Sullivan County Real Estate

NAR's May Existing Home Sales Data Out

If you caught the national news last evening, you probably heard the latest bleak report on Existing Home Sales from the National Association of Realtors. Nationally, May's seasonally adjusted sales were down 10.3% from May, 2006, with a slight 0.3% dip from April. But housing performance varies tremendously by region, with the south and west chalking up double digit drops while the northeast region showed just a 3.5% decline in year over year sales. In the northeast, May's sales actually increased 5.8% on a seasonally adjusted basis from April. (On a seasonally adjusted basis, the peak in the northeast was reached in Feb. 2007, and sales are off in this region by about 10% from that peak.)

On the price front, May's median sales price fell 2.1% from May 2006, but in the northeast, prices actually rose 0.5% in May over the same month a year earlier, and the average sales price rose 2.3% year over year.

The real estate picture right now is multi-layered and complex. Performance varies tremendously by region, and within regions, by markets and even submarkets. While few places in the country are galloping merrily ahead like a few years ago, there certainly markets that are doing well, and others that aren't.

Trying to Buy in NYC is Sooooo Frustrating

I don't just sell real estate. Occasionally I buy it, too, and experience many of the same emotions and frustrations that many of my clients do. Recently I've been shopping for a pied a terre in NYC and have zeroed in on the Bronx. (Yes, I know my neighborhood selection can likely generate a whole blog thread on its own. New Yorkers' opinions about neighborhoods can reach the frenzied fervor of political or religious debates.) I'm looking in the Kingsbridge Heights area, through to the Van Courtlandt Park / Broadway side of Riverdale.

My heart goes out to any of you who've shopped for a coop or condo in NYC. Its downright frustrating. First, there's no single source of listing information. There's no real Multiple Listing Service, although in the Bronx a handful of Westchester Realtors have listings there that show up in the Westchester-Putnam MLS. The NY Times' online real estate database functions like a quasi-MLS, but its far from comprehensive, particularly for the Bronx. Every day I search a half dozen agency websites, use a program to search Craigslist for any new keyword hits, and have auto-notifies set up on the Westchester-Putnam MLS and the NY Times.

When all my fishing comes up with a bite --- a listing I'd be interested in seeing --- I send an email or leave a voice message for the listing agent, and count my blessings if I ever hear anything back. I'd say that the response rate to a first inquiry is about 1 in 3. A second call or email will increase that to 2 in 3.

What I'd really like to do is find a good agent who works in the area I'm interested in, and rely on them to find appropriate properties to see. But in NYC, a lot of brokers don't cooperate with each other, so you can't rely on a single agent to be your point person for comprehensive inventory. You have to go from brokerage to brokerage to check on listings and find what you're looking for.

Compared to the city, buying real estate here in Sullivan County is virtual nirvana. The vast majority of properties are included in the Sullivan County MLS. Brokers cooperate with each other well here, and even the handful of brokers who don't participate in the MLS are willing to work with other brokers. And you can work with a single agent here and be confident that you'll be aware of most everything available that meets your criteria. it is just so different than shopping in the city.

State Senate Votes Sweeping Property Tax Reform

Joe Bruno, the NY Senate majority leader, has pushed a sweeping property tax reform bill through the state senate. Property taxes are a hot button issue here in New York state, and Bruno's plan has a huge, politically attractive carrot —  to enable local school districts to effectively eliminate all school taxes on owner-occupied primary residences, to be replaced by state funding. (See the North Country Gazette article which explains the plan.) The plan, which has tremendous voter appeal, has been passed by the Senate and is now in front of the Assembly.

But the plan has some downsides that, in my opinion, could have long term negative impacts as well. The elimination of school taxes (which would be phased in over 5 years through a 20% reduction each year) only applies to primary, owner occupied homes that qualify for the current STAR exemption. School taxes would continue to be paid on second homes (not designated as primary) as well as on investment and commercial property. Even though the state plans to reimburse school districts for the "lost" property taxes on primary residences. So theoretically it would be a wash and taxes would not increase on non-primary residential property. But long term, I fear that state funding may not keep up and non-primary residential property would assume a greater tax burden.

The plan seems to eliminate much incentive to streamline our school systems and make them more efficient.  Will voters stay involved in the school budget process if they're not paying any school taxes? Will there be any incentive to combine small school districts to reduce costs?

I'm a property owner in Florida, a state with two classes of property owners — primary homeowners who enjoy a homestead exemption as well as a "Save Our Homes" cap on the annual increase in their assessment, and non-primary homeowners (like us New Yorkers who have winter places there.) The system of capped increases in very popular, politically, in Florida, but the result is that every year non-homesteaded property owners bear a greater and greater tax burden. Its not uncommon in Florida for one owner to be paying 4 or 5 times the taxes paid by their next door neighbor with an almost identical house. The Florida system is very different than what is proposed in New York, but we need to think carefully about the long term impacts of any reform that creates two different classes of property owners.

