Latest Current Market Conditions Posted

The latest Current Market Conditions report is up, with sales through Dec. '08. The picture is far from rosy, with annual single family home sales volume in the Sullivan MLS running at about a 400 rate and closed sales prices hovering right around late 2004 levels. There is some good news — asking prices are finally dropping, many sellers seem more flexible, and there has been some pick-up in buyer interest, particularly in "good value" properties.

Comments

[Sir Bosco]

Dave,
A good report as always.

Notice, however, when you look at the last 30 days - 12/15/08 through 1/15/09 - houses that sold within all of Sullivan County are 32.

Additionally, both the average and median sold prices are quite below your three month running total of $171,791 and $150,000 respectively.

Currently for the 30 day period - 12/15/08 through 1/15/09:

=================
MEDIAN: $100,000
AVERAGE: $121,181
=================

The trend will remain lower go into the latter part of January, February and March.

One topic that has yet to be addressed is not only has the sales volumne shrunk but with the median sold price - so, too, does the commission payout.

B.

[Reg]

Good stuff, Dave.

I think when you compare to previous times (your "How Far Have We Rolled Back" section), you need to compare apples to apples, which means adjusting those 2008 median dollars to equivalent dollars in the year when the comparison takes place. It's an important step, because it show true declines and advances, as opposed to inflation effects.

I don't have access to your raw numbers, so I used your 4th Quarter Single Family Sales, taking the $150K median figure for 2008 and adjusting it. If you do this, it seems to equate pretty well to a figure that matches up to a mid-2003 number (i.e. $129K in 2003 dollars). There is an accurate calculator online to help you do this here: http://dollartimes.com/calculators/inflation.htm

What this means is that, based on that quarterly sales figure, we're looking at a market that is most like it was more than five years ago, about 1-1/2 years earlier than the apparent equivalent if you don't control for inflation. Given how the market exploded in '04, that's a pretty interesting result. We're back before the boom.

[houser]

not even close to pre-boom

[David Knudsen]

Sorry, folks, I'm not going to get into doing inflation adjustments. I have a life and a job. My full time job isn't slicing and dicing Sullivan County real estate number.

[friday910]

"A good target is probably about 20% below what a house may have sold for at the peak of the market (mid-2007)."

Any idea what the selling price was relative to the asking price back in the mid-2007?

[Robert Paparella]

Very interesting analysis and, I believe, for the most part correct.

I was one of those December 2008 purchasers who just closed on a second home in Hortonville. Reading some of the opinions expressed here have the potential to make my hair stand on end, however, I recall my experience as a "small time" landlord in New York City for many years. There have been times when, looking for tenants for my condo's, I couldn't give my apartments away for any price. In the past few years, that was quite different. In terms of the value of my units, I also lived through the early 90's when I was told that I couldn't sell my apartments for the amount of the outstanding mortgage. The newspapers spoke of a glut of studio's and one-bedroom apartments. That also turned around - eventually. Now, it looks like we are going through a correction period.

What I learned the hard way is that real estate value must be analyzed with a long term view. At the same time, it is almost impossible to time the market in real time. That can only be done in retrospect. What may now look like a "collapse" of the market is for the most part a reflection of the fact that there are few (if any) buyers and the only people selling are those who have to. I considered "pulling the plug" on my purchase after Lehman when under, but decided not to. I wanted the house I had seen and was fortunate enough to be able to buy it. The beauty of Sullivan County remains the same. The speculative excesses of the market are gone but that is a good thing, not a bad one.

[bix]

I agree 100%.

[b.]

"What I learned the hard way is that real estate value must be analyzed with a long term view."
------------------

Indeed. Good post.

Too many folks bought high recently (in the past three to four years) with no intention of staying for more than a few years along with doing extensive renovations (for example - the recent New York Times article).

Here are the three week figures from 12/27/2008 through 1/17/2009 for closed sales in Sullivan:

MEDIAN: $86,000
AVERAGE: $114,007

One will note that there is a huge weighting of lower price houses (under 75k - many which are foreclosures) making the overall bais lower whereas the most expensive house that has sold in the past three weeks has been 275k.

Of note, a bank owned house in Callicoon that went for 32k recently.

I, personally, believe that this trend will continue into the winter dragging Dave's three month medians and averages lower than it presently is.

B.

[Junior Mac]

All the more evidence of Demand Destruction

[andy]

At these prices, I can't understand why sales numbers aren't much higher. I bought in 2005 and that means I effectively set a match to a big pile of money. Shame on me. I salivate at the thought of what I could buy now for the same money. Don't understand why others, who didn't make my mistake, don't see the same opportunity.

