Sullivan County Real Estate

Inventory Dropping - Buyer Strike Meets Seller Lockout

Markets are defined by 2 sides, supply and demand. A key component of a buyers market is increasing supply. In some parts of the country, the supply of available homes for sale is 2 or 3 times what is was a year or two ago. Here in Sullivan County, that's not the case. The inventory low came in 2005, when we bottomed out at about 700 single family homes on the market. Earlier this year the number peaked at 1,292 home for sale in the Sullivan MLS, but that number has been slowly declining ever since. Right now there are 1,157 single family homes for sale in the MLS, down slightly from the 1,179 at the beginning of September.

What's happening? Of course, some houses are being sold and drop out of the inventory. But many sellers, it seems, are seeing the same news reports about the real estate market that buyers are seeing, and either deciding to pull their houses off the market for the time being, or wait to list their property until they think conditions improve. The impact is that inventory is shrinking. It may be ever so slight, but its happening.

Its almost like there's a lockout by sellers in the face of a buyers strike. Somebody, though, is going to blink.

The Problem with "I Can Wait. I Don't Have to Sell"

Lots of sellers tell their listing agents, "Look, we can wait. We're not under any pressure to sell," when they insist on slapping a too-high asking price on their property. (Of course, 2 or 3 weeks later those same sellers are screaming at their listing agent about why their house hasn't been shown, but that's another blogpost.)

There are a number of hidden 'gotchas' in the 'list high and wait' sceanario for sellers. The biggest is the appraisal issue. You may think your house is worth $400,000 (and yes, you say you're real motivated so you'll take $385,000). But all the other houses similar to yours, in terms of square footage, acreage and number of bedrooms and baths, that have sold recently had selling prices between $290,000 and $320,000. If you have a deal at $385,000, the appraiser can only value your house based on the comps, so the appraisal value (which is the value that the bank will lend on) may only come out at $310,000. In the current lending environment, banks are being very conservative about appraised value, and buyers are very unwilling to make up a difference above the appraised value.  So even though you have patience, and your house has special features that you think makes it worth  more than those other houses, you're essentially hostage to those sales unless you've nabbed that rare bird, an all cash buyer.

If a market is trending down, those appraisal comps over time will also trend downward. Appraisers have time limits, depending on the lender, of how far they can go back to look at comparable sales. (Traditionally this has been 12 months, but in the current lending environment some lenders have tightened up that window substantially.)

When I was trying to sell my condo in Florida, a friend who is a real estate agent here and weathered the 80's downturn, advised me, "If a market is heading down, you want to lead it down, not follow it down." Wise advise. For the first 12 months that the condo was on the market, I instructed my broker to always make sure I was the lowest priced 3 bedroom 2 bath unit on the market. I stayed a few thousand below the nearest competitor, but still didn't have a sale. As inventory rose, prices kept slipping down, and I'd move my asking price down in $5,000 or $10,000 baby steps. After 16 months on the market, I was at $339,000. The market was slow as molasses. I told him, "Reduce the price to $299,900 and move it." I had a full price offer of $299,900 by the end of the day, and 2 backup offers the next day. The sale closed 3 weeks later.

The other sellers in the condo complex with 3 bedrooms units listed at $379,000 or $399,000 probably hate my guts. The reason is that my sale at $299,900 reset the appraisal bar. Even though there may have been some sales in the upper $300's in the last 12 months, to a lender the most recent sale of a comparable property is the most important.

Also, in the current environment, a buyer's biggest fear is that they're buying at the top of the market and prices will fall. A great way to overcome that is to set your asking price slightly below recent market value, and then negotiate a bit from there. That can make buyers more comfortable that even if the market drops by 5% or 10% they're not going to take a bath.

Slow as Molasses

Kids are back in school, Rosh Hashana and Yom Kippur are over, the weather's been perfect for weeks. This should traditionally be one of the busiest times of the year. The past few weeks have been so dead I'm ready to call in the cast from 'Six Feet Under.' I'm getting some property inquiries and calls and have had some appointments. But the volume has been turned way down.  A lot of inquiries continue to be about lakefront homes, as well as very inexpensive properties (e.g. bungalows for $60,000). Nary a peep for anything non-lakefront in the mid to upper range.

