Good Time to Buy?

In the post below (Cochecton in UK article), someone commented that "... real estate folks ... always tend to believe anytime is the time to buy." Its understandable that us Realtors would have that sentiment, because making sales is, after all, the way we pay the bills and put food on the table. But I find that I, too, have a similar reaction when my colleagues say "now is a great time to buy" without being able to give me real reasons "Why?"

Whenever I hear that from colleagues, I always ask "Why?", and generally they can't give me any solid reasons. Often the response is, "Well, prices are good now and may well be higher in the spring." I don't think there's any way of knowing if prices have bottomed out, given the economy, and its very doubtful we're going to see a spring buying surge that's going to push prices markedly up.

Personally, I don't think "now" is necessarily a "bad" time or a "good" time to buy, depending on what you're looking for, the deal you can strike, and your financing parameters. Mortgage money is pretty cheap right now if you qualify, and there are some sellers who are looking to strike a deal and get out of their houses. I think that 'good' or 'bad' is going to be on a house by house, opportunity by opportunity basis. Florida has been in the real estate doldrums for going on two years now. The 'market' hasn't bottomed out into an even plateau of coast to coast good deals, but there are good deals to be had.

Just like in stocks, it will be very difficult to time the bottom of the market, and different types of properties may "bottom out" at different levels and different times. You just need to keep your eyes and ears open. A $450,000 3 bedroom lakefront house on Swinging Bridge could be a great deal, while a $699,000 one probably isn't — and both could be on the market at the same time next month or in six months.

Comments

[Banker from NYC]

It might be a tough pill to swallow but we may not see bottom until 2012.
Selling now might be in the best interest if all those contemplating to sell.
In a deflation spiral, postponed purchases create more deflation...."who wants to catch a falling knife?"

We may very well see 1999-2000 prices in real estate, more-so in NYC/Metro than anywhere else...but it will take 2-4 more years of delation. Only those who bought long ago will sell; most others will try and hold thinking each spring will bring a miracle.

Gas now stands at 1999-2000 prices.
Wages are at 1999-2000 wage levels (adjusted for inflation).

With deflation comes PAIN. No-one will be able to hide from deflation and deleveraging.

[friday910]

Some more National numbers to digest:

Home prices in record decline
http://money.cnn.com/2008/11/25/real_estate/third_quarter_case_shiller/?postversion=2008112515

Existing home sales tumble
http://money.cnn.com/2008/11/24/news/economy/existing_home_sales/index.htm?postversion=2008112411

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"US Retail Gasoline Prices, 1990-2007"

http://en.wikipedia.org/wiki/Image:Gas_Prices_Medium_Term.png

[gus knikoas]

I saw gas as low as 1.85 in Jersey (1999/2000 price)

Who says real estate can't fall the same amount?

[mal]

The fact that gas prices have dropped is both good and bad. The timing will be cheered by oil producers, and lamented by anyone with an environmental heart, because it reduces leverage for pursuing alternative energy strategies. On the other hand, it does create the equivalent of a significant salary increase for many people, and hence is a very effective stimulus. Lower gas prices in the short term will at least remove one major concern about the costs of a 2nd home in Sullivan county. But current prices are not necessarily a return to 1999 —  the national average gas price was actually $1.83 in Jan 2005. In fact, adjusted for inflation, gas prices were within the range $1.50-$2 from 1986-2005. So in that context, the price of gas could be seen as returning to a level of stability following a temporary price surge (much like in the 1930's and 70's).

[friday910]

"... In a deflation spiral, postponed purchases create more deflation...."who wants to catch a falling knife?..."

Besides your relation, one other relation I found on "postponed purchase" and deflation is here: http://tech-spirits.com/index.php?option=content&task=view&id=630&Itemid=2

"... * Deflation is worse: falling prices causes postponed purchase, economy stops growing, firsms cut price and spending, economic death spiral..."

Both statements are "equally" vague when relating it to the real estate market.

