Sullivan County Real Estate

Shift Back to Local Lenders

Until recently, most buyers I worked with found that the best option for a mortgage loan — from the standpoint of rate, responsiveness and ability to get the loan closed — was working with a large national lender with a local presence (and local loan officer.) Local and regional lenders typically offered even more responsive service, but didn't offer competitive rates. And national or online lenders without a local presence, even with great rates, were often a disaster in terms of getting a loan underwritten and closed.

Lately, though, those national lenders with a local presence just aren't coming through. I've had a number of situations lately where the loan applications get mired in a Catch-22 underwriting black hole. Underwriters reject appraisals, and ask for more and more comps. Underwriting standards have tightened to the point that it can be impossible, in a low density rural area like Sullivan County, to find responsive comps that meet their narrow parameters for geographic distance, time and size. National lenders, in an effort to standardize the appraisal process, now typically funnel all appraisals through regional appraisal firms. I've had appraisers come from as far as 80 miles away, who are not members of the local Multiple Listing Service (which is a key source of comp data). Earlier this year, an appraiser was assigned who didn't even know there was a Sullivan MLS — and when I requested a reassignment to a local appraiser, it was declined. (Note: I didn't request reassignment to a specific appraiser, but only requested that an appraiser be assigned who had local market knowledge and access to local sales data.) In fairness, I've also had good local appraisers assigned by the national lenders, but it seems to be a crapshoot.

On the processing side, clients get frustrated because they're asked over and over again to submit the same paperwork. Often its because underwriting is taking far longer than expected, and some paperwork submitted a month or two ago — like the most recent bank statement — has 'timed out.' There are often last minute requests that force clients to scramble. Compounding the problem is that the lenders seem to have constructed a wall between the loan officers (who know the local market) and the underwriters and processors (who work out of far away processing centers), so the ability of a local loan officer to act as an advocate and go-between during the underwriting process is severely limited.

The situation seems to be very different with local lenders — credit unions, or local banks like Ulster Savings or First National Bank of Jeffersonville. Clients who have used these local sources for mortgages seem to be having a much smoother time. They use local appraisers. Their underwriters understand the local market, and seem more willing to adjust time and distance parameters to encompass a workable universe of comps. They're more willing to consider some qualitative factors in their decisions, like some lakes that have generally higher value than others. Don't get me wrong — these aren't pushover lenders with loose lending standards. In fact, in terms of creditworthiness, they're probably tighter.

Given the recent experience of my clients, I'm finding I"m less likely to recommend the big national lenders as a first choice — unless I'm convinced that we have a "perfect storm" of responsive comps. Even then, I'm not totally confident the process will go smoothly. I really hope some of these national lenders will adjust their procedures to be responsive in low density, low sales areas like Sullivan County. Its in the buyer's interest to have more competitive lending options.

Good Gas Drilling Article in Today's Sunday Times

The article, "The Light is Green, and Yellow, on Drilling" in today's NY Times is definitely worth a read. It talks about Gov. Patterson signing the gas drilling bill while at the same time ordering a more extensive environmental review. It gives me hope that the experience here in NY state will likely be different — and less disruptive — than in other states. While many complain about New York's penchant for overregulation, in this case it could be our salvation.

Monticello Motor Club Grand Opening

Wealthy boaters have their yacht clubs,  duffers their golf clubs,  sportspeople their hunting clubs. Now  the fast car set have a club of their own. The Monticello Motor Club, on the site of the old Monticello Airport on Cantrell Road south of Monticello,  had its grand opening today. I was pleasantly surprised to get an invite.

I've been excited about this project since it was first announced about 3 years ago. Part of my excitement stems from the fact that I have a pretty bad car jones. (I have to admit that if I had the choice of dinner with Lily Tomlin, Meryl Streep or Colin Firth, or two hours behind the wheel of a Ferrari, the Ferrari would probably win.) The other part of my excitement was that a facility of this caliber, with the membership it is likely to attract, was coming to Sullivan County.

Gotta tell 'ya, the place is impressive, even though the major buildings (the event center and clubhouse) are still on the drawing boards. But the centerpiece isn't the buildings, its the track — 4.1 miles of banked curves and straightaways where the well heeled can go all out with their fast driving machines. To my knowledge, there's no other facility like it in the northeast. Its essentially a country club for car racing. (In the interim, until the permanent club buildings are constructed, they've erected a pretty impressive two story temporary structure to act as a clubhhouse for members.)

