Sullivan County Real Estate

The Two Sullivans

With May coming to a close, I started purusing the sale data this morning for the next Market Conditions Report. As I was scrolling through the individual sales over the past few months, I was struck by the number of bank-owned properties in the closed sales list. 23 of the 80 single family sales reported in the Sullivan MLS for the 3 month period from March 1 through May 31 were foreclosure sales. That's 28.75%! That means there were only 57 non-foreclosure sales over that same period. Figure that a few of those were short sales (there's no way of divining that from the MLS sales data), and add in the couple of estate sales, and we probably end up with only about 50 "market rate", or non-distress sales.

In looking through the foreclosure sales, it became apparent there are really two different Sullivans. Only 7 of the foreclosure sales were "west county" (generally thought of as the river townships, plus Callicoon and Bethel). 3 of those 7 were the Parsons/Barriger foreclosures above Callicoon, which are weird outliers because of the convoluted circumstances. Of the other 4, one is in Smallwood, one on Park Rd. in Yulan, one in town in Narrowsburg and the last on Deceker Road in Glen Spey.

All of the other foreclosures were in the central and eastern reaches of the county, east of a line running from Livingston Manor through White Sulpgur and down through Mongaup Valley, including properties in Parksville, Grahamsville, Liberty, Monticello and Woodridge. There doesn't appear to be any single area of concetration — when you're looking at 16 sales (23 minus 7) spread over 7 townships.

The foreclosure sales market is pretty rough and tumble, down and dirty. Most of the properties are lower end, often in "fair or poor" condition, and are sold "as is." Purchasers tend to be savvier investors looking to repair them and rent them out, rather than for their own personal use. Some buyers are looking to fluff them up and flip, but that's riskier because it relies on buyers being able to buy them.

The post title, "The Two Sullivans", isn't just about geography, but rather that there are presently two very separate and distinct real estate markets — the bargain-shopping, investor driven foreclosure side and the "market rate" side. When you pull foreclosures (and short sales) out of the total volume, the meager sales volume on the "market rate" side becomes even more striking.

Another interesting note is that while foreclosures accounted for 28.75% of sales during the most recent 3 month period, they don't comprise anywhere near that share of the inventory. In fact, of the 1,080 single family homes currently listed in the Sullivan MLS, only about 1.5% are bank-owned. Clearly there is a robust appetite for anything "bank owned", because when they come on, they generally sell pretty quickly (which is why, at any given time, there are so few listed.)

Deals are Tough

I had a very pleasant, laid back week after the frenzy of the Memorial Day weekend. When I have a breather, I often travel around the county previewing new listings, which also gives me the opportunity to stop by offices and chat with colleagues. Quite a few agents, particularly in the western parts of Sullivan, confirmed my recent experience that they've been very busy the past few weeks showing property.

But the other piece that I'm picking up is that being busy isn't necessarily translating into making deals. One refrain I heard repeatedly, from more than one agent, is that buyers are making offers but they've been unable to bring the buyers and sellers together to make a deal. Some of the tales I heard were of buyers and sellers being very far apart, with little likelihood of bringing the parties to a meeting of the minds. But I also heard of a number of cases where the gap, after a few rounds of counteroffers, was much narrower — 8%, 5% or even less — and a deal couldn't be struck.

The psychology of those narrow-gap stalemates is very intriguing to me. When the parties are that close, it's seldom really about the money. A $10,000 gap between a buyer at $190,000 and a seller at $200,000 translates into about $54 a month in additional monthly mortgage payment. It's more about buyers and sellers recognizing each other's position. Buyers want acknowledgement that it's a buyers market, and they expect to "win" — which means essentially that the seller accepts their final offer, not them accepting the seller's final offer.

On the other hand, the seller may be taking a loss, and they want some acknowledgement of their financial pain and sacrifice. (Even if they aren't taking a hard dollar loss, in the seller's mind they may be taking a 'virtual' loss over what they could have sold their house for a year or two ago — and may exhibit the same behavior.) The buyer accepting the seller's "final" offer provides that acknowledgement.

