$4 Gas Boon or Bust for SC?

The sharp run up in gas prices has real estate tongues wagging up here. The conversation starter, "What about them Mets?" has been replaced with "What about them gas prices?" (OK, I'm not that into sports and have never started a conversation with "What about them Mets', but you get the point.) There is some worry that high gas prices will choke the New York second home market. But I have a somewhat contrarian view.

Once the shock of higher gas prices passes, and you get used to the sixty buck fill up for a Suburu, there could actually be some benefits for Sullivan County. The biggest plus is that Sullivan County, as a second home destination for New York city-ites, is relatively close compared to the Berkshires, upper Hudson Valley/Columbia County and far closer than the Adirondacks, Vermont and Maine. Wurtsboro, the closest village in Sullivan County to the city, is only 75 miles from the GW Bridge. (Hudson in Columbia County is 125 miles; Stockbridge in the Berkshires is 166 miles). The majority of our lakes are within 100 miles of the GW.

Over the past decade, the prime area for many second home buyers in Sullivan has moved further north and west to the more rural areas (think roughly of a crescent shaped swath from Livington Manor in the north to Barryville in the southwest) and led to the revitalization of hamlets and villages like Jeffersonville, Callicoon and Narrowsburg. Some of Sullivan's more eastern hamlets, like Mountaindale and Hurleyville, haven't fared as well. Higher gas prices could get buyers to rethink those areas, as they look to get 30 miles closer to the city. Their proximity could lead to a revitalization. Likewise, Emerald Green around Rock Hill, one of the closest lake developments to NYC, could see a rise in demand. (Younger 30-something second home buyers from NYC have tended to bypass Emerald Green due to its more 'suburban' style in favor of lakes further afield with a more rustic, 'mountain lake getaway' feel.)

There may also be some rethinking about 'privacy and seclusion', two of the most in-demand second home features that buyers I've worked with in the past few years have requested. In general, finding privacy and seclusion means being further from a village. Houses at the edge of a village or hamlet, on an acre or so of land (plenty for a nice sized garden) may become more appealing again — if it means you can take a short walk to pick up the Sunday Times rather than drive 5 or 10 miles.

I also expect that in the next year, airfares are going to skyrocket. Airlines are back in their old pattern of losing billions of dollars, and at some point they have to bite the bullet and raise fares. The era of being able to fly a family of four round-trip to Florida for $800 is probably past. As fly away vacations become more and more expensive, a close by drive away second home becomes more appealing.

I'm not saying that high gas prices won't have a negative impact on the real estate market here. But as we retool to adjust to those prices, Sullivan County may fare better than some other areas.  Already higher gas prices have definitely had a downshifting effect, from the size of houses people are looking at to the size of cars they're considering to get to the house they're thinking about buying.

I think that some parts of the primary home market are going to have a tough time. Remember a year ago those billboards on Route 17 touting a new development around Hurleyville that proclaimed "Drive 30 minutes and save $50,000"? Daily commuters who work in Middletown or Newburgh are going to think long and hard before they add 50 or 60 miles to their daily round-trip. For daily commuters, convenience to work and shorter commuting distances are going to become even more central to their home shopping.

So what are your thoughts about the possible impacts of higher gas prices on Sullivan County? Will we see more cluster housing? Will some of the unbuilt developments originally targeted to primary homeowners retool for second home owners? Will we get more frequent bus service between Sullivan County and NYC? Will Mountaindale become the new hotspot?

Comments

[Beware]

So you're prepared to spend $250,000 plus all the carrying costs for a second home, and the choice is between somewhere in Sullivan County and some point in Columbia County. Let's say the differential distance to the city comes down to 40 miles. Your Subaru gets 20 miles a gallon. We're talking two extra gallons, costing $8 if you assume we get to $4 a gallon. Ok, make it $16 for the round trip. My thought: I think it's a stretch to suggest that $16 is a significant plus in favor of Sullivan County. It's not a factor, not even at the margin of the margin. More likely that gas prices will put the kabosh entirely on a close decision whether to buy a second home anywhere at all. A better argument for the second home, in my opinion, is in lieu of vacations that require air travel, which has become intolerable for a lot of reasons in addition to cost.

[tom fry's ghost]

I do believe the post above mine, written by Beware, makes for a rather cogent argument.

