If Its So Bad, Where's All The Inventory?

The past couple of days I've been making arrangements to go out a new client this Saturday. What they're looking for in a second home getaway is fairly 'typical' — a house with some charm or unique character, nice quiet country setting with some privacy, 3 bedrooms, under $300,000, willing to do some updating or reconfiguration. A no-brainer, right? There will be dozens of houses on the market to choose from. After all, the market has collapsed and everyone, just everyone, has put their house on the market, and at fire sale prices to move them.

Wrong. Big time wrong. From the MLS I only found about 15 possibles. After looking the listings over and talking about the various houses, the client and I shrunk the list down to about 8. Then I started calling to make appointments to show the houses, and found that 3 of the 8 had deals on them.

I'm finding a similar situation in a number of other property categories. I have someone looking for a nice lakefront house on a non-motorboat lake, something with a little acreage and privacy. Good budget, not bargain hunting, but there's very little available. And then there's someone looking for a non-lakefront house at Black, York, Timber or Wolf — and again, nothing apart from one house at Wolf that needs significant updating. There hasn't been a non-lakefront house at Black, York or Timber on the market in six months. I've worked with a couple of folks who have been looking for good fly fishing property on one of the Big 3 rivers for over 6 months, and there's been almost nothing available.

If the market is so bad, where's all the inventory? A year ago there were a number of cabin or chalet-style houses at modest prices on the market in Black Forest Colony and Pine Ayre. Now, nothing. (Well, there is a larger house in Black Forest at $399K, and a new construction cape in Pine Ayre, but neither hit the target for the moderate getaway buyer.) There isn't even a lakefront house on Loch Ada, and as long as I can remember there's always been one lakefront house on the market there.

The inventory of available houses in Sullivan County is actually dropping. Today, there are 1,129 single family houses listed for sale in the Sullivan MLS, down from 1,160 at the beginning of November. Market pessimists will surely say, "Just wait until the world as we know it collapses. The market will be flooded by second home owners trying to get out." But the fact is that most second home owners are quietly enjoying their houses, and not looking at them as just pieces of an investment portfolio to shift to another category.

I do think, though, we'll see something different with raw land. I don't track land inventory historically, so don't have the figures on how much there was on the market a month or year ago versus today. But I would venture that most owners don't have the same "enjoyment attachment" to land, even if they bought it with plans to build rather than hold for investment.

Comments

[JM]

Inventory is not way up .....yet
Unemployment figures never jump until an economic recession actually has come through and passed.
Much like devastation doesn't get witnessed until after the hurricane has passed through.
It is just a matter of time before inventory goes up and demand will fall. The suburbs: Orange, Putnum and some of Ulster counties will get hit the hardest compared to metro nyc.

Keep in mind also that property taxes are just starting to creep up to the threshold point for some 2nd home owners. It is insane to pay 8K in taxes per year for a small cabin in Mamakating or Liberty while a 3-5 bedroom primary residence on Long Island is similarly 6-8k per year. Sullivan county tax assessors will need full time security in the coming years much like Giuliani had as Mayor!

[Dan F]

Agree with some of JM's comments, especially the taxes.

One thing is the timing, I think. If I were looking to sell, I would probably list after the holidays so as to avoid the inconvenience of having to show my house during the holidays. I think buyers will look at the listing time and seeing a shorter listing time helps the price. Also a buyer may not look until after the holidays or until the warmer weather. So, in a nutshell, the new year will show more inventory, I believe.

[TR]

DK writes:
"I do think, though, we'll see something different with raw land. I don't track land inventory historically, so don't have the figures on how much there was on the market a month or year ago versus today. But I would venture that most owners don't have the same "enjoyment attachment" to land, even if they bought it with plans to build rather than hold for investment."
-----------------------------

That's correct.

If you look at the current available five to six acre lots in the Sullivan MLS in say - Highland, Lumberland, Tusten and Cochecton - there is so much inventory on the market today.

Lots of land.

What's more important is that the offering prices for these parcels are now dropping like a lead balloon - and might continue through the winter and early spring due to 1) seasonal conditions in the Catskills and 2) the overall market malaise.

Plenty of five acre lots are now offered now in the **high 30's** - not the high 50's - which was they were at in the beginning of 2007.

Chances are that when these lots finally sell - it will probably be in the low 30's - even after the price reductions.

