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.

Comments

[b.]

Last week somebody posted the following sale on this board which garnered many comments:

==========
3 BR / 3 Bath
5 Acres / semi-private to private
Very good condition
2400 square feet
New roof
2 car attached garage

Sold for $120,000
=============

Well, recently another great value sold.

2 BR / 2 Bath
Detached garage
11 Acres
Good Condition
Private

SOLD for $124,500

=======================

Folks, regardless what others may say on this board, if the sellers lower their offering prices into *realistic 2009 asking prices* - there will be sales.

A house like this would have sold in the upper one hundreds to low two's two to three years ago - but not today!

Also, please note that these two properties WILL be used for comp data by appraisers going forward into the 1 and 2Q of 2009.

Low 100's.

B.

[David Knudsen]

Yup, sure fits my definition of private:

http://maps.live.com/default.aspx?v=2&FORM=LMLTCP&cp=qyzhrv8rxjtn&style=b&lvl=1&tilt=-90&dir=0&alt=-1000&scene=26606693&phx=0&phy=0&phscl=1&encType=1

FYI, it's the house with the red/brown roof on the left between the white house with the barn behind it (to the north) and the creek (to the south.) It's a dog-leg lot, and about 8 or 9 of the 11 acres are wetlands. 868 above grade sq. ft., on the market for 301 days.

I beg to differ, b., that this house would have sold in the upper $100's to low $200's two or three years ago. A larger, more charming renovated 1920's era bungalow that was Scott Bakula's vacation place a while back, 2 doors down from this house sold in Jan. 2006 for $175K (on 1.4 acre, almost the same usable land). A 3BR, 2 1/2 bath 1970's era ranch, 1,680 above grade square feet on 8.6 acres much further down White Sulphur Road, in a more rural setting with more separation from neighbors, sold in May 2006 for $195,000.

Given those two sales at the peak of the market, I'd be hard pressed to think this house would have sold for close to or above $200,000.

[Jack]

b,

I don't want to be buying in 2009 prices.
I want to be buying 2012 prices in 2009!

Jack

[Bill Miller]

But Jack, in 2012 after a full rebound you'll find it impossible to buy. Real estate prices never go down, buy now or be priced out forever. Soon everyone who didn't participate in the free money machine will be living in tent cities. Get with the program.

[ar]

This looks to me like a NEIGHBORHOOD strung along a major road , not a "country" setting. But this sure demonstrates the value of photos when we're talking about sales.

[Reg]

Dave,

You're right about the sample size. Tiny number statistics are unreliable, and it's smart to point out how just a week would have skewed the numbers far in a different direction.

[mal]

Once again B is deliberately misleading us. This very tiny house in Liberty is up on the road right next to the neighbors because the only buildable part of the property is ~2 acres on White Sulphur Road. The wetland area begins directly behind this 2 acre piece and occupies most of the remaining 9.6 acres. The only other dry portion of land (about 2.8 acres) is separated from the house (and from the road) by the wetlands. The image of the house doesn't truly reveal its tiny size because the neighbor's house to the north has a tiny footprint too (818 sq ft on first floor).

Concerning the selling price: the owners bought the property in 1969, so presumably they had the financial flexibility to sell low. Besides, $124500 is comfortably ABOVE the property tax estimate of 2008 "full market value" of $106,673 ($90823 for the house and garage on 2 acres + $15850 for the additional 9.6 acres). For comparison, the neighboring property is on 2.4 acres, and has a full market value $114,281.

It really doesn't seem to me like a particularly good deal in today's market.

[ar]

Mal -- The kind of additional information you provide is invaluable. I do have a quible with your suggestion that property tax "full market value" numbers are meaningful. Is there any lender that would rely on those numbers as a basis for extending credit? If so, a lot of money and aggravation could be saved by putting appraisers out of business. In some towns the "full market value" is ridiculously low, in others ridiculously high; but my understanding is that it is widely understood that if "full market value" for property tax assessment purposes ever bears any relationship to actual market value, it's a pure fluke.

One other point, the fact that the sellers, because of their particular circumstances, had the flexibility to sell low, does not seem to me to be relevant. Rational sellers don't forego available profits; if they could have gotten a higher price, presumably they would have done so. The price they sold at is a reflection of market conditions for that property, regardless of whether or not the seller feels pain or pleasure or relief at tht price.

[b.]