Another perception gap is between sellers who think that the buyers are "stealing the house" and getting a great deal with their latest counter, and buyers who believe that they're taking a big risk. In buying a house today, any house, buyers want a deal to compensate them for assuming the risk of any further market downturn. The reality of that may or may not be real, but the perception of it certainly is.

That tried-and-true stalemate breaker, "let's split the difference", isn't necessarily successful. A lot of buyers I've worked with in the last few months have a number, and when they reach that number, they're done. Once they've put that number on the table, whether they're 3% apart or 15% apart, that's their final offer. I'm not sensing a whole lot of "house love" that might motivate them to go above that number. There's a widespread attitude among buyers that if they don't get this house at the price they want to pay, another one they like just as well will come along. That may nor may not be true, but it is a pervasive feeling, and one that sellers need to be attentive to.

Another factor contributing to the difficulty in putting deals together is that right now there isn't a lot of recent sales history to guide pricing. I'm sure that the brokers advising sellers are having as much difficulty with this as I am with many buyers. In some market segments, where there has been some sales traction, notably that mid to low $200's range for second homes, and for some new construction 'primary' style homes. But I'm working with some clients in other market segments where it's much more a shot in the dark, where values are more a function of hunch and emotion than solid sales data.

Why Marriage Equality is Good for Real Estate

Unless you've been in a coma for the last month, or getting in touch with your inner spiritual self at a remote monastery, you're likely aware that New York is heating up as the next battleground in the gay marriage fight. In April, the NY State Assembly passed Gov. Patterson's Marriage Equality bill, and it's now working its way through the Senate, where passage is still very touch and go. Democrats have a very slim majority in the Senate, and a handful of Democrats from conservative districts are not supporting it (while some Republicans, on the other hand, are.)

Sullivan County is part of the 42nd Senate District, a seat held by Sen. John Bonacic, a Republican who is not currently a supporter of the marriage equality bill. But it ain't over 'till the fat lady sings, and Sen. Bonacic has been getting a lot of comments from constituents (both pro and con) on this issue.

Sure, for me, marriage equality is personal. But others in the real estate community for whom it isn't necessarily a personal issue should look at it as a business one. Supporting marriage equality is good for real estate.

Why? For gay and lesbian people, marriage equality has become a bedrock issue. We are very aware of which states are in the marriage equality camp, and which aren't. Consciously or not, that awareness will impact spending patterns. If a gay or lesbian couple from NYC have the choice of buying a vacation home in a marriage equality state or a non-equality state, a state's position on marriage equality will be a factor. It's not just a matter of legal ownership of property (which can be handled by contract in a non-equality state), but one of putting your discretionary dollars where you're most welcome.

True, Connecticut is a marriage equality state and there hasn't been an exodus of gay and lesbian people moving their primary homes from Chelsea to Greenwich. But choosing whether to move your primary home location isn't as discretionary as where to buy a second home.

Once New Hampshire approves marriage equality, which is likely to happen very soon, all of New England except Rhode Island will have approved marriage equality.  If New York doesn't follow suit, the states to New York's east will siphon off some second home business. But that will likely have more impact east of the Hudson, in the counties bordering Connecticut, Massachusetts and Vermont, than here in Sullivan.

How it's good for business here is the impact on buyers making a choice between Sullivan, Delaware and Orange Counties in New York and the adjacent counties in lower-tax Pennsylvania.  While I have a preference for the NY side for a number of reasons (which I'm not going to get into here), it is challenging to counter the lower-tax appeal of Pennylvania. (By the way, I'm licensed to sell real estate in both states, so it's not a matter of being able to sell in NY but not in PA.)

If NY approves marriage equality and Pennsylvania doesn't (and it will probably be quite a while before Pennsylvania falls into the marriage equality camp), gay and lesbian buyers from NYC will likely look much more favorably on New York for a second home than Pennsylvania. The emotional pull to be in a marriage equality state will carry substantial weight over the financial pull to be in a lower tax state.