The spring and summer were tough but active. There was an ongoing tug-of-war between buyers and sellers over price and value. Buyers, of course, thought we were in a buyers market and wanted to pay less, sometimes a lot less. Sellers didn't necessarily share that view. Ultimately a deal could usually be made when there was a motivated buyer and a motivated seller.

There's been a big change over the last month. One very important ingredient — a motivated buyer — has virtually disappeared. The buyers I have been out with since Labor Day have been more casual lookers getting the lay of the land, not quite ready yet to pull the trigger to buy. Our second home market is primarily a warm-weather use one. During the boom years, inventory was so tight that people would shop and buy in the fall and carry a home over the winter so they'd be sure to have a vacation getaway for the following year. (This was followed by a second mini selling season in mid-winter.) This year, I think second home buying activity will bypass the fall and all push into the mid-winter. In 4 or 5 months we should have a better sense of where the real estate market is moving. Some sense of stability is essential to bring buyers back to the table.

I had a long talk with a real estate agent friend yesterday about prices. She said that a lot of her clients are asking, "Well, should we lower the price?" to get some activity on their property. She doesn't think that lowering prices will have much impact, if the phone isn't ringing and there aren't buyers looking. I don't know that I necessarily agree. Most buyers start their shopping on the internet, and form their opinions of price and value from listings posted there. Price reductions can certainly help to pull buyers back in. The problem, though, is that most sellers only take baby steps in reducing their price reductions, rather than taking a giant step that causes people to say "What a great deal!"

I think the next few months are going to be very interesting. There's about a month left in the fall selling season, and I don't see any appreciable pick-up. The timing is just about perfect for buyers, particularly in the second home market, to make the decision to wait. There isn't anyone I know who thinks that prices will rise between now and the spring. At best, they'll remain stable and possibly drop. There's also little indication that mortgage rates will make a steep climb. So overall there is little risk to buyers to wait it out.

Have We Lost the Value Edge?

I'm noticing the market is definitely slower than 3 or 6 months ago. I'd venture a guess that the number of inquiries I'm fielding is down by a third to a half. But I've still been pretty busy with appointments on the weekends since Labor Day. Most people I'm going out with, though, are new to second home shopping and often making their first trip to Sullivan County to check us out. That's been the case for the past few months --- we're one model being test driven along with a lot of others (Pennsylvania, Delaware County, the Upper Hudson, Greene County, even the Berkshires.)

Lately it seems we're not doing well in the second home horse race. Of course, some of that can be attributed to a more widespread buyer hesitancy about real estate in general.  But I'm sensing something more specific to Sullivan —  that many buyers aren't delighted with the values here, and are in fact, disappointed in what they're finding. We Realtors can try to sweep it under the rug with a comment that buyers have unrealistically low price expectations. But at the end of the day, it is those expectations that drive the market.

Three or four years ago, before the start of the "boom", buyers were often blown away by the value they found here. $250,000 got you a pretty nice country getaway, and outside of Chapin and Lew Beach, $500,000 was a huge budget and could buy you the world. Smaller, 2 bedroom lakefront cottages could be had in the $250,000 range, and a nice 3 or 4 bedroom house on Swinging Bridge seldom climbed above $500,000. The occasional lakefront house that sold above $500,000, at York Lake or Black Lake, raised eyebrows.

3 or 4 years ago, there was also an optimism here that's been tempered somewhat. Bethel Woods was under construction, and many believed it would become the summer home of the NY Philharmonic and a huge tourist draw. Casinos were edging closer to approval. Louis Capelli was floating plans for the redevelopment of the Concord. Hotel developers were scouring the county for potential sites, with plans leaked for five star resorts near Roscoe and Livingston Manor. Million dollar plus homes were rising at Chapin. New fancy restaurants were opening in Livingston Manor and Jeffersonville. The 'New Catskills' was on a roll, with Sullivan County at its heart. We even made the covers of magazines!

The psychology here shifted from seeing Sullivan County as a "value" destination to seeing us as a "world class" destination --- a country playground, just 2 hours from one of the wealthiest, more powerful cities in the world. Some of us, me included, saw us as the New Saratoga Springs.