Boys,
You can spin this anyway you want but when the President of the Sullivan MLS states in a published article yesterday [link below] the median sold price in Sullivan County currently is:

$111,750

[URL]

http://www.recordonline.com/apps/pbcs.dll/article?AID=/20090310/BIZ/903100320

and you don't believe her data then it's really hard to argue with either ignorance, arrogance or Kubler Ross' first level: Denial.

B.

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

[Posted] December 28, 2008 {Two and a half months ago}

"In fact if you look at the breakdown, you'll see that the median closed price is LESS than $150,000..."

"I think you'll find that the median in Sullivan is now closer to $135,000 to 140,000 if you were to use the November and December 2008 figures."
----------------

http://en.wikipedia.org/wiki/K%C3%BCbler-Ross_model

The stages are:

Denial:
Example - "I feel fine."; "This can't be happening, not to me!,"

Anger:
Example - "Why me? It's not fair!"; "How can this happen to me!"; "Who is to blame?"

Bargaining:
Example - "Just let me live to see my children graduate."; "I'll do anything for a few more years."; "I will give my life savings if..."

Depression:
Example - "I'm so sad, why bother with anything?"; "I'm going to die . . . What's the point?"; "I miss my loved one, why go on?"

Acceptance:
Example - "It's going to be okay."; "I can handle it with change"; "I can't fight it, I may as well prepare for it."

[Bix]

I don't think the property tax appraisals are supposed to mean very much, but I agree with the rest of your (mal's) post. Only a small portion of he land on this property is usable, and the house itself is tiny and without privacy.

The proximity to the house to the north becomes even more apparent if you flip the image so that south is on the top, and magnify.

What this indicates to me is that cheaper houses are moving, not that expensive houses are selling cheaply.

[David Knudsen]

Bix, I think you hit it on the head ... cheaper houses are moving, not that more expensive houses are selling cheaply. The drop in the median into the $111K range (or the $120K or $130K range, however you sample) is a combination of two factors — individual houses selling for less than they would have a year or two ago AND less 'expensive' types of houses comprising a far greater proportion of what's selling. By the way, I haven't denied Michelle's data in the record. I just think it has to be put into a context. B.'s post implies that a house that "would have sold in the upper 100's or low 200's" sold for $124,500, or about 35% to 38% off of where it would have sold 2 years ago. I tried to make the point that house would probably never have sold for $200K. Possibly it would have sold for $150K, maybe $160K at the peak, so maybe we're looking at an apples-to-apples drop in the 25% range.

One thing that's striking in looking over the solds for the last couple of months is how few mid range type properties have sold, the bread and butter range of the second home market — farmhouses or vacation chalet style on a few acres in the $250K range, for example. I would agree with Michele that the second home segment of the market, or at least the homes that second home buyers would traditionally gravitate towards, has been very, very slow. Looking in that range has picked up, but it hasn't translated yet into much activity. I don't know that price, alone, is going to revitalize that market segment until there's more general economic confidence. That being said, a few of my clients who have taken the plunge have grabbed what in my opinion are some very good deals in situations with very motivated sellers. For example, a client of mine just recently picked up a 5,200 sq. ft. non-lakefront house on 6 acres at Chapin for $822,000. It was originally listed a few years ago at $1,89M, then $1.3M and more recently $995K. (Kinda interesting that B. never posted that one on here.) I don't think that sale defines the market any more than the $124,5 sale in White Sulphur that's being flogged to death here. Both, however, illustrate that there is opportunistic buying going on.

[Rod]

B-Hind and his associated personalities are like a child pounding the table screaming to be listened to, so he repeats and repeats. First gas drilling was our demise, then the powerlines, now the world economy. Sure, there are winners, there are losers and the losers are outnumbering the winners at the moment. What's new?

Folks, David does a great job at attempting to capture the essence of market at any given time. And Folks, Sullivan County is holding up better than many areas in this god-forsaken country that promotes speculation, loose lending and fast wealth. And, Folks, the reported numbers don't include non-mls sales, which when sales are so few, impact the medians and averages greatly.

Folks, The fact that closed sales in February result from deals struck in November - which was an awful month, from every vantage. The Market may be better, or may be worse, at this moment - but measuring November's deals doesn't tell us a whole lot.

And what exactly, are the qualifications of the Sullivan County Real Estate President? Obviously not crisis management or communication.

[cfranch]

ROD:

Sounds like you're in the denial phase of this housing mess. Must be a broker or new owner. And Sullivan County is holding better than other parts of the country but also doing much worse to the rest. It seems to be in the mid-range of the decline.

