Inventory Drops Below 1,000

As of today, March 2nd, the inventory of single family homes in the Sullivan County MLS was 986. This is the first time inventory has dropped below 1,000 homes since April, 2006, and amrks a 24% drops in available homes for sale since the peak of 1,292 reached last August. Inventory does typically drop through the winter, with owners often deciding to take their houses off the market because they don't want to keep them plowed out and heated for the occasional showing. Current inventory is tracking right about even with 2006 levels.

What's curious, though, is that inventory isn't higher than 2006, given that many people believe we've shifted into a buyers' market. A buyers' market is pretty much defined as rising inventory combined with lower demand leading to lower prices. That's certainly what's happening in overbuilt or high-foreclosure markets like Florida and Arizona. (To put the numbers in pespective, in one zip code in Florida, 32169, the beachside area of New Smyrna Beach, there are 1,274 single family properties - condos and homes - on the market. I use New Smyrna as an example, because that's where I had a condo that was on the market for 18 months before finding a buyer.)

But not here. There are a number of sellers who have just pulled their houses off the market, at least for the time being. And this week when I called to ask about the status of a few houses I was interested in showing, I got the response that the owners decided to rent it out and may put it back on the market when things improve.

April and May are going to be very telling. I've been keeping records since 2001, and inventory has bottomed out every year in late March, and then started climbing again in April and May. Its going to be interesting to see if that same inventory trend holds this year, and at what prices sellers put their houses on the market for.

Comments

[Mal]

There is no logical reason why a "buyers' market" could not arise purely by a significant decrease in demand (rather than also requiring an increase in inventory). The New York State Association of Realtors just announced that sales of existing single-family homes have fallen more than 25% statewide compared with sales a year ago. The region with the most precipitous fall in sales has been Sullivan County, with a 56% drop! Perhaps the low inventory is a contributing factor, but the drop in sales far exceeds the drop in inventory, and it has occurred despite a fall in the median price from $170,000 to $140,000 in the year to January 2008. One can quibble about whether to call it a buyers' market when sales are so infrequent, but it certainly isn't a sellers' market.

[David Knudsen]

Mal, I want to clear up one thing. The NYSAR data is wrong. I know you and most people view NYSAR as an 'authoritative source', but the data is wrong. In the Sullivan MLS, there were 30 closed sales in Sullivan County reported in January 2008. In the Greater Hudson MLS, which also has some transactions in Sullivan, there were 28. Now there is some overlap between the two systems (with identical listings in both), so you can't add 30 + 28 to arrive at the total. The total is a subset of that. There is also some discrepency in closing dates reported in the 2 systems which is too idiosyncratic to get into here, as well as how properties like mobile homes, townhomes and seasonal cottages are categorized in the 2 systems. But suffice it to say there were at least 30 single family sales in Sullivan, and if I really worked on normalizing the data transaction by transaction, it would probably be 35 to 38. There is some problem with how NYSAR is picking up their data, and the data source isn't referenced on their website. I just emailed NYSAR about this, because such a wide discrepency is a big problem. We just simply are not the basket case of New York state one would be led to believe by the NYSAR report.

[TR]

Dave - Sullivan sales off over 50% from 2007 from NYSAR.

Article from New York State Association of Realtors:

http://www.nysar.com/consumers/stats.asp

Stats from NYSAR (.pdf file):

http://www.ilovethecatskills.com/nysar.htm

~TR

[CP]

Inventory can also be down because selling your home is now a difficult decision, with uncertainty about price, whether it will sell, etc... In the recent past, the decision was simple - do we want to cash out? Over the past few years, people would put there home on the market just as a test, or with an inflated price tag to see if someone would bit. Now the inconvenience of having someone tramp through your house, living in limbo, and dealing with real estate agents can be heavily weighted as a reason not to sell your house. So I think it's more than people pulling the hosue off the market - it's people not considering selling their home, now that it's not a sure fire way to financial freedom.

TR - any antedotal examples, or all just stuff we all have been reading in the papers?

Catskill Farms is not seeing a decrease in sales activity, or people looking. We are, however, noticing people are a lot more careful in what they are considering buying.

[TR]

CP - Not certain what you mean by 'antedotal examples'?

Please advise.
Thank you.

The URL link to the closed sales (please see above) in Sullivan County, New York from 2008 vs. 2007 - where that organization states that it's off by more than 50% YTD is from the New York State Association of Realtors in Albany.

I'm not going to dispute their data.