Here is an interesting opinion regarding deflationary spirals and real estate prices, written before the September meltdown.

http://blogs.wsj.com/developments/2008/04/22/yales-shiller-us-housing-slump-may-exceed-great-depression/

[friday910]

Your monthly "Overview of the Sullivan County, New York Real Estate Market" work is extremely helpful, but there is something that really bugs. Somehow your "Average and Median Sales Prices" doesn't seem to be in sync with your "How much Does a Home Cost" page.

This is info from your "What House Cost in Sullivan County" ranging from 2004 to 2008

The Farmhouse (same picture)

2004
The Farmhouse. $400,000 to $600,000, depending on size and amount of acreage, in good condition. Farmhouses with large acreage (80+) can sell for more.

2005
The Farmhouse. $400,000 to $750,000, depending on size and amount of acreage, in good condition. Farmhouses with large acreage (80+) can sell for more.

2006
The Farmhouse. $400,000 to $750,000, depending on size and amount of acreage, in good condition. Farmhouses with large acreage (80+) can sell for more

2007
The Farmhouse. $400,000 to $750,000, depending on size and amount of acreage, in good condition. Farmhouses with large acreage (80+) can sell for more. At the lower end of this range, you're looking at smaller houses, about 1,200 to 1,500 sq. ft., with 1 bathroom.

2008
The Farmhouse. $275,000 to $750,000, depending on size and amount of acreage, in good condition. Farmhouses with large acreage (80+) can sell for more. At the lower end of this range, you're looking at smaller houses, about 1,200 to 1,500 sq. ft. on 3 to 5 acres; at the upper end, likely 50+ acres. Some "estate quality" large farmhouses on substantial acreage (100+) can be above $1 million.

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The same picture

2004
The Farmhouse Fixer-Upper. $200,000 to $300,000 with up to 10 acres to $400,000 to $600,000 with 40 to 100 acres. (And I mean "fixer upper", typically requiring structural or systems work is addition to cosmetics.)

2005
The Farmhouse Fixer-Upper. $200,000 to $300,000 with up to 10 acres to $400,000 to $600,000 with 40 to 100 acres. (And I mean "fixer upper", typically requiring structural or systems work is addition to cosmetics.)

2006
The Farmhouse Fixer-Upper. $200,000 to $300,000 with up to 10 acres to $400,000 to $600,000 with 40 to 100 acres. (And I mean "fixer upper", typically requiring structural or systems work is addition to cosmetics.)

2007
The Farmhouse Fixer-Upper. $250,000 to $350,000 with up to 10 acres to $400,000 to $800,000 with 30 to 100 acres. (And I mean "fixer upper", typically requiring structural or systems work is addition to cosmetics.)

2008
The Farmhouse Fixer-Upper. $200,000 to $300,000 with up to 10 acres to $400,000 to $800,000 with 30 to 100 acres. (And I mean "fixer upper", typically requiring structural or systems work in addition to cosmetics.

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or

The Charming In-Town House

2003
In the country towns of western Sullivan County (Jeffersonville, Callicoon, Callicoon Center, Narrowsburg), occasionally there interesting "Victorian-era" houses, often with original detailing, on the market. Expect to pay from $150,000 (for a smaller 2 or 3 bedroom house) to as much as $300,000 (for a larger, grander home that's been restored.) The house at the left, in Callicoon Center, sold for $189,000 in April, 2003. It does, however, sit on a main road. The Village of Liberty offers the best value in older homes, with nice examples under $150,000 — but higher taxes in the Village of Liberty can offset some of the 'savings.'

2006
In-Town with Charm. $175,000 for a smaller house to $350,000 for a larger Victorian with nice detailing. On smaller, town-sized lots. (Less expensive in Village of Liberty due to higher taxes).

2007
In-Town with Charm. $175,000 for a smaller house to $350,000 for a larger Victorian with nice detailing. On smaller, town-sized lots. (Less expensive in Village of Liberty due to higher taxes).

2008
In-Town with Charm. $175,000 for a smaller house to $350,000 for a larger Victorian with nice detailing. On smaller, town-sized lots. (Less expensive in Village of Liberty due to higher taxes).