[boscobel]

"At these prices, I can't understand why sales numbers aren't much higher. I bought in 2005 and that means I effectively set a match to a big pile of money. Shame on me. I salivate at the thought of what I could buy now for the same money. Don't understand why others, who didn't make my mistake, don't see the same opportunity."

Posted by: andy | January 17, 2009 at 01:14 PM
------

My guess is that you'll see a pickup of activity (i.e.; "showings") this winter into spring due to reduced prices and if the weather is decent.

Now, whether "activity" translates into "offers" which then become "closed sales" is anybody's guess.

That is the litmus test - it's all fluff unless the deal closes.

Remember it takes two to deal and I still think that many seller's that are offering quality homes and locations have yet to capitulate -if they really want to sell.

Much will depend on unemployment numbers, Obama's first 100 hundred days, the economy - it is still a dicretionary purchase.

B.

[klezmerang]

Andy

Relax. We plan to buy once housing comes down another 40%. Before this STAGFLATIONARY DEPRESSION is over your teeth will be chattering. Watch the stock mark in the Feb-May time period.
Two years ago you were told to get out of dollars and now it's becoming a reserve currency again.
If you bought something you really like then it's a home-run for you. On this point David is correct. If you bought it as an investment you are f##ked for at least ten years.

[David Knudsen]

B's 3 week data pull has to be taken in context. It's only 18 or 20 sales, depending on the criteria set, and probably reflects mostly October and November sales activity. In my experience, October and November from the standpoint of buyer activity and interest, were the deadest I can remember in the 8 years I've been selling real estate here. In the two months post-Lehman, there was this widespread fear that led to general paralysis. To paraphrase one real estate agent quoted in an article in the NYTimes, talking about the NYC market, "Nobody's looking to buy an apartment. Heck, people are too afraid to even buy a sweater."

For the most part, for a couple of months the only potential buyers I talked to were cash investors trolling for dirt cheap bargains — foreclosures, short sales and handyman fixers. Almost everyone I was working with through the summer and early fall who was looking for a house for their personal use said they were going to wait it out for a few months.

Those 20 sales that B. summarizes pretty much bears that out. 10 of the 20 were cash sales, and another 3 involved owner financing or were a "contract for deed". Only 7, or about a third, involved traditional financing (conventional or FHA). While it's impossible to absolutely discern the intent of buyers from the sales data, it is probably same to assume that the high percentage of cash buyers and the very low sales prices indicates that the market was heavily weighted to bargain hunting investors.

Those buyers have served, and will continue to serve a very important function, of clearing the market in lower end distressed properties. Many of these investors, armed with cash, are able to take advantage of opportunities and may be making very savvy buys.

But they are only one part of the market. Over the last month, I've started to see other buyers begin to re-enter the market. The almost total paralysis we saw in October and November among 'personal use' (primary or secondary home) buyers is beginning to ease. I'm not in any way saying we're back to the robust heydey of 2006 and 2007, but folks are starting to look seriously again and yes, starting to buy. Due to the relatively long closing time frame in Sullivan County (typically 7 to 10 weeks with financing), we probably won't see a significant impact until March. And there will still be ongoing opportunities for those bargain hunting cash investors, so the overall median and average sales price numbers will probably continue to be relatively low.

I think folks may be surprised at some of the sales coming through in the next couple of months. I don't know everything in the closing pipeline, so can't predict how the average or median may move in March or April. But I do know what I have in deals, and also the houses I've called to check availability on to find out they have deals on them. I think we're going to see some improvement from the short term figures that B. is posting.

[andy]

If an when these promising sales materialize, I hope Dave will post the news on this site with pics of the houses. Ideally, it would also be nice to know the sales price, though there may be restrictions that prevent that. But I find it frustrating to try to visualize from vague phrases like "modest" or "great value" or similar descriptives. Without seeing what actually sells and for how much, a lot of the talk about the market is pretty uninformative. Of course, Dave gets paid for sharing that information with clients who engage him, and I can understand a reluctance to share it for free, but nevertheless generalities only go so far.

[henry]

Regarding Dave's comment on upper end lakefront properties, how do we know what the good "value price" is for this type of property? Nothing of this type has sold. Having the best "asking" price means little given that bid/ask spread and when the competition is still priced at 600K.

If you assume that the June 2008 sale was a good benchmark, is a "good value" price down only 10% from there? Given all that has happened to wall street and every other financial asset? That seems very optimistic.

