Sullivan County Real Estate

Foreclosures Not Right for Everybody

Hey, we all want a great deal, right? Recently, lots of buyers have been asking me to help them find foreclosures (or their close cousin, short sales, which I'll cover in a later post.) The common perception is that foreclosures are the Filene's Basement of real estate, the section of the market where the really great deals are hiding. But most buyers don't really understand what's involved in a foreclosure purchase, and many aren't necessarily good candidates for delving into this market sector.

Foreclosure buying is the down and dirty, rough and tumble of real estate, more suited to savvy, cash-laden investors than owner-occupiers shopping for that dream home, for a couple of reasons. First, most foreclosures are generally sold "as-is", without the ability to conduct the same due diligence that a buyer might in a more "normal" purchase. When a bank takes over a property, they turn over responsibility for it to an asset manager who's first job is to secure the property. That typically means draining the house (to prevent any freeze damage), having heating systems turned off or disconnected, and sometimes even turning off electric service to the house (to minimize the risk of an electrical fire.) In some areas, they'll even have the windows boarded over with plywood to prevent vandalism or squatting.

Many banks will allow a potential buyer to conduct a home inspection, but if the systems aren't on, the buyer has to pay to have the house de-winterized and systems turned on before the inspection and re-winterized and turned back off afterward, usually the same day. That can cost hundreds of dollars in addition to the cost of the inspection.

Lost My Patience

It took a long time. But I finally lost my patience with some of the commenters on this board. The last straw came when B/Gleason/Cav or whoever he or she is basically accused me, yet again, of posting inaccurate information, and by extension, of "cooking the books." That poster is clearly a Realtor, because they have access to the MLS sold data (or, if they're not a Realtor, they have access to a Realtor's MLS sign in.) Fellow Realtors are more than welcome to post comments on here, and counter my statistics or my opinions — but I've asked repeatedly that if they do so, to please identify themselves and not do so anonymously. Then, if there's a discrepency, I can pick up the phone and call them to find out where we're seeing things differently. But they've steadfastly refused, and continue to change their pseudonyms on here.

I'm tired of defending myself on here at every turn, and spending hours every week policing posts with inaccurate or deceptive information, particularly when that information is posted by commenters who refuse to identify themselves, and whose motives are a mystery to me.

So I've changed the settings on this blog to require moderator approval for comments. You can still leave comments, but they won't post until I've read through them. I plan to check pending posts a couple of times a day. Sure, this move may dampen some of the spontaneity and banter, but hopefully it will also help improve the crumudgeon tone that has developed on here over the last few months.

"Entertainment City" at old Concord Stalled?

An article in today's Times Herald Record, "Cappelli's $1B Sullivan resort plan could be a long shot" kinda confirms what I've been saying for months — that despite all the bravado about breaking ground and getting construction underway, the funding isn't there. And in this tight commercial lending environment, where platinum projects like Atlantic Yards in Brooklyn and the City Center project in Las Vegas are stalled or have been scaled back, the funding for Entertainment City isn't a sure bet.

Totally Adorable

My colleague, Kathy Rieser, and I went on a house preview trip on Monday to the southwest part of Sullivan (Barryville, Eldred, Glen Spey). A preview trip is when we print out a stack of new listings (or things we haven't seen) in an area of the county, pack some sandwiches and Diet Cokes, and go driving. (We used to stop for a nice, leisurely lunch. But, heck, times are tough.) The trips are like panning for gold. You sift through mountains of mud and occasionally come up with a nugget of gold. After previewing a property, the listing sheet either gets tucked into a "Keeper" folder, or dramatically flung into the back seat with an exclamation of "What a piece of crap!" Needless to say, at the end of most of these trips, there's more paper strewn around the back seat than tucked into that folder.

This trip yielded three good nuggets. A $179,000 year round 3 bedroom, 2 bath log sided cabin in Black Forest Colony, a $199,000 direct lakefront 2 bedroom cottage on Mohican Lake, and the house in the photo at the left, a totally adorable 2 bedroom seasonal fixer in Black Forest for $119,000. (Click here to check out the 3 listings.)