So marriage equality doesn't just make good 'justice' sense, it makes good business sense. There just isn't much economic downside to approving marriage equality — I doubt there will be a major exodus across the river into PA by opponents if we say 'yes'. But there is a very tangible upside. I encourage all of my colleagues to contact Sen. Bonacic to express your support for marriage equality.  Here is the link to his contact information:

http://senatorbonacic.com/42/contact.aspx

Catskill Farms in Today's NY Post

Great article in Today's NY Post about Albert Hammond, Jr., the guitarist for the Strokes, buying a Catskill Farms house near Eldred. The article segues into an interview with Chuck Petersheim, the developer/builder, who's had considerable success with the small, finely detailed reproduction farmhouses that have become his trademark.

There's a nice exterior photo of Albert's house in the article. But if you're a Strokes fan and want to go hunting for the house, you won't be able to find it. It's tucked way up in the woods and not visible from a public road.

Albert's comments in the article also sum up well the appeal of Sullivan to a younger, hipper group of famous folk looking for a quiet escape and not just a second home extension of the city scene. There hasn't been a huge migration here among this group, but it has been steady and noticeable over the last couple of years.

One interesting thing here — and possibly part of Sullivan's appeal — is that there isn't much public fuss over celebrities. (Well, not totally true. When Leo DiCaprio spent the weekend visiting a friend here, it created quite a stir!) There's a tacit understanding about privacy. The local papers don't cover them, or even tuck in a little tidbit about "Look who just moved to the neighborhood." The only time they're generally mentioned in print in conjunction with Sullivan County is in an article in the NYC press about Sullivan County or the Catskills that wants to add a little spice. I never pepper my blog with mentions of who just bought. (Leo didn't buy, by the way. He was just visiting.) I'm just mentioning Albert here because of the article in the Post.

Busy, Busy, Busy

No, I'm just not talking about real estate (although I have been busy-busy-busy the last couple of weeks.) I'm talking about the Memorial Day weekend overall up here. Everywhere you go, there are people and crowds — at the farmer's markets, at the lakes, at the garden stores, in the restaurants. I was visiting with some friends last evening who were all commenting on how busy everything was this weekend (with subcomments about how many new faces there seemed to be.)

The almost-perfect weather we've had for the past few days certainly contributed to folks coming to the country for the weekend, and getting out and about. But I think there's more going on. Most second home owners I know had their houses stuffed to the gills this weekend with houseguests. A couple of friends called to borrow my airbeds for last minute overflow.

Holiday weekend houseguesting is a time honored tradition around NYC, and hinting for an invite is a well honed art. Once you become an owner of a country house, you may well find your country-houseless friends may be just a little bit nicer to you. (A hint to those looking for a repeat invite: hosts smile on those who pitch in and help.)

Because of the recession, this may turn out to be the "Year of the Houseguest." Some country home owning friends have already pencilled in houseguests on their calendars through Labor Day. Houseguesting may be yet another example of recession chic. After all, there is a certain panache to telling coworkers on a Friday afternoon that you're heading out to so-and-so's country house for the weekend.

Houseguesting is a far more affordable alternative to a paid vacation, whether flying the family off to Disneyworld or retreating to a lodge in Vermont. A bag of goodies from Citarella or Fairway and a few bottles of good wine are much less expensive than airline tickets to anywhere. (OK, to make that equation work you do have to keep away from the lobster salad at Citarella.)

So I expect we'll have a very busy summer thanks, in part, to our houseguests. While this tsunami of houseguests may take up all the parking spots at the Callicoon farmer's market, today's houseguests are tomorrow's country home buyers. So pump up those airbeds and bring 'em on.