Four years later, all that optimism hasn't borne a lot of fruit. Yes, Bethel Woods is open, and its a spectacular venue. But the expected surge in development related to it hasn't come to pass. There hasn't been a shovel put into the ground for a new resort or hotel. Many of our villages are still struggling. Some of the new restaurants fueled on all that optimism, like Resort in Livingston Manor and Stella's in Jeffersonville, have closed. (To be fair, a number of new restaurants have opened in Kauneonga Lake, an unexpected new center of activity.) And casinos are dead in the water, at least for the time being.

Sullivan County is kind of in the same place we were 4 years ago. We're an idyllic backwater with beautiful natural resources just 2 hours from New York City. We haven't evolved into a New Saratoga or New Woodstock. We still don't have a luxury destination hotel with a spa and restaurant.

We're back to the USP (unique selling proposition) we've enjoyed relative to our second home competition — we're the best value in a country getaway within 2 to 2 1/2 hours of NYC. But we may have lost sight of the "value" part of that statement. I don't know where we need to be, pricewise, to recapture the value crown. But without a slew of world class amenities (like the Lodge at Whiteface in Lake Placid), what we have to sell is value and proximity. Consider lakefront buyers, for example. Lately, a lot of folks looking for a lakefront second home with 3 bedrooms seem to be thinking in the $400's, while most lakefront houses of that size are priced in the $500's. For a smaller cottage-sized 2BR lakefront, buyers seems to be thinking low $300's, while the asking prices for those are more in the high $300's.

I expect things to be sluggish over the next few months, until the uncertainty hovering over the real estate markets settles. But we also need to take a hard look at the value proposition here. We need to bring back the words "great value" on the lips of our potential new neighbors.

Verizon Broadband Wireless Expanding in Sullivan?

I have a Verizon Wireless Smartphone, a Motorola "Q" - one of those Blackberry wannabes with a tiny little thumb keyboard that can send and receive email and, at least theoretically, surf the web (on a screen about the size of a matchbook cover.) The email and internet capabilities work over Verizon's wireless data network, which operates in tandem with their voice network (meaning that wherever you get voice service you can get data service.) Verizon has 3 different speeds of wireless data. The most widely available is "1X", roughly equivalent to dial-up. "1X" is a legacy data format, and the only type that's been available in most of Sullivan County. Their broadband-speed wireless is called "EV-DO", with the turbo-charged version (available in very limited areas) called "EV-DO Rev. A."

On any Verizon phone that's capable of receiving data as well as voice, there's a little icon that shows whether you're in a "1X" area or an "EV" (EV-DO) area. Coverage in Sullivan has been totally "1X" until recently. I'd always get excited when I dropped over the Wurtsboro Hill heading into Middletown and the little icon would shift from "1X" to "EV". Ah, civilization.

A couple of months ago when I was driving west from Monticello to Callicoon, I noticed that my Moto Q briefly switched to "EV". I got all excited. Hey, I live in the country. We get excited by stuff like this. But a week later, all I picked up around Monticello was "1X" again. Oh well, maybe my phone was glitchy the day I saw the "EV" icon on the screen.

Months went by. "1X' "1X" More "1X".

Then last week I was again driving west from Monticello. The "EV" icon popped up. And stayed up. All the way through Bethel and up into the Beechwoods between Jeffersonville and Callicoon. Yesterday, the same thing. "EV" all the way, and up towards Livingston Manor, too, And today, I still got "EV" on my trip to Monticello,

It looks like Verizon has upgraded their wireless network in Sullivan County to "EV-DO". I don't know if its the faster "Rev. A" flavor, because my phone's hardware doesn't pick that up. But even plain vanilla EV-DO is a huge upgrade for wireless data speed.

For us regular Smartphone and Blackberry users, its not really that big a deal, because those text emails aren't big data hogs. But for folks in a rural location with good wireless phone service, but no cable or DSL for high speed wireless internet access, it is. You can get a laptop card and connect at EV-DO speeds, which are much faster than dial-up. Its not cheap, but it could be a good option, particularly for weekenders who need broadband speeds in the country but find that satellite internet doesn't work for them. (Satellite internet, for example, doesn't work well for folks who need to connect with work via a VPN, or virtual private network.)