The cottage in the photo, MLS 25370, is particularly intriguing. It's one of the original hunting cabins, circa 1920, on the property that became Black Forest Colony in the late 1930's. It appears to be in surprisingly good condition, although it is authentically "rustic". There's no indoor bathroom, just an outhouse (although there is indoor running water from a well shared with the old Black Forest cemetery across the road.) The house needs a septic system (to put in a bathroom) and probably a new drilled well, and would need some additional work to make it a winterized, year round getaway. The right person could do so much with this little house. And if someone is looking for a family compound, the "ready to go" $179,000 Black Forest house (in the listing group) is adjacent to this, just up the hill.

Most folks in Sullivan County (including a lot of Realtors) don't know about Black Forest Colony. It's a luscious secret, tucked in near Glen Spey, south of Proctor Road and west of Hollow Road. The Colony was started in the late 1930's by German immigrants (hence the name) as a mountain getaway for hunting and enjoying nature. Most of the houses there are set on 2 to 5 acres, and share about 800 acres of community land that is some of the most beautiful in the county. There's a pond, a river, a waterfall, and miles of trails through the woods. It's sort of like having your own private state park.

Of course, these aren't the only houses we like in the SW part of Sullivan. But these were the 3 we uncovered on this trip and thought you might like to see 'em.

NAR Existing Home Sales Data Shows 5.1% Rise

The National Association of Realtors just released the existing home sales (EHS) data for February, which showed a 5.1% rise nationalwide in the Seasonally Adjusted Annual Rate over January, which is good news — sort of. The biggest regional gainer, year over year, was the west, where sales were up 30.4% over February, 2008. But the west — which has been one of the regions hardest hit by foreclosures — also recorded the biggest drop in prices year over year, with February 2009's median down 30.3% from a year earlier.

The northeast showed a nice 15.6% pick up in the annual sales rate over January, but sales were still off 14.9% from a year earlier. Prices, though, have held better than in the high-foreclosure west, with only a 4.8% drop in the median from a year earlier.

Notably, Lawrence Yun, the chief NAR economist, posited in the accompanying press release, that 40 to 45% of sales nationalwide in February were foreclosure or distress sale properties, and that was having downward impact on prices. That number shocked me, and probably means that in some high-foreclosure markets like Phoenix, Las Vegas, Florida and parts of California, the lion's share of the market must be foreclosures and short sales.

The volume pick up, and the regions where it's picking up, seem to indicate that bargain pricing is a key factor in getting buyers back to the table.

What's Up Lately?

Believe it or not, I've been busy the last couple of weeks. This weekend I've been fully booked with appointments, the first time that's happened in a couple of months. My colleagues at Catskills Buyer Agency have a full dance card this weekend, too. Chalk it up to a combination of factors — nice weather and an early popping spring, the stock market pickup over the last 2 weeks, pent up demand from the winter, and the perception that there are good values for savvy shoppers.

The buyers I've been talking with have been pretty wide ranging in what they're looking for, with a few notable gaps. Quite a few folks are asking about lakefront houses, which is common this time of year as thoughts turn to lakes with the good weather. But almost every lakefront shopper I'm talking with is looking at moderate priced lakefront, capping out about $400,000. It's starting to look like $400,000, not $500,000, is the "new black" for lakefront buyers looking for 3 BR lakefront houses. I've also gotten a few inquiries for lakefront cottage-sized houses in the low to mid $200,000 range. I haven't gotten one inquiry for "better" lakefront, e.g. Chapin or Black Lake, in the $1M+ range this month.

The other active category is non-lakefront second homes — farmhouses, vacation chalets and cabins — with most shoppers looking in the $150,000 to $225,000 range, sharply lower than the $200,000 to $300,000 range last fall. There have also been quite a few inquiries about houses people have found on the MLS search on my website under $75,000, which are often seasonals (only able to be used during the warmer months), handyman houses needed significant structural work, or "locationally compromised."