Many of these lots were purchased in the 20k's 5 to 10 years ago and have debt service in the way of taxes to the town and school of about $600 per year - if they were purchased with cash and no financing.

So, it's still a 50 to 70% ROI to the seller over that time period - or 10% to 15% annually provided that the seller has no improvements on the lot like a driveway, well or septic.

IMO - inventory, in general, is still quite high - if you take away the "niche" waterfront properties and look at the market as a whole.

Lastly, many seller's will take their homes off the market before winter sets in so as not to keep them heated with oil now priced at $3.30 per gallon and will wait for, hopefully, a better market for them in the Spring.

We have not had a correction for many years.

~TR

[TR]

Related.

Today's article at:

http://www.recordonline.com/apps/pbcs.dll/article?AID=/20071201/NEWS/712010337

===================

Sullivan West plans total tax increase of 24.5%
By Victor Whitman

Times Herald-Record
December 01, 2007
Lake Huntington — Sullivan West Superintendent Kenneth Hilton told residents that the district should prepare for tax increases totalling 24.5 percent, spread over the next three years...{snipped}
======================

[CP]

Sullivan West is a disaster, and it's really, without sarcasm or cynicism, quite sad for the whole western Sullivan County area. Someone should really go to jail for that mess.

TR is absolutely correct - land prices are going down quickly. I've seen a 26 acre farm (small, unattractive house) go for $160k in foreclosure, and have been offered multiple pieces of land (building lots) for less than $40k. This is exactly what we needed, since there is no rational explanation for land quadrupling in price, besides people unfamiliar with the local pricing thinking they are getting a deal when actually drastically overpaying. A lot of smart money made bad land decisions over the past 2 years.

For all the crying, what's happening now in Sullivan County - with buyers having the choice to walk away, and sellers having the choice to turn down deals - is quite healthy and will result in natural fair market value pricing, unbouyed by exuberance, or dragged down by exageratted pessimism.

Personally, I don't see any panic.

Truth be told, if someone finds a decent deal, now is a great time to buy because the overloaded system (banks, appraisers, inspectors, surveyors, real estate agents) are now less busy. It's a great time to hire a contractor, since many of them are actively looking for work for the first time in 5 years. Although, beware, in Sullivan County there is no correlation between needing work/business and improving customer service. I think that will have to wait until the next generation.

[Nest Dweller]

"Sullivan West Superintendent Kenneth Hilton told residents that the district should prepare for tax increases totalling 24.5 percent, spread over the next three years..."

Holy Cats! Now I'm really glad our place is in the Town of Highland. :)

[Chuck]

We made the strategic decision to focus our building in the town of Highland for the past 3 years because of the uncertian tax situation in the Sullivan West area. Now, with the election of Tina Palacek as supervisor, Highland will be the most progressive town in the County, with the lowest tax burden for our homeowners.

Honestly DK, as a buyer's broker, can you really even continue to recommend houses in the Sullivan West District with the extreme tax increases and unknown future direction of additional increases?

[MLS]

We are entering the economic stage of our cycle where municipal governments begin to have fiscal shortfalls. These "governments" look to new tAXes to shore up shortFALLS. This pattern hasn't changed from years back, but, for those under forty it's all new to behold.
What's scary about this R.E. correction is that people think the worst is behind them. The correction will still be 50% to 60% from the top and until then it's self-delusion.
Three more years till we hit a bottom. As to be expected "THEY" will fight it all the way down. Traditionally, it's new construction AT THE BOTTOM that breaks the back of old inflated asking prices.

[DSS]

If he can't in good conscious recommend houses in the Sullivan West District, how can he in good conscious recommend a house ANYWHERE through which the NYRI powerline project might pass, which includes Town of Highland? The impact of the NYRI project will be a lot greater than any real estate tax levy, and the uncertainty is just as great. There is some measure of control over taxes as things now stand; none over the powerlines once they are erected. How has Chuck's strategic planning taken NYRI into account? Here's the equation: Buy a new house, then find out that 13-story transmission towers will be built within a mile or two, blighting the visual landscape, driving down property values, putting increased strain on the tax base (both property and school), which can only be relieved one way, and you finish the sentence.

