Sullivan County Real Estate

The Sport of Real Estate is Over

Recently there have been lots of reports about the "real estate downturn", along with countless analyses about the reasons — overbuilding, tighter credit, higher mortgage rates, dropping consumer confidence, etc. But one thing I'm not reading much about is buyer psychology, except occasionally in the context of lower consumer confidence or future fear.

One thing missing is a discussion about the changing dynamics of the real estate buying process itself. Or, in short, that the sport's gone out of it.

At the peak of the market frenzy, in 2005 and into 2006, real estate was a competitive, almost contact, sport. Buyers were charged up with adrenaline, prepared to mark their turf and elbow out any competitors for the house they wanted. Bidding wars, which were common, created excitement. Around the water cooler, buyers who ventured into battle for a house would share stories about bidding wars won and lost. The media carried report after report of skyrocketing prices, and buyers who were flipping houses and making fabulous profits in a matter of months. In hot markets like Miami, Las Vegas and Phoenix, people would camp out overnight to be first in line to grab a contract on a pre-construction condo or townhouse. Real estate was the iPhone of 2005.

So just how much of the sales peak we saw in 2005 was a function of "hype" demand rather than "real" demand? "Hype" demand can take many forms. Owners of a perfectly adequate 4BR suburban split level decide to cash in on their profits and trade up to a larger house in a 'bettter' neighborhood. Urban renters decide to buy a 'second' home in the country, not because of any long term desire, but because its a way to jump into the hot real estate market. Amateur real estate investors decide to pick up a few condos or rental houses. After all, mortgage money was cheap and widely available, you could leverage yourself to the hilt, and at the time it seemed like owning real estate was practically a license to print money. All of these people — who in "normal" times probably wouldn't have been buyers — jumped into the market, competing for properties with "real" demand buyers.

I think what we're seeing today is a market devoid of "hype" buyers. With hype buyers gone and only "real" demand buyers remaining, the market sure seems a lot quieter. The frenzy volume has been turned way down. While the market is certainly more stable and reasoned, for some its probably a lot less "fun." Buying a house today has become rather pedestrian.  During the frenzy, buyers would anxiously wait for "The Call" from their broker that the perfect house or apartment just came on the market. They would drop everything and rush out, with the same energy (and understanding from co-workers) as if their partner was having a baby. The more dramatic the better.

I'm sure that the end of real estate as a contact sport is having a pretty dramatic impact — because I don't think that the downturn being reported in many areas can be explained purely by the 'fundamentals' like mortgage rates or tighter credit. A significant factor, I think, is that the "fun" is gone from real estate. Hey, if you want to make a splash at the water cooler, its cheaper to buy an iPhone.

Strange Week - Real Estate Back in the News

Real estate made it to the top of the news again this week. Countrywide, one of the nation's largest home lenders, reported that the increase in defaults that was limited to the sub-prime market was creeping into its prime lending portfolio. That sent a shock through the credit markets. By the time the story wove its way into the mainstream media, the impression was that mortgage money is drying up. That's really not the case at all for borrowers with good credit and a down payment, two things that up until a few years ago you needed to buy a house. Personally I'm glad that mortgage lenders are starting to come to their senses and imposing some discipline on themselves. If you've been a regular reader of this blog, you know I'm pretty conservative on this score. On more than one occasion in the past few years I've had a heart-to-heart talk with clients — while the bank is saying you can afford such-and-such a house under these terms (typically some convoluted adjustable rate or negative amortization mortgage with little or no down payment), I've been pretty up front saying that I don't think they can, especially when the rates start to readjust.

Now, before you shout that I'm some kind of elitist, who only thinks that people who are well off should buy houses, that's not the case at all. New York State has one of the best programs for first time home buyers. SONYMA, the State of New York Mortgage Authority guarantees loans for low and moderate income NY home buyers at below-market interest rates. SONYMA also permits some closing costs to be rolled into the mortgage, to increase affordability. But there are two key factors that differentiate SONYMA loans from regular commercial "adjustable" rate mortgages. The loans are fixed rate, meaning no surprising payment adjustments down line. And they require buyers to have at least 3% of their own money in the deal. I'd really like someone to research a comparison on loan defaults in New York state between  SONYMA buyers and those who went with riskier adjustable commercial loans.

The other big news was the monthly release of the National Association of Realtors' Existing Home Sales data for June. Nationally, the picture was pretty dismal, and the media took delight in reporting the bad news. But like most sound-bite news reporting, they just painted the broadest brush stroke.

Nationally, existing home sales were down 11.4% from the same period a year before on a seaonally adjusted basis. But there were wide regional variations. The west and south both posted double digit declines, while the northeast was the healthiest region, with a sales drop of just 7.3%. Now that's nothing to sneeze at, but its far less than the sharp 19.1% decline in the west, the worst performing region.

Price wise, prices in the northeast were up 1.8% over the same period a year earlier, significantly outperforming other regions. And as I've said again and again, even within these large regions there are submarkets with widely varying performance. Ask a homeowner trying to sell on Long Island what the market's like, and you'll likely hear that its the pits. Ask someone selling in Manhattan and you may get a very different answer. A lot of readers have been following my tale of looking for and buying a place in the Bronx. I was in a multiple bid situation (and won). The fact that there was a lot of interest in the apartment wasn't a surprise --- it's well maintained, affordable and appropriately priced.