***********

Dave's comment: "Keep in mind that a property "priced to move" is probably going to be priced about 15% to 20% below its competition, not 50%. Quite a few buyers I've spoken with lately have somewhat unrealistic price expectations, even for a buyer's market. Consider what I often conjure as my "benchmark", that elusive 3 bedroom, 2 bath house on 1/4 acre on Swinging Bridge Lake. In June, 2007, it might have sold around $550,000 to $570,000. In June 2008, a good example sold for $495,000. Today, the good value price for something similar is probably around $450,000. It's not, however, $325,000 to $350,000 — where some folks may expect the price to be in a "buyer's market"."

[friday910]

Back in the mid-2007, April 7, 2007 to be exact, "price recommendation turned out to be 25% or 30% above where I thought the property would likely sell for" and "I (David) took a look at the 583 houses that have been on the market here longer than 180 days. By the way, that's 57% of the total inventory of 1,022 single family houses. The shocking statistic is that of those 583 market laggers, 250 (or 43%) have had no price reductions (and even price increases) during their time on market, and an additional 162 (28%) have had price reductions of less than 10%."

Today January 2008 the advice is "A good target is probably about 20% below what a house may have sold for at the peak of the market (mid-2007)."

Interesting!

------------------------------------
As for the "the robust heydey of 2006 and 2007" read on...

May 31, 2006 - With Sullivan County sales down about 15 to 20% over last year, there's no doubt that the real estate market has slowed. (It hasn't died, by any means --- a 20% drop in sales brings us back to 2004 levels, which was considered a very healthy year here.)

June 27, 2006 - "Overall, both nationally and regionally, the real estate picture is much rosier than many anticipated just 3 or 6 months ago. Sales are down, but very modestly and prices, while certainly not galloping upward like the past few years, are holding their own."

July 27, 2006 - Land is Hot, Houses Aren't

July 26, 2006 - National June Sales Data Released, Sales Down

August 24, 2006 - Is a Real Estate Dust Bowl in the Making?

September 29, 2006 - Selling a House in a Down Market

October 10, 2006 - Signs of a Market Pick Up?
Last week, the National Association of Realtors (NAR) released its Pending Home Sales Index for August. (The PHSI measures contracts signed during the month, compared with the monthly Housing Sales Report, that measures closed sales, and is considered a leading indicator of housing activity.) The August Pending Home Sales Index rose 4.3% nationally to 110.1 from 105.6 in July, but was still down 14.1% from August 2005. In the northeast, the August 95.4 number was up 3.6% over July, but 12.4% below August '05.

November 6, 2006
October Sullivan Sales Numbers Posted
"While the market is certainly slower than a year ago, October's sales numbers are painting a slightly brighter picture. September's 3 month sales count was down 32% from a year earlier, while October saw a slight improvement, to just 25% below a year earlier (and when all the final numbers are in, which takes a few weeks, the drop will likely be about 23%)"

January 26, 2007
"...Overall, it looks like pretty soft landing in real estate from the frenzied peaks."

March 05, 2007 - February 07 Sales Data and Market Analysis Posted
"My Current Market Conditions analysis this month is very interesting. How can sales plunge 36% over a year ago, while prices are actually holding? Doesn't that go against everything you learned in Economics 101? There are reasons. You'll have to read my Current Market Conditions to find out. I'm sure you'll have your own thoughts, so please come back here and leave your comments, too."

April 25, 2007 - National, Regional Existing Home Sales Data Shows Downturn
"But I gotta tell you, I'm getting impatient. Sometimes I wish I could just run around and put scarlet letters on the 'For Sale' signs in front of houses that I think are ridiculously overpriced."

read on, just go through the blog about they heydays of 2006-2007...

-----------------------

[rod]

Does Friday have a point?

[friday910]

I'm not making a point, I'm just sharing with you what David was saying back in the "heyday of 2006-2007", at "the peak of the market (mid-2007)". You seem to be smart enough, draw your own conclusion. Let me give you a little hint, usually durring "peaks", sales are not down, houses are hot, sales don't drop, there is no landing, and there is no plunge. The only thing up back in the heyday were the prices, and those were "25% or 30% above where I thought the property would likely sell for".

If you doubt the quotes, you're free to go through them one by one. Start with http://blog.catskill4sale.com/catskill4sale/2008/04/index.html, and go back alway the way to the "heyday(s) of 2006-2007" using the link on top of the page.

In spite of the numerous perspective of the different posters on this blog, there seems to be streak of anti-history/anti-fact attitude, and I'm taking a wild guess that this attitude is coming from agents and owners/sellers. That being my final point, good luck to everybody, I'm out of here.

ps David, keep up the good work

[cfranch]

From the newswire:

NEW YORK (AP) -- Only five metropolitan areas in the U.S. will escape job losses this year, according to a forecast released Saturday by the U.S. Conference of Mayors.

