Current Market Conditions Posted with October Data

Well, folks, I finally got the Current Market Conditions report posted with the October sales data. I've been struggling with this one for a few days, writing it, setting it aside, reading it and then rewriting it. The picture looks pretty bright from the data, with sales up 13% from September. But this is closed sales data for the period ending Oct. 31st, and almost all of the sales reflected deals that were made prior to Sept. 15th, the date of the Lehman bankruptcy and the ensuing economic crisis. So it's really tough to base any trend predictions on that, because I think consumer behavior has radically shifted in the last 7 weeks.

There is a very interesting factor I culled from the data. It appears that the second home sector, as a percentage of the total sales, is shrinking, to 32% of total sales for the 3 months ending Oct. 31 2008 from 44% for the same period in 2006. It's somewhat of a judgement call, based on categorizing each sale for both periods as either second home or primary/investor on some qualitative factors. I'd love to get folks thoughts on that.

Please check out this month's Current Market Conditions Report and drop on back to leave your thoughts or comments.

Comments

[Chris L]

Thanks David. I always enjoying your report. In the summer I will start looking for a place between Liberty and Callicoon and will definitely use your services.

[outdoorsy type]

Some folks just want out of the catskills

http://newyork.craigslist.org/mnh/reo/911122879.html

[David Knudsen]

Pioneer, I took off your comment. These really long and rambling more generic pollitical/economic posts really aren't on topic here. There wasn't a single reference to Sullivan County or real estate. Mister Nick, I also took off your reponse to him, because without that post it doesn't make sense.

[Mister Nick]

Good. I knew I shouldn't have responded. But those people just bring out the worst... ;-)

[bix]

That's a sobering account, Dave, but not surprising.

Page one story in the Times today about a town in Calif. where prices are down 90 pct. I wonder if sellers are pigheaded about pricing there too.

[Stephen]

Bix -- FYI, the story doesn't say prices are down 90%, but that 90% of homeowners are underwater -- they owe more on the mortgage than the houses are worth. Of two of the people profiled in the town, one is a contractor whose interest-only loan will balloon to $12,000 per month by 2015, and another person is cutting back on buying DVDs, from 50 per month to one. Interest-only loans and 50 DVDs a month? No wonder some people are feeling the pinch.

[David Knudsen]

In California its a VERY different situation. Also, from reading the article, prices there aren't down 90%; the 90% figure comes from the percentage of mortgage holders who owe more on their homes that they are currently worth. In many parts of California, you had these new developments spreading further and further out from the cities — basically, overbuilding and speculation. There are a whole lot of intertwining factors, but those far far out exurbs have lost their appeal and plummeted in value.

Five or six years ago, developers were looking to Sullivan as the 'next' New YOrk City exurb development ring, and there were a few highly publicized ventures. Remember D.R. Horton's "The Grande at Hurleyville" with the signs that said "Drive 30 minutes, save $50,000" (or whatever, but that was the gist.) We were just a little too far, though, for large scale suburban development to take hold here. And that may have been a saving grace. Look over at East Stroudsburg, PA, where (often shoddily built) suburban tract houses were slapped up and marketed to less-creditworthy city apartment dwellers, holding out the promise of raising their families in an area of good schools and good air. A lot of those buyers were sub-prime borrowers who are defaulting. The area around East Stroudburg is a poster child for what went wrong, and the high foreclosures in that area will likely be a drain for years to come.

[Lisa]

We don't see any good value in sullivan county. Just lots of unsold, over-priced homes.

[bix]

You're right on the 90 pct. - careless wording on my part.

Lisa, I experienced the same thing when I was house hunting last spring. That is something many have commented on. The rare properly priced house sells quickly.

[compo]

Hello everyone,

I own land in Bethel which I plan to construct a house on next year. I recently discovered this blog which I think is great. Does anyone know of any other online community resources for Sullivan County where you can discuss issues, kids activities, restaurants, happenings, etc? I want to interact with others in the community and do not know if anything like that exists. Thanks for this blog and keep up the good work.

[o_lac]

I'm currently constructing a house in the town of Highland. I've been following this blog as well for quite some time. Understandably, most of the discussions are on pre-existing homes.... Is there any available data on new construction in Sullivan County? Are # of buiding permits kept track of?

[cfranch]

Well the stock market meltdown continues. After hours intel corp reports sales down and the market is gapping down to the October lows. Cannot see how this is good for a second home market. Check out craigslist apartments for rent in the financial district of Manhattan. I used to live at 21 West Street and I can tell you rents are now down about 30%. Apartments are renting for 10% less in my midtown west building. Lonely? Just show up at any open house in new york city and fill out the intake form asking for your email and telephone. You will be called at least 3 times a week and receive daily emails. If people aren't buying or renting in New York why would they buy a second home?