The other very disturbing part of this is the likely impact on renters. Investor owned properties, like apartment buildings, will continue to pay school taxes. Those taxes will be passed on in rent, so renters won't enjoy any benefit from this. Yet the state revenues to reimburse school districts for the eliminated school will come from state coffers, and that money needs to come from somewhere — and that could well be an increase in the state income tax. So those renters who work, and pay income taxes, not only will not benefit from the phase out of school taxes, but may end up subsidixing those who do.

I agree that we need property tax reform in New York, and am a supporter of reforms that would equalize school funding throughout the state. But scholl tax reform needs to be accompanied by spending reform, a curb on campaign contributions by special interests, and incentives combine small school districts to reduce costs.

No Matter What a Seller Does, Price is Still the #1 Factor

Yesterday I had the pleasure of showing a house where the owners have done everything right to make it appealing to potential buyers. Great curb appeal --- the house had been recently painted, the gardens were popping with blooms (I want to know their secret for big peonies), the lawn was mowed. Inside, the house was spotless. Prior to putting the house on the market, the owners had a pre-sale home inspection (with reports available to potential buyers), fixed repair items and had the septic pumped. They had a nice display of information on a sideboard, including a color handout with photos and house features, a copy of the survey, the home inspection report and utility information.

I wish more sellers would follow their lead. They're doing everything right. So why isn't their house selling? (Which, by the way, isn't a 'dog', its an attractive house in a nice setting with considerable second home market appeal.) Price. Their house has been priced around $400,000, in one of those 'orphan' categories where we don't have a lot of buyers.  This is a phenomenon I've written about a lot before.  Buyers cluster around certain price points. The moderate second home buyer is shopping roughly in a range of $275,000 to $325,000, while the upper end buyer here is looking at $500,000+. Buyers aren't spaced out evenly along a price continuum. Its kind of like looking down at cities in the midwest from a plane at night — there's a cluster of lights for one city that dribble out into darkness and then grows into another cluster of lights. The problem with many $400,000 houses on the market right now isn't that they're not 'worth it', in terms of square footage, acreage, etc., but rather that they're too expensive for the mid-range $300,000 buyer and not fabulous enough for the upper end $500,000+ buyer. (Of course, there are also plenty of $400,000 houses on the market that aren't even close to being worth it in objective terms, but that's another story.)

I'm finding the mood among buyers to be interested and motivated — but conservative. A $300,000 buyer might be willing to go to $325,000, or even $350,000 if they found an absolutely fabulous house they fell in love with. But they're not stretching to $375,000 or $400,000. A year or two ago they might have, but not now. And that's the conundrum facing the owners of that house with the great peonies who've done everything right. At the end of the day, a successful sale depends on having a price that's as appealing as the peonies.

Mortgage Rates Jump Sharply, Reach 11 Month High

FreddieMac reported this week that the average rate on a 30 year fixed rate mortgage climbed sharply to 6.74% (with an average of 0.4% points), up from 6.53% last week. The rate on the 30 year fixed is the highest since July 2006. Mortgage rates have increased now five weeks in a row and are closing in on the psychological 7% level.

The direct impact of higher mortgage rates is on affordability. Borrowing $250,000 at 6% will result in a monthly payment of $1,500 (on a 30 year fixed rate mortgage). At 7%, the same $250,000 will cost $1,662.50 per month, an increase of 10.8%. For a borrower at their mortgage qualifying ceiling, it means they can only afford a house that is about 10% less expensive. A few years ago, a borrower might decide to shift to an Adjustable Rate Mortgage (ARM), with lower initial monthly payments, to afford a more expensive house. But ARMs have gotten a black eye in the last year, as borrowers find that those loans do adjust, and they face sharply higher monthly payments.

In the second home market, which is much of what I handle, borrowers are usually not near their mortgage qualifying ceiling and can often afford the higher payments resulting from  higher mortgage rates. But in the second home market - which is discretionary, after all - there may be an indirect, more psychological impact. In primary home markets, higher interest rates may have a exert a moderating to downward pressure on prices, even in higher demand areas like NYC which have weathered the downturn quite well. There will be a segment of buyers that will have to downshift their price point to qualify for a house. A buyer that was looking in the $400,000 range when rates were around 6% may now be looking in the $350,000 to $375,000 range. There's also the looming shadow, particularly at the "affordable" end of the market, of increasing foreclosures resulting from the resetting of adjustable rate mortgages to higher mortgage rates, resulting in a sharp rise in inventory that lenders are looking to unload.

Overall, what we're probably looking at is uncertainty over the next few months. Will interest rates go up or go down? Will foreclosures, particularly in the subprime market, increase? Will the government step in to help owners keep from losing homes to foreclosure?  Uncertainty may just cause many buyers to decide to wait, to see how things settle out.

There is some good news in all of this. In news reports this week, many experts attribute the rise in interest rates to string consumer and business spending along with wage increases — which are indicators of economic strength, and reduce the likelihood that the Fed will pull back interest rates anytime soon.

Why does closing take so long here in Sullivan County?

You're offer has been accepted. As the buyer, you're excited and want to move in as quickly as possible. As the seller, you're ready to move on. In most parts of the country, the transaction can be finished in 30 days or less. Here in Sullivan County, closing within 45 to 60 days is considered pretty good, and closings that drag on 90 or 120 days or even longer are far too common. The lengthy closing time here is frustrating to buyers and sellers ... and certainly for us Realtors. So what's the problem?

