Bottom?

The pall of doom and gloom that hung over real estate (and the stock, market, retailing and the economy overall) over the winter seems to be lifting a bit. Six weeks of generally positive stock market results, along with some glimmers in other sectors, may be having a positive impact on people's psyches. I'm sure you're noticing it among your friends too --- over cocktails or over dinner, the tone is more upbeat. There's a sense that "it's" working --- whatever that "it" is that the government is doing. Of course, some of it is the passing of time; we've officially been in a recession for 16 months, and the Lehman bankruptcy was seven months ago.

I'm starting to sense that we may have seen the real estate market bottom here, at least in some sectors. I've been following the median sales price for Sullivan County single family sales closely. At the end of March, the 3 month measure (Jan. 1 thorugh Mar. 31) stood at $132,000, the lowest I've seen since March 2004. I just pulled the data from Feb. 1 through Apr. 17, which is a good indicator of where the 3 month number is headed when I pull the next full period through April 30th, and the number is $138,000. That's up from the previous month, not a lot, but up and not down.

I've also been a bit surprised this week when I've been calling around to make appointments to show houses. A number of houses that I wanted to show --- and were available two or three weeks ago --- have deals on them. Now, a lot of the houses that make my "short list" to show prospective buyers tend to be attractive and pretty well priced, so it shouldn't come as a huge surprise that some of them are gone. But there are definitely folks out there buying. In the last 10 days, I've put together one deal and have another in negotiation, and one of my colleagues at Catskills Buyer Agency, Kathy Rieser, is in negotiation on two properties. That's more activity than we saw in a month over the winter.

Price wise, none of what I'm working on is upper end. The houses I'm finding out are in deals are in a solid bread-and-butter range from the mid-$100's to the upper $200's. That's definitely the sweet spot among folks who are calling. I'm not getting calls for big renovated farmhouses on acreage or lakefront houses above $500,000. I'm not complaining. I'm happy to see the activity.

Comments

[Dan F]

Dave-

I have seen the seemingly upbeat attitude among some folks and in the media. Being an admitted skeptic, I have "read between the lines" of all the "positive" news on the banks etc. and I have to tell you, it still ain't pretty. All those so called profits have been absent a proper accounting of losses in other areas, in my opinion. I am not saying they are lying. All they have done and reported is perfectly legal according to FASB rules. Lets just say, in my opinion, they are stretching the truth in some instances. Alas, it will all come out in the wash. They are actually achieving one of their main goals which is to buy time. That being said, unemployment continues to rachet up, foreclosures are ratchting up now that the moritorium is lifted, prices are coming down (still). The list goes on. I fail to see how we hit bottom. Isn't this a normal seasonal pickup in activity ? Has the number of forclosure sales as a percentage of the overall number decreased ? I don't know but I think not. IMO there is a huge pipeline of bad loans waiting to hit the statistics and its coming soon despite all the "help" that homeowners were promised. Sorry to say it, but I just don't buy it...Not yet anyway...

[David Knudsen]

Dan, keep in mind that the deals I'm seeing — and the renewed buyer interest — are not at peak 2007 price levels. Far from it. The deals I'm seeing being done are at about 25% below those levels. Actually, seasonality is not playing the big part you may think. The second home market here typically has two seasons of major buying activity --- September/October, when summer shoppers start to get serious about actually buying something, and January/February, after the holidays when folks start thinking about the year ahead and having a place for the summer. So some of what we may be seeing now is displaced demand from the winter, when frankly, nobody was buying anything.

[Vonnie]

As a matter of fact Dave, from February 1 2009 through April 17 2009, there were 60 closed sales with a median of:

$132,500

That's smack about where it was for January 1 through March 31 2009 which you posted at:

$132,250.

Facts:

*Closing sales volume is still way down from prior years.

*There is still a lot if inventory on the MLS.

*The ratio to homes coming onto the market to closing sales is 1:10.

*Foreclosures (which were not part of the market from 2003 through 2007) will continue to weigh down the median and average prices.

*The amount of foreclosures - along with buyer bargain bin mentality - will continue to confuse neophyte buyers and make the realtor's job longer with more red herrings.

*Primary home co-op prices in the city will continue to fall in Brooklyn and Manhattan for all of 2009 and into 2010, giving your clients a choice with their capital - buy a co-op (which you also did - alas - last year) in the city or spend on discretionary second home in Sullivan County.

Bottom, Dave?

I think not - nor a V-shaped recovery up here.

As your choir has sung, the Sullivan County real estate market is not the stock market which has seen a 28% gain from its' bottom (let us hope) in mid March with the SP500 in the mid 600's.

The Sullivan home market, however, is the last to go up, one of the first to go down and again - it will be a long recovery as it crawls up with baby steps next year or the year after.