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1. So for the Farmhouse, the average and the spread both went up between year 2004 and 2008, and the average price came down 15% from a 3 year constant price.

2. The average price for a current Farmhouse fixer-upper is higher today than it was in 2004, 2005, 2006, and the same as it was in 2007 for 40-60 Acres.

3. And the "In-Town with Charm" has been the same price for the last few years.

And just because you mentioned "A $450,000 3 bedroom lakefront house on Swinging Bridge could be a great deal"...

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2004
Private Lakefront. $450,000 to $1 million on a 2 to 5 acre lakefront lot with 200 to 300 ft. lake frontage (with higher prices for Chapin Estate.)

Lakefront in Newer Community. $350,000 to $550,000. 1/2 to 1 acre lot, 90 to 140 ft. lake frontage. Nice settings, but not totally private

Traditional Lakefront $275,000 (for a small cottage under 1,000 sq. ft.) to $400,000 for a larger cottage. Small lots, close neighbors

2005
Private Lakefront. $525,000 to $1 million on a 2 to 5 acre lakefront lot with 200 to 300 ft. lake frontage (with higher prices for Chapin Estate.

Lakefront in Newer Community. $425,000 to $650,000. 1/2 to 1 acre lot, 90 to 140 ft. lake frontage. Nice settings, but not totally private.

Traditional Lakefront $300,000 (for a small cottage under 1,000 sq. ft.) to $450,000 for a larger cottage. Small lots, close neighbors.

2006

Private Lakefront. $525,000 to $1 million on a 2 to 5 acre lakefront lot with 200 to 300 ft. lake frontage (with higher prices for Chapin Estate.) More information on

Lakefront in Newer Community. $450,000 to $700,000. 1/2 to 1 acre lot, 90 to 140 ft. lake frontage. Nice settings, but not totally private.

Traditional Lakefront $350,000 (for a small cottage under 1,000 sq. ft.) to $500,000 for a larger cottage. Small lots, close neighbors.

2007
Private Lakefront. $525,000 to $1 million on a 2 to 5 acre lakefront lot with 200 to 300 ft. lake frontage (with higher prices for Chapin Estate.)

Lakefront in Newer Community. $450,000 to $700,000. 1/2 to 1 acre lot, 90 to 140 ft. lake frontage. Nice settings, but not totally private.

Traditional Lakefront $350,000 (for a small cottage under 1,000 sq. ft.) to $500,000 for a larger cottage. Small lots, close neighbors.

2008
Private Lakefront. $525,000 to $1 million on a 2 to 5 acre lakefront lot with 200 to 300 ft. lake frontage (with higher prices for Chapin Estate

Lakefront in Newer Community. $400,000 to $700,000. 1/2 to 1 acre lot, 90 to 140 ft. lake frontage. Nice settings, but not totally private.

Traditional Lakefront $300,000 (for a small cottage under 1,000 sq. ft.) to $450,000 for a larger cottage. Small lots, close neighbors. Occasionally there is a small lakefront cottage in the $250,000 that generally hasn't been fully winterized for year round use.
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Do you really think a Lakefront in a Newer Community that was average in 2004 should be considered a "great deal" today?

[David Knudsen]

friday, your historical track of this is helpful. I need to do some readjustment. On the "private lakefront", I probably should have had a higher 'bottom' in 2006/2007, and a higher top in 2007 (More like $1.2M), but there hasn't been much downward movement in private lakefront this year. These also aren't necessarily where I think these prices should be, but where I'm seeing the sales come in and where the availability in inventory is. The lower end of "Newer Lake Community" would probably be Emerald Green, where you can probably get a 3BR lakefront now under $400K. I haven't seen Swinging Bridge come to that price level yet, but has been, over the past few years, somewhat more expensive than Emerald Green on a comp basis.

Regarding farmhouses, in 2006 and 2007, I probably should have gone a little lower with the bottom (to around $350K) and higher on the top ($1M) for a wider spread, and dropped for 2008.

