Sullivan County Real Estate

A Metric Worth Noting

A friend, Chuck, emailed this graph to me yesterday showing the historical ratio of the U.S. median home price (from Case Shiller) to median family income. Historically, house prices have been about 2.7 times income, but during the run up, peaked at over 5 times income. This graph shows the ratio at 3.62 as of Oct. '08, and has likely dropped somewhat since then. (I can't find a more current version.) With the drops of the past few months, maybe it's 3.2 right now. To get back to that 2.7 price to income ratio would take about another 15% drop in prices (assuming income holds.)

When you Google "Case Shiller home prices" and "median income", you'll find various versions of this calculation with adjustments based on different adjustments. And of course, there are regional differences, with the largest price drops likely found in the overbuilt, high foreclosure Sunbelt markets. And of course, as the recession deepens, the ratio could overshoot that 2.7 level to the downside as it did in the early 90's.

If one accepts the premise that there is some magical "P/E ratio" for residential real estate, and historically we'll correct to that level, then it appears we are well into the correction, not just at the beginning. And that may be good news.

I expect this post will generate a LOT of comments.

Driving Blind in a Snowstorm

I've been a bit amazed that the post below, "Housing Tax Credit and Sullivan County" generated over 60 comments. Most of those comments are very thoughtful, and took the writers quite a bit of time. Notably in that thread, there's a real conversation going on. The barbs and attacks by the "Crumudgeon Club" that punctuate many previous threads are largely absent, replaced by a tone of folks trying to figure out what's going on.

Over the last two or three weeks there has been a noticeable attitude shift — among both buyers I'm working with and colleagues I talk with. For the past 3 or 4 months, the downturn in sales volume has been laid at the feet of unrealistic seller price expectations. There's been a collective belief that if an attractive house is priced right, it will sell. That belief has been echoed on this blog, both by myself and a number of commenters.

I don't know that price, alone, can be blamed for the sales doldrums. There have been a number of houses in the last 4 to 6 weeks that have taken a drastic price haircut, and I was almost certain they would sell quickly. Most haven't. A lot of buyers are choosing to sit on the bench right now, waiting to see what happens. Even the carrot of a great price isn't quite enough to get them off the sidelines and back into the game.

I get a half dozen calls a week from sellers or other brokers asking my opinion about what it will take, particularly in terms of price, to get a house sold. Up until a couple of months ago, I could proffer a range for most houses with some confidence. My numbers often weren't what a seller wanted to hear, but I believed that at the right price, most homes would find a buyer. I don't think that's necessarily true now.

Take that mythical 3 bedroom, 2 bath, 2,000 sq. ft. lakefront home in good condition on a 1/3 acre lot on Swinging Bridge, the example I often trot out to make a price point. The last one that sold closed last June at $495,000. Through the fall, I felt that sale pretty much represented a market value range for that type of property. As the market turned down, I revised my price expectations downward somewhat, and up until mid January thought the mid-$400's would be a good target for that type of property. How the world has changed! Today, I really don't have a clue about what the price would be to move a similar house. $350,000? $400,000? $450,000?

That's the big problem right now. Where should prices be to counter the demand inertia? Is there a price that will entice nervous acorn-hoarders to get off the bench? Or is price irrelevant, and for the time being at least, price isn't a tool that can effectively stimulate demand?

That's what I mean when I say it's like driving blind in a snowstorm. There aren't any recent guideposts. The real estate valuation model over the past decade has rested on historical comps, with some percentage time adjustments during the faster run-up periods. With low sales volumes, that model isn't working well right now. There's been a lot of discussion about ratios — income to price and rent to price — but these deal more with macro price levels, not the price of individual properties.

Pricing today depends greatly on all the parties — buyers, sellers, brokers and lenders — essentially agreeing on a set of assumptions. If buyers are pessimistic about the future, and believe that prices might drop a further 30% in the next 12 months, they're only going to strike a deal with a seller who generally shares that pessimistic assumption, or if in a distress situation, is forced to accept it. These tacit assumptions are often emotional, and not based on actual recent sales data, because we don't have enough data to confidently draw a trendline. While the overall median sales price in Sullivan County is down about 35% from the peak, that doesn't necessarily translate directly to every type of house. For example, I can't confidently say that lakefront houses have declined 35%, or 15% or 45% for that matter, from the peak because there haven't been enough lakefront sales in the last 3 or 4 months to draw any meaningful conclusions.

With the dearth of market activity, and a meaningful volume of actual sales data, I think a lot of the commenters on this blog are trying, like I am, to paint some picture, any picture, of where real estate here is headed using a palette of theories, metrics and hypotheses. It ain't easy, and none of us, if we were truly honest, have the answer. I sure do appreciate everyone who's adding a new brushstroke to the canvas.