[andy]

O_lac's post raises an interesting point: As bad as things are in the existing home market, it must be worse -- and riskier for buyers - in the new construction market. Lots of existing home buyers bought long enough ago that they can cut their selling price and still come out with a profit. Builders, however, can't raise their prices in this environment and therefore can only maintain or increase their margins by cutting quality corners, often in ways that buyers won't be able to detect. Over the past year, inflation has certainly raised builders' material costs.

[Bond Market]

Bonds
Credit Markets Dip Into Absurdity
Matthew Craft, 11.11.08, 07:05 PM EST

Blame forced selling, not approaching apocalypse, for the madness in the bond markets.
To judge from the crystal ball of debt markets, next year will bring some incredible calamity, maybe a depression, maybe worse. Bond prices suggest that nearly one in five companies with high-yield debt could slip into bankruptcy. The average prices for certain loans have dropped to 70 cents on the dollar, what they usually fetch in bankruptcy. The differences between corporate bonds and Treasurys now stretch beyond some investors' beliefs.

"Spreads are more than ridiculous," said David Kotok, chairman of Cumberland Advisors in Vineland, N.J. "Either we have dysfunctional credit markets evidenced by absurd pricing, or the market pricing is accurately forecasting the Great Depression of 2009, '10, '11, '12 and '13."

With three-quarters of high-yield bonds trading at distressed levels, the market implies a one-year default rate of 18.5%, according to Garman Research. That's worse than most expectations and higher than previous peaks of 13% in 1991 and 11.5% in 2002. Standard & Poor's forecasts a 7.6% default rate in a year from now. The rating agency's worst-case scenario has the default rate hitting 9.6% at the end of 2009.

[ross]

Andy - your assertion about material costs is off the mark. Lumber and materials have never been cheaper, and labor is cheaper also (supply and demand, not much demand equals lower prices). If you are going to build, add on or renovate this is the best time in 6 years in terms of contractor availability, vendor responsiveness and material costs.

[Tracy]

In response to Compo's comment/question above: We recently purchased a summer home in Bethel, and I would love to see a site or blog that would allow "summer people" to network, get ideas for dining, activities with children, etc. I have two sons, ages 6 & 8, who love spending time in the country, but we're always looking for new things to do while we're there.

The only source of information I've found is an ad-based magazine available at the supermarket checkout called "The Catskill Shopper" which lists local businesses, events, camps, farmer's markets, etc. It is our summer bible for planning activities with the kids.

Maybe we could start a Facebook group or other internet medium to allow summer families to share ideas for entertainment and activities. We do know several other families with young children who spend summer or weekends in the Catskills, and we share ideas among each other. I'm sure a timely and on-going on-line conversation between summer families would be a positive tool for both current summer-homeowners as well as prospective ones.

[andy]

Ross -- I don't see these lower costs you're referring to reflected in new construction home prices.

[cf]

is andy kidding? what does he think the lowest # of building permits issued in 40 yrs, record breaking foreclosures and short-sales represent in terms of pricing? most new construction is being given away. and bloomberg just reported cost of living fell by the largest % in 60 yrs.

[compo]

Andy,

Ross is correct. Lumber prices are about 50% cheaper than their recent peak a few years ago. See the link below. Many other commodity prices (copper, oil, etc.) have been plummeting with the recent slide in the world economy. You are not seeing a similar drop in spec home prices because they started the process when commodity prices were higher. I agree that if you are in a position to construct a new home (one off custom built/modular etc. vs buying from a spec builder), there has not been a better time in years.

Tracy I appreciate your comments on networking. I agree more information can only be good for the area and even year around residents. Perhaps we should correspond more. I am hesitant to post my private email and I do not know if you are allowed to do so. I recently started following this blog so I am not sure of all the protocols.

Thanks all. I really appreciate reading this blog.

http://www.nahb.org/generic.aspx?genericContentID=527

[Isaac K]

If one had purchased a home in Sullivan County on January 1 2008 the AVERAGE price of a home (as seen in David's monthly report) was approx. $200,000 while the S&P500 was 1,468. Fast forward to October 31, 2008 amd the average home is down to $175,000 (approx -12%) while the S&P500 is down to 986 (approx -33% and -40% through today) !!!

I know hindsight is 20-20 but where WOULD you have invested that 401K/IRA money??

Nobody likes to loose money but given the choice I prefer loosing less.