Unfortunately, taxes remain the Achilles heel for the area. Municipal governments are beginning to feel the economic contractions of the Recession and it can only get worse from here forward.

I am aware of "the pride of ownership" but there really is The Inn at Lake Joseph for those only wanting an occasional getaway. $5000 dollar taxes buy you a lot of weekends (if NOT weeks at the Inn.)

Powerlines across the Rio reservoir, natural gas drilling on the western end....

[BE VERY WARE]

We have all the macro-economic components in place for a perfect storm BIG recession. This time will be much longer and more protracted; much worse than the 1982(the great recession) or 1991 or the unfelt 2000 recession.

In 1987, peak prices were reached in the last real-estate bubble. Prices did not settle to trough until 1993. That's 5 years of decline and 30% cummulative fall in prices. It was not until 2001 that property purchased in 1987 was able to re-sell at 1987 prices. That's 14 years of recovery and 0% increase in prices. The recent real-estate bubble reached peak in 2005;(Sullivan County may have been 2006 for reasons of another discussion). We are still in only 1989/1990-like territory. We have a LONG LONG way to go before even thinking of a market stabilization. Assuming this recovery will be just the same in length as the last real-estate bubble, we could reach trough in 2012. So far, prices have only fallen 8% country-wide, so at least 22% more to go. And when will those who purchased in 2006 peak prices be able to sell at that same price again? They will have to wait until 2020. Perfect timing for Sullivan County's vision of 2020.

[D]

Who do some of you people who get on here after every post with your chicken little economic forecasts (usually not supported by any data)?
If all of you think that everyone in Sullivan County is screwed and that real estate here will be dead for the next 10 years, then why do you even bother reading a Sullivan County Real Estate Blog? Why don't you just check back in 10 years to see if you were right?
I don't think anyone can predict with any accuracy what the ultimate fallout of the subprime crisis and likely recession will be for the county....it may suck for quite some time, but for chrissakes, lets try to limit the negativity when it is mostly pure conjecture. I am really curious what some of these people are trying to accomplish....I hardly doubt it is an altruistic attempt to save people from making a "real estate mistake" by buying here.
David, I really appreciate the updates on the various projects in the county, notices of new services, etc. That is the main reasson I like to check in the blog.

[great places]

sullivan county seems to be in a severe depression if you ask me.
with all the stupidity of the housing and land flippers being stuck with their properties, it goes to show that when the music stops, ya still need a place to sit.

[KLM]

$4 gas is not a problem.
we are looking at $5-7 a gallon soon....$200 a barrel oil is not far away.
why should the USA pay only $4 per gallon while Europe pays $10 per gallon and Canada pays $8?

How will that affect the catskills? Sunday evening drive home will get much better!

[KLM]

http://www.nytimes.com/2008/04/28/nyregion/28york.html?ex=1210046400&en=e5075edeaa883d0b&ei=5040&partner=MOREOVERNEWS

[Henri Balsom's Ubris]

D, we are going to break out the little happy faces for you.

When I was your age we had trees and free access to all the lakes. Soon we will have drilling rigs, cell towers and power lines to beautify and enhance the landscape. "Whatever turns you on, bro."

What do I want? For beginners I would like to see a constitutional law enacted preventing Bob Dylan from parading across any concert stage, mumbling and wearing a lampshade on his head.

P.S.
You simply have no idea how long and deep this Recession is going to run. I wouldn't worry too much about the current housing stats.

2009 is the year to watch.

[C. P.]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aNGtHO1tbzng&refer=home

KB Home's Broad Says Home Prices May Drop Another 20% (Update2)

By Rhonda Schaffler and Bob Ivry

April 28 (Bloomberg) -- Eli Broad, a philanthropist and co- founder of KB Home, the fifth-largest U.S. homebuilder by revenue, said he expects home prices to drop another 20 percent.

``I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. ``We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.''

Homebuilders, hurt by banks' stricter requirements for granting home loans and concern over the rising number of homeowners failing to pay their mortgages, have begun work on the fewest number of houses since 1991, according to the U.S. Department of Commerce.

``People were using their home equity as really an ATM machine,'' Broad said, referring to an automated teller machine. ``They were spending more money than they were earning by taking equity out of their home. That couldn't go on indefinitely. We're now paying a price for that.''