I Got Cell!!!

I live in one of those notorious "cell shadows", with a big hill between my house and the nearest cell tower, which is just about two miles away as the crow flies. I can make a cell call — barely — if I go outside on my second floor deck or walk up my driveway to the road. On a good day, if the planets are aligned just right, the Gods are with me, and I've eaten all the spinach on my plate, I can get a weak signal if I stand near one of my north facing windows.

So for all intents and purposes, I'm in a cell dead zone. Until now. I'd heard about signal boosters and amplifiers, but they seemed 1) expensive, 2) difficult to understand, with all the Yagi yadda yadda (Yagi is a type of antenna) and 3) a hassle to install.

Then I read about Wilson Electronic's SignalBoost DT (DT stands for 'desktop'). Everything except the mounting pole comes in one kit. (You don't have to mount it on a pole; there's also a wall mount option and a window suction cup mount, if you get enough signal at a window.) There are essentially two parts — a small externtal antenna (shown at left, attached to a 10 foot pole on my 2nd floor deck) and an internal antenna/amplifier that looks similar to a common wireless router. You connect the external antenna to the interior amplier with coax cable, which comes in the box.

It took me about an hour to set up, including attaching the pole to the deck post, drilling a hole in an exterior wall, running the coax cable down, through the basement and up through a hole in the floor of my home office, and plugging it in.

The miracle is that IT WORKS!!! My signal strength up on the deck runs roughly between -90 and -95. (Cell phone signal strength is measured in decibels, and is a negative number. The higher the number, e.g. closer to 0, the stronger the signal. So a -70 dB signal is stronger than a -90 dB signal.) In my house, my unamplified signal strength, when I get a signal at all, is typically -100 to -105, a level that makes dropped calls almost a certainty. Most cell phones have a test mode where you can see the signal strength in dB. I found it kind of fun to see the signal strength change as I moved around to different locations inside and outside my house. (Wilson Electronics posts a .pdf of how to put most popular phones into test mode.)

So how does this little booster setup perform? Inside, in my home office, on the other side of the house from the window where I can sometimes get a signal, my Verizon phone is showing signal strength from -71 to -78 dB. That's four bars in bar-talk. Phenmonenal! I even tried my backup AT&T Go Phone (a Pay-As-You-Go phone for those places where I don't get a Verizon signal.) To my surprise, since I've never been able to make an AT&T call anywhere right around my house, and Wilson states you have to have at least some signal strength for the amplifier to work, I was able to make a call! (Yes, the booster works with all major carriers except Nextel, and also works with wireless data cards.)

The downside to the Wilson SignalBoost DT is that the internal amplifier only covers a small area, like a single room. If you need whole house coverage, you'll need to go with a more powerful and expensive system. But for my needs, this works just fine. The cost? Most online retailers sell the DT Signalboost for about $330. I found it at Alternative Wireless on sale for $279.

Locally, Wilson cell booster products are sold by Cronk's Electronics in Liberty. (845-292-0324). They're great folks, and a great choice if you want someone to install the antenna and hook everything up.

If you're in a weak cell area, one of these booster / amplifier set ups could be just the ticket to much better cell reception.

Trapped in Their Homes

A commenter on the previous thread pointed out a good article in the Times' Long Island Edition, Trapped in Their Homes. The main focus of the article is homeowners who want or need to move on with their lives — trade up, move out of the area, retire and move into smaller digs, etc. — but are unable to find buyers for their houses. Of course, when sellers can't sell their current home, they can't buy the "downline" house, meaning there are no sales instead of the two that would have happened in more "normal" times.

The reporter makes raises some very good points. Buyers are bypassing houses with any "warts" — high tension wires nearby or a steep slope to the lake. I'm seeing the same thing here. Any significant negative factor moves a house into a buyer's "no" column — too close to the road, not private enough, low ceiling heights, vinyl siding (for city second homers who want 'authentic' and 'natural'). And some of the problem, of course, stems from sellers stubbornly holding to outdated price expectations and overpricing their houses.

But there are some systemic problems, not seller created, that contribute to the current house trap many sellers are facing. The biggest one is the difficulty buyers face in getting financing. I'm hearing more and more tales of deals falling apart because a buyer is unable to get financing, even when the buyer has very good credit. Appraisals continue to be a real conundrum, especially in low density areas like Sullivan with low sales volume. It's increasingly difficult to find responsive comps that meet lender's tightening underwriting standards. The deal price can be really good, but the house may not appraise because there haven't been 3 similar houses sold in the last 3 to 6 months. That's a big issue right now for lake houses, for example. Apart from the $1.75M lakefront sale at Chapin in January, there hasn't been a lakefront sale above $400,000 reported in the Sullivan MLS since last August.