What's been notably absent are folks looking for non-lakefront second homes in the mid to upper mid range, between $250,000 and $450,000. That mid range has been a bread and butter core category here, and is eerly quiet right now. There are some very attractive houses on the market right now in that range, with some good deals to be cut, but just very little interest.

The Vinyl Divide

I went to preview a house yesterday for a client coming up this weekend. Recently renovated, very nice setting, attractive price. The house hits nicely on all cylinders. But it has vinyl siding. Quality vinyl with deep color, well installed and nicely trimmed around the windows and doors. (Vinyl has come a long way since it's introduction in the late 1950's.) But I know that among some city buyers, vinyl siding can be the kiss of death. I find that many buyers can have a stronger reaction to vinyl siding than almost any other feature of house except possibly paneling. But vinyl-aversion is not universal. It got me thinking,

Apartment-living urbanites who are shopping for a second home, regardless of what they're looking for in terms of size, price or setting, often have a common natural-driven narrative that includes a wood burning fireplace, wood floors and natural exterior siding — shake, wood clapboard or stone. "Authenticity" trumps convenience almost every time. (These apartment dwellers, for the most part, have never had to be concerned about exterior maintenance.)

Interestingly, if I have a client from Long Island, New Jersey or one of the outer boroughs who owns a single family home, they seldom have the same vinyl aversion. These single family homeowners have experience with exterior maintenance, and want to minimize it in a second home. Many still want the parts of the house that they 'touch' — floors, cabinets, doors and countertops — to have 'natural' origins. But give 'em easy care, never paint, no-leak vinyl on the outside.

This got me thinking about clothes. After all, the siding and insulation of a house is sort of like a foul-weather or winter coat. The next time you're riding the subway in the city, look around at the winter coats people are wearing. They're almost all are some type of synthetic on the outside — GoreTex, treated polyester, nylon, whatever. Natural wool coats are few and far between. And when it rains, those wool-coat wearers need an extra water shield, in the form of an umbrella, to stay dry.

Lots of those synthetic coat wearers still prefer natural fiber inner layers, the parts of their clothing they touch and touch them. 100% cotton shirts and pants and blouses. But outside, synthetics are preferred because they're far superior in repelling cold and wet than their natural predecessors. Better living through chemistry.

But that logic hasn't quite transferred over to houses. Vinyl siding is still seen more akin to polyster stretch pants than a cool North Face winter jacket clad in Polartec. Maybe vinyl siding needs an image makeover or repositioning. Call it something like "EnviroShell by North Face" (with a North Face logo to affix underneath a soffit). Use the word "Extreme" in marketing a lot, like "Extreme Durability" and "Extreme Conditions." Clad a sceintific station in Antarctica with it. And get some hip architects to extol its virtues in the pages of "Dwell".

Super Motivated Setting the Bar

A number of recent commenters have highlighted a handful of very low priced sales, or sales well below recent "market value". Quite a few recent sales that fit into that "eye-popping deal" category have been distress sales (foreclosures or short sales) or involve a super motivated seller (that could be an estate, a builder or investor looking to cut their losses and get out of a property, or a relocation company looking to move inventory off their books.) And quite a few of the houses currently in contract and scheduled to close soon that I know of fit that bill — the Parsons spec house foreclosures above Callicoon, a log sided foreclosure on 5 acres on Decker Road near Glen Spey, an adorable mid-century ranch near Barryville, also a foreclosure, a relocation home near Jeffersonville and a couple of estate sales. There are a few other properties I'm aware of that are close to deals, where the sellers' economic circumstances are dictating a quick sale and the likely price will be well below "market".

