Sullivan County Real Estate

Concord Revamp Takes a Big Step

We waited a long time for Bethel Woods, the first jewel in Sullivan County's new crown to become reality. Now the next jewel — the long awaited redevelopment of the shuttered Concord Hotel — took a major step forward last week. The Town of Thompson (where the Concord is located, in Kiamesha Lake) approved a Planned Resort Development Zone, a major hurdle for the huge project. The plan for the $1.5 billion development by Concord Associates, helmed by Westerchester developer Louis Capelli, calls for as many as 3,000 homes, two hotels, a new clubhouse for the Concord's famed golf courses and retail outlets on the 1,735 acres of the former Concord Resort. (Read the story here in the Sullivan County Democrat.)

The initial phase calls for the construction of a $100 million 125 room hotel and spa (that could grow to as many as 200 rooms) and a new, 63,000 sq. ft. townhouse. The second phase includes 565 homes. Later phases include multi-family condos and rental units. A senior executive of Concord Associates, Bruce Berg, has been quoted as saying that they are in "heavy negotiations" to bring in Ritz Carlton to operate the initial hotel. (Capelli is the developer of the new Ritz Carlton in White Plains.) A second, 1,500 room hotel would be built during a later phase.

This project is very exciting. Yes, we need the hotel rooms and jobs. But besides putting Sullivan County on the resort map again, it will anchor the redevelopment of the eastern part of the county, and set a standard for higher density resort-oriented second home development to complement the lower density, rural focused popularity as a second home destination of the western and northern areas of the county. One 'product' glaringly missing from what we offer is low-maintenance, 'lock and go' homes for part-time residents. If the Concord is successful, it could position the southeastern part of Sullivan County as a major development location for reverse snowbirds. The Concord is, after all, less than 90 miles from midtown Manhattan.

Mortgage Rates Continue to Drop

Earlier this year, as interest rates edged ever higher, most of us in the real estate business bid a fond farewell to sub-6% fixed rates, thinking it unlikely we'd see rates that low again (or at least in the near to mid term.) Just a few months ago, the rate on a fixed 30 year conforming mortgage was running about 6.5% and most indicators had it pushing to 7% by year end.

Well, that was then and this is now. Interest rates have been steadily dropping for the last six weeks, and a few lenders are quoting sub-6% rates on conforming, fixed 30 year mortgages with 1 point, and just above 6% with no points. Chalk it up to competition and supply and demand. With the slowdown in real estate markets, there is more money chasing fewer borrowers, and that is having a moderating effect on mortgage rates. (There is more to it than that; the 'wholesale' cost of money, which is affected by much more than just real estate markets, has also been dropping.)

While mortgage rates are only one component of demand, the psychological impact of sub-6% rates could give a positive boost to demand.

Have We Set Expectations Too High?

Experienced house shoppers here know that there aren't a lot of perfect places for sale in Sullivan County. We've got some so-so houses in great settings and some great houses in so-so settings, but not a lot of properties that are just perfect. Sure, there are some classic farmhouses in nice settings, some dramatic lodge-style contemporaries and the occasional mid-century jewel, but for the most part Sullivan County's architectural style leans more to the 'haphazardly eclectic.' Many houses have been added on to (some more than once), updated and 'remuddled', with the result that form often took a backseat to function.

Until recently, most buyers I worked with had a pretty realistic view of the inventory here. Most understood that the perfect house here was as rare as the perfect storm, and were prepared to accept come compromises and do some work. I always said, "If you can get 70% there with a house --- in terms of setting, size and style --- you should consider buying it."

Lately, though, I've sensed a shift. A lot of current lookers have an ideal in mind, and have set a pretty high standard. For the most part, they're not considering properties that involve compromises, or that with some work could be turned into their ideal, or at least close to it. A year or two ago I'd regularly go through houses with clients and talk about bumping out a kitchen, changing sliders into French Doors, adding a master bath, additional bedroom or new great room. I would venture that more than half of my clients did something major to a house to adapt it to their tastes and needs.

A lot of people lately have been making one or two forays into Sullivan County, look at some houses, decide they didn't find exactly what they're looking for, and move on. They come, they look, they disappear. Its not just me --- I've been hearing that from a whole lot of agents. One factor among buyers may be a belief, with the real estate slowdown, that the market is flooded with inventory — which, here in Sullivan, just isn't the case. In some property categories, like farmhouses on 20 to 30 acres set back off the road, they're still as hard to find today as they were a year or two ago. Finding good properties here can still take time and patience.

But I think there may be another reason for this shift in expectations. Sullivan County has gotten a lot of media play in the last year. Coverage every few weeks in the NYTimes Escapes section, lumping Sullivan County in with destinations like Ogunquit, Maine as the 'new wave of gay getaways', the opening of Bethel Woods, and the construction of some of those trendy pre-fab modern houses here, all served to raise bar among those unfamiliar with Sullivan County. 'Newbies', not familiar with Sullivan in person, come here with very high expectations that often can't be met. Overall, the housing stock here is not of the same quality — or price — as more mature and expensive second home markets like the upper Hudson Valley or the Berkshires. Rather than seeing us as we are --- a very exciting, but still emerging market --- many now expect a bargain Berkshires with all the quaintness and conveniences but at a lower price.

We face a real challenge here, balancing expectations and reality. In the B.H. era (before-hype), buyers were typically delighted — at how beautiful Sullivan County was, and how much they could get here for their dollar compared to surrounding areas. In contrast, many buyers now — with much higher expectations — see the glass half empty, with more disappointment than delight. The reality hasn't really changed all that much — prices aren't a lot higher than a year ago, and the inventory is similar. What has changed, though, it seems, are expectations.

