Current Market Conditions Posted with June Data

It took me a few days longer than usual this month, but I just posted the July Market Conditions Report with June sales data. The confounding picture we've seen over the last few months continues, with sales down by 28% over the same period last year, but prices holding. Check out the report and then come back here to add your thoughts to this blog post.

Comments

[robin]

David,

I always look forward to your excellent analysis of the current market conditions. Do you think the time is right to buy some of these ugly ducklings, fix them up a little and resell?

Robin

[Chuck]

Robin - I was wondering the same thing.

I think that over the next 6 months we will see sellers make the price concessions DK is talking about, moving imperfect high 300's homes into the $345k and lower bracket - where they probably belonged in the first place. I don't believe the buyers will go much higher then their budgets. In fact, I have been seeing a true desire from buyers to buy less than they can afford. 2 years ago, the game was to buy and leverage to the hilt, since the thinking was every dollar invested was 20% earned annually. Now buyers seem to accept the volitility, and understand the downward pressure on prices. But as the market activity in certain niches attests, buyers who want to get away from the urban hub-bub are still buying, but at times buying under their budget. And they want a lot of value for their money.

At some point the listing agent community will begin to put real pressure on sellers to price houses according to the new market conditions, because it's expensive to repeatedly show houses that don't sell. Of course, there will always be agents willing to take a listing another agent passes on, but smart sellers who eventually want to get a deal going will listen to the agents who continue to move property in this uncertain marketplace. The bottomline is that if you bought something less than perfect for the marketplace more than 4 years ago, there is still plenty of upside in the low $300's, albeit with some psychological and finacial adjustment.

Even Chapin Estate- along with a slew of other front-page 2nd home communities, like Kenoza Lake Estates for instance - are suffering from lackluster sales, and probably should really look at what their prospective client is most willing to pay.

Selling agents may also need to re-evaluate their marketing programs - the traditional Sullivan County approach of waiting for the walk-ins and advertising in the Catskill Real Estate Guide may be dated in this more competitive environment. I know some of my customers (before they found us) eliminated some realtors due to fact that they didn't use email effectively.

[Pete]

Robin

Great idea, except for the fact that Sullivan County has a profound lack of professional, skilled, reliable builders. Unless you are willing and able to perform all of the work yourself it is difficult at best to find skilled labor. Tradespeople show up if and when they want, usually without calling to cancel. When they do show up for work our experience has been that it is shoddy. Even 'good' contractors that come with 'good' references are often not to the same caliber one would expect closer to the city. So people buying in Sullivan should rightly shy away from anything but the superficial fixer upper until we get good local builders or unless they can coax a contractor in from closer to the city and pay the price.

[David Knudsen]

Al always, thanks for all your comments.

Robin, I think the problem with the "ugly ducklings" is that most are priced too high for an investor to buy them as "raw material", reconfigure them and flip them. To sell something at $300,000, an investor really needs to purchase the property around $150,000 or possibly $175,000, put maybe $50,000 in it, figure in carrying costs and sales expenses, and still make a reasonably profit.

Pete, I don't quite agree with your comments about contractors here. There are good contractors here, but they're seldom the cheapest. Its really a matter of finding a good contractor and holding on for dear life.

Finally, Chuck, I agree with you that I'm also seeing buyers looking under what they can afford. Its part of that whole buyer conservatism I'm seeing. If you can afford $400,000, you could go there, but if the market tanks, its kind of like you've put all your chips on black. So buyers pull back and say, "We're comfortable spending $300,000 even though we can afford more." In fact, among the second homers I've been working with lately, almost all can afford more, they're just not willing to go there.

Regarding listing agents, I hear more and more say they are really encouraging their sellers to move to realistic price points. But even if a seller remains adamant on their price, there isn't really much of a downside for a listing agent. Yes, they waste some time and gas taking people out to see the houses. But over time, after getting the same response again and again (e.g. buyer's saying its way overpriced for what it is), they tend to show it less and less. And in terms of agents in the MLS that co-broke, like myself, most of us just kind of sweep them off our radar. But overpriced listings do have a purpose. First of all, showing a couple of overpriced dogs helps make appropriately properties look more attractive. And second, listing agents like to have lots of listings, because they're like a big spider web. You have more exposure on sites like Realtor.com, Trulia, Lakehouse or wherever else you post the listings. And the more exposure points you have, the greater likelihood someone will pick up the phone and call you (or email you). And its that call that listing agents want, because maybe they ahve some other things to show you.

Also, the common response among listing agents about taking overpriced listings is, "If I don't take it at that price, someone else will." The hope is that they take the listing at the price the seller wants, and then over time the seller will come down so they can ultimately make the sale.

The problem here is also on the seller side. Listing agents vary greatly in their listing presentations, but a number here do very thoughtful presentations, including a careful review of comparable sales as well as competing properties on the market. Some of those good listing agents often complain that sellers just don't want to listen. So I don't think all the blame here can be laid at the feet of the agents.