Sometimes whether a house will comp or not is the luck of the draw. While I'd have trouble getting a $500,000 lakefront house at Swinging Bridge, Devenoge or Wolf to comp, an $800,000 non-lakefront house at Chapin wouldn't be much of a problem because there are some sales in that particular category.

Another direct impact on Sullivan stemming from those house-trapped Long Islanders is the downturn in the "retirement split" market. I often comment on this blog about the 30-something city renters driving much of the Sullivan second home market. But another very significant component has been empty nesters and retirees selling their now-too-large suburban homes, and making a lifestyle change to have a winter place in Florida and a summer place in the Catskills. If these potential buyers can't sell their primary homes, they can't double down and make the split. This isn't a major part of the winter market here, but the impact will be worth watching — particularly for retirement split magnets like Emerald Green — as the summer progresses.

All of these factors are contributing to a kind of freezing in the market, sort of like an ice dam on the Delaware. It does put one category of buyers in the catbird seat, those with excellent credit, lots of cash, and no need to sell or refinance an existing property to buy another.

Housing Tax Credit and Sullivan County

The $787B economic stimulus bill signed into law this week includes an $8,000 tax credit for first time home buyers who purchase a house anytime in 2009. (The housing tax credit is similar to the $7,500 credit available during the 2nd half of 2008, but differs in a few key ways.) Here's the thumbnail:

• A tax credit of $8,000, or 10% of the purchase price of a home priced under $80,000, that can be applied to either 2008 or 2009 taxes. This is an actual tax credit, not a tax deduction.
• Limited to first time home buyers, or home buyers who have not owned a home during the previous three years.
• The full credit is available for single purchasers with incomes up to $75,000 and couples with incomes up to $150,000, with a phase out of the credit for incomes slightly above these levels.
• The credit only applies to the purchase of single family residences, including houses, condominiums and coops.
• The home must be a primary residence. Second homes don't qualify. (Even if you rent in the city, and the house you buy in Sullivan is your first purchased home, it is not your primary home if primary place of residence remains in NYC.)
• The credit is no longer a 15 year loan that must be repaid (like under the 2008 program.) However, if you own the home for less than 3 years, the credit must be repaid.

The housing tax credit has implications for Sullivan County, and not all good. The core of the second home market here over the past few years has been younger 30-something buyers who feel priced out of buying in the city. They wanted to buy some real estate, and often chose to continue renting in the city and put their "buy energy" into a place in the country.

That "rent in the city / buy in the country" equation that's favored Sullivan County may be changing. Coop, condo and home prices in New York City and the surrounding suburbs, by all reports, are dropping. Even in Manhattan, prices could drop 20%. That makes buying a primary residence more attractive. Many industry watchers believe that the government is going to work to push mortgage interest rates lower, with a target of 4.5% frequently bandied about. That makes home ownership more affordable. Sweeten the pot with the $8,000 tax credit, and buying that primary home in or around NYC starts to look very appealing.

A couple earning $150,000 can qualify to buy roughly a $500,000 to $600,000 property. That probably won't get you a fancy loft or a junior 4 in Chelsea, but it covers a lot of the real estate landscape in the NYC area — a house in Maplewood, a new construction one bedroom condo in Brooklyn, a 2 bedroom coop in Inwood or Washington Heights, a single family home in Jersey City or even a 3 or 4 bedroom coop in Riverdale. (Keep in mind, also, that FHA and conventional conforming loan limits are substantially higher in the New York Metro area.)

I don't think the stimulative effect of the tax credit will have a significant immediate impact on NYC real estate. But I expect that some buyers will begin shifting their thinking and getting their ducks in a row. They'll be following price trends in the city and surrounding areas, to see if and how far they drop. They'll be watching mortgage rates to see if they actually do move into the mid 4% range. If those two factors come together — lower prices and lower interest rates — I expect that many city renters will seriously consider pulling the buy trigger in a big way, probably starting during the 3rd quarter. And that means that some of those folks just won't be buying up here, at least for the time being.

Kathy's Best Picks Under $200,000

There are three of us that work together at Catskills Buyer Agency, and we each focus on somewhat different parts of the market. My colleague Kathy Rieser works a lot in the more 'affordable' end of the second home market, with clients looking in the $100,000 to $200,000 range. She knows most of the houses in that range, both the gems and the dogs. I asked her to pick out some of her favorites under $200,000. (Click here to see her picks from the Sullivan MLS.) She has another favorite, a foreclosure not listed in the Sullivan MLS, an adorable 1950's era ranch on an acre near Barryville for $129,900. (You can check out that listing here.) Kathy also does quite a bit in Smallwood, which is often one of the most affordable vacation getaway options here, but the inventory of good Smallwood charmers is a bit sparse at the moment.

