Not Armageddon

I've taken some flak from my real estate colleagues here in Sullivan County for the, well, downer tone of my October Current Market Conditions report. I wrote that monthly column during the 1st week of October which was not the brightest week in the economic calendar, and used phrases like "screeching halt" and "economic Armageddon." The Armageddon reference might have been a bit, well, dramatic — although pretty apt descriptors for the first couple of weeks of October.

Yes, business is slow, but its not dead. The Sullivan MLS shows 99 single family homes "pending" or "in contract", and from calls I've made in the last week about the status of various listings for potential clients, there are another couple of dozen in active negotiation. A preliminary peek at October's closed sales figures indicate that they'll be up slightly from September. Buyers are going through with every deal I have underway, and other agents I talk to are indicating that most buyers are sticking.

What they're sticking with, though, is somewhat different than a year ago. Caution, moderation and good value are the watch words. Of the 99 single family homes listed as "pending" or "in contract" in the MLS, only 4 have asking prices above $400,000. The upper end continues to be pretty soft, but that's where savvy buyers looking for something really special may find some great values. For example, 2 large renovated farmhouses on substantial acreage (one with 85 and one with 172 acres) and ponds have recently come back on the market at $699,000 and $799,000. We haven't seen prices like that for this quality and acreage in a number of years. (Click here to see the 2 listings.) A 107 acre property with stunning waterfalls, listed at $699,000, just went into contract. A dramatic custom contemporary on 14 acres with a spectacular view of the Delaware River valley just dropped in price from $895,000 to $695,000. True, none of these houses are in the $200K range where we're seeing the most action, but they're very interesting opportunities. (I also wish I had a dozen cute little houses on a couple of acres to sell around $200K!)

Comments

[Kevin G]

I think realtors need to defend buyers in this market.
Those who continue to defend sellers will very soon go out of business while those who defend offers of any kind will be the ones making sales.

85 acres for 699k? who are we kidding? Is this some kind of joke?
Large acreage of that kind is not even moving at 299k
Look at the MLS and you will see. Those large properties of 50+ acres for around 200k or more are sitting still without one offer.

[David Knudsen]

Kevin, your comment and my editing of my post passed in the night. I took out the line about "85 acres for $699K is almost like getting the house for free." True, there isn't much raw land moving. (To be fair, there isn't really much of anything moving in the upper price ranges, land or otherwise.) But there have been a few large acreage sales, and for rolling farmland on back roads, it seems as though the price lately has been in the $5K to $6K per acre range.

When you talk about real estate agents defending buyers, you need to make a distinction between 'buyer agents', who represent the interests of buyers and have a fiduciary duty to them, and 'sellers agents' who have a fiduciary responsibility to sellers and represent their interests. As a buyer agent, I have more leeway to give my opinions about asking prices and seller expectations — and I've been very vocal on this site about that.

Sellers agents have a tougher row to hoe in this environment. Legally, they can't compromise a seller's position or do anything to undermine it. But behind the scenes, the good agents are working hard with their sellers to adjust prices in line with market realities. Some are reasonable and some aren't. The market ultimately deals with the ones who aren't. Their property doesn't sell.

[Bix]

I actually know a gent who may be interested in raw land. I have seen some listings and find some if not most of them staggeringly overpriced.

[henry]

Hi Dave,

Your comments were appropriate. Look at auto sales, smaller discretionary purchases than second homes. Ford described the same events on their monthly sales call on 10/1/08 as a "natural disaster":

"When the crisis emerged on Wall Street and the debate started in Washington, CNN I understand was the most watched program over this past weekend. It was tantamount really to a natural disaster and the kinds of showroom traffic and ups in the showroom that we’re accustomed to, the events of a large storm or I hesitate to say immediately following the 9/11 situation. The 10-day sales in the last 10 were extremely weak and most manufacturers’ activity fell off sharply."
Source: http://seekingalpha.com/article/98112-ford-motor-company-sales-call-transcript?page=5

Separately... Congrats on the NY Times mention!

[henry]

Update... October auto sales even worse. Lowest SAAR since 1975 (in spite of lower gas prices) on credit, consumer confidence and recessionary conditions. GM described "shell shocked" consumer on call today. Yikes.

[David Knudsen]

I think October will go down as the 'everything tanked' month. It was a frightening month, and I don't think many people spent much on anything. Over the past week, though, once the markets seemed to start stabilizing, I've gotten a number of calls from folks I worked with over the late summer and into September asking me about anything new on the market, and reminding me that they're still interested. So I think people may be starting to poke their heads up out of the foxhole.

Regarding GM, their sales may be in the toilet, but only some of that can be attributed to the October meltdown. If we hadn't seen the Sept/Oct. meltdown and gas prices had remained high, GM would still have had lousy sales because of their failed product strategies. They just kept churning out those Escalades and Yukons, when buyers were shifting to smaller and greener. GM hasn't made a car in 20 years that's made my short list to buy.

[henry]

The SAAR figure is an industry number that includes large declines from companies like Toyota (which had a large no-interest financing promotion).

It would be good news if real estate markets like SC picked up; however, it seems very counter intuitive as none of the headwinds (credit, consumer confidence, unemployment, economy, etc.) have abated and ask prices have not moved.

[JM]

We're not even into the full swing of the recession but just the very begining.
When unemployment reaches 10% or higher, we won't need blogs to chat about prices, offers, ratios or other metrics. The silence will speak for itself.

[Chris]

It sure is Armageddon in NYC
Real estate collapse is accelerating.

http://www.bloomberg.com/apps/news?pid=20601014&sid=aY13Id6B9RqE&refer=funds

Chris