Last Minute Lookers

Over the last couple of months, there has been a sharp decrease in 'advance planning time' among shoppers making trips up to look at property. Generally, I count on a week or two lead time when starting to work with new buyers. I find out what they're looking for, email a range of listings, we talk about them, narrow down the list, I send some other options, etc. Often, they've been doing their own homework for weeks or months, looking at listings on the internet, before contacting me. When we do finally go out, we've collaborated on what to see and it's a pretty well choreographed trip.

Recently, I've had a lot more requests for last minute appointments. Folks getting in touch for the first time on Thursday or Friday to come up on the weekend. Overall, more of an impulsive feeling, with a common call starting, "We've been thinking about buying a vacation home and want to come up this weekend to take a look at what you have."  Often they're brand new shoppers, who haven't been to Sullivan before, and only have a very general idea of what they'd like. They may have done some home surfing through listing websites, but not the serious searching and listing saving I'm more used to.

I don't have a good handle about what this shift is about. I suspect it may have something to do with pent up demand that built up over the winter. Traditionally, a lot of second home buyers start their shopping just after the New Year, but this year almost nobody — apart from the occasional bargain shark — was thinking much about real estate in January and February. Now, folks may be thinking "Maybe now's the time to dip our toe into the water."

This last minute casualness may also stem from not wanting to be "too serious" about buying a house. Planning a week or two ahead to come up may imply a buyer is more "serious" and "committed" to buying a house, while deciding at short notice to take a drive to the country to get a lay of the land is, well, just a nice drive to the country. Less serious. Dipping your toe in the water to check it out.

I'm not complaining. The fact that people are thinking about second homes again, and willing to make a trip out to the country to take a look, is a positive development. And folks need to dip their toe in the water before they jump in for a swim. Unfortunately, at the last minute my weekend appointments are already booked. There's less time for that collaboration to plan a really good trip. And because I'm often pulling together a selection of properties to show with only sketchy guidelines and not a lot of feedback from the buyers, I may not be as on target with what I'm showing.

I'm hearing from other agents that they're seeing a similar shift in lead time. And that does have some implications for sellers and how they've arranged to have their properties shown, as well as how accessible their agents are. If a seller doesn't want a lock box on their house, requires advance notice or asks that their listing agent be present for all showings, those houses generally can't be set up to show at the last minute. And listing agents need to have some method for fast turnaround to confirm a showing.

The Joy of Showing Beautiful Houses

I love beautiful houses and property, as am fortunate that much of my business is in the 'better' end of the market. Since the beginning of the year, though, most of my clients have been scaling back, and the "upper end" I've been seeing has been about $400,000. Over the past few months, almost all of the deals I've put together have been in the moderate to upper moderate range, from $200,000 to $400,000.

This past week I was out with a client exploring options in the next tier up, nicely renovated, larger farmhouses with more acreage in beautiful settings. While I stay on top of the property in this category, it had been a while since I spent a weekend visiting them.

When you start at $600,000 and go up from there, it's a different world. My favorite, of course, was the most expensive, at $1,750,000. (Ain't that always the case?) A 228 acre estate-quality property in Wayne County, PA with a small, private lake, a long winding drive to the house, beautiful rolling fields and orchards. The house is deceivingly large (it looks much smaller in the photos), and has been very tastefully renovated. It's the kind of place you could envision Eleanor Roosevelt sitting at a desk at a window writing her memoirs.

I had two other favorites from this trip. The second was a beautifully renovated farmhouse on 11 acres with a small pond near Obernberg. A classic "Love, Valour, Compassion" house with a large rocking chair porch, set well back from the road down a winding drive. The third house was in PA, on 62 acres, also set well back from the road with stunning views.

Click there to see the three houses.

The common element among all three houses is that they don't involve many compromises. With most houses I show at lower price points, the buyers and I typically are going through the house discussing what it will take to make the house what they want it to be — reconfiguring the floor plan, renovating the kitchen, adding French doors, breaking down walls to combine rooms, replacing vinyl siding with clapboard, ripping out paneling and carpeting, etc. With these houses, I was uncharacteristically quiet — I just didn't have that much to say.  It was just such a pleasure showing such beautiful houses that were "ready for my closeup, Mr. DeMille."