Please keep in mind that this isn't a historical tracking measure, although you've filed it away to refer to. I'm just trying to give NYC folks a general idea about what one can expect to pay for different types of houses here. Also, I tend to think about houses in these categories without significant compromises. A farmhouse with low ceiling heights, a neighboring house close by or on a busier road may well sell for substantially less than these numbers. Likewise, lakefront houses with "compromised" lakefront, like marshy wetlands or no lake view from the house, can be priced lower.

Regarding the gap between the monthly average and median sales prices, and "what houses cost here", I often try to explain that gap in my monthly reports. The overall average and median prices include all types of homes sold here, from falling down in-town fixer uppers at the low end to expensive farmhouses. The average and median, all along, for the overall market basket in Sullivan County, have been well below the prices for houses that are more typically purchased by New York second home buyers.

[David Knudsen]

friday910, another thought ... I think over all you highlight an important point. Selling prices, which is the final word about what buyers are actually willing to pay, are coming down, but asking prices, for the most part, aren't, or at least in any meaningful way. I don't know where prices will ultimately end up, but I do know that the asking prices for a lot of the inventory on the market have been real turnoffs for buyers.

I use Swinging Bridge often as an example, because I think its a good barometer for the second home market. Its middle class, mid range in price, and has a fairly wide demographic demand profile. I don't have the historical data to know what a lakefront 3BR would have sold for there in 2003 or 2004, and the lake was beset by the water and dam issues in 2005/2006. But my gut feeling, based on other lakefront houses I sold in 2004, is that a 3BR, 2BA lakefront there in good condition would have sold in the low $400's, with a 2 bedroom in the mid to upper $200's.

In 2008, there's only been one sale of a 3BR on SB, for $495,000 this past June. There have been a number of others listed, but the next 'up' from the house that sold had an asking price of $549,000, and they went up — way up — from there.

Over the past couple of months (yes, since the September downturn), I've worked with a number of buyers looking for 3BR lakefront houses on motorboat lakes. Their price point is pretty much the mid-$400's, not the mid $300's. I've spoken with other agents who also have buyers looking for similar houses in a similar price range, so there probably is a market to be made for motorboat lakefront 3BR houses around $450K. But there are no sellers at that price. Of course, there's nothing to guarantee that a market can be made at $450K for that type of property in 6 months. By next April, buyers could be much lower.

Very similar situation with more private lakefront houses on 2 to 5 acres. There are buyers in the $600's, but the handful of good, private lakefront houses are priced well above that. So we sit and wait.

[mal]

David's comparison of costs for different classes of home is a particularly valuable orientation to the market for people who still have lots to learn about the area. Newbies are not ready to take in all the nuances of any market segment, but David's orientation gives them a template on which to build. "Lakefront" includes numerous communities on vastly different lakes, with different local rules and amenities. Any particular lakefront has lots that are ideally situated to take advantage of views, privacy, etc., while other lots on the same lake are compromised by roads, waterfront access, lack of privacy, etc. Then, of course, the homes themselves vary immensely in size, style, and condition. David's overview of 3 different classes of lakefront helps newbies build a framework for recognizing how the various factors contribute to the relative pricing. Of course, his broader point in referring here to Swinging Bridge properties was not really about lakefront... it was about the risks and benefits of buying in these uncertain times.  

[friday910]

David, IMO:
(a) I don't think a large (200K or more) spread is beneficial to a prospective buyer.
(b) I really like the format of "How Much Does a House Cost?" circa 2002 (see below). Why did you switch to the new format? Do you think the old format is more appropriate in these uncertain times?

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Under $60,000

* A small, winterized year round cottage in an older lake community like Smallwood (but not lakefront)
* A 2 or 3 bedroom ranch house in need of some work in one of the hamlets or villages, without acreage or privacy.
* A 20's or 30's era bungalow in one of the more run down hamlets.

$75,000
* A classic 50's or 60's era 2 or 3 bedroom ranch in good condition on a large lot in one of the hamlets or on 1 -2 acres in the country, on a medium travelled road.
* A larger winterized cottage in one of the older lake communities.
* A 2 or 3 bedroom farmhouse-style home without acreage on a main road in one of the hamlets.
* A 2 or 3 bedroom condominium.