Cochecton Development Pulled

Paul Savad, a developer from Nanuet who proposed a 42 home subdivision on New Turnpike Road in Cochecton, pulled the plug on the development last week. The development faced considerable local opposition from neighbors who argued that the plan would compromise the quiet solitude and rural character of the area.

The New Turnpike Road case raises important issues for development in Sullivan County, particularly the more rural western townships. Cochecton zoning permits one to two acre lots in certain areas, so Savad was not asking for a variance --- just subdivision approval under current zoning regulations. Concerned citizens in Cochecton wanted to preserve the rural character of the area, and were particularly concerned about increased traffic on New Turnpike Road, which is a narrow local road. At the same time, though, one of the big complaints among property owners here is high property taxes, and the Savad development, when complete, would have added about $12 million to the tax rolls (and generated about $400,000 in annual property and school taxes.) Savad's plan also called for more reasonably priced houses --- about $250,000 --- which is an underserved market niche here. (However, I doubt his plan for houses on small lots in a traditional subdivision layout would have had much appeal for the second home market, which is where the $250,000 demand is.)

This is also a classic case of the raw land cost squeeze that developers are facing here. The 108 acre parcel is on the market for $500,000, roughly $5,000 an acre. Figure half of the land is 'developable', given that Savad planned to develop that much (and leave the rest in green space.' So you've got roughly 50 developable acres. Cut into 5 acre, rather than 1 acre lots, would yield 10 parcels --- with a raw land cost of $50,000 per parcel. With development, carrying costs, sales expenses and profit, that would translate into a minimum 'retail' per parcel sales price of $150,000. And that puts you back into the upper end market that's so slow right now.

Somehow we've got to figure out how we have our cake and eat it too.

Have Developers Horribly Misread the Market?

Last week I learned that the developer of Eagle Nest Estates, an upmarket development with Delaware River views and lot prices in the mid $300's, is looking to sell the whole development, lock, stock and barrel. The developer of Swan Lake Estates, with lakefront parcels starting in the mid-$400's, has also put the whole development on the market. A number of builders have put up spec houses in the $450K to $600K range in the last year, and a lot of them are still sitting on the market.

In the last few years, there has been a lot of 'upscale exhuberence' here, following the stunning success of the Chapin Estate, the opening of the Bethel Woods Center for the Arts, and the general buzz about Sullivan County in the NY press. All the talk about the Catskills as 'The New Hamptons' went to people's heads, and many saw a surge of million dollar buyers streaming up Route 17 to grab their spot in up and coming Sullivan County.

Amid all this heady self congratulatory backslapping, we may have lost sight of our knitting. Notwithstanding the occasional celebrity buy, we're still firmly a middle class second home market — the role that Sullivan County has played for over a century. Affordability is the key to the success of Sullivan County — for middle class working people in the city, Sullivan remains the best second home getaway value within 2 to 2 1/2 hours of NYC. Sure, the work that the working people coming here has changed; mid-level creative professionals have greatly contributed to the resurgence of Sullivan County, along with early career financial types.  But we're still not the getaway of choice, for the most part, of the wealth class — the partners in the law firms, the CEOs of Fortune 500 companies or coupon clipping trust fund babies. yes, there is the occasional J. Lo spotting, but Entertainment Tonight and Access Hollywood have yet to send crews here to track celebrities. And thank heavens we're not on Paris Hilton's radar. Frankly, we just don't have the infrastructure yet for broad appeal to the very upper end. Sullivan County doesn't have a gourmet grocery or artisan bakery, no luxury hotels and the landscape of better restaurants in still pretty thin.

While upper end sales have lagged here this year (its been 6 months since I've made a sale at Chapin), houses in the moderate price range have been flying off the shelves. Most buyers I've been talking to in the past few months have been looking in the $250,000 to $350,000 range, with some below that but few above that. Demand is absolutely there, but the key is affordability. For the right property, some of the buyers in the upper end of that range would stretch to $400,000, but they're not going to $500,000 or above.

And that's where I think that developers have midread the market. There's tremendous demand for $300,000 getaways, plus or minus $50,000. Modest, interesting (e.g. not vinyl-sided modular ranches or capes) 1,500 sq. ft. houses on a few acres with privacy. The 30-something first time home buyers in this price range don't have grand expectations; cozy, comfortable, cleverly designed with a fireplace and some place to stash house guests is the right recipe, not a 3,500 sq. ft. cedar McMansion with a media room.

A number of new developments are in the planning stages — the RM Farm subdivision near Livingston Manor, the Menderis Road subdivision near Youngsville and the New Turnpike Road subdivision in Cochecton. All the developers refer to their projects as upscale and luxury, which means they're not targeted to that $300,000 buyer. Which is a mistake because, in my opinion, that's where the market is.

October Sullivan Sales Numbers Posted

While the market is certainly slower than a year ago, October's sales numbers are painting a slightly brighter picture. September's 3 month sales count was down 32% from a year earlier, while October saw a slight improvement, to just 25% below a year earlier (and when all the final numbers are in, which takes a few weeks, the drop will likely be about 23%). Inventory of available homes has also stopped its climb, retreating slightly from its September peak, and prices overall are holding pretty steady. While a slight pullback in prices on closed sales can be anticipated over the next couple of months, the operative word is "slight", and it looks like we're heading into a period with prices in a range of 2005 levels, which was a very good year.

For a more in-depth analysis of the data, check out my Current Market Conditions page at http://www.catskill4sale.com/current.asp. And come back here to leave your comments on where you think the market is and where its going.