The same is true here in Sullivan County. Houses that are attractive, affordable and appropriately priced for their target markets are generally selling.

Many Realtors "blame" the media as the cause for the housing downturn. That's just not true, although it certainly contributes to and reflects a market psychology. Fundamentals, like supply, the cost of mortgage money, affordablity and job strength are tremendously important. What is a little disconcerting, though, is how the real estate numbers are reported. The headlines scream, "Worst housing decline in 4 years", with an 11.4% year over year drop nationally. In the northeast, as I mentioned, the drop was smaller, just 7.3%. The amazing statistic is the flip of that — 93% of the activity we saw last year is happening this year. Correct me if I'm wrong, but to me that's just not a bust. (To be fair, 2006 wasn't the peak year, 2005 was. And seasonally adjusted sales in the northeast are down 14% from frenzied peak of that year.)

Swinging Bridge Reopening This Weekend

Alliance Energy brought joy to homeowners on Swinging Bridge Reservoir, that they are reopening the reservoir for recreational use this Saturday, July 21st. Alliance completed the dam repair work weeks ahead of schedule, and have salvaged some of the summer lake season on Swinging Bridge. This is GREAT news! (Click here for the Times Herald Record article.) Alliance cautioned that the water level is only 1,055 feet above sea level, 15 feet below the traditional 1,070 level --- so boaters are encouraged to keep speeds below wake level, particularly in the shallower northern end of the lake. They plan to keep raising the water level (at a maximum of one foot a day) until the 1,070 level is reached.

Tennanah Lake Golf Course Reopens!!!

Earlier this summer I blogged that 3 golf courses in Sullivan County, the Tennanah Lake Golf Club west of Roscoe and the 2 courses at the Concord Resort in Kiamesha Lake were closed this summer for renovations. Well, the Tennanah Lake Golf course renovation is running ahead of schedule. The back 9 reopened for play on June 29th, and they're looking to reopen the front 9 for play on Friday, August 3rd.

The reopening of this beautiful course is great news for golfers. Perched on the top of the hills west of Roscoe, the course offers some of the most scenic play in the northeast --- and plenty of challenges as well, with very reasonable greens fees. The new owners of the club have also totally renovated the clubhouse, and brought in Buffalo Zach's, the trendy nosherie in Roscoe, to run the bar and restaurant. For more information, check out www.tennanah.com.

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.

Where Have All the Houses Gone? No Room at the Inn in Sullivan?

I've been selling real estate for almost 8 years here in Sullivan County. At times over those eight years I've seen tight inventory in popular property categories, but nothing like what I'm seeing now. Yes, the overall inventory in Sullivan County is up — to about 1,100 single family homes on the market, from a low of about 700 during the peak of the so-called "hot" market in 2005/2006. But while inventory overall may be up, the inventory of good houses, particularly for the second home market, is way way down. Or so it seems, every time I try to put together a tour of houses for buyers coming up from the city.

A reliable category for moderate range buyers looking for something with privacy or lake rights has been the 80's era "vacation chalet" A-frame style house with cathedral ceilings and a loft in the $250 to $325K range. There were a number on the market this past winter and spring — one at York Lake, one at Edgewood Lakes, on on Mahogony Road in Liberty, one in Pine Ayre and one on Klinger Hill Road west of Roscoe. They're all now sold or in contract, and there haven't been new similar houses coming on the market to replace them. This is the first time I can remember - in 8 years - that I don't have a good vacation chalet style house in the moderate price range to show. Its kind of like a Realtor in the city saying, "Sorry, I don't have any one bedrooms available." This type of house has always been the reliable little black dress that marked the middle of the market — always available, with wide appeal, that could be accessorised up or down.

Most of the spec houses that Catskills Farms had in inventory all sold or went into contract in the last few months.  (With the exception of one home in Chapin Estate, Catskills Farms is now selling from plans.) Two new construction spec houses by other builders in the $400,000 to $500,000 range, west of Roscoe, that lagged on the market for over a year, are now in contract as well.

As for farmhouses, this is also the first time I can recall that I don't have a few nicely renovated, well-sized farmhouses on 10 to 20 acres in the $500,000 to $600,000 range to show. There are 3 or 4 beautifully renovated, larger showplaces in the $1M+ range, as well as some houses with compromises in the  $400,000 range, but nothing great in that key $500,000 market segment.

The market is definitely very active. But the buyers that are active all seem to be looking for something similar. Setting is key — privacy, or nicely set houses with lake rights or lakefront.  Above all, a house has to be charming, or have that 'vacation feel', like a cabin or vacation-chalet style. Ranches and anything with vinyl siding is out. And houses with those features are in very short supply.

I gotta say that this is one of the toughest markets that I've dealt with, in terms of matching buyers up with appealing houses. We're already into July, which should be the peak of the annual inventory cycle. The demand is here, but the houses just aren't.

Swinging Bridge on Track for Aug. 1st Reopening

Alliance Energy (the new owner of the Swinging Bridge Reservoir and dam) has reported that it is 45 days ahead of schedule for the final phase of work, and has begun the final stage of the refilling of the reservoir. They've set a target date of August 1st to reopen the reservoir for recreational use, which is great news for boaters, fishers and definitely for the patience-weary homeowners around Sullivan County's largest lake. Read the Times Herald Record article here.