New York is expected to take the biggest hit as thousands of jobs are lost on Wall Street. Big financial firms are slashing workers as they cope with bad debt. Other companies have gone under, like Lehman Brothers Holdings Inc., which filed for bankruptcy in September.

The New York area is expected to lose 181,000 jobs in 2009, the report said. Consulting company IHS Global Insight produced the report for the group.

It is hard to see how housing bottoms in the NY region until the employment picture improves. Goldman Sachs recently issued a report on Manhattan housing that predicts a 40% drop in Manhattan real estate probably based on the above employment prediction. Second home purchases are highly discretionary. If you're sitting on one losing investment(your Manhattan condo), you're highly unlikely to invest in another vehicle in the same category. It would be interesting if Dave disclosed the demographics of his most recent clients i.e. do they rent or own in Manhattan, age group, industry they work in etc....

[JM]

Folks, this is going to be rough and tough for everyone, more so for the ultra wealthy since it is they who fumbled the ball and are stingy with their money during these times.

cFrench, In NYC, 181,000 jobs will be lost in 2 or 3 zipcodes alone.
The finance sector will see loses in the 300k plus range. Add accessory and supportive jobs (suppliers, xerox, staples, hot-dog stands, etc..) and you're looking at 500,000+ job losses.

friday911, you don't need to exhaust yourself looking up older posts. Statistics speak for themselves. You can take comfort in reminding yourself about this process:
Denial[~2007], Anger[~2008], Bargaining[~2009], Acceptance[~2010]

klezmerang, we are currently in a StagDeflationary, not stagflationary recession. Inflation is running at -5%. If it lasts beyond 2010, it will be technically a depression. We're more likely to be in and out of multiple recessions for the next decade (W-shaped, cat-bounce recessions) which will be influenced by stimulus plans and resultant slumps which follow once their effects wear off. Until we have a stable engine in our economy, we will be lacking growth. A bubble is not a stable engine.

reg, there is no need to account for inflation in David's monthly analysis. It was only at 2% for the past decade. And we are not at pre-boom price levels in anyway whatsoever. Are homes on your block really selling for the same price as pre-boom levels?

This is it sheople. Banks are vomiting from the excessive partying of the past. Right now they are begging "never again, never again, I promise". It will take at least a decade to fix this. Unless median salary doubles or triples, home/land prices are slowly deflating until banks have it in them again. For now, deleverage and deflate.

[klezmerang]

JM

If you print enough money, inflation does return, regardless of Mish's deflationary model.
A decade sounds about right. It's a fitting ending for those whose spent the last ten years pitching everthing in sight.

[cfranch]

The inauguration is dominating the news. The more important story is that the global banking bailout has failed. Royal Bank of Scotland will be gone by the time we wake up tomorrow morning. Citigroup is essentially in receivership and Bank of America isn't far behind. I agree we are in for a continuation of deflation in all asset classes except treasuries. How long this goes on is something nobody can predict. There will be fire sale prices in real estate, stocks and commodities but unfortunately there will be no money to purchase any of these assets. The great unwind continues.....

[rod]

There is a lot of money out there - and it's just sitting waiting to pounce. It's a once in a lifetime opportunity to pick up assets cheap. It's how wealth is created. Invest in times of maximum pessimism.

[Julio]

The mountains can wait for my money.

[cfranch]

rod i agree invest in the time of maximum pessimism. unfortunately sentiment is still too bullish in both the stock market and housing.

[q]

david has a doggie frolicking in the snow, so let them eat cake.

[Frank P]

JM writes,
"Denial[~2007], Anger[~2008], Bargaining[~2009], Acceptance[~2010]"

That is so true. I can see this taking a decade to deflate. Many sellers are just reluctant to let go in 2009 with 40% off 2007 prices. Better off buying from older folks who have owned their house for at least 15-20 years. They would be willing to let go since they might not have known about bubble prices.

Frank

[b]

The one month median and average totals for January 2009 coming this Friday will be at least 15% to 20% off from Dave's three month posted numbers.

The range will be from 105k to 125k for closed sales in Sullivan.

Roll it back to 2003 - six years up in smoke.

Monthly numbers are just as important (if not more so) than the three month data.

B.

[b.]

====================================================================
Closed Sales - Within Sullivan County - 12/21/2008 through 1/21/2009
====================================================================
MEDIAN: $100,000
AVERAGE: $125,721
====================================================================

[Martha]

10:30 a.m.Volker: Bank rescue will cost several trillion dollars

How the hell did the people "in charge" of the banking sector every let it get to this?? Where are the protests??? What the hell is wrong with Joe 6 pack? Are they that dumb that this can go on right under their noses, with their money being stolen from them, and that is ok in the name of patriotism??? This country is doomed!