Your completely unverifiable claim of "non-mls" listings is, frankly, a pathetic attempt to pump the market.

Your final comment attacking the SC RE president for actually speaking the truth is telling. This is exactly the clarity buyers need to see to start building some confidence.

[b.]

Rod,
An official of the MLS gets quoted in the paper yesterday about the current median price in Sullivan County which has been the subject of countless threads on this blog and you dis it along with your fan club.

Typical.

My point is that the buyers should gather as much information as possible from all sides of the table (gee...sorry about bringing up the gas leases, powerlines, economy, foreclosures, unemployment) about the state of this market before entering into any decision.

B.
----------------------------

FYI: (written in August of 2008)

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

[David Knudsen]

Wow, this is a tough crowd. When Lawrence Yun, the chief economist for the National Association of Realtors, spins the data with uber-rosy fluff, he gets slammed for being unrealistically optimistic. And when Michelle Tsaptsinos (who, by the way, is the president of the Sullivan MLS, not the Board of Realtors) says something from her perspective that's not managed by spinmeisters, she gets slammed. Is it so hard to believe that a Realtor might be straight talking, not trash talking? I don't quite share the same perspective that Michelle does, and it would probably be more instructive for her comments to have more context around them. That isn't saying, by the way, that she might have given it more context. I've been quoted in the Record quite a bit over the years, and often find the context stripped from the sound bite.

[Mrs. Robinson]

To Bill Miller:

Jack is assuming that technical deflation turns into genuine deflation.
In that case, 2012 might very well be bottom for housing.

Priced out forever?
Are you in lala land?

Mrs Robinson

[Mr. Robinson]

To Rod:

Are you implying that a prospective SC buyer speak with someone qualified in "crisis management or communication" vs. taking advice from the president of the SC MLS?

Mr Robinson

[Baby Robinson]

To all SC Realtors (excluding David):

The faster you side with Buyers, the faster we reach bottom.

Baby Robinson

[David Knudsen]

Baby Robinson, there are already Realtors who side with buyers. They're called buyer agents. But most buyers don't use them, or demand them — otherwise there would be more than 3 exclusive buyer agents in Sullivan County.

[Mark]

Michelle Tsaptsinos's comments in my opinion were way off base, and not helpful to the realtors she represents. Currently she has only four active listings, and no recent deals. (I believe her last one was before Christmas.) So maybe in her real estate opinion the second home market has ground to a halt, but the 23 pending sales on the MLS say differently.

I think the last eight years has taught us that just because someone has the title of "president" does not necessarily mean they have a clue what they are talking about.

[Jimmy]

Mark,
She is the highest officer in the Sullivan County MLS!

Her statement in the newspaper yesterday was based on fact - not her opinion.

Duh.

Then you mention her listings and closings.

What's that got to do with the price of tea in China?

Nobody mentioned her sales / production capabilites until you did.

Your logic is awful. She *is* the president of the Sullivan MLS.

Reread the article.

Jimmy

[dr.jones]

Dave,

buyers' agents perform a valuable service and deserve proper compensation. However when their compensation is a percentage of the closing price it does not inspire confidence that they have the buyer's interest at heart. Your conflict of interest statement is not entirely satisfactory in this respect.

If a buyer confides to their broker he/she is prepared to pay $200K on a $250K property but would rather negotiate it down to $150K, what would be the broker's incentive to fetch the lower price? Even if the broker knows the property can be had for $150K he has 3 motives to shoot for a higher price: (1) he makes more commission on the sale (and as a general practice this adds up to many 1000s of dollars over a year); (2) he helps maintain real estate values high, so he makes a higher commission on subsequent sales; (3) he maintains a more amicable, less adversarial relationship with seller's brokers which allows him to work more efficiently.

The buyer will never know that he could have had the property for $50K less, and that confiding his true ability and desire to his broker was a mistake. If there's no confidence in this relationship, what's the point?

I mean no disrespect here, on the contrary I commend your very professional and balanced stance. However, as a mechanism for protecting buyers from overpaying, commission-based representation is ineffective. A flat fee and a bonus based on price reduction from asking might attract more buyers. This is especially crucial today when price differentials from asking to closing are widening.

One other point: have you made or looked at histograms of the 3-month sales data you are reporting? This could help you distinguish whether (A) sales volume has shifted to the low end, versus (B) sale prices have dropped across the board. (A) should produce a noticeably skewed distribution (or a change in skewness) from previous periods.