$100,000
* A 70's era smaller contemporary vacation home in one of the newer lake communities, like Lake Louise Marie, on a small lot (not lakefront).
* A smaller old farmhouse on 2 acres in need of substantial work.
* A larger old unrenovated farmhouse on 2-10 acres with a 'location issue' (e.g. right by Route 17 or on a bosy road without privacy.)
* A modular home or ranch house in the country with privacy and some acreage (2-5 acres), but without a view or pond.
* A Victorian or Four Square in Liberty or Monticello in need of some work.

$150,000
* A liveable but unrenovated farmhouse on 2-5 acres with privacy but no view.
* A partially renovated farmhouse on 2-10 acres in one of the more remote areas of the county (e.g. 3+ hours from Manhattan.)
* A classic 50's or 60's era ranch in good condition on 5-10 acres with a pond or stream and view.
* An 80's or 90's era split level, salt box or contemporary on 2-5 acres with privacy on a secondary road.
* A smaller lakefront home or cottage on a small lot in an older lake community.
* A renovated or updated Victorian, Four Square or farmhouse-style home on a large lot in one of the hamlets or villages.

$200,000
* A 2-3 bedroom contemporary with a view or pond in a desireable country location.
* A smaller renovated farmhouse on 2-5 acres with privacy on a secondary road.
* A smaller lakefront home in good condition in a newer lake community, but still on a smaller lot with close neighbors.
* A larger unrenovated farmhouse on 5-10 acres.
* A 3 bedroom ranch house on the Delaware River.

$250,000
* A renovated or updated farmhouse in good condition on 5-10 acres.
* An unrenovated farmhouse on 10-40 acres.
* A 3 bedroom lakefront home in good condition with 100 feet of lake frontage.
* A newer 3-5 bedroom home in a private location with some acreage and a view and/or pond

$300,000
* A unique property like a renovated barn on 10+ acres with privacy and a view and/or pond.
* A partially renovated farmhouse on 10-40 acres with a view and/or pond.
* A fully renovated farmhouse on 5-10 acres with privacy.
* A larger lake or riverfront home with good frontage and privacy.
* A contemporary or log home with unique features on acreage with a pond and view.
* A larger lakefront home in good condition in a newer lakefront community like Emerald Green.

$400,000
* Everybody's farmhouse fantasy - a large, renovated farmhouse on substantial acreage (40-80 acres) with privacy, a barn, a killer view and a pond.
* A large, architecturally unique contemporary on a lake, or on private acreage with a view.

$500,000+
* A country estate on substantial acreage in perfect condition with unique architectural features.

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Mel, I think you missed the point of my post. Think of my compilation of David's yearly (or so) "How Much Does a House Cost?" as a movie, and think of each individual year a frame. I could have included all the classes for all the years available, but that would have been a bit too much info.

[David Knudsen]

friday, your role is clearly that of pundit. This site, frankly, is designed to help out folks who are thinking about buying a house in Sullivan, which doesn't seem to be what you're looking to do. But I am flattered that someone has kept copies of all these webpages for 5 years

[David Knudsen]

friday, those spreads are real. They're general guidelines. If someone wants to seriously look for a property, say, in the "farmhouse with acreage" category, its important to note that prices can vary widely. There are farmhouses on acreage at $400,000 and $700,000; size of house, location, setting, style and features all affect price. These guidelines are very general, more to help buyers understand the general price ranges they can expect. Those ranges will likely change, but these ranges are what I see in the market, based on showing hundreds of houses a year and previewing or driving by many others.

[David Knudsen]

oops, not flattery, you're using the wayback machine to check out past pages

[mal]

David's point about the range of prices for a given class of home is demonstrably true, and it's the reason why any "Overview" can only be a general orientation. A potential buyer benefits from a rough guide to the kinds of homes available within a broad price range. For more specific pricing, and more specific house details, the obvious next step is the MLS...