 The Grand Opening Celebration included the usual parade of dignitaries and politicos making (thankfully short) speeches. But the highlight was the inaugural lap of the track led by racing legends Mario Andretti (blue car in photo) and Brian Redman. A few dozen of the founding members followed them in their own cars around the track, while a helicopter filmed it all.

All in all, it was an exciting afternoon, and I hope the Motor Club enjoys tremendous success.

So you want to join? Membership is by invitation only, and the current initiation fee is $125,000.

Bad Statistics Day

Yesterday brought a double-barreled dose of disappointing real estate statistics. The National Association of Realtors released Existing Home Sales data for May, showing a larger than expected 2.6% drop nationally over April. Regionally, the northeast showed the largest drop, with a 6.6% decline over April. (Over the past year, the northeast has generally performed much better than other regions. So the drop in May that was larger than any other region could be the real estate slowdown catching up with the northeast.) On a year over year basis, sales were off nationally 15.5%, with the northeast down 15.8%. On the price front, the median price was down 6.1% nationally year over year, with the northeast clocking a 12.6% decline in the median.

Later in the day, Freddie Mac released its Primary Mortgage Market Survey, showing a sharp  38-basis-point jump in average interest rates on long-term loans over the past week. Average rates on 30- hit 6.63 percent compared with 6.26 percent a week ago. Points that borrowers paid to attain these rates this week averaged 0.6.

To put it in perspective, a year ago, average rates on 30 loans were 6.69 percent, about on par with today. But in 2008, rates were dropp, hitting about 5.8% in May. While rates in the upper 6% range are usually referred to as "historically low", it is a significant jump in the cost of borrowing over just a few months ago.

Some Recent Favorites

Recently, there have been some very attractive new listings that have caught my attention in the moderate price range between $199,000 and $299,000, as well as price reductions on some others that have brought them into my "sit up and take notice" category. Click here to see the seven that I consider pretty interesting right now in the moderate range.

There's one other house, outside of the moderate range, that's my personal favorite in the county right now. (Its always difficult to pick a personal fave, since there are usually about a ha;f dozen houses on the market I'm really drawn to. But this one stands out for me because I love modern style.) Its a $499,000 newer modern home in Black Forest Colony. (Click here to see.) While we have a number of "contemporary" style houses in the county, we have very few in a stark modern "Dwell" style, and only occasionally does one of them come on the market. Black Forest Colony (near Glen Spey) is also a very interesting place. There are about 40 or so houses in Black Forest, most set on wooded parcels, usually about 5 acres. What makes Black Forest so unique, though, is that the community shares 800 acres that includes woods, streams, a waterfall and pond. Its like living in your own private state park.

Paterson Signs Gas Bill, Orders Environmental Study

A few weeks ago, the NY State Senate passed a bill favoring the gas drilling industry in New York that included a reduction in the setbacks required for wells, broadly permitting 'horizontal drilling' and streamline the gas well permit process. That bill has been sitting on Gov. Paterson's desk, awaiting his signature. Today was the deadline for his signature or veto, and he gave little indication of which way he would go. Well, today he signed the bill into law. BUT, at the same time he also ordered an overhaul of the system to determine the environmental impacts of drilling on an are. (See the report on the PressConnects site) According to the report, "Paterson also directed officials from the state Dept. of Environmental Conservation to assess drilling's impact on water resources, wetlands, air quality, aesthetics, noise, traffic, community character and cumulative impacts on communities."

While I supported Paterson vetoing the bill so it could be reconsidered in a more thoughtful fashion next year, the Governor's recognition that there needs to be more study before opening the floodgates to drilling, is encouraging. Paterson's move also indicates an understanding that the expansion of gas drilling in the Marcellus Shale is a major event with significant impacts on communities, infrastructure and the environment. We can also take heart that New York state can study projects right into the ground (no pun intended), and its likely that extensive and comprehensive environmental and community impact studies could possibly delay drilling for years if they're undertaken with New York's "fast track efficiency."