The Verizon wireless coverage map on their website hasn't been updated yet to show "EV-DO" coverage in Sullivan. And I haven't yet been all around the county to see if EV-DO is everywhere there's Verizon service. Please post any information you have on whether you're seeing EV-DO in your neck of the woods. And if you have a wireless card or Smartphone that's "Rev. A" capable (you know who you are), please post any info on whether you're picking up "Rev. A" anywhere in Sullivan. Many thanks to anyone who can add their insights into this development.

Just Saying No To Growing My Own

I've been living in the country for 8 years now. For the first two years, I lived with my partner, Zintis, an accomplished and passionate organic gardener. I loved the fruits of his labor, but try as I might, I never shared the passion for that labor. Then I moved out on my own, onto 18 acres that cried out for a garden. But for years, I never planted one --- and harbored subtle pangs of guilt. I was living in the country, for heavens sake. Living here and not having a garden is kind of like living in Manhattan and never going to the theater. Never going to the theater? Practically heresy. You're living in New York City for chrissakes! If you live in New York and don't partake of culture, you might as well be living in Des Moines. And if you live here and don't have a garden, you might as well be living in, well, Manhattan.

Almost all of my friends reveled in their gardens, tilling, planting, weeding and sowing. Springtime dinner conversations would be filled with gardening plans and sharing tips for the best early season tomatoes, a new heirloom carrot or beet variety to be tried, or the secrets of actually growing an edible melon. Throughout the summer, friends would harvest fresh whatever to whip up a home grown country repast.

This year, my guilt got the better of me and I decided to take the plunge and plant a garden. I cleared a 15 foot square patch, hauled out all the rocks, hauled in manure and surrounded the sacred growing space with deer fence. Armed with a list prepared by my good friend Joe, I headed off to the holy grail of heirloom seedlings, Silver Heights Farm, to buy my precious seedlings. I planted them, watered them, and waited. I was so excited. I was growing my own.

But all those heirloom vegetable missionaries don't talk a lot about the downside. The little mites that eat through the basil leaves until they look like bits of lacy green underwear at Victoria's Secret. The advancing armies of slugs that delight in the newborn tomatoes. The critters that burrow under the fence to nosh on the baby greens. And the weeds! The never ending battle between man and weed!

Gardening, it turns out, is work. Now some may view that work as a pleasure --- being in the outdoors pulling those weeds and scattering those slugs. But those folks have different DNA than I do. When I want to enjoy the outdoors, I'd rather go for a walk or a swim.

Last Sunday I stopped by the Farmers Market in Callicoon. The booths were laden with beautiful produce. Big juicy slug-less tomatoes. Hefty clumps of basil and arugula (without any holes!) Squashes and carrots and beets. Oh my! These folks know how to do it. After all, they do it for a living!

Sunday evening I sat down to a delicious, harvest-fresh dinner of fresh basil pesto, tomatoes with basil and mozzarella and fresh sweet corn. I  didn't pick any of it from my garden, or more accurately, garden-attempt. But it sure tasted darn good.

I certainly appreciate my friends' zeal for gardening. And I sure appreciate the results. But this "guilty gardener" may finally throw in the towel, and leave it to the professionals and the passionistas. I know what I'm good at, and gardening isn't one of the skills in my plus column.

I'm just one of those folks with a black thumb. I gave it the college try, but it just isn't in my DNA. I can now live in the country, guilt free, and buy my tomatoes from Heller, who does a much better job growing them than I do.

August Sales Data Posted, Results Better Than Expected

I've posted my latest monthly Current Market Conditions Report, including Sullivan County sales data through August. The most interesting thing is that the year-over-year sales decline, which had been in the 15% to 25% range, narrowed to 9%, while the median sales price he;d steady. Check out the latest Market Conditions Report and come on back here to add your thoughts on what's happening in the market.

It's All About Lakefront

For the past couple of months, it seems that almost everyone I talk with is looking for a lakefront house or property. I'd say that 90% of the calls or emails I'm getting lately about finding a second home are for lakefront property. (Sometimes a buyer will add river or pond to the option mix, but its still about water.) I have 3 deals in contract at the moment, and all are lakefront.