[Mark]

Jimmy,

I did read the article.

"The banks are not lending on second homes right now, or they're asking for a huge down payment," Tsaptsinos said.

That statement is just untrue. If your financials are good, and the house appraises, you can easily get a mortgage with the tradtional 20% down. Her statement was wrong. It is that simple.

"Sullivan's once-booming second-home market has ground to a halt, said Michele Tsaptsinos, president of the Sullivan County Multiple Listing Service." Wrong again...23 pending sales as we speak. A million plus closing at Chapin...It has slowed, but ground to a halt?? It was an irresponsible statement, feeding fear mongering.

My point with her lack of productivity is that her personal business may have ground to a halt, but not sales in general. Her statement was indeed her opinion, not based on fact. And it was a disservice to the brokers she represents.

As for calling her the highest officer...please it is a figure head position.

Don't believe everything you read Jimmy

[henry]

Mark,

14 single family sales in SC in a month (based on her data) IS grinding to a halt. Take out the forced sales (death, divorce and default/foreclosure) AND primary home sales, and there can only be a tiny number second home purchases. THAT IS FACT... for her and for most brokers in SC. Not much "second home" pie to go around.

Clearly, there are reasons why signings of purchase agreements were low several months ago... but how much have these conditions improved since then? Look at the stock market, economy, auto sales, banks, tighter lending standards, higher cap rates demanded by real estate investors,... Then compare with how asking prices in SC have adjusted to these changes relative to real estate in neighboring locales. Not surprising that discretionary SC second home purchases have fallen off a cliff. ("Off a cliff" is appropriate for a market where sales of single family homes are down 40-50% year-over-year and where second home sales are down even more given the skewing of sales to low-priced and primary home sales.)

As it takes several months to close in SC, then the 23 pending sales that you quote implies (amazingly) an even lower number of closings in the months to come. 23 / ~2 months = UGLY, any way you slice it.

As for the Chapin sale, while positive, one sale does not make a trend. Very few lakefront properties have closed since last august... as dave has oft noted. Still, there will be people that buy based on a good deal, and/or people that are less price sensitive.

Lastly, the "and the house appraises" is a big assumption for many second home submarkets. Lending to appraised value can lead to large down payments.

[Jaspreet]

Michele was referring to the second home market that has "fallen off a cliff".
Given that only trailers and small homes under 100k are selling, one can conclude that the vast majority of sales are in the primary home market of SC residents.

By the way, I never understood why locals pay far less for similar homes in this county.
In Columbia county, a price is a price regardless of who buys it. But in SC, non-residents seem to overpay by way too much.

[David Knudsen]

dr.jones, your point is well taken. Over the years I've proposed flat fee arrangements to a number of clients, and not one has taken me up on the offer. I'm still certainly open to it if a buyer is concerned about a conflict. However, buyers seem to want commissions to be invisible, embedded in the transaction. The downside of a flat fee is that if the co-broke commission on the sale is less than the flat fee, the buyer has to write a check at closing to make up the difference. I'm opposed to the concept of a flat fee + bonus, because it provides an incentive to only show houses where the potential of a sharp cut of the asking price is greater, not necessarily the house that ultimately is best for the buyer or the best value.

Frankly, the best system would be for buyers to pay us for our time and tasks completed. That would also allow buyer agents to set their own hourly rates, and charge what we think we're worth. Then the buyer can make a decision whether they want to work with a less experienced agent at, say, $65 an hour or a more experienced agent at $150 an hour. That would go over like a lead balloon. "I'd be happy to take you out on Saturday to see 6 houses. I expect it will take 6 hours, so my fee will be $900."

Not sure where the previous poster got 23 pending single family sales. I'm currently showing 63 pending SF's for Sullivan in the Sullivan County MLS. Because some agents are lax in updating pendings, particularly if the deal fell through after the listing expired, the number of actual houses moving to close is probably closer to 45 or 50.

[Rod]

cfranch - how wrong you are I'm afraid, on all accounts, per your above post - but thanks for the confidence-building thought that a blog post can 'pump up the market'. A bit self-centered to think this blog drives the marketplace - the feedback I get is more 'exasperation at all the suicidal people attracted to this site." Of course, it's really only one person.

Well said Mark - if I was a realtor, I'd be furious. PR 101. And her listings, sales, and general professional profile have every thing to do with credibility that keeps getting used as proof for one point or another.