Roubini on Top to Trough

NYU economist Nouriel Roubini has been a controversial voice in the debate about the length and depth of the real estate downturn. Roubini has been more pessimistic than many other economists, but his arguments are very compelling. In an interview yesterday on Tech Ticker, Roubini estimated that the national 'top to trough' drop in home prices could be 30%, with a bottom not coming until possibly sometime in 2010. (Other economists have weighed in with more conservative predictions of  top-to-trough drops in the 15% to 18% range.)

Of course, there will be wide regional variations. Areas that experienced overbuilding and widespread speculation will likely see the biggest drop. (The Case Schiller Index data for April 2008, the last month available, already shows Miami and Las Vegas prices off just under 30% from their peak, with southern California markets not far behind. The New York Metro area, by comparison, is only down about 7%.)

If the 30% top-to-trough number holds true for Sullivan County, that would translate into a bottoming out of the median sales price at $140,000 (from a peak in June 2007 of $201,000) and the average sales price at $176,000 (from a June 2007 peak of $252,000). The June 2008 3 month tally for Sullivan was a median sales price of $163K and an average of $200K, drops of about 20% from their 2007 peaks.

If you accept Roubini's estimate, as well as the concept of regional variation, the big question is whether Sullivan County has experienced the lion's share of its hit or has further to go. Pessimists, of course, will jump on the 'further to go' bandwagon. But there are some indications of price stabilization — June's 3 month median sales price of $163K was actually up from the low of $150K in April and May, and its looking like July's 3 month median will come in about $170K.

July - Busy or Slow?

Personally, I haven't been all that busy this month. July isn't typically one of the big months for sales, but is usually quite busy for showing property.  (Second home buyers, in particular, tend to starting shopping in the summer and then buy in the fall.) But I've gotten reports from other real estate agents, particularly in the western part of the county from Glen Spey up through Callicoon, that they've been very busy with appointments for the past few weeks. We won't know for a while, though, if all that property looking is actually translating into sales.

Looking at sales closed so far in July, the month isn't likely to finish strong. We'll likely see a further drop in the average sales price, largely attributable to a dearth of upper end sales. In the past 3 months, there have been no closed single family sales reported in the Sullivan MLS over $500,000. (The last $500K+ sale closed on 4/9.) Overall, I'm seeing a retreat by buyers to moderate price points. I'm not seeing anyone at the moment, for example, looking for that renovated farmhouse on acreage in the $500K to $650K range. By comparison, I've gotten a number of inquiries for getaway properties with 10+ acres and privacy for under $200,000, and lakefront houses in the $300K range.

Gas Drilling and Real Estate

Last evening, I was talking with a second home buyer who's thinking about buying a house somewhere in the Catskills, but was under the impression that anything in Sullivan County will be vulnerable to gas drilling. That's not the case, although this is a new area of due diligence buyers will likely be exercising here.

First, maps of the Marcellus Shale show it only under the western and northern parts of Sullivan County, with the eastern boundary depicted on many maps running from Barryville in the SW to Rockland township in the northeast. It seems that Bethel is in, Mamakating and Fallsburg aren't.  (I'm still looking for a good close-up map of  the Marcellus in Sullivan, if anyone knows a site with one posted.)

A second big factor is that the gas needs to be transported to market by pipeline. The Millennium Pipeline, a major gas pipeline in the northeast, runs through western Sullivan. (Pipeline map .pdf.) Proximity to the pipeline likely increases the probability of drilling activity. So even though Bethel, Liberty and Rockland townships include significant areas on the Marcellus, they're not close to the pipeline (with the exception of the far southwest corner of Bethel, where the pipeline runs through.) Even in the most vulnerable western townships (Fremont, Delaware and Cochecton), most of the land in those townships is miles from the pipeline. A good rule of thumb, in the short term at least, is that the closer you are to the pipeline, the higher probability there will be drilling activity in the area. (Note, though, that a drilling area doesn't have to be contiguous to the pipeline. There will likely be networks of small feeder pipelines to get the gas to the main Millennium pipe.)