The number of mortgage borrowers behind on their monthly payments rose to a 22-year high in December, according to the Washington-based Mortgage Bankers Association. The trade group estimated that 16 percent fewer mortgages will be issued this year compared with 2007.

Los Angeles-based KB Home fell 25 cents to $23.72 at 4:15 p.m. in New York Stock Exchange composite trading. Shares have dropped 9.8 percent since the beginning of the year.

To contact the reporters on this story: Rhonda Schaffler in New York at rschaffler@bloomberg.net; Bob Ivry in New York at bivry@bloomberg.net.

Last Updated: April 28, 2008 16:40 EDT

[Beware]

Doesn't the housing collapse affect the Sullivan County second home market in two ways? First, and most directly, it decimates the price of homes in Sullivan County itself while bloating the market with non-selling inventory. Second, it has a negative wealth effect that inhibits would-be purchasers: People in, say, New Jersey, whose homes are suddenly worth a lot less, feel a lot less wealthy and therefore less able to afford a second home. It will get worse as collapse inevitably spreads to the Manhattan coop and condo market; you can't lose tens of thousands of financial services jobs, in a city where every tertiary location is already sporting a half-finished residential project, without prices taking a hit.

[Melissa]

I agree with David Knudsen about Mountaindale and the surrounding areas becoming a more active spot when looking for a second home. I live in Mountaindale and I commute down to White Plains three days a week. It's much closer than let's say from Barryville, Jeffersonville, or Callicoon.

The reason I bought here is because it is still very rural but closer to larger towns like Ellenville and Rock Hill for shopping, etc.

I am 11 minutes from Route 17 and 10 minutes to Ellenville. Middletown is 30 minutes away also for major shopping versus 45 minutes from like Barryville, etc.

[C. Woodward 'Woody' Woodchuck III]

Melissa!

Is there an echo?

We hear you!

Rock Hill for shopping?

Where?

CP

[melissa]

I don't know why my posting was posted three times. It was clearly an accident, sorry guys! I know Rock Hill has no major shopping, but the trading post is good for the deli, and it is a small supermarket with also home goods and housewares. Ellenville has a ShopRite, a Hospital, pizza, chinese and a few other restaurants including a vegan restaurant which is pretty upscale. Oh, there is also Pete's alternative grocery. Not a bad place to shop either and Cohen's bakery which has some really good stuff. They're famous. The lighthouse deli is very inexpensive and the food is fresh as well. There is also a bunch of farms on route 209 a little further up where I go in the summers for peaches, strawberries and corn. There is also a cute farm market in the summer months in ellenville every weekend with local cheeses, breads, and gourmet foods.

[henry]

Hamptons Home Prices Decline on Wall Street Job Cuts, Economy

http://www.bloomberg.com/apps/news?pid=20601093&sid=axeUPXHfnG8U&refer=home

(I know that there is a large difference between hamptons and catskills... however, not good for the upper end of market.)

[CP]

Neither of the C.P.'s above are the original, who is writing now. I'm flattered though.

I think gas prices will have more of an impact on existing homeowners who are shocked at their heating costs, rather than auto fuel costs which are probably a fraction of the amount they pay for parking in NYC.

Having a weekend home cost a $1000 a month for heat just because of a runup in prices is hard to swallow.

[xx]

What fuel are you using to get a bill of $1000/Month? Natural gas?

[Rich Klein]

Out-of-control gasoline prices might make some reconsider Sullivan as opposed to Columbia and other counties further from NYC. However, these high gas prices just as summer begins will also keep many people away from Sullivan..the people who when gas was closer to $3 than $4 might normally drive through the county on a Sunday, fall in love with the area, then come back to look at 2nd homes the following year. This demographic should not be overlooked in any analysis of the future RE market. Bethel Woods has its best lineup ever in 2008 (and its longest season of continuous entertainment) and, combined with the opening of the "Woodstock" Musuem, should make this season the busiest since it opened in 2006 despite gas prices. Two other projects need to move forward fast: the Capelli/Empire Resort project at The Concord and The Corner at Bethel, which would be an ideal place for 3 star hotel, a supermarket, pharmacy and nice restaurant.

[Jill]

I just paid 4.45 for regular gas!! Yikes!!

[Catskill Farms]

XX - we use natural gas for some homes and oil in others - do you think $1000 is a lot or a little?

CP

[PNJ]

1000 per mos in dec-april is now normal