Current Market Conditions Posted with March Data

I just posted the Current Market Conditions monthly column, with the latest quarterly single family sales data reported in the Sullivan MLS. Check it out and then come on back here and post your thoughts.

Comments

[Rod]

DK - in your market report, you state an average 89% 'ask to purchase spread' - how does that work? The last reported asking price, correct? So if it started out at $600,000, but was reduced, through the MLS to $400k, and sold at $360k, then a sale such as this would only record a 10% off asking, rather than the more accurate 40%.

Please clarify - since if it is only the most recent reduction being considered in the averages, than that metric is pretty meaningless and misleading.

As always, great report. Thanks for putting it together.

[David Knudsen]

It's absolutely meaningful. Buyers make offers based on the asking price at the time they make their offer, not on what the asking price might have been a year ago. And I look at things from a buyer's perspective. If you bid $4 for a share of stock, and the offer from the seller is $5, you're bidding $1, or 20% lower than the offer. It's only tangentially relevant that the stock may have traded at $25 a year ago.

But FYI, if I run the ratio for closed sales prices versus original asking prices, the ratio is 79%. But that doesn't mean that houses are selling for 79% of their asking price. They're selling for 89% of their asking price. Knowing the interim price reductions on a specific house to get to the current asking price is interesting back story for a buyer in shaping their offer, as an indication of the seller's motivation. But to say that houses are selling for 79% of asking price would not be accurate, because sellers base their offers on current asking prices.

[rodney]

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

"Knowing that there is a two to three month lag in the pipeline, my guess is that you will see the median drop further for the January 2009 numbers to about $125,000 to 130,000 which will reflect the negativity that has run rampant since the fourth quarter of 2008."

Officer

Posted by: Officer | December 29, 2008 at 01:16 PM
======================

Hello Dave, interesting site. This guy, Officer, and a few others, were really quite prescient in posting that the median price in Sullivan would be around $135,000 back in late December 2008.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

"On the price front, March's 3 month median sales price dipped 4% from February, to $132,200..." [Knudzen]

[cfranch]

This is one tough market for a broker. As Dave notes buyers and sellers are moving in opposite directions. Something will have to give of course and I think it will be sellers. Similar patterns play out in the stock market where people hold on to their shrinking asset and then finally give up in disgust. We get capitulation and a true bottom. Volume picks up dramatically and prices begin to rise again.

I read and post on NYC RE blogs and many owners/sellers are pinning their hopes on the recent stock market rally. It has been impressive(and in my opinion will be a multi-month rally) but the Wall ST that fueled the RE boom does not exist anymore. Not only have the large bonuses disappeared but thousands of jobs up and down the pay scale are gone as well. And it isn't just finance as law, advertising, architecture, real estate and media jobs have disappeared as well. Furthermore people with cash will park it in a rising market(stocks) not a falling one(RE). This is exactly what played out post-1987 stock market crash. Belated kudos to the NY times for finally writing an accurate piece on the state of RE in NYC. They have been a notorious booster of RE as it is major source of advertising income and have been loath to paint anything but the rosiest of pictures. Kind of hard to ignore the dead pink elephant in the middle of the room.

http://www.nytimes.com/2009/04/09/realestate/manhattan/09real.html?_r=1&em

[peter]

Good point Dave.

There's an article in today's New York Times about studio apartments for sale *in Manhattan* for $200,000.

If there was every a time for somebody in their 20's through 40's considering anteing up their savings / down payment for either a primary first home coop in the city (which had been out of reach in the past five years) - or a second home in Sullivan County - while still renting in NYC - I said they'll choose buying a home in Manhattan which will cause the second home market in Sullivan to suffer further price drops.

At:
http://www.nytimes.com/2009/04/12/realestate/12cov.html?hpw

There's another good audio from Nightly Business Report {Big Layoffs = Big Bust} of the Manhattan market at:

http://www.nbr090410.mp3 [download and scroll to 13:15]

For those that are patient, they will be able to buy in Manhattan and not be forced into fringe areas.

For example, prices in the Bronx for co-ops are now dropping quicker than in Manhattan.

Timing is everything.

peter
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NY Times:

Making a Comeback: $200,000 Studios [in Manhattan]

http://www.nytimes.com/2009/04/12/realestate/12cov.html?hpw

[Game Over]

In Plain English:

1989: Market Peaks
1991: Minor Recession
1993: Unemployment Peaks
1994: Housing bottoms
1995-1998: Housing Flat

2007: Market Peaks
2008-20?? Major Recession or worse
2012: Unemployment Peaks
2014: Housing bottoms
2015-2018: Housing Flat

And don't forget that 77 million baby-boomers will be downsizing and/or reorganizing in preparation for retirement.