Another consideration is that the gas companies are only interested, at least at this point, in larger acreage leases, or the ability to put together large acreage leases. I've been hearing that the "land men" have only been approaching landowners with at least 50 acres to lease, and preferably much more. If you're in an area with large, locally owned farms, there is a high likelihood those farms are being targeted for gas leasing. Large hunting club properties are also likely candidates for leases. The area where I live, for example, in Delaware Township is primarily second home owners on 5 to 25 acre parcels, so less likely that the immediate surrounding area will see drilling. But across the valley, as well as the northern end of my road, are some large farm holdings — and are more likely leasing candidates.

Some areas and types of property may be relatively immune. Covenant protected developments, like Black Forest Colony and Pine Ayre and any of the lake developments may not see much impact.

Lastly, in many areas that have experienced drilling, many reports indicate that increased truck traffic to and from drill sites is one of the major disruptions. Currently, second home buyers tend to avoid the busier state roads through the county (97, 55, 52, 42 and 17B) because they're major traffic arteries. Some of our county roads, particularly those that run to or through the  prime drilling areas, may also see significant increases in truck traffic. Its way too early to know what the traffic patterns or road use will be like, but potential increases in traffic start to become a consideration in a home purchase.

Some Thoughts on Gas Drilling

Go to any dinner, party or gathering of friends here in Sullivan County, and the topic of conversation inevitably turns to gas drilling. In case you've just come back from Antarctica, and haven't had the chance yet to pick up a local newspaper, Sullivan County sits at the eastern edge of the Marcellus Shale, widely considered the richest natural gas find in the U.S. The gas industry is salivating at the prospect of the billions of dollars in profits they anticipate from extracting that gas, located so close to the densest population centers in the country. (Energy and investment blogs and websites refer to it as the 'Marcellus Play'. The Marcellus Shale actually extends from Ohio east to western New York and south to West Virginia, but the richest section is considered to be right here under good old Sullivan County and our neighbors to the immediate north and west.)

"Land men" (their term, not mine) have been quietly scouring the area since sometime last year to get large landowners, primarily farmers, to sign gas leases. In the last few months, the leasing has intensified and the 'Marvcellus Play' is getting wider media attention (including a number of articles in the NY Times). Public awareness (which includes elected officials) about gas drilling was almost non-existent at the beginning of the year, but has been growing, and is now like a tsunami. The public, our elected officials, and various environmental advocacy groups are struggling to ramp up quickly on what could be the biggest change to ever roll over the upper Delaware region. (I say 'roll over' because the Federal Energy Policy Act of 2005 not only exempts the gas industry from most local oversight of their drilling activities, but also from the Federal Clean Air and Clean Water acts. Thanks Dick Cheney!) Even the two key water protection entities in the Upper Delaware basin, the 4 state Delaware River Basin Commission (chartered with protecting both the quality and quantity of water in the Delaware River, the source of drinking water for a number of major cities including Philadelphia) and the NYC Department of Environmental Protection / Catskill Watershed Corporation (responsible for NYC's water supply) have been blindsided and are now rushing to evaluate the impacts of gas drilling. (The reason water is key to drilling is that 1 to 2 million gallons of water are required to drill each well. The water has to come from somewhere and has to be disposed of after drilling.)

One of the biggest problems right now is the lack of good, objective information. How many wells will there be? Is drilling safe? What are the environmental impacts? The lifestyle and community impacts? The impact on our infrastructure? Listen to spokespeople for the gas industry, or the New York State Dept. of Environmental Protection (responsible for issuing drilling permits and inspecting well operations) and drilling is benign, safe and generates only prosperity and happiness. Listen to the drilling foes, and its an evironmental Armageddon that tears communities asunder and leaves a toxic soup in its wake. People who visit different areas where drilling is already active come back with widely varying reports — some operations seem to be poster children for land raping horror, while others seem to be relatively innocuous with happy famers collecting royalty checks. Its like the proverbial blind men describing the elephant.

I think it is safe to say, though, that the gas industry has no other motivation than profits. They're not stakeholders in our communities and when the gas runs out they'll be gone. They have deep pockets,  political connections and armies of well paid lawyers. They're Goliath to our David. We have to act, and act fast, to organize the resources to protect our interests.

I don't know what that is yet. I don't think many folks here do. I"m not sure where to hang my hat yet on this issue. But like many folks around here, I need to learn a lot more.