There is some "sampling bias" to what I'm seeing, in that I Google well for search terms like "Sullivan County lakefront" or "Catskills lakefront" — so I probably hear from a higher proportion of lakefront shoppers than many other agents. But that's no different than a year ago — I googled well for lakefront then, too, and only about a third of my business was lakefront.

Its been very interesting this summer to see what's been moving in lakefront property and what hasn't. Almost everything priced in the low to mid $300's on water has sold (with the exception of a couple of houses that are seasonal, not equipped for year round use.) In the upper $300's, pretty much everything with 3 bedrooms has sold, while the 2BR houses in that price range, or houses that need a lot of work, haven't. There's kind of a gap in the $400's, and then things pick up again between $500K and $650K. In that price range, though, buyers are gravitating to lakefront houses that involve few compromises. They want direct lakefront, a rustic setting, at least 3 bedrooms and a master bath.

Very surprising to me is that the some of the 5 houses listed for sale on Swinging Bridge haven't sold. The lake problems at Swinging Bridge are pretty much over, the lake is close to refilled and was reopened for recreational use at the end of July. 3 of the 5 listings there (2 smaller houses at $399K and one larger 3BR, 2 1/2 bath house at $599K) seem pretty well priced and are in good condition, but just haven't moved. Maybe the word isn't out that Swinging Bridge is back.

The Dog Days of August

Its been close to 2 weeks since I last posted --- and usually I have some opinion on something every couple of days. The last few weeks, though, I've just been trying to figure out what's going on. Which has basically been nothing. August is typically a slower month here, contrary to popular opinion. A lot of folks go on vacation the first couple of weeks, and then get into "end of summer, get the kids ready for school mode" the last couple of weeks. But this year, August was dreadfully slow. I had some appointments every weekend, and one weekend in August was booked back-to-back. But I didn't put one deal together all month. People came, looked, and decided to wait - for either a better property to come on the market, or for more confidence in where the market is going.

This August was actually a lot like last year. In July/August 2006, the news media was filled with doom and gloom reports about the slowing housing market. This year, every where you turned was another report about the mortgage collapse, along with the obligatory reports about housing sales and prices down nationwide. You can't ignore the fact that it's had an impact on buyer psychology. The overriding impression that buyers have is that real estate is bad, and its better to wait for the inevitable bargains coming down the pike.

Unfortunately, most buyers aren't really digging into the data, instead only filing away the sound bites. The real estate market is awful in the overheated markets like California, and the overheated/overbuilt markets like Las Vegas, Arizona and Florida. Economists are predicting a 16% drop in prices in California, where the boom was fueled by risky adjustable mortgages. And Florida isn't far behind.

But the northeast is showing much more stability. According to data from the National Association of Realtors, July sales were down in the west 15.2% year over year (with prices  relatively flat), while in the Northeast year-over-year sales only showed a 2.9% drop and prices were actually up 5.9% year over year. Price declines in the south and midwest were the culprits that led to the headlines shouting "Home prices drop".

The mortgage "crisis" is certainly going to have an impact in the Northeast. I predict we're going to see a real softening in the upper end, as the 'spread' in mortgage rates between conventional/conforming mortgages (under $417,000) and "jumbo" mortgages increases. (The spread was grown from 25 to 35 basis points pre-July to 75 to 100 basis points today.)

Overall, in the near to mid term, we may seem some price declines from the peaks reached earlier this year. Many real estate economists that I check out seem to think price declines will be in the low single digits in New York state, compared to the double digit declines in many Sunbelt and western locales. Many buyers, however, seem to be waiting for a market collapse akin to Linux and telecom stocks at the height of the dot-com boom, where a lakefront house that may sell for $500,000 today will be bargain priced at $300,000 in 6 or 9 months.

I just don't see that happening.  But there is a silver lining to all of this. Sellers are seeing and reading the same news reports. Hopefully, a lot of them will become more realistic about their expectations in the next few months. In the meantime, I think we may have a chilly fall while buyers wait and see what happens in the real estate market, and sellers adjust to the current reality.