If you're looking for a getaway in this price range, Kathy is a great person to work with. If you'd like to get in touch with Kathy directly, her email is kathy@catskill4sale.com and her phone number is 845-482-4247.

Best Weather Sites for Sullivan

It's stunningly beautiful here today — over 50 degrees and sunny! It's about time we got our "January thaw." When you sell real estate, the weather is a key concern. Is it going to be too cold, too icy, too rainy or too snowy to show property? Do I need to throw the snowshoes in the Durango, along with the shovel, the salt and the sand? Do I need to remind folks in the milder clime of NYC to come prepared? I rely a lot on weather websites, and different sites have different information.

I wanted to share my favorites, and also ask for any recommendations for sites you look at. So here's my rundown:

National Weather Service This is the grandaddy of weather sites, with the latest watch and warning updates. The current conditions reporting, though, is only from Monticello, which is lower (and often warmer) than further north in the county. I like the 3 day history, as well as the forecast discussions.

Wunderground.com I like this site because, when I put in the zip for Callicoon, 12723, it pulls current conditions from Tennanah Lake, which is sometimes more accurate for areas further north in the county than the NWS pull from Monticello.

Weatherbug For Callicoon (12723), Weatherbug reports current conditions from a reporting station at the Damascus School, just across the Delaware River from Cochecton.

Intellicast has the best radar maps. They're detailed, and easy to scroll and zoom. I particularly like the feature where I can mouse the whole map west or south to see what's coming.

If you have a site that you particularly like, please post it in a comment. Also, is anyone aware of any weather webcams up here that show the current weather?

Rural Broadband Still in Stimulus Bill

I've been following the "broadband" component of the stimulus bill closely. (I'm not using the term 'rural broadband', because the definition of just what the broadband portion of the bill will target keeps changing.) As of today, broadband investment for underserved areas is still in the package. The amount has been cut in the Senate from $9 billion to $7 billion, but the terms have been tweaked in a way that makes it more likely a significant portion of the funds will go to rural areas. (Wording that would have enabled Verizon, for example, to use the tax breaks to offset its already-planned FIOS rollout to suburban areas has been tightened.) (Latest update on broadband component of bill.) So far, this is all very good news!

Pendleton, Not Prada

My post below about the house at the Chapin Estate on the market at $2.15M generated a big response. A thread running through many of the comments is some disbelief that there's actually an upper end market here, and that anyone would pay upwards of $1 to $2 million for a place here rather than in the more 'glamorous' areas to our east — the Hudson Valley, Columbia County and the Berkshires.

This is not the first $2M+ house on the market here. There are 6 or 7 homes in the $2M+ range available, plus another dozen or so in the $1M to $2M range. Not all of these are in the multiple listing system. Some are just very quietly known to be available for purchase. Every year for the past few years there have been about a half dozen home sales in the $1M+ bracket, as best as I can determine (as large sales involving multiple tax parcels are sometimes handled as separate sales due to tax consequences.)

It's true, we don't have a lot of very upper end buyers. But those who gravitate here choose to be here, because of something unique and special they can't find elsewhere within 2 or 3 hours of Manhattan. The Chapin Estate, for example, is one of the only places where you can find an Adirondack-style setting with reasonable privacy on a motorboat lake within a hundred miles of the GW Bridge. (One lakefront home at Chapin sold last year for $2.4M.) Greenwood Lake, Candlewood Lake and Lake Wallenpaupack just don't have the same feel. Owners up at Lew Beach in the Beaverkill Valley choose the area because of the greenspace, environmental protections and mountain views — not to mention private access to some of the best fly fishing in the U.S.

A Great Lakefront Value

Every so often, a fabulous house comes on the market, like the Chapin house I featured below. They tend to be few and far between. And every so often, too, a great value comes on the market — but the really great values are often as rare as the really great houses.

This 3,400 sq. ft., 6 bedroom, 3 bath home on 5.2 lakefront acres on Edgewood Lake south (in the Beaverkill Valley, NE of Livingston Manor) was just relisted at $399,900 (down from $599,000 when it was on the market last year.) Edgewood is a 45 acre non-motorboat lake, and the setting is totally private. (Click here for the LiveMaps Aerial.)

So what's the downside? The house was built in 1985, and now feels dated. It's a ranch-style house, 1,700 sq. ft. above grade and 1,700 sq. ft. in the walk out lower level. It's a more traditional floorplan with separate rooms, rather than the open plan preferred today. A lot of the finishes and fixtures (carpet, wallpaper, cabinets, sliding glass doors) are very '80's. (Click here to see the full listing with additional photos courtesy of Prudential Rand.)

This is a house that's crying out for someone with imagination (and budget) to reconfigure and update it for more contemporary tastes. If this is something that might be of interest, please give me a call (845-468-5710) and I can give you more information, or arrange a showing.