Regarding the marketing and tech savvy of some agents, I agree with you Chuck. I think a very positive outcome of a market contraction will also be a reduction in the number of Realtors. The barrier of entry to become a real estate agent is very low, and when houses were flying off the shelves, lots of people jumped in because it seemed to be easy money. Some of those people will likely start jumping out now that its tougher. And sellers hopefully will be more discerning in choosing agents to represent them, and demand performance and accountability.

[John]

stuck flippers and dumb money is all that is left in this market.
wait until 2015 for the next flipping days.

[Dan]

I think the sales number should be the litmus test for the market. When you look at median and average sales prices, IMO it does not tell you anything. A sale of one high end house in a given period could taint that market data that could have had dozens sell at the lower end a large percentage off their asking prices. In that case, the number would not show an accurate indication of the market. I never understood why that data made sense as far as guaging the health of the market...

[seymourpansick]

Congrats Dan.

Welcome to the Land of Statistics. At the end of every RR cycle the median gets skewed to the right because the willingness of banks to make loans begins to contract and cash purchases at the high-end dominate. You will also see a natural increase in inventory as the "dogs" come to market as well. Realtors should know this but even if they do they intentionally engage in "sins of omission" as LeCarre termed them. ("Nothing is volunteered unless asked," Smiley informed Peter. See: Watergate. )

Ultimately taxes will be the achilles heal for the average buyer. The area has created an interesting knot for itself. You do understand that the upper end isn't concerned with this.

Cheers.

[David Knudsen]

seymourpansick, I don't think I engage in the "sin of omission". Over the 5 years I've been tracking statistics and posting my monthly Market Conditions Reports, I've been very cautious in how I use and interpret the sales numbers. Again and again, I try to encourage readers to focus on the median sales price rather than the average as a more reliable indicator of market trends. (The median is the price at which 50% of the houses have sold for more and 50% for less, and is far less susceptible than the average to skewing by a handful of large sales.) When particularly large sales do come through, and push the average way up, I always note that the average has been temporarily affected by that. And when a statistic does not, in my opinion, accurately indicate a trend, I note that. For example, this month both the median and average showed a 10% year over year increase, and that statistic alone would lead some to conclude that the current rate of price increases is running at 10%, when it isn't. If you look at prices over the last 9 months, rather than a full 12 months, it looks like we're settling more into a 5% annual rate of increase. Also, this month I looked at month-by-month sales for the past 2 months (rather than the more statistically reliable 3 month running average), as well as properties in contract but not yet closed, and warned that we may see a modest drop in price in the near term. I could easily have omitted that, but didn't. I think I am more than fair in how I report data, and consciously avoid engaging in obfuscation and hype.

I do think you make an interesting observation about prices being skewed to the right because of tightening credit for buyers at lower price points. I actually think that is a factor here. The anecdotal evidence --- from talking with agents in different parts of Sullivan County --- indicates that the strength in the market is the second home sector, which is typically at a higher price point than the primary home market.

Dan, your comment raised an interesting question, whether lower priced houses sold for a greater percentage off their asking prices than higher priced houses. I looked at all the sales since Jan. 1, 2007, and broke out sales below $200,000 and sales above $400,000. In both groups, the average sale was 92% of asking price, with no statistical difference.

[seymourpansick]

David,

Permit me to qualify my earlier comments.
I would, without any reservation, advise any serious buyer to engage your professional services as well as those of a house inspector($250+). The surprises that one may find on occasion in the "treasure" chest of repairs and code violations may be remarkable. Discovering a circuit breaker box, behind the sugar and INSIDE of the updated kitchen cabinetry adjacent to the sink, does capture one's attention.
I recall the inspector was impressed as well !!

Regards.

[Dan]

David-

I dont know, I think even the 1mm type buyer would like lower taxes ! While it may not be a deal breaker, it certainly would raise eyebrows when a $35,000 tax bill comes in for a house one spends a small part of the year in.

Also when you look at the data the way you did, you will likely get no difference because you are only omitting the 200-300k houses. My point was merely that the weighting of a high end home does not reflect in the stats. And it goes both ways. That avg and med numbers can be skewed by a single sale of a high end home.

[Chuck]

It appears, regardless of statistical interpretation one way or another, that the market is segmented into niches, and some of those niches remain quite vibrant - which makes sense considering New Yorkers have a strong presence in the marketplace, and the NYC job and real estate market is vibrant(and the confidence generated from this) - meaning there is plenty of money to buy real estate, but much more reluctance to compromise or hurry on the part of the Purchaser.

[Tony Ritter]

Most markets are segmented into niches - and certainly, without a doubt, Sullivan County's is.

Probably more so than other county - since the county is so diverse - physically {lakes, farms, small cities, hamlets, high and density and what some might consider - blight - in some areas, etc.} geographically {closer to the mid Hudson and NYC or not}, politically {i.e; casinos - most people in the east want them or no casinos - most in the west do not, etc.} and ecomonically {second home owners from the city or 'burbs -or primary home owners - i.e.; "locals" - or renters}.

Closer to the Orange County line and Middletown there is more of a mix of primary homes, further to the west near Narrowsburg, Jeff and Callicoon it is mostly secondary rural for people from city wanting a get-a-away and then you have the eastern area like Fallsburgh and Woodbourne which - many might say - is light years away from the western area.