The result about labeling all of these sales as "below market" is that, as more and more occur, they define the market — and form a body of appraisal comps that can't be dismissed. Non-distressed "market rate" sellers, suffer, but they're also a contributor to the problem. If non-distress sellers cling to unrealistically high price expectations, their properties don't sell, and the appraisal pool is more and more defined by distress properties. Sellers need to take a hard look at their asking prices, and move them into more appealing ranges to appeal to buyers. That doesn't mean they have to necessarily move down to distress sale prices, but they can't be wildly off of those ranges.

This is exactly what's happened in markets like Florida, where distress sale pricing is largely defining the market. In many parts of Florida, if a house isn't a short sale or a foreclosure, it's a tough sell. It's too early to tell if that dynamic is taking hold here, but recent sales indicate it could be gaining momentum.

Latest Market Conditions Report Posted

I just posted my latest Market Conditions commentary with sales data through February, 2008. I anticipate that there will be a desire among some to draw and quarter me for "cooking the books" and painting a falsely rosy picture because my numbers appear to vary somewhat from what was reported in today's Times Herald Record (and commented on a number of times in the post below). I'm not 'obfuscating' anything. Michele Tsaptsinos, the Sullivan MLS President, was correct in reporting that there were 14 single family sales in Sullivan County reported in the Sullivan MLS. I use a slightly different sample, looking at all single family sales reported in the Sullivan MLS, the vast majority of which are Sullivan, but there can also be a few sales in neighboring counties reported in the Sullivan MLS. So for February, I got 19 sales. Michele's number is down 50% from a year earlier, mine is down 42%. Either way, it was a dismal month and I'm certainly not trying to hide that fact.

On the price front, there is more of a discrepency --- my single month median was $148K for the Sullivan MLS pull, Michele's was $111K forn the Sullivan County-only pull. A few out-of-county sales above the median in such a small sample size pulled it way up for the Sullivan MLS pull. That illustrates the problem with the median when the data sample size is so small — and why I focus on the trends in a larger, 3 month sample. If MIchele were to move up the Sullivan County-only pull by one week, from Feb. 8 through Mar. 8, it still shows just 14 sales for the 4 week period, but the median jumps to $131K because of where the median comes in the sales data.

Real Estate and the Obama Budget

The ink had barely dried on President Obama's proposed budget when NAR, the National Association of Realtors, sent out an email blast to members opposing any tinkering with the mortgage interest deduction. In part, the email, from NAR President Charles McMillan, states "A small section of the sweeping budget plan has the potential to become a major impediment to a recovery in real estate markets across the nation. NAR is 100% opposed to the provision that modifies the Mortgage Interest Deduction and is prepared to use its formidable array of resources against its enactment."

Did Obama propose to eliminate the mortgage interest deduction? No. Did he propose eliminating it on second homes? No. Did he propose cutting the $1 million total mortgage debt ceiling upon which one can take a mortgage interest deduction? No.

President Obama has proposed limiting the tax rate at which high income taxpayers (singles earning more than $200,000, families earning more than $250,000) can take itemized deductions to 28 percent. (The marginal tax bracket for single filers is 33% between $164,550 and $357,700 and 35% above $357,700. In 2010, the top marginal bracket could reset to 39.6%.)

During the campaign, Obama was very forthright about plans to shift the tax burden to wealthier taxpayers. It's a bedrock philosophical difference between Democrats and Republicans, and Republican tax policies launched during the Reagan era have significantly reduced the tax burden on wealthier Americans. During the 1970's and until 1986, the top marginal tax rate on earned income was 50%.

So will this change be a "major impediment" to the housing recovery, as Mr. McMillan claims? I doubt it. Sure, it may slightly reduce "housing affordability" for upper income home buyers. But over the last year, the drop in mortgage rates from the low 6% range to the low 5% range has increased "affordability" far more than the tax changes will reduce it. Not to mention that the houses they may be looking to buy are 20% or 30% cheaper in many parts of the country than they were 12 to 18 months ago.

Personally, NAR's knee jerk response, to defend real estate interests uber alles, is embarrassing. In this country, we need to regain a sense of common purpose and shared sacrifice. But the special interests in Washington, including NAR, are pulling out all their guns to protect their niches.