TR

[TR]

DK and CP-

Addendum from NYSAR:

Home sales in Sullivan County, NY:
January 2007 to January 2008 - (-55.9%)
January 2006 to January 2008 - (-54.5%)

Median Home Price in Sullivan County:
January 2007: $170,000
January 2008: $140,000

-------------------------
Home sales in Delaware County, NY:
January 2007 to January 2008 - +15.4%
January 2006 to January 2008 - +87.5%

Median Home Price in Delaware County:
January 2007: $113,000
January 2008: $100,000
-----------------------

Those are interesting figures since Delaware County, New York is one county northwest from us and their homes sales are *up* in the past tweleve months in a very bad market - and a market in which Sully is off by 50%.

Eventhough Andes, Margaretville, etc. are a three hour drive (as opposed to a two plus hour drive) from the city - their median home value is roughly 30% less than ours - which represents good value to the second home owner.

People are still shopping - but they are looking for value and they're also looking - and buying - beyond Sullivan.

Not until the seller's prices in Sullivan come down much further will we see any market to speak of.

~TR

[David Knudsen]

Tony, you may not be disputing NYSAR's data, but I am. Its just plain WRONG. Before everybody goes off and tries to analyze why Delaware is doing better than Sullivan, we need to know if that is, in fact, the case. Tony, if you go in to the Sullivan MLS and run search for closed single family sales in Sullivan County with a closing date in Jan., you'll see that there were 30 sales. Yet NYSAR's statistics show 15.

[CP]

TR - what I meant was it's more interesting to relay stories about actual people looking locally, as opposed to linking to national stories that we all have read or seen summarized on the news.

Catskill Farms is closing 2 deals a months, and we have 4 families waiting to get started in the spring. Well qualified, nervous, but as DK said, their fear is not outweighing the motivation to add some balance to an urban life.

On the mortgage front - we are seeing good applicants get qualified, and we aren't having appraisal issues. What we are seeing, however, is a very hard time actually closing the loan - with the banks changing the rules everyday, taking pictures of 'appliances installed', adhering very strictly to LTV, down payments, sellers concessions - in sum, much more painful, but still, at the end of the day, a closed deal. There is absolutely no room for unqualifed buyers.

On the same note, we are still seeing 5% down payments, small 'sellers concessions', and all the traditional manipulation of the system, just with much more caution on the bank's part.

For instance, we have been trying to close a deal on our first mini-house - 800 sq ft, 1 bedroom, 2 acres, brook - for 35 days, the bank has been jerking us around at the last minute with new submissions, reworked addendums, new pictures, postponing 4 closing dates the day of, or the day before closing. Of course, everyone is thinking that the bank is just making excuses and eventually will pull the loan - but, we have a closing scheduled for today again, and no one has pulled the loan.

It seems that the rules at the big banks are changing so quickly, and their behemoth bureaucracy is having trouble communicating from dept to dept - and there is no longer an incentive to make a bad loan, in fact, it's probably an immediately fireable action, so everyone is covering their ass.

[CP]

With everyone sitting at the attorney's office, with the buyer traveling 2 hours, the buyers attorney 1 hour, the closing was cancelled because the bank disapproved the HUD closing statement. I think all real estate agents and real estate attorneys understand the HUD statement is probably the most revised paper at a closing - to cancel a closing because of a HUD form discrepancy is rare.

But again, they are not revoking the loan - just torturing us endlessly. But in the end, Maurizio will own a little dream house, and the pain and suffering will be forgotten quickly.

Got another request for a picture of the appliances installed today. Plus a letter from the buyer stating she is happy with the installation before the bank will schedule a closing.

So why not go with a local bank? It's a good idea, but for some reason their appraisals are coming in low. Jeff Bank is coming in 10%-20% lower than what I am selling houses for, and the appraisals for these homes at large banks are finding comps to support that 10%-20% higher price.

I think it's a great time for local banks to strut their stuff and pick up a lot of market share- but they have to step up to the plate. The reason why they are in a position to lend is because they are conservative, but with their undiminished capacity to lend compared to the big boys, this might be a time to loosen up the belt and make some deals.

I used to avoid sending my clients to local banks because the process was a little aggravating, but now everywhere you go the process is aggravating - so I would think the local banks have a great opportunity to market themselves as progressive lenders, as opposed to acting like old ladies like the big banks.

To extrapolate macro-ly, I would think Jeff Bank and maybe Catskill Hudson (although they may be smarting from their loan portfolio), would see this as a great time to position themselves as the bank of first choice, as opposed to last resort. There has never been a better time to reinvent or expand a business with good cash flow. Buyers aren't just homeowners - they are land speculators, developers, homeowners, stock buyers, appliance buyers, car buyers. Bottomline, its a great fricking time to buy something.