Generation X and Y live off baby-bommers' life savings. Don't count on them to pay today's inflated prices. All they need are Ipods and Iphones.

GoodLuck to all

[Nick]

As always, fascinating and informative reading. My question has to do with the very high end sales. In the last couple reports there have been a few mentions of seven figure closings. My understanding is that those have always been quite rare for SC. And to see another two of them makes me wonder -- do you have any insight into what's driving these? I don't know if you can comment on specific listings like this but did those deals have anything interesting about them that we should know, ie utterly incredible properties that were selling at a dramatic discount, even at such a high price? Or do you get the sense that at the extreme upper end you're dealing with savvy and very wealthy, buyers who have long experience in markets and plenty of cash and are ready to pounce wen the market gets depressed as it has been? I dunno, really just curious about that end of the market.

From what I can understand the lower end is "normal" people who are looking for a deal on a vacation place, and as the expectation of free-money from appreciation -- as well as general uncertainty about their own employment or income -- gets taken out of the equation they are less likely to "stretch" and want a much larger margin of safety. Ie they know they can still make payments if one half of a couple loses their job, etc. To my best guess that's what would cause the upper-mid level (ie 400-600k) to fall back so sharply. Those were previously "normal" (meaning wage-earning) type buyers, and the same type of people are still around and still interested but much more conservative. Whereas at the million plus level it seems like that's likely a different kind of buyer altogether, likely someone who probably has a high net worth and the day to day concerns (ie having to sell in a year unexpectedly, job loss fears) aren't that important for them, and they figure the deals right now are good enough to not bother waiting. Am I guessing right? Or is this side of the market so thin that it's impossible to generalize.

OK once again that was too long a question. In short, basically I'm curious as to your read on who these buyers are shopping for and actually closing deals on $1MM+ properties? Who are these people?

[David Knudsen]

Nick, I really can't comment on "who are these people" because one of the two sales involved a client of mine. And having a client relationship binds me by some confidentiality expectations. That's not a cop out. It's the law. One of the challenges sometimes on this blog is that past clients ask me to comment about some aspect of their purchase, but I can't even publicly acknowledge they were a client without their permission.

However, I can talk about the two sales at Chapin from a value standpoint because, at the moment of closing, they're a matter of public record. I think the property that my client bought, a 5,500 sq. ft. house on 5 non-lakefront acres, plus two adjacent 5+ acre non-lakefront lots, for $1,040,000, was a very good value. It was one of those "perfect storm" situations, with a very motivated seller in a very specific situation matched up with a buyer who saw the value in the deal that could be struck, and was able to take advantage of it. Working on that deal was a such a pleasure, because it was such a good fit and an opportune time for both parties.

I was not a party to the deal on the other house, the lakefront on a cove on Toronto at $1.75M. All I can say is that I was pretty shocked that house sold at that price. 'Nuff said.

[David Knudsen]

That being said, the upper end of the market has a handful of very interesting opportunities. A lot of folks probably think that upper end sellers are mostly laid off hedge fund managers and ex-Lehman traders who need to offload some assets. But that's generally not the case. Those owners generally have enough assets to float a home up her for the near future. If your perception is a flock of Ruth Madoff's needing to sell of the family jewels fast, you're probably wrong.

However, there are some upper end sellers who are in the process of "reconfiguring". Possibly due to divorce, illness, relocation or consolidating their real estate holdings. Many of these sellers are financially sophisticated and savvy, and are comfortable with concepts like "Net Present Value", carrying costs, and where the market may be headed. So it's sometimes possible to strike an attractive deal on strictly financial rather than emotional terms.

[Bix]

Maybe it's just wishful thinking on my part (and being "long" Sullivan Co. real estate it probably is), but I would think that upper-end buyers who had once thought of Ulster or the Berkshires might consider the Catskills, given the values available here.

The problem, as usual, is that Sullivan County simply does not have the amenities of the Berkshires (cultural attractions, restaurants, etc.). Here you're buying isolation, which is an acquired taste.

[David Knudsen]

Bix, I think our position relative to the Berkshires and Ulster really isn't that different than it was a year or two ago. Some people gravitate here, some there. I was at a regional meeting a week ago and talked with other agents who work in Columbia, Delaware, Ulster and further north towards Saratoga and the Adirondacks. The situation seems very similar. Lots of tire kicking and bargain shopping, more activity at the lower end and very little happening at the upper price ranges.