Sullivan County Real Estate

Return to Frugality and Moderation

I was driving home from the city yesterday, and for about twenty miles was behind a Porsche Cayenne, the large Porsche SUV. On the radio, Bloomberg AM1130 was giving a play by play of the cliff-falling end of day sell off. Staring at the wide hindquarters of the 14 m.p.g., $70,000 Porsche Cayenne, I couldn't help but reflect on the relationship of our beyond-our-means consumption and the economic mess we're in.

I'm 52, and was raised by parents who grew up during the Depression. They were frugal but not skinflints. We were working to middle class (back then there wasn't such a huge gap between those two) and we never seemed to lack for anything. We didn't have upper class aspirations; my parents knew what we could afford and, apart from a home mortgage, paid for everything in cash. No, I didn't have to walk uphill both ways for miles in the snow to school. I grew up in Florida. Its flat with no snow.

Houses back then were much smaller than they are today. Our house was about 1,300 sq. ft. with one bathroom, very similar to other middle class houses. Families shared bathrooms, kids shared bedrooms and guests slept on a pull out sofa in the living room. A house was considered pretty nice if it had a den and a second half bath; a private bathroom in a 'master' bedroom was considered pretty fancy - the kind of houses the lawyers and doctors had. My parents didn't replace things because they went out of style, only because they wore out and couldn't be repaired. We had the same turquoise pull out Simmons sofa for 30 years, and my parents saw no need to replace the avocado kitchen appliances. After all, they matched the Waring blender and electric skillet.

We never owned a vacation home, but we had relatives who did — on Sebago Lake in Maine. We'd spend a week with them every summer. Their lake houses were small, seasonal cabins with at most two bedrooms and big screened porches. I didn't think in "square feet" when I was 10 years old, but I'll bet that none of their lake cabins was more than 1,000 sq. ft. There was little semblance of privacy, and on big family weekends, there were adults and children sleeping everywhere — in bunk beds, on air mattresses on the porch, on the sofas and in a pup tent or two pitched in the yard. Those summer weeks at the lake were some of the best times of my childhood.

Thoughts about a vacation home are so different today. In the 7 years I've been selling real estate here (primarily vacation homes), I've watched buyer expectations go up and up and up. Many want absolute privacy, in a setting of pristine seclusion. If they're looking for a lakefront home, they want that "On Golden Pond" magic. Buyers want houses that are 'authentic' and 'charming', preferably renovated in great condition, but with at least three bedrooms and two baths and an open floor plan with a stylish, modern kitchen. The list of desires and requirements for many second home buyers has grown so large, that its almost the house equivalent of a Porsche Cayenne.

I expect that the recent economic chaos, combined with the oil price shocks earlier this year, will reshift the vacation home market back to basics. It won't happen immediately, but I think that buyers may have very different expectations next year. Smaller, more affordable houses in less pristine or private settings that have been overlooked may be more appealing. The little cottages in Smallwood and at lakes like Yankee may find a new audience. Demand could increase for less expensive seasonal cottages that aren't winterized for year round use.

How people buy may also shift. Families and groups of friends may band together to share in a purchase. Sharing a vacation home means giving up some spontaneity, but it a great way to reduce the cost. Car-less city folks might also join forces with their home sharing partners to buy and maintain a car.

We could also see renewed interest in co-op bungalow colonies. For the most part, they've been the overlooked ugly ducklings of the second home market for years. But they could offer a vacation getaway option at very affordable prices.

I don't have a crystal ball about what real estate here in 2009 will look like. Hell, even the CNBC experts can't predict where the DOW is likely to end up at the end of the day. But I think its fair to say that this economic shock is likely to dramatically change the dynamics of the second home markets around New York City. Affordability will likely trump extravagance, and SubZero refrigerators and granite countertops may be seen as costly extravagances.

Sullivan County may be well positioned as a second home choice if we do shift back to a 1950's mentality. We have a good stock of small cottages and seasonal bungalows that could form the core of a revived market.

Interesting Pending Home Sales Data from NAR

NAR (the National Association of Realtors) released its Pending Home Sales data for August. The PHS is more 'forward leading' than closed sales data, as it tracks deals made and contracts signed, but not yet closed. The August PHS activity will be reflected in September and October's closed sales numbers.

Nationally, the PHS posted a 7.4% gain from July, and is up 8.8% from August, 2007. The rise came as a surprise, as many analysts were expecting it to fall again (for the 6th month in a row). The 93.4% index number is the first time its risen above 90% this year. (The PHS is based on a baseline of 100, reflecting the level of contract activity in 2001.)