[CP]

DSS - if you look around, there are plenty of powerline projects in Sullivan County built over the past 50 yrs. Sullivan County is 60+ miles long, so a 1/2 mile powerline easement really effects a very limited amount of people. Besides those directly affected, the power lines will not have any impact on Sullivan County, in fact most people won't even know anything changed - thing is, we are so used to seeing stuff like this we don't even notice it. Most of Sullivan County is heavily wooded - so the 'view vista' is pretty much to the tree line 50' away, not 3 miles to a transmission tower - I wish there was more land with 2+mile views. The impact of the new gas line they are putting in across the County has zero impact on those not living on it or very close to it.

Although, it does seem like a perfect storm of bad news for western sullivan county - first the crazy taxes, then a huge power line looming over Callicoon.

[DSS]

Sorry, CP, but that sounds a bit like a salesman's pitch rather than a realistic assessment of NYRI's threat. I don't know what you mean by "directly affected," but the negative impact of these powerlines will extend well beyond homes in their immediate sightline. There is nothing -- nothing -- like this string of 13-story towers in Sullivan County now. Homeowners (including myself) won't be able to travel to or from their homes, or much of anywhere in the vicinity of their homes, without encountering the towers. The gas line is no comparison because it is UNDERGROUND. Although we don't yet know the precise path of the powerlines, here, from the Times Record-Herald, is what NYRI plans for the Town of Highland:

Town of Highland

The route enters the Town of Highland adjacent to the Columbia A-5 pipeline. It continues to parallel the pipeline located immediately north of the Tusten/Highland town line for 1.8 miles.

Continuing for 1.6 miles adjacent to the gas pipeline, it crosses Kieferle Road and state Route 55 (Broad Road). At a point about 1.2 miles east of Route 55 and north of Sunrise Lake, the route departs south from the pipeline and travels southeast for 3.4 miles, crossing two unnamed roads, before exiting the Town of Highland. The proposed route crosses the town for 7 miles, of which 3.4 miles is adjacent to the gas pipeline and 3.4 miles is along a route not associated with existing rights of way.

I wish the local real estate industry would become more visibly involved in the fight against this monstrosity rather than appearing to be in denial.

[TR]

The following link is the proposed New York Regional Interconnect Powerline Map.

Two proposed routes.

At:

http://powerlines.captecinc.com/

~TR

[DSS]

TR -- a useful link. Also, at http://www.nyri.us/HTML_Site/maps.html, you can find extremely detailed maps of the proposed route -- right down to precise road, stream and pasture crossings, including the path proposed through Town of Highland. Communities Against Regional Interconnect ("CARI"), a consortium of affected county governments and volunteer groups, has been doing a marvelous job trying to prevent this thing, but they need continuing support because NYRI has enormous resources. You think a few hundred bucks a year more in real estate taxes is a problem? Wait 'till you hear the crackle of 1,200-volt powerlines.

[JM]

"Bottom" for housing can never be known until economic recession has come and passed. The last housing downfall was 10% losses PER ANNUM for 1990, 1991, 1992 and 5% losses for 1993 in New York alone. The short economic recession lasted from august 1990 to march 1991 even though its painfull affects were felt until 1996. Therefore, if history is a lesson, this housing downturn will not hit bottom until at least 2 years after the 2008 economic recession. Given that this housing bubble lasted for so long and was so steep, the downturn will be much more severe. Today, We are now much like in early 1990: the calm before the storm.

[CP]

Sorry DSS, but the electric lines will have very little impact on most people. Regrettably, the people who are affected are affected dramatically. Have you been effected by the 3 yrs of no water in Swinging Bridge, and now no water in Toronto? For some families having bought a house that now sat on an empty lake-bed, this was a big deal, others never knew of the problem besides what they read.

It's not a positive thing, but I doubt it will hamper SC's long term prospects much.

[DSS]

Well, CP, I agree with you that "the people who are affected are affected dramatically" by NYRI's proposal to build high-voltage transmission towers through western Sullivan County, including seven miles through the Town of Highland. We disagree about how many such people there will be, but it seems to me that the risk of underestimating the impact falls on the homebuyer. Back to the tax issue that prompted you to suggest that DK shouldn't recommend homes in the Sullivan West district. As I read the news reports, Sullivan West is talking about a total increase of 25% stretched over three years. By way of example, for my modest three bedroom/two bath house on five acres in the Sullivan West district, that would mean a total increase of $650, or about $223 a year -- a number that may be further reduced as a result of a federal income tax deduction. All other things being equal, I doubt that numbers of that magnitude are material to someone looking to spend $250K-plus on a vacation home. And I would suggest that the risk of a tax increase of a few hundred dollars a year is awfully small change in relation to the risk of having 13-story-high transmission towers planted anywhere near your new home. So if Sullivan West should be off DK's list, so should any location through which the NYRI powerlines might reasonably be expected to pass.

