?" Seclusion and community are kind of polar opposites. But could there be a development that would be so cool, from an architectural and land planning standpoint, that buyers would give a little on the privacy thing in exchange for being part of a great community?

Bright Eyed and Bushy Tailed Newbies

A common element among almost everyone I've been working with this summer is that they're brand new to Sullivan County. For many its their first time here (not counting college-era stops at the Roscoe diner on trips between NYC and Ithaca or Binghamton.)

To be honest, 'newbie touring' is not a favorite past time among Realtors. The payoff tends to be low, especially in the summer up here when 'house shopping in the Catskills' is on the top 10 list of 'things to do on a hot summer weekend', up there with antiqueing, going to the shore or taking the family to a 'pick your own' blueberry farm.

One frustration with 'never evers' is that they don't quite grasp how large Sullivan County is or how much variety we have here. You just can't get your hands around this county in a single day trip from the city. Driving from Claryville to Barryville, for example, take about an hour and fifteen minutes.

I've had folks say they want to see these 2 houses in Claryville, a house outside of Livingston Manor,  2 near Jeffersonville and a couple more down in Barryville — which just isn't possible in one day. Most people wouldn't dream of flying to Orlando and trying to get in the Magic Kingdom, Epcot, Disney/MGM Studios and Universal in one day. Is it physically possible? Yes, but not very enjoyable.

Most newcomers are pleasantly surprised by the variety here. Many folks start a second home search with a pretty defined idea of what they'd like, in terms of setting, house style, amount of privacy, etc. But that idea is often formed in a vacuum, without understanding what the range of options are. Unless someone is very specific about what they want, I try to expose newcomers to as wide a range of options as possible on a first trip — even if that means doing more 'drive bys' and actually visiting fewer houses. I can't tell you how many times I've had potential clients say, "Wow, this setting is really beautiful and not what we were thinking of at all, but is something we'd consider." I've venture that the majority of my clients end up buying something very different than they initially envisioned.

Something I'm noticing among this season's newcomers is that they're excited about Sullivan County, and they're excited about the possibility of getting a place here. They're excited that there is this place just a couple of hours from Manhattan that's so beautiful — and they can actually afford. They're quite different than some of the more jaded shoppers we saw over the past few years, who would compare us with the Hudson Valley, Cold Spring and Saugerties and invesitably rate us short.

Today's buyers are looking at the Sullivan glass as half full, not half empty. They tend to see how much we have to offer, not how much we lack. Its a whole new attitude, all bright eyed and bushy tailed.

True, the profile of the current crop of second home buyers is different, which I've written about a number of times before. They're younger, often first-time home buyers, with modest budgets. They're not looking for trophy property and don't expect to find something that can grace the pages of Country Living.

While they may not be spending the big bucks, their enthusiasm is infectious and they can be awful fun to work with.

Business Picked Up This Week

Wow! I'm busy this week. Whadds up with dat, huh? There have been a lot of calls and emails this week about finding vacation property here. It could be related to the U.K. airline terror plot uncovered last week — when there's publicity around a terror plot related to new York, some folks do, at least subconsciously, start thinking about an escape place. But usually I pick that up from people, and I'm just not getting that now.

I think I'd be impossible to live with, because I 'reverse engineer' everything, try to figure out a reason. In this case, I think its just a plain old vanilla desire for a vacation getaway. There's also a settling happening among buyers. Over the last 6 months or so, the economic and geopolitical landscape has been very stormy, with every new stress on the 'system' from higher oil prices to the turmoils in the Middle East, predicted to be the last straw and usher in an economic Armagedoon. But it just hasn't happened. There hasn't been a stock market collapse, gasoline hasn't hit $5 a gallon and millions of people haven't been laid off from work.

While consumer confidence is down, it hasn't collapsed. As I've written numerous times before, I think people are trimming back on excess and searching for solid mid-range value in any number of categories, including real estate — which is why we're seeing a pretty vibrant market under $300,000 and a stagnant one over $500,000.