David does a good job in laying out "thumbnails" of the different areas of the county.

IMO, I think it's come up on this blog on more than one occasion that - to me - it would much more constructive - as a realtor - regarding the current trends to know the monthly stats of one particular region - say The Western Region - where one poster on this blog builds primarily or one realtor sells primarily - rather tham lumping all of these distinct districts into a gumbo.

Not certain whether a breakdown of "niches" - or regions - can be done (or whether David has the time or - even wants to) but nonetheless he does an excellent job and I look forward to his reports each month.

Kindest regards,

Tony Ritter
in Narrowsburg, NY

[John]

I agree with Tony on segmented niches. But it would be so much work for David to breakdown the county by region statistically every month. How has the demand been for raw land, Tony? How would you say demand is broken down in the county?

[Tony Ritter]

>>I agree with Tony on segmented niches. But it would be so much work for David to breakdown the county by region statistically every month.
---------

No question about that - eventhough the Sullivan MLS database gives realtors a way to cull sold and open listings by towns (along with other attributes) in their queries.

I'd be happy with any monthly data to the west of New York Route 17 which would be Highland, Lumberand, Bethel, Tusten, Cochecton, Callicoon, Delaware and Fremont.

For the most part, that is the region in Sullivan County sought out for second home buyers from New York City and it's suburbs.

And more importantly, that is the region that I and many other Sullivan County realtors focus on.

-----------

>>How has the demand been for raw land, Tony?

Quite slow for most of 2007.

There is a lot of inventory of 5 to 7 acre buildable lots on flat wooded areas with no improvements (i.e.; no well - no septic) in those towns.

Offering prices are usually from 55k to 79k.

Sold prices are usually about 10% to 15% off the asking price.

IMO, the only areas that are holding their own in the current land market is waterfront - on rivers, lakes and large ponds.

Or, if you can find vacant land with lakerights - that's even better. The buyer gets the use of private water without paying a premium.

I was able to move two at Wieden Lake near Narrowsburg in the 1 and 2Q of 2007. Data on my website.
----------

>>How would you say demand is broken down in the county?

Not certain I understand your question - however, most of my clients that I represent are in the areas I mentioned above - west of NY Route 17.

And from reading David's blog, I think that most of the focus is also about the area west of 17.

Kindest regards from Narrowsburg,
Tony Ritter

[David Knudsen]

Tony, thanks for your kind comments. And your ongoing participation and insights are always welcome on here.

Your suggestion to do some type of regional/sub market breakdown is a good one. The sample size for each township, or even groups of 2 or 3 townships, is too small on a single month or even quarterly basis to provide any meaningful comparison. But I think it could be done on an annual basis, comparing a full year against a full year, for groups of townships. With the MLS upgrade, we'll now have data available for at least 5 years going back, not the current 2 years we had under the old system. That opens up the door for some interesting historical analysis.

I don't really do much raw land, so its not an inventory category I stay on top of. But I did just take a look at raw land sales in the MLS, up to 100 acres. (I figure most land over 100 acres is probably being bought by investor/developers, so I excluded that.) From 1/1/2006 through 7/16/2006, 126 raw land parcel sales were recorded in the Sullivan MLS, with an average sales price of $152,603 and a median sales price of $60,000. For the same period this year, from 1/1/2007 Year To Date, only 83 parcels were recorded sold, with an average sales price of $110,658 and a median sales price of $77,500. That's a drop of 34% year over year, much greater than the 22% Y-T-D year over year decline we've seen in single family homes.

The apparent declining interest in raw land to build may be similar to what I've been reporting in the single family home market since the beginning of the year — the desire of many second home buyers to get something that's 'ready to go' and doesn't need much, if any, work. The drop in land sales may also be related to the severe drop off in starts of new construction 'spec' houses. Quite possibly in early 2006 we still had developer-investors looking for 3 to 5 acre buildable parcels to put up spec houses, but this year that market has dried up, as we've been working off the inventory of spec houses built in the last 2 years.

[Chuck]

DK - I think the 2nd half of the year will show an even greater decline in land sales, since the first half of last year was still pretty heady. No more $10k per acre sales - which is more than fine with me. In fact, as I was checking out land pricing yesterday, it appears that land pricing is adjusting to the new reality quicker than residential pricing.

[Arthur]

Even though we're seeing market softness now, I think the longer-term trend will only be favorable for Sullivan County. As David posted in a message awhile ago, there's lots of activity coming to the area: BethelWoods; extensive re-development of the center of Kauneonga Lake, with new restaurants and stores; the "Corner" of Route 55 and 17B; so many new home developers, that Bethel had to institute a moratorium, maybe a casino, etc., etc. Sure, it's soft now, relative to the last five years; but, compared to the ten years before that, it's still a growing, vibrant, area. I think if we look beyond this dip, it all looks good, for all the reasons that attracted people in the first place: natural beauty, proximity to New York City, and affordability compared to other NY City resort destinations. I've met many people in the City who never heard of the Catskills just a few years ago, and, are now interested in finding a country place.

[Susie]

David, I think you've outdone yourself with your latest market conditions report! Always a great read. Thanks for your wisdom.