[CP]

DSS - If you ask me, both scenarios are actually quite a conundrum for DK. DK?

On a dissimilar note - Most high-rises don't use the 13th floor - guess bad luck doesn't concern the power lines companies.

[TR]

Has anybody seen our host?

TR

[David Knudsen]

Wow, mentioning property taxes and the housing downturn in a single thread sure gets comments flowing.

Yes, school taxes are likely to go up over the next 3 years in Sullivan West. But they're likely to go up in the other districts as well. At the end of the Record article, Kenneth Hilton was paraphrased as saying, ... "That's because the district will have rising expenses, everything from contractual obligations for employees with locked in raises and benefits, to the rising cost of heating oil and unresolved construction issues at the high school." Hilton said he also believes that the state will be hard pressed to fulfill its promises for increased state aid for schools in this worsening economy.

Those factors aren't isolated to Sullivan West. Folks who criticize the merged school district somehow think that expenses for separate school districts would have remained stable, but they likely would have skyrocketed as well. One major contributor to rising school taxes in SW is declining enrollments — because many school subsidies are doled out on a per head basis. Fewer students = fewer dollars. So every time a farmer (who may have 3 kids in school) closes up shop to move further north and sells out to a second home owner, that's 3 less kids in school. As much as many of us want Sullivan to remain an idyllic rural hideaway, that comes at a cost. If we want taxes to drop, then we need to encourage economic development. And yes, that may mean a casino. A couple of new B&B's and restaurants don't make an economic engine. There hasn't been a major new project that created a lot of jobs since the Kohl's warehouse opened in Mamakating and that was 5 years ago. Casino foes say that casino jobs aren't the kind of jobs we want, but I don't see other high paying professional jobs flooding into Sullivan.

So, if we decide we want to be anti-growth, the price we pay for that is higher taxes. Low density rural idyll has a cost.

By the way, I don't see why Sullivan West should be 'off my list', because, frankly, I don't think the tax situation is that much worse overall than other low density townships. You want to talk to some homeowners freaked out about tax increases, go down to Lumberland. And Bethel, which is mostly in the Monticello school district, isn't any tax haven. And I do regularly inform potential buyers about NYRI, am very aware of the route, and overlay any property in the vicinity of the proposed route to the NYRI maps to alert potential buyers.

[Mike]

Dave (and others)-

What does government deal regarding the interest rate lock mean for Sullivan County Real Estate?

Also, are there any "Sullivan County"-type places east of the Hudson (not necessarily in NY State)? Low key, OK houses, land, inexpensive relative to the fancier parts of the Hudson Valley? I ask because my commute would work a lot better staying on that side of the Hudson. Not that I am ruling out Sullivan County.

THANKS!

[CP]

Our host is sick. he sounded like a broken trumpet when I talked to him yesterday.

[CP]

DK - I think your SW pitch is a bit biased - If all other school districts are facing rising costs, SW is facing natural rising costs plus a school they can't afford plus declining enrollment. Bluntly, no one knows if Hilton's projections are correct, and no one knows where it will end. We've seen huge school tax increases for the past 3 years.

And the point about the 2nd homeowners buying up farms and the district losing kids - duh - so why did they build the #@$%ing school in the first place? Nothing like hometown geniuses ruining their hometown.

[Tyler Durden]

People in glass (farm) houses should not throw stones...

Thank you, Chuck, the trumpet is sounding better now.

I'm not totally SW biased, but I think the issue with schools and property taxes in this county goes WAY beyond one school district. Personally, I think we should have a consolidated county-wide school district with at most 3, or possibly 4, middle-high schools. But that won't happen because of this quaint and ridiculously expensive New York concept about home rule.

I think there were definitely some projection errors made in terms of SW enrollment. But I'm not sure the situation would be better, in any major way, with unconsolidated schools. There would have been the same enrollment declines, and there would have been other infrastructure costs.

I just saw a listing on Pine Grove, at the edge of Smallwood. A 2,700 sq. ft., 3BR, 2BA log home on 3.45 acres with total taxes of $15,371 --- with almost $9,000 of that being school taxes, for the Monticello school district. This isn't a lakefront home, or a home in Smallwood. Its totally crazy.