Wolf Lake House Sells for $790,000

This week, a lakefront house at Wolf Lake, one of our prettiest non-motorboat lakes, closed at $790,000 ($1,000 over its asking price of $789,000). The 3BR, 2BA house with a fireplace sits on a .34 acre lot and has 1,768 sq. ft. The house had a deal on it within weeks of coming on the market in June. Good lakefront houses have been one of the bright spots in the market over the past few months. Lakefront houses that have hit on all cylinders — an appealing house in a mountain rustic style on a nice lake — have sold well and for fairly healthy prices. A larger house on 5 acres on Black Lake sold in May for $925,000 and a small, 1,200 sq. ft. well done cottage with a western sunset view on Tennanah sold very quickly for $500,000. Both of these houses sold very close to their asking prices. A nice rustic contemporary house at Timber Lake that was listed at $749,000 (but not yet closed, so the sales price isn't public) went into contract almost immediately after being listed.

New Conservation Tax Changes --- Will Better Land Use Planning Result?

Two subdivision proposals went before the Town of Liberty Planning Board on August 1st. One would subdivide 144 acres on Menderis Road into 26 lots, mostly about 5 acres. The second would subdivide the 252 acres of RM farm into 44 lots, also about 5 acres each. Both are planned to be gated communities. Both are also very traditional --- cut up the land, build roads, bring in utilities and put up houses.

What's striking in these and most of the other subdivision proposals floated in Sullivan County is how unimaginative and uncreative they are from a land use planning perspective. They generally don't involve conservation easements, farmland protection or forest conservation unless forced by some government entity to make concessions.

One reason that Sullivan County is still so beautiful is that we were mired in the economic doldrums during the late 80's and early 90's, when other areas were experiencing a lot of development and were cut up into ticky-tacky subdivisions. We have an opportunity to leapfrog all that and become a model for much more progressive land use planning and conservation-oriented real estate development.

During the 1st week of August, at the same time the Town of Liberty Planning Board was reviewing those two subdivision proposals, both the House and Senate approved sweeping changes to the tax treatment of conservation easements that offers landowners much more incentive to protect their land. The Pension Protection Act of 2006, which is expected to be signed by President Bush, raises the maximum deduction a donor can take for donating a conservation easement from 30% of their adjusted gross income (AGI) in any year to 50%; allows qualified farmers and ranchers to deduct up to 100% of their AGI; and increases the number of years over which a donor can take deductions from 6 years to 16 years. This is a huge change in the tax treatment of conservation easements, and makes it much more attractive to protect land.

Our Planning Boards needs to start demanding more creative land use plans that protect land in exchange for permission to develop. Those "trade off" provisions are common in NYC, where developers regularly agree to add features to a project for the public good as part of the approval process.

Buyers also need to begin rewarding developers who bring conservation-oriented developments to the market. Another way to approach that 252 acres (now slated for 44 five acre lots) might be to propose, say, 20 two to three acre lots surrounded by about 200 acres of commonly held land protected by conservation easements. The big question is whether the market will value — and pay for — that type of lower density development with shared conservation areas. The new tax incentives will hopefully make that type of development much more attractive for developers and investors. But its also up to buyers to decide if they'll be willing to pay $125,000 for a 2 acre parcel surrounded by protected land instead of, say, $100,000, for a 5 acre parcel not part of a conservation development.

In light of the flooding that occured in parts of Sullivan County earlier this summer, some citizen groups are proposing moratoriums on subdividing in some of our townships. I think a blanket moratorium is a wrong approach. However, I do support brakes on these traditional subdivisions with little or no conservation focus. If we do impose moratoriums on this type of development, we should encourage lower-density, conservation-oriented developments that protect our farmland, forests and watershed.

If we don't begin incentifying conservation-oriented developments and dis-incentifying traditional developments, we're headed to a future here with hideous McMansions sprouting up in the middle of hayfields. Just take a drive around Orange County between Goshen, Middletown and Newburgh to see what that future looks like.