The most interesting part of the data is that the PHS rose most in the West (18.4%), where foreclosure activity has been highest, and bargain piced foreclosure homes have been flooding the market and driving prices down. Blogs I've been reading this morning have been talking up the uptick in the west being a direct result of sharply lower prices. That logic isn't quite holding across the board, as the south only rose 2.3% last month (and is down 2.1% year over year), and Florida — which comprises a large part of the southern sample — has been one of the most foreclosure affected markets in the U.S.

The Northeast posted an 8.4% increase in August over July, and is up 2.8% year over year.

Of course, all of this August activity predated the mid-September market meltdown, so its hard to predict what September's numbers will look like. But it does support the argument that there is a strong correlation between dropping prices and increasing demand. The west has been the worst performing region from a price standpoint for months, with August's closed sales posting a 23.9% year over year decline (compared to -9.5% nationally and -3.8% in the northeast.)

Where are Sellers and Prices?

A couple of comments on the previous post caught my eye, namely what's the price cut level that would bring NYC buyers back into the Sullivan real estate market? Some people suggest we may need to drop 30% or even more to be perceived as a 'good value' and reinvigorate demand. (My personal opinion is that, in the short term until this economic chaos settles down, there isn't a lot to be done on the pricing front to stimulate relatively flat demand. But at some point, things will stabilize and demand will pick up — the wild card, though, is at what price.)

Demand was was sluggish through the summer, although did show some pick up from the doldrums of last winter. Over the summer, I know a lot of listing agents were encouraging sellers to reduce asking prices to bring them in line with market realities. Two or three months ago, there was a market of buyers looking for good values, and would jump on them. I wrote over and over in the last few months that buyers were motivated by the perception of value and essentially thumbing their noses at properties they didn't see as good values. Over the summer, the 'market basket' of average and median asking prices for single family homes in Sullivan County barely budged. The average asking price has only dropped about 4% to 5% this year (depending on whether you compare to January, or the 2008 peak in July). The median has fallen a bit more, in the 7% to 9% range.

Its interesting to look at the amount of price reductions relative to the total inventory of 1,187 single family homes in the Sullivan MLS.

Price Reduction from Original Asking Price	# of Listings	% of Total (1187) Listings
30% or more	34	2.9%
20 - 29.9%	62	5.2%
10 - 19.9%	201	17%
0.1 - 9.9%	242	20.4%
No Price Reduction	539	45.4%

The price reduction percentages are probably skewed a little low because of the practice of 'relisting' — where a listing has expired or is cancelled, and then a new listing for the same property entered at a lower price. But even if I could adjust for that, it probably wouldn't change the picture in any significant way. What is striking is how little overall price adjustment there has been on the seller side, even as we've seen actual selling prices drop around 20% from their 2007 peaks. 

Current Market Conditions Posted with September Data

I just posted my monthly Current Market Conditions Report, with Sullivan County real estate sales data through September. If you look at sales data through September, the modest pickup in sales we saw through the sales was continuing (even though prices have been trending lower). However, I don't know how relevant it is, given that closed sales data is a backward looking indicator, reflecting buyer behavior over the summer. As I've been writing this today, CNBC has been on in the background, and its another rout in the markets, with the DOW down 800 points at one point. New activity here has come close to a screeching halt in the last couple of weeks, as a lot of folks have shifted into 'economic crisis' mode.

Villa Roma Reopens

The Villa Roma, one of the last remaining Catskills resorts, had its grand reopening last weekend, after rebuilding from a devastating fire in 2006 that destroyed the resort's main building. Villa Roma has 140 hotel rooms and 230 time share units. (The time share units, along with the Clubhouse at the golf course and most of the recreational facilities remained open during the reconstruction of the main hotel.) I haven't been over yet to take a look, but friends report that the place looks fabulous. The reopening of the resort will certainly bring a much anticipated boost to nearby Jeffersonville, where many Villa Roma guests went to eat and shop.

Yeager Realty to Close Sullivan Offices

Yeager Realty Associates, the largest real estate brokerage in Sullivan County with 3 offices and three dozen agents and associate brokers, is closing its 3 offices. Paula Yeager, the principal broker who started the company in 1984, announced the shutdown at a company meeting Monday afternoon. (Update 10/2: Paula indicated in an interview with the Times Herald Record printed this morning that the company was not closing, just the offices, and that agents, if they chose, could continue working for her from their homes.)