My guess is that you'll see a flat line with the median closed price some where between $115,000 and $125,000 for the next 18 months - or another 10 to 15% off what is the median of 132k currently.

Yours in sales,
Vonnie

[V.]

Related:
http://www.nytimes.com/2009/04/19/realestate/19cov.html

Oh - also:

* Many Sullivan sellers are still in the first phase - denial.

Vonnie

[David Knudsen]

Ah, T, I see you're back. As usual, our numbers don't quite jive. But that's neither here nor there. On march 30th, you posted a comment on here that the median for 12/30/08 through 3/30/09 was $125,000. Now you've posted that it's $132,500 for the period since 2/1. That sure seems up to me. And even though our data isn't quite apples to apples, your statement above that your current $132,500 pull is almost equal to the $132,250 median I reported for the first quarter doesn't indicate a downward trend to me.

As to the statement that there are 10 new listings for every closed sale, I'm not sure where you're getting that number. Since January 1, there have been 317 new single family home listings in the Sullivan MLS. Figure that some of those are relists (where a listing has expired, and the agent reinputs it as a new listing to reset the listing date and make it look 'fresher'), probably at least 10%. So there have probably been around 270 to 285 actual new SF listings since Jan. 1. During the same period there have been 90 closings. So the ratio looks to be more 3:1, not 10:1. When that ratio is greater than 1:1, it means that the inventory of houses on the market in months is growing, and is one more indication that we're in a buyer's, and not a seller's, market.

I don't think I'm floating a red herring here. I'm not saying we're out of the woods. There are lots of unknowns that can affect us here, notably job losses in NYC and where real estate prices head in the metro area. But the steady downward march in the median sales price seems to have slowed.

There are lots of folks who comment on here who applaud bad news (the badder the better), and view only bad news as "honest." While any indications of "good news" is derided as fraudulent misdirection. I think I've been pretty even handed, and quite upfront with bad news. During the late fall and into the winter, I've used phrases like "economic Armageddon", "slowed to a standstill" and "the phone just stopped ringing." I've also been very upfront on where I think prices need to be in certain property categories to generate buyer interest.

The houses that are getting interest right now are in that small subset of the market where sellers are motivated and pricing their houses to attract buyers. That's where the action is. $250,000 charmers on a few acres on a quiet country road are 'in'. $400,000 ones aren't.

[vonster]

I agreed with you that $132,000 is now the current median in Sullivan County from 2/1 to 4/17.

However, if you pull the last 30 days - new listings to closed sales - it's 255 to 36 - or about 7:1 for the past month.

A buyer's market to be sure - increased inventory coupled with low sales - and YOY median of (-25%).

Yours,

[David Knudsen]

V, good article in the Times. I agree that most sellers are in denial. When I talk with old hands here who have been through multiple ups and downs, they all say that when the market turns down sellers lag buyers by about twelve months. During a transition time, there's this small subset of sellers who are motivated, for whatever reason, to do a deal at the leading edge. (Similar to the way up, when there was a small subset of buyers who were willing to pay above the appraised value for a house.) Those motivated sellers are the ones that are essentially defining the market. I definitely saw that in Florida, when I was selling my condo. I bit the bullet, went to the leading edge of the wedge, accepted a slight loss and sold my condo. Others further back in the pack weren't as lucky,

The Manhattan sellers in the Times article are still very much at the beginning of the process. For the past couple of years, there's been this collective belief in the city that NYC was somehow immune to a real estate downturn because of the city's status as a "world capital." It's probably going to take a bit of time for it to settle in that New Yorkers are affected by mortal factors, and not protected by a real estate Zeus.

[David Knudsen]

You didn't agree with me. I show $138K as the median sales price for single family homes as reported in the Sullivan MLS.

You're also confusing inventory churn with total inventory. If I pull new single family listings in the Sullivan MLS from 3/18 through 4/17, I come up with 146. Total inventory hasn't increased by 146 houses. There's churn in that number. Some listings expire, some go into contract, some are withdrawn, and new listings (whether really new or relisted) come to market. That happens all the time, all year. The total single family inventory listed in the Sullivan MLS stood at:

Jan 1 - 921
Feb 1 - 920
Mar 1 - 896
Apr 1 - 933
Apr 17 - 943

Your implication is that there is this flood of inventory coming on the market. In fact, available SF inventory is about 10% lower than a year ago. Yes, sales volume is much lower and that's leading to a far higher "months of inventory" ratio. But the gross sales inventory number is not sharply climbing.

[cfranch]

Glad to see Dave talk about the psychology of the market. People hate admitting mistakes i.e. selling at a loss. It is the number one reason small investors blow up their brokerage accounts. Right now we are at the beginning of the seller cycle where fear is setting in. This will be followed by panic, desperation and capitulation. It is the capitulation part of the cycle where buyers will want to emerge. I think we are further along this cycle in SC and only in the beginning in NYC real estate.