There isn't just one culprit. There are a lot of moving parts to a system here that has just become unnecessarily cumbersome.  Compared to other parts of New York State further north, the contract process here is handled by attorneys. I actually think having attorneys represent the buyer and seller is good, but the attorney-initiated contract process here  is time consuming because attorneys don't use a standard real estate contract form. So, depending on the attorneys involved, there can be rounds of back and forth addendums and contract changes. We don't have a legal courier service here, so contracts are often mailed  back and forth, which can add days to the process. Some sellers attorneys (and contracts are initiated by the seller's attorney) wont start the contract process until the buyer inspection is complete. And once a contract is agreed to between the attorneys, the contracts begin a long arduous journey from the buyer's attorney to the buyers; who sign and return it to their attorney, who then sends it on to the seller's attorney to send to the seller to sign, who returns it to their attorney, who sends a fully executed copy to the buyer's attorney. In a transaction where both the buyer and seller are outside of Sullivan County, and where the contracts are sent by regular mail, all of this contract shuttling can take a couple of weeks. I don't know of any attorney here who prints contracts to .pdf so they can be emailed to the parties. (Please correct me if I'm wrong on this one, so I can consider them for my recommended attorney list.)

But the fault doesn't all lie with the attorneys. One of the first questions I ask a listing agent once we have a deal is "Is there a current survey? How old is it? Who did it?" I'm always amazed at how many listing agents don't have the survey information, or a copy of the existing survey to forward to the buyer's attorney to review. But whether the existing survey can be recertified or a new survey needs to be ordered has a major impact on the closing time frame.

The appraisal and mortgage underwriting system has also undergone recent changes that add time. FannieMae and FreddieMac now require that appraisers review the fully executed contract as part of the appraisal process. This means that the appraisal can't even be ordered, for all practical purposes, until contracts are fully executed — which can be 4, 6 or 8 weeks after the parties have arrived at a deal.  And some lenders are requiring more and more documentation, often at the last minute. Just last week, on a deal where the appraisal was done a month ago and we all expected to close within days, the lender required that the appraiser return to the property to do a FEMA Flood Evaluation before they'd issue the final lending commitment. This was for a house, by the way, on the top of a hill 300 feet above the Delaware River that wasn't anywhere near a flood zone on FEMA's flood maps!

A rural area also has some other challenges that can add time. Often a Realtor or attorney needs to get some clarification on a property from township officials. For example, the status of outstanding building permits, whether there's a certificate of occupancy, or clarification of a subdivision application. In many of our smaller townships, town halls are only open part time and some officials you need to talk to may only work a couple of days a week. So getting an answer to a question can take a few days rather than just a few hours.

The current system is more than just irritating or inconvenient. It can actually hurt consumers.  Buyers, for the most part, can't lock their mortgage rate for longer than 60 days --- and I can't confidently say to a buyer that they can be closed within 60 days of having an accepted offer. So they wait to lock their rate and risk their rate going up. Sellers also can't plan. They can't sign a contract on a new house they want to move into, because they don't know when they might close on their existing house.

Let's get a discussion going here on how the system can become more efficient and streamlined. I don't think that we can relaistically set a goal of a 30 day close --- rural property is a more complicated than cookie-cutter suburban property where 30 day closes are common --- but I think having an expectation of a closing within 45 to 60 days of an accepted offer isn't asking too much. Every little inefficiency adds a couple of days here, a couple of days there — and all of a sudden we're at 75 or 90 days.

Golfers Face Slimmer Pickings this Summer

Sullivan County has been a golf mecca among 'in the know' golfers in the New York region for decades.  The county sports a variety of courses, including some top-rated links like the Monster at the former Concord Resort. One of the great attractions of the courses here, besides their often beautiful natural settings, is that they're generally uncrowded. But this summer, 3 of our popular courses are closed for renovations — the 2 courses (Monster and International) at the Concord as well as the Tennanah Lake Golf Course. That's sure to put some increased pressure on the courses that are open this summer, particularly Grossinger's in Liberty, Kutshers near Monticello and the Villa Roma west of Jeffersonville.

Swinging Bridge Update

I was over at Swinging Bridge a few days ago. The good news is that there is, indeed, water in the lake. But the lake level still seems to be about 20 or 30 feet down from its traditional level, and recreational use is still curtailed. Alliance Renewables, the new owner of the reservoir and dam, has fast-tracked the completion of the dam repair, and according to their spokespeople, could be fully refilled by sometime in July. I've updated my page on the status of Swinging Bridge, if you'd like more information. For the first time in the more than two years since the lake has been drawn down, the homeowners I know on Swinging Bridge are actually optimistic that this long saga will come to an end soon!

May Sales Data Posted, Median Sales Price Hits $200,000

Hey, everybody. Its that time of the month again. The closed sales data for May is in. I've posted my monthly "Current Market Conditions" Report. Please check it out and then come on back here and add your own comments about what's happening.
Thanks,
David