All three houses, by the way, have had substantial price reductions since being listed. The 228 estate, now at $1,750,000, started at $2.5M. The PA farmhouse of 62 acres is down to $650,000 from an original price of $999,000, and the Obernberg farmhouse has come down to $745,000 from $895,000.

By the way, there are two other farmhouse properties that have been on my radar that I had hoped to show this past weekend — one listed at $499K and the other at $799K. When I called on them, I found out that both are in contract. So maybe the upper end has a little more life in it than I've personally been seeing for the past few months.

No Surprise, Casino Fever is Back

Article this week in the Record about the latest casino plan to be trotted out in front of the County Legislature. I'm not surprised. With the change in administration in DC and in Interior Secretarys, and a clear pro casino stance by our Sen. Schumer and Rep. Hinchey, casino proponents are likely more optimistic that something may be possible. The tone of the article is what I find most interesting, from both the reporter's and the legislator's standpoint. Out-of-towner comes with big plans and Powerpoint presentation. Been there. Done that. Big yawn. Until there's an approval, financing is arranged and a shovel goes into the ground, I don't think anyone here's going to get all that excited — except all those out-of-towners with big plans to cash in on Catskills Gold.

Latest Current Market Conditions Posted

OK, folks, I just finished my monthly Current Market Conditions report, with sales data through April. While I wouldn't call the current picture "robust", there are some signs of improvement from the mid-winter doldrums. Closed sales in April were up over February and March and the median sales price appears to have reversed its downward slide, although remains well below the 2007 peaks. The weak link of the data trinity (sales volume, median price and average price) continues to be the "average sales price", which continues to trend downward, largely a function of ongoing softness in the upper end of the market. Please check out the latest report and then drop on back here and post your thoughts on what's happening.

Sellers, Fix Problems or Risk Buyers Walking

When the market was hot, sellers were in the driver's seat and buyers would put up with a lot. Buyers were almost grateful to have a seller accept their offer and make a deal on a house that they were willing to overlook problems that would crop up with the house or the closing process. Those days, however, are long gone.

Buyers today don't want any surprises, and don't want to assume any uncertainty or risk. Underground oil tank? Get it tested or get it out. Old mineral rights or rights of way on your title? A seller may be correct that they are unlikely to cause any problems, but buyers want them cleaned up. That inground pool that hasn't been used for a few years? Buyers expect sellers to get it operating, so they don't assume the risk of any pool problems. No road maintenance agreement on the private road you share with four neighbors? A buyer may well want to see something formalized before plunking down the cash. No idea about your septic that's been operating fine for 20 years? Get it pumped out and looked at.

Unless they're buying an "as-is" handyman or foreclosure, buyers want a pretty clean bill of health. They aren't necessarily expecting houses to be perfect, or every repair item identified during the inspection be fixed. But there is an expectation for some assurance that there is little risk with big kahuna items like septic systems, oil tanks, central air conditioners and pools that often can't be thoroughly tested or inspected during a standard home inspection.

Title "clouds" (issues) and survey discrepancies can also crop up in the process of a sale. (They're more common than you may think.) A couple of years ago, if there was a discrepancy in a survey that required the seller to negotiate a lot line adjustment or legal accommodation with a neighbor, a buyer would often be patient and willing to wait the couple of months it could take to work it out. Today, buyers are far less patient. Sellers need to have done their own due diligence, to make sure they have marketable title, or risk losing the deal when the buyer's attorney uncovers a title or survey issue.

It's striking how few sellers have adjusted to this change in buyer attitude. I'm sure part of it is that sellers feel they are "giving their house away", and therefore are even less willing to spend money to get it 'market ready.' Hanging some baskets of petunias on the front porch and painting the front door may increase curb appeal and get buyers to walk into a deal, but they'll walk right out if there are problems in big kahuna items. Providing buyers with some assurance that your property is "low